[Federal Register Volume 90, Number 9 (Wednesday, January 15, 2025)]
[Rules and Regulations]
[Pages 4424-4542]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-00640]
[[Page 4423]]
Vol. 90
Wednesday,
No. 9
January 15, 2025
Part X
Department of Health and Human Services
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45 CFR Parts 153, 155, 156, et al.
Patient Protection and Affordable Care Act; HHS Notice of Benefit and
Payment Parameters for 2026; and Basic Health Program; Final Rule
Federal Register / Vol. 90 , No. 9 / Wednesday, January 15, 2025 /
Rules and Regulations
[[Page 4424]]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Office of the Secretary
45 CFR Parts 153, 155, 156, and 158
[CMS-9888-F]
RIN 0938-AV41
Patient Protection and Affordable Care Act; HHS Notice of Benefit
and Payment Parameters for 2026; and Basic Health Program
AGENCY: Centers for Medicare & Medicaid Services (CMS), Department of
Health and Human Services (HHS).
ACTION: Final rule.
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SUMMARY: This final rule includes payment parameters and provisions
related to the HHS-operated risk adjustment and risk adjustment data
validation (HHS-RADV) programs, as well as 2026 benefit year user fee
rates for issuers that participate in the HHS-operated risk adjustment
program and the 2026 benefit year 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 modifications to
the calculation of the Basic Health Program (BHP) payment; and changes
to the Initial Validation Audit (IVA) sampling approach and Second
Validation Audit (SVA) pairwise means test for HHS-RADV. It also
addresses HHS' authority to engage in compliance reviews of and take
enforcement action against lead agents of insurance agencies for
violations of HHS' Exchange standards and requirements; HHS' system
suspension authority to address noncompliance by agents and brokers; an
optional fixed-dollar premium payment threshold; permissible plan-level
adjustment to the index rate to account for cost-sharing reductions
(CSRs); reconsideration standards for certification denials; changes to
the approach for conducting Essential Community Provider (ECP)
certification reviews; a policy to publicly share aggregated, summary-
level Quality Improvement Strategy (QIS) information on an annual
basis; and revisions to the medical loss ratio (MLR) reporting and
rebate requirements for qualifying issuers that meet certain standards.
DATES: These regulations are effective on January 15, 2025.
FOR FURTHER INFORMATION CONTACT:
Jeff Wu, (301) 492-4305, Rogelyn McLean, (301) 492-4229, Grace
Bristol, (410) 786-8437, for general information.
Ayesha Anwar, (301) 492-4000 or Joshua Paul, (301) 492-4347 for
matters related to HHS-operated risk adjustment.
Leanne Scott, (410) 786-1045 or Ayesha Anwar, (301) 492-4000 for
matters related to HHS-operated risk adjustment data validation.
Preeti Juturu, (301) 450-3234 or Leanne Scott, (410) 786-1045, for
matters related to user fees.
Lisa Cuozzo (410) 786-1746, for matters related to the single risk
pool.
Brian Gubin, (410) 786-1659, for matters related to agent, broker,
and web-broker guidelines.
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.
Christina Whitefield, (301) 492-4172, for matters related to the
medical loss ratio program.
Preeti Hans, (301) 492-5144, for matters related to Quality
Improvement Strategy.
Ken Buerger, (410) 786-1190, for matters related to certification
standards for QHPs.
Nikolas Berkobien, (667) 290-9903, for matters related to
standardized plan options, non-standardized plan option limits and
exceptions, and financial requirements for issuers of QHPs on the FFEs.
Adelaide Balenger, (667) 414-0691, for matters related to the
Actuarial Value Calculator.
Mary Evans, (470) 890-4113, for matters related to the Failure to
File and Reconcile process.
Chris Truffer, (410) 786-1264, for matters related to the Basic
Health Program (BHP) provision.
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 and
Analysis of and Responses to Public Comments
A. 42 CFR Part 600--BHP Methodology Regarding the Value of the
Premium Adjustment Factor (PAF)
B. 45 CFR Part 153--Standards Related to Reinsurance, Risk
Corridors, and Risk Adjustment
C. 45 CFR Part 155--Exchange Establishment Standards and Other
Related Standards Under the Affordable Care Act
D. 45 CFR Part 156--Health Insurance Issuer Standards Under the
Affordable Care Act, Including Standards Related to Exchanges
E. 45 CFR Part 158--Issuer Use of Premium Revenue: Reporting and
Rebate Requirements
F. Severability
IV. Waiver of Delay in Effective Date
V. Collection of Information Requirements
A. Wage Estimates
B. ICRs Regarding the Initial Validation Audit (IVA) Sample--
Enrollees Without HCCs, Removal of the FPC, and Neyman Allocation
(Sec. 153.630(b))
C. ICRs Regarding Engaging in Compliance Reviews and Taking
Enforcement Actions Against Lead Agents for Insurance Agencies
(Sec. 155.220)
D. ICRs Regarding Agent and Broker System Suspension Authority
(Sec. 155.220(k))
E. ICRs Regarding Updating the Model Consent Form (Sec.
155.220)
F. ICRs Regarding Notification of 2-Year Failure To File and
Reconcile Population (Sec. 155.305)
G. ICRs Regarding General Program Integrity and Oversight
Requirements (Sec. 155.1200)
H. ICRs Regarding Essential Community Provider Certification
Reviews (Sec. 156.235)
I. ICRs Regarding Quality Improvement Strategy Information
(Sec. 156.1130)
J. ICRs Regarding Medical Loss Ratio (Sec. Sec. 158.103,
158.140, 158.240)
K. Summary of Annual Burden Estimates for Finalized Requirements
L. Submission of PRA-Related 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
H. Congressional Review Act
I. Executive Summary
We are finalizing changes to the provisions and parameters
implemented through prior rulemaking to implement the ACA.\1\ These
requirements 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
[[Page 4425]]
implemented and are finalizing new provisions. Our goal with these
requirements is to provide quality, affordable coverage to consumers
while minimizing administrative burden and ensuring program integrity.
The changes in this final rule are intended to help advance health
equity, mitigate health disparities, and alleviate discrimination.
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\1\ The Patient Protection and Affordable Care Act (Pub. L. 111-
148, 124 Stat. 119) was enacted on March 23, 2010. The Healthcare
and Education Reconciliation Act of 2010 (Pub. L. 111-152, 124 Stat.
1049), 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 1301, 1302, 1311, 1312, 1313, 1321, 1331, and
1343 of the ACA and sections 2718 and 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 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.
Below, we summarize sections of the PHS Act and ACA that are
relevant to this final rule.
Section 2718 of the PHS Act, as added by the ACA, generally
requires health insurance issuers offering group or individual health
insurance coverage to submit an annual medical loss ratio (MLR) report
to HHS and provide rebates to enrollees if the issuers do not achieve
specified MLR thresholds.
Section 1301(a)(1)(B) of the ACA directs all issuers of qualified
health plans (QHPs) to cover the essential health benefits (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.
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 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.
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(d)(4)(A) of
the ACA requires the Exchange to implement procedures for the
certification, recertification, and decertification of health plans as
QHPs, consistent with guidelines developed by the Secretary under
section 1311(c) of the ACA. 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 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 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,
[[Page 4426]]
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 1331 of the ACA provides States with an option to establish
a Basic Health Program (BHP). In the States that elect to operate a
BHP, the BHP makes affordable health benefits coverage available for
individuals under age 65 with household incomes between 133 percent and
200 percent of the Federal poverty level (FPL) who are not otherwise
eligible for Medicaid, the Children's Health Insurance Program (CHIP),
or affordable employer-sponsored coverage, or for individuals whose
income is equal to or below 200 percent of FPL but are lawfully present
non-citizens ineligible for Medicaid. For those States that have
expanded Medicaid coverage under section 1902(a)(10)(A)(i)(VIII) of the
Social Security Act (the Act), the lower income threshold for BHP
eligibility is effectively 138 percent of the FPL due to the
application of a required 5 percent income disregard in determining the
upper limits of Medicaid income eligibility (section 1902(e)(14)(I) of
the Act).
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(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 Act permits 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 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 section 1341 of the ACA (transitional reinsurance
program), section 1342 of the ACA (risk corridors program), and
section 1343 of the ACA (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
issued 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 fiscal year 2015 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
[[Page 4427]]
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
issued 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). 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 issued 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 issued 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 issued the 2021 Benefit Year Final HHS Risk Adjustment Model
Coefficients on the CCIIO website.\6\
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\6\ CMS. (2020). 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 the 10th revision of the International Classification of
Diseases (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 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 December 4, 2020 Federal Register (85 FR 78572) (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\ CMS. (2021). 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.
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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 models, beginning with the
2023 benefit year.\8\
[[Page 4428]]
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.
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\8\ CMS (2022). 2023 Benefit Year Final HHS Risk Adjustment
Model Coefficients. https://www.cms.gov/files/document/2023-benefit-year-final-hhs-risk-adjustment-model-coefficients.pdf.
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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 approved 50 percent
reductions to HHS risk adjustment transfers for Alabama's individual
and small group markets and repealed prior participant States' ability
to request reductions of their risk adjustment transfers for the 2025
benefit year and beyond. 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.
In the April 15, 2024 Federal Register (89 FR 26218) (2025
Payment Notice), we finalized the benefit and payment parameters for
the 2025 benefit year, including the 2025 risk adjustment models and
updated the adjustment factors for the receipt of CSRs for the American
Indian and Alaska Native (AI/AN) subpopulation who are enrolled in zero
and limited cost-sharing plans to improve prediction in the HHS risk
adjustment models. In addition, we finalized that in certain cases, we
may require a corrective action plan (CAP) to address an observation
identified in an HHS risk adjustment program audit.
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'' issued in the August 30, 2013 Federal Register
(78 FR 54069), and the ``second Program Integrity Rule'' issued 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) issued 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 application documentation
requirements for agents, brokers, and web-brokers that assist Exchange
consumers in FFE and SBE-FP States.
3. Market Rules
In the February 27, 2013 Federal Register (78 FR 13406), we issued
the health insurance market rules, including provisions related to the
single risk pool. We amended requirements related to index rates under
the single risk pool provision in a final rule issued in the July 2,
2013 Federal Register (78 FR 39870). In the October 30, 2013 Federal
Register (78 FR 65046), we clarified when issuers may establish and
update premium rates. In the March 8, 2016 Federal Register (81 FR
12203), we clarified single risk pool provisions related to student
health insurance coverage. We finalized minor adjustments to the single
risk pool regulations in the 2018 Payment Notice, issued in the
December 22, 2016 Federal Register (81 FR 94058).
4. Exchanges
We requested 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 based on 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 ECP
certification standards.
In the August 17, 2011 Federal Register (76 FR 51201), we issued a
proposed rule regarding eligibility determinations, including the
regulatory requirement to verify incarceration status. In the March 27,
2012 Federal Register (77 FR 18310), we finalized the regulatory
requirement to verify incarceration attestation using an approved
electronic data source that is current and accurate, and to resolve the
inconsistency when attestations are not reasonably compatible with
information in an approved data source. We also established
requirements regarding accessible communications for individuals with
disabilities and those with LEP.
In the 2014 Payment Notice and the Amendments to the HHS Notice of
Benefit and Payment Parameters for 2014 interim final rule, issued 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, issued 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 the 2018 Payment Notice, issued in the December 22, 2016 Federal
Register (81 FR 94058), we set forth the standards for the request for
reconsideration of denial of certification specific to the FFEs at
Sec. 155.1090.
In an interim final rule, issued 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, issued in the December 22, 2016
Federal Register (81 FR 94058).
In the Market Stabilization final rule, issued 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, issued 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
[[Page 4429]]
established a new special enrollment period.
In the May 14, 2020 Federal Register (85 FR 29164) (2021 Payment
Notice), we finalized revisions to the parameters of special enrollment
periods and the quality rating information display standards for State
Exchanges and amended the periodic data matching requirements.
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 issued part 2 of the 2022 Payment Notice. In
part 3 of the 2022 Payment Notice, issued in the September 27, 2021
Federal Register (86 FR 53412), 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 2024 Payment Notice, issued in the April 27, 2023 Federal
Register (88 FR 25740), we revised Exchange Blueprint approval
timelines, lowered the user fee rate 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; reduce the
risk of plan choice overload on the FFEs and SBE-FPs by limiting the
number of non-standardized plan options that issuers may offer through
Exchanges on the Federal platform to four for Plan Year (PY) 2024 and
to two for PY 2025 and subsequent years; and ensure correct QHP
information. In addition, we amended coverage effective date rules,
lengthened the special enrollment period from 60 to 90 days for 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. We revised the failure to file and
reconcile process to ensure enrollees would not lose APTC eligibility
until they or their tax filer failed to file their Federal income taxes
and reconcile APTC for 2 consecutive tax years.
In the 2025 Payment Notice, issued in the April 15, 2024 Federal
Register (89 FR 26218), we required a State seeking to operate a State
Exchange to first operate an SBE-FP for at least one PY, revised
Exchange Blueprint requirements for States transitioning to a State
Exchange, established additional minimum standards for Exchange call
center operations, required an Exchange to operate a centralized
eligibility and enrollment platform on its website, and finalized
various policies for web-brokers and direct enrollment entities. In
addition, we required State Exchanges and State Medicaid agencies to
remit payment to HHS for their use of certain income data, amended re-
enrollment hierarchies for enrollees enrolled in catastrophic coverage,
revised the parameters around a State Exchange adopting an alternative
open enrollment period, and extended 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). To ensure provider network adequacy in
State Exchanges and SBE-FPs, we finalized provider network adequacy
policies applicable to such Exchanges for PY 2026 and subsequent plan
years. We also further lowered the user fee rate for QHPs in the FFEs
and SBE-FPs. In addition, we finalized the policy to maintain FFE and
SBE-FP standardized plan option metal levels from the 2024 Payment
Notice and finalized an exceptions process to the limitation on non-
standardized plan options in FFEs and SBE-FPs. We also finalized the
requirement for Exchanges to provide notification to enrollees or their
tax filers who have failed to file their Federal income taxes and
reconcile APTC for 1 tax year.
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 issued in the February 25, 2013
Federal Register (78 FR 12834) (EHB Rule). We established at Sec.
156.135(a) that AV is generally to be calculated using the AV
Calculator developed and made available by HHS for a given benefit
year. In the 2015 Payment Notice (79 FR 13743), we established at Sec.
156.135(g) provisions for updating the AV Calculator in future plan
years. In the 2017 Payment Notice (81 FR 12349), we amended the
provisions at Sec. 156.135(g) to allow for additional flexibility in
our approach and options for updating of the AV Calculator.
In the 2025 Payment Notice, issued in the April 15, 2024 Federal
Register (89 FR 26218), we revised Sec. 155.170(a) to codify that
benefits covered in a State's EHB-benchmark plan are not 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. We finalized three revisions to the
standards for State selection of EHB-benchmark plans for benefit years
beginning on or after January 1, 2026: we revised the typicality
standard at Sec. 156.111 for States to demonstrate that their new EHB-
benchmark plan provides a scope of benefits that is equal to that of a
typical employer plan in the State and removed the generosity standard;
removed the requirement for States to submit a formulary drug list as
part of their application unless they are changing their prescription
drug EHBs; and consolidated the options for States to change their EHB-
benchmark plans. We also removed the regulatory prohibition at Sec.
156.115(d) on issuers from including routine non-pediatric dental
services as an EHB beginning with PY 2027.
In addition, we revised Sec. 156.122 to codify that prescription
drugs in excess of those covered by a State's EHB-benchmark plan are
considered EHB. We also stated that the 2025 Payment Notice does not
address the application of this policy to large group market health
plans and self-insured group health plans, and that HHS and the
Departments of Labor and the Treasury 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.
6. Medical Loss Ratio (MLR)
We requested comment on section 2718 of the PHS Act in the April
14, 2010 Federal Register (75 FR 19297)
[[Page 4430]]
and issued an interim final rule with a 60-day comment period relating
to the MLR program on December 1, 2010 (75 FR 74864). A final rule with
a 30-day comment period was issued in the December 7, 2011 Federal
Register (76 FR 76573). An interim final rule with a 60-day comment
period was issued in the December 7, 2011 Federal Register (76 FR
76595). A final rule was issued in the Federal Register on May 16, 2012
(77 FR 28790). The MLR program requirements were amended in final rules
issued in the March 11, 2014 Federal Register (79 FR 13743), the May
27, 2014 Federal Register (79 FR 30339), the February 27, 2015 Federal
Register (80 FR 10749), the March 8, 2016 Federal Register (81 FR
12203), the December 22, 2016 Federal Register (81 FR 94183), the April
17, 2018 Federal Register (83 FR 16930), the May 14, 2020 Federal
Register (85 FR 29164), the May 5, 2021 Federal Register (86 FR 24140),
the May 6, 2022 Federal Register (87 FR 27208), and an interim final
rule that was issued in the September 2, 2020 Federal Register (85 FR
54820).
7. Quality Improvement Strategy
We issued regulations in Sec. 155.200(d) to direct Exchanges to
evaluate quality improvement strategies, and Sec. 156.200(b) to direct
QHP issuers to implement and report on a quality improvement strategy
or strategies consistent with section 1311(g) standards as QHP
certification criteria for participation in an Exchange. In the 2016
Payment Notice, issued in the February 27, 2015 Federal Register (80 FR
10749), we finalized regulations at Sec. 156.1130 to establish
standards and the associated timeframe for QHP issuers to submit the
necessary information to implement quality improvement strategy
standards for QHPs offered through an Exchange.
8. Basic Health Program
In the March 12, 2014, Federal Register (79 FR 14111), we issued a
final rule entitled the ``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'' (hereinafter referred to as the BHP final rule)
implementing section 1331 of the ACA, which governs the establishment
of BHPs. The BHP final rule established the standards for State and
Federal administration of BHPs, including provisions regarding
eligibility and enrollment, benefits, cost-sharing requirements and
oversight activities. In the BHP final rule, we specified that the BHP
Payment Notice process would include the annual publication of both a
proposed and final BHP payment methodology.
On October 11, 2017, the Attorney General of the United States
provided HHS and the Department of the Treasury (the Departments) with
a legal opinion \9\ indicating that the permanent appropriation at 31
U.S.C. 1324, from which the Departments had historically drawn funds to
make CSR payments, cannot be used to fund CSR payments to insurers. In
light of this opinion--and in the absence of any other appropriation
that could be used to fund CSR payments--HHS directed CMS to
discontinue CSR payments to issuers until Congress provides for an
appropriation. As a result of this opinion, CMS discontinued CSR
payments to issuers in the States operating a BHP (that is, New York
and Minnesota). The States then sued the Secretary for declaratory and
injunctive relief in the United States District Court for the Southern
District of New York.\10\ On May 2, 2018, the parties filed a
stipulation requesting a stay of the litigation so that HHS could issue
an administrative order revising the 2018 BHP payment methodology.
After consideration of the States' comments on the administrative order
revising the payment methodology, we issued a Final Administrative
Order on August 24, 2018 (Final Administrative Order) setting forth the
payment methodology that would apply to the 2018 BHP program year.
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\9\ Sessions, J. (2017, Oct. 11). Legal Opinion Re: Payments to
Issuers for Cost Sharing Reductions (CSRs). Office of the Attorney
General. https://www.hhs.gov/sites/default/files/csr-payment-memo.pdf.
\10\ See Complaint, New York v. U.S. Dep't of Health & Human
Servs., No. 1:18-cv-00683 (RJS) (S.D.N.Y. filed Jan. 26, 2018).
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In the November 5, 2019 Federal Register (84 FR 59529) (hereinafter
referred to as the November 2019 final BHP Payment Notice), we
finalized the payment methodologies for BHP program years 2019 and
2020.\11\ The 2019 payment methodology is the same payment methodology
described in the Final Administrative Order. The 2020 payment
methodology is the same methodology as the 2019 payment methodology
with one additional adjustment to account for the impact of individuals
selecting different metal tier level plans in the Exchange, referred to
as the Metal Tier Selection Factor (MTSF).\12\ In the August 13, 2020
Federal Register (85 FR 49264) (hereinafter referred to as the August
2020 final BHP Payment Notice), we finalized the payment methodology
for BHP program year 2021. The 2021 payment methodology is the same
methodology as the 2020 payment methodology, with one adjustment to the
income reconciliation factor (IRF). In the July 7, 2021 Federal
Register (86 FR 35615) (hereinafter referred to as the July 2021 final
BHP Payment Notice), we finalized the payment methodology for BHP
program year 2022. The 2022 payment methodology is the same as the 2021
payment methodology, with the exception of the removal of the Metal
Tier Selection Factor.
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\11\ BHP program year means a calendar year for which a standard
health plan provides coverage for BHP enrollees. See 42 CFR 600.5.
\12\ ``Metal tiers'' refer to the different actuarial value plan
levels offered on the Exchanges. Bronze-level plans generally must
provide 60 percent actuarial value; silver-level 70 percent
actuarial value; gold-level 80 percent actuarial value; and
platinum-level 90 percent actuarial value. See 45 CFR 156.140.
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In the December 20, 2022 Federal Register (87 FR 77722) (hereafter
referred to as the 2023 final BHP Payment Notice), we finalized the
payment methodology for BHP program year 2023. The 2023 payment
methodology is the same as the 2022 payment methodology, except for the
addition of a factor to account for a State operating a BHP and
implementing an approved State Innovation Waiver under section 1332 of
the ACA; this is the section 1332 waiver factor (WF). In the 2023 final
BHP Payment Notice (87 FR 77722), we also revised the schedule for
issuance of payment notices and allowed payment notices to be effective
for 1 or multiple program years, as determined by and subject to the
direction of the Secretary, beginning with the 2023 payment
methodology. In the 2025 Payment Notice, issued in the April 15, 2024
Federal Register (89 FR 26218), we finalized that States may start BHP
applicants' effective date of eligibility on the first day of the month
following the date of application. In addition, we finalized that,
subject to HHS approval, a State may establish its own effective date
of eligibility for enrollment policy.
B. Summary of Major Provisions
The regulations outlined in the final rule are codified in 42 CFR
part 600 and 45 CFR parts 153, 155, 156, and 158.
1. 42 CFR Part 600
We are finalizing changes to the methodology regarding the premium
adjustment factor (PAF), which is used to calculate the adjusted
reference
[[Page 4431]]
premium (ARP) for BHP payment. We are finalizing maintaining the PAF
value at 1.188 for States that have fully implemented BHP and are using
Second Lowest Cost Silver Plan (SLCSP) premiums from a year in which
BHP was fully implemented. As previously clarified, for States in their
first year of implementing BHP and choosing to use prior year SLCSP
premiums to determine BHP payment, the PAF value will be set to 1.00.
We are finalizing that if a State is using SLCSP premiums from a year
in which BHP was not fully implemented, the PAF is calculated by
determining the CSR adjustment that QHP issuers included in the SLCSP
premiums, reporting the CSR adjustments for the SLCSP for each region
in the State to CMS, and then CMS calculating the PAF as 1.20 divided
by 1 plus the adjustment. Additionally, we are finalizing a technical
clarification for BHP payment rates in cases of multiple SLCSP premiums
in an area.
2. 45 CFR Part 153
In accordance with the OMB Report to Congress on the Joint
Committee Reductions for Fiscal Year 2025, the HHS-operated risk
adjustment program is subject to the fiscal year 2025
sequestration.\13\ Therefore, the HHS-operated risk adjustment program
will sequester payments made from fiscal year 2025 resources (that is,
funds collected during the 2025 fiscal year) at a rate of 5.7 percent.
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\13\ OMB. (2024). OMB Report to the Congress on the BBEDCA 251A
Sequestration for Fiscal Year 2025. https://www.whitehouse.gov/wp-content/uploads/2024/03/BBEDCA_251A_Sequestration_Report_FY2025.pdf.
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We are unable to complete the calculations for the final
coefficients for the 2026 benefit year in time to publish them in this
final rule. Therefore, consistent with Sec. 153.320(b)(1)(i), we are
finalizing the datasets to be used to calculate the final coefficients
in this rule and will publish the final coefficients for the 2026
benefit year in guidance after the publication of this final rule.
Starting with the 2026 benefit year, we are finalizing the proposal to
begin phasing out the 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 also finalizing
the incorporation of pre-exposure prophylaxis (PrEP) as a separate, new
type of factor called an Affiliated Cost Factor (ACF) in the HHS risk
adjustment adult and child models starting with the 2026 benefit year.
We are finalizing a risk adjustment user fee for the 2026 benefit year
of $0.20 per member per month (PMPM).
Beginning with the 2025 benefit year of HHS-RADV, we are finalizing
the proposals to exclude enrollees without HCCs, which includes adult
enrollees with only prescription drug categories (RXCs), from the IVA
sample, remove the Finite Population Correction (FPC) from the IVA
sampling methodology, and replace the source of the Neyman allocation
data used for HHS-RADV sampling with the most recent 3 consecutive
years of HHS-RADV data. In addition, beginning with the 2024 benefit
year of HHS-RADV, we are finalizing the proposals to modify the SVA
pairwise means test, which tests for statistically significant
differences between the IVA and SVA results, to use a bootstrapped 90
percent confidence interval methodology and to increase the initial SVA
subsample size from 12 enrollees to 24 enrollees.
3. 45 CFR Part 155
We address our authority to investigate and undertake compliance
reviews and enforcement actions in response to misconduct or
noncompliance with applicable agent, broker, and web-broker Exchange
requirements or standards occurring at the insurance agency level and
how we intend to hold lead agents of insurance agencies accountable for
such misconduct or noncompliance.
We are finalizing revisions at Sec. 155.220(k)(3) to reflect our
authority to suspend an agent's or broker's ability to transact
information with the Exchange in instances where HHS discovers
circumstances that pose unacceptable risk to accuracy of Exchange
eligibility determinations, Exchange operations, applicants, or
enrollees, or Exchange information technology systems, including but
not limited to risk related to noncompliance with the standards of
conduct under Sec. 155.220(j)(2)(i), (ii) or (iii) and the privacy and
security standards under Sec. 155.260, until the circumstances of the
incident, breach, or noncompliance are remedied or sufficiently
mitigated to HHS' satisfaction.
We are finalizing updates to the model consent form that agents,
brokers, and web-brokers can use to obtain and document consumer
consent.\14\ The updates expand the resource to include a standardized
form that agents, brokers, and web-brokers can use to document the
consumer's review and confirmation of the accuracy of information in
their Exchange eligibility application, which is a new standard of
conduct that was also implemented as part of the 2024 Payment Notice
(88 FR 25809 through 25814). The updates also add scripts that agents,
brokers, and web-brokers may utilize to meet the consumer consent and
eligibility application review requirements finalized in the 2024
Payment Notice via an audio recording.
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\14\ CMS. (2022, December 14). CMS Model Consent Form for
Marketplace Agents and Brokers. PRA package (CMS-10840, OMB Control
Number 0938-1438). https://www.cms.gov/files/document/cms-model-consent-form-marketplace-agents-and-brokers.pdf.
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We are finalizing, in connection with the failure to file and
reconcile process at Sec. 155.305(f)(4), that Exchanges are required
to send notices to tax filers or their enrollees for the second year in
which they have been determined to have failed to reconcile APTC
explaining that they risk being determined ineligible for APTC. A
notice to the tax filer may specifically explain that if they fail to
file and reconcile for a second consecutive year, they risk being
determined ineligible for APTC. Alternatively, an Exchange may send a
more general notice to the enrollee or their tax filer explaining that
they are at risk of losing APTC, without the additional detail that the
tax filer has failed to file and reconcile APTC.
We are finalizing the addition of Sec. 155.400(d)(1) to codify
HHS' guidance that requires that, within 60 calendar days after a State
Exchange receives a data inaccuracy from an issuer operating in an
State Exchange that includes a description of an inaccuracy that meets
the requirements at Sec. 156.1210(a) through (c) and all the
information that the State Exchange requires or requests to properly
assess the inaccuracy, State Exchanges must review and resolve the
State Exchange issuer's enrollment data inaccuracies and submit to HHS
a description of the resolution of any inaccuracies described by the
State Exchange issuer that the State Exchange confirms to be
inaccuracies in a format and manner specified by HHS.\15\
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\15\ OMB Control No: 0938-1312 and 0938-1341.
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We are finalizing a provision at Sec. 155.400(g) to allow issuers
to adopt a fixed-dollar payment threshold of $10 or less, to be
adjusted for inflation by annual agency guidance, under which issuers
would not be required to trigger a grace period or terminate enrollment
for enrollees who fail to pay the full amount of their portion of
premium owed, provided they do not owe more than the threshold amount.
We are also finalizing a provision allowing issuers to adopt a gross
percentage-based premium threshold of 98 percent or higher, which
similarly would not require issuers to trigger a grace period
[[Page 4432]]
or terminate enrollment for enrollees who fail to pay the full amount
of their portion of premium owed, provided they do not owe more than
the threshold amount. In addition, we are finalizing a provision that
permits issuers to set the premium payment threshold based on net
premium owed by the enrollee at 95 percent or higher of the net
premium, rather than providing for a ``reasonable'' standard as is
currently set forth in regulation. We are finalizing a policy limiting
application of the fixed-dollar payment threshold and gross premium
percentage-based threshold to premium payments after coverage is
effectuated. Issuers will be allowed to apply the fixed-dollar payment
threshold and/or one of two percentage-based thresholds (but not both
percentage-based thresholds). Issuers will be required to apply all
chosen premium payment thresholds uniformly to all enrollees and
without regard to their health status.
We are finalizing a provision at Sec. 155.505(b) to codify an
option for application filers as defined under Sec. 155.20 to file
appeals on behalf of applicants and enrollees on the application
filer's Exchange application.
We are finalizing amendments at Sec. 155.1000 to state explicitly
that an Exchange may deny certification to any plan that does not meet
the general certification criteria at Sec. 155.1000(c). We also
finalize amending Sec. 155.1090 with refinements to the standards for
a request for the reconsideration of a denial of certification specific
to the FFEs.
We are finalizing that in addition to collecting the information
and data currently provided by State Exchanges under Sec. 155.1200 to
monitor performance and compliance, we would use the information and
data that State Exchanges submit to increase transparency into Exchange
operations and to promote program improvements. We anticipate publicly
releasing the State Exchange spending on outreach (including
Navigators), Open Enrollment call center metrics (call center volume,
average wait time, average call abandonment rate), and website visits
and visitors. We are stating in this final rule that we no longer
intend to publicly release the State Exchanges' annual State-based
Marketplace Annual Reporting Tools (SMARTs). In addition, we intend to
only post those metrics for which we also have reasonably comparable
data from Exchanges on the Federal platform.
4. 45 CFR Part 156
We are finalizing 2026 benefit year FFE and SBE-FP user fee rates
of 2.5 percent and 2.0 percent of total monthly premiums, respectively.
We are also finalizing alternative 2026 benefit year FFE and SBE-FP
user fee rates of 2.2 percent and 1.8 percent of total monthly
premiums, respectively, if enhanced PTC subsidies,\16\ at the level
currently enacted or at a higher level, are extended through the 2026
benefit year by July 31, 2025.
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\16\ ARP, Public Law 117-2, 135 Stat. 4 (2021). These enhanced
subsidies were extended under the IRA, Public Law 117-169, 136 Stat.
1818 (2022) and are scheduled to expire after the 2025 calendar
year.
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We are finalizing amendments to Sec. 156.80(d)(2)(i) to affirm
that CSR loading practices that are permitted by State regulators are
permissible under Federal law to the extent that they are actuarially
justified and provided the issuer does not otherwise receive
reimbursement for such CSR amounts.
We are finalizing changes to the method for updating the AV
Calculator, starting with the 2026 AV Calculator. Under this approach,
for a plan year, we will only release a single, final version of the AV
Calculator.
We are finalizing minor updates to the standardized plan option
designs for PY 2026 to ensure these plans continue to have AVs within
the permissible de minimis range for each metal level and to maintain a
high degree of continuity with the approaches to standardized plan
options finalized in the 2023, 2024, and 2025 Payment Notices. In
response to comments requesting the expanded bronze metal level designs
revert to the 50 percent coinsurance rate used in previous years, we
have revised this plan design to maintain this consistency, instead of
raising it to 60 percent for PY 2026, as proposed. We made several
additional modifications to both sets of plan designs at the expanded
bronze metal.
In addition, we are finalizing amendments at Sec. 156.201 to
require issuers that offer multiple standardized plan options within
the same product network type, metal level, and service area to
meaningfully differentiate these plans from one another in terms of
included benefits, provider networks, included prescription drugs, or a
combination of some or all these factors.
We are finalizing amendments at Sec. 156.202(b) and (d) to
properly reflect the flexibility that issuers have been operationally
permitted since these requirements were introduced to vary the
inclusion of the distinct adult dental benefit coverage, pediatric
dental benefit coverage, and adult vision benefit coverage categories
under the non-standardized plan option limit in accordance with Sec.
156.202(c)(1) through (3).
We are finalizing conducting ECP certification reviews of plans for
which issuers submit QHP certification applications in FFEs in States
performing plan management functions, beginning in PY 2026.
We are finalizing the proposal to share aggregated, summary-level
QIS information publicly on an annual basis beginning on January 1,
2026, with information QHP issuers submit during the PY 2025 QHP
Application Period.
We are finalizing an amendment to Sec. 156.1220(a) to introduce a
new materiality threshold for HHS-RADV appeals, such that we will rerun
HHS-RADV results and adjust HHS-RADV adjustments to State transfers in
response to a successful appeal when the impact of that appeal to the
filer's HHS-RADV adjustments to State transfers is greater than or
equal to $10,000.
5. 45 CFR Part 158
We are finalizing amendments to Sec. 158.140(b)(4)(ii) to allow
qualifying issuers to not adjust incurred claims by the net payments or
receipts related to the risk adjustment program for MLR reporting and
rebate calculation purposes beginning with the 2026 MLR reporting year
(MLR reports due in 2027), with certain modifications. Specifically, we
are finalizing that at the option of qualifying issuers, earned premium
would account for net risk adjustment receipts by simply adding these
net receipts to total premium, without subsequently subtracting them
from adjusted earned premium, such that these net receipts would impact
the MLR denominator rather than MLR numerator. We are also finalizing
an amendment to Sec. 158.103 to add a definition of ``qualifying
issuer,'' with certain clarifications.
We also are finalizing amendments to Sec. 158.240(c) to add an
illustrative example of how qualifying issuers that opt to apply risk
adjustment transfer amounts as described in Sec. 158.140(b)(4)(ii)
will calculate the amount of rebate owed to each enrollee to accurately
reflect how such issuers will incorporate the net risk adjustment
transfer amounts into the MLR and rebate calculations differently from
other issuers, as well as a conforming amendment to clarify that the
current illustrative example in paragraph (c)(2) will apply to issuers
that are not qualifying issuers and to qualifying issuers that do not
opt to apply risk
[[Page 4433]]
adjustment transfer amounts as described in Sec. 158.140(b)(4)(ii).
III. Summary of the Provisions of the Proposed Regulations and Analysis
of and Responses to Public Comments
A. 42 CFR Part 600--BHP Methodology Regarding the Value of the Premium
Adjustment Factor (PAF)
1. Overview of the Payment Methodology and Calculation of the Payment
Amount
In the HHS Notice of Benefit and Payment Parameters for 2026
proposed rule (89 FR 82308, 82317), we proposed to make a change to the
calculation of the PAF starting in program year 2026. Section
1331(d)(3) of the ACA directs the Secretary to consider several factors
when determining the Federal BHP payment amount, which, as specified in
the statute, must equal 95 percent of the value of the PTC under
section 36B of the Code and CSRs under section 1402 of the ACA that
would have been paid on behalf of BHP enrollees had they enrolled in a
QHP through an Exchange. Thus, the BHP payment methodology is designed
to calculate the PTC and CSRs as consistently as possible and in
general alignment with the methodology used by Exchanges to calculate
advance payments of the PTC (APTC) and CSRs, and the methodology used
to reconcile APTC with the amount of the PTC allowed for the tax year
under section 36B of the Code. In accordance with section
1331(d)(3)(A)(iii) of the ACA, the final payment methodology must be
certified by the Chief Actuary of CMS, in consultation with the Office
of Tax Analysis (OTA) of the Department of the Treasury, as having met
the requirements of section 1331(d)(3)(A)(ii) of the ACA.
Section 1331(d)(3)(A)(ii) of the ACA specifies that the payment
determination shall take into account all relevant factors necessary to
determine the value of the PTC and CSRs that would have been paid on
behalf of eligible individuals, including but not limited to, the age
and income of the enrollee, whether the enrollment is for self-only or
family coverage, geographic differences in average spending for health
care across rating areas, the health status of the enrollee for
purposes of determining risk adjustment payments and reinsurance
payments that would have been made if the enrollee had enrolled in a
QHP through an Exchange, and whether any reconciliation of APTC and CSR
would have occurred if the enrollee had been enrolled. Under all
previous payment methodologies, the total Federal BHP payment amount
has been calculated using multiple rate cells in each BHP State. Each
rate cell represents a unique combination of age range (if applicable),
geographic area, coverage category (for example, self-only or two-adult
coverage through the BHP), household size, and income range as a
percentage of FPL, and there is a distinct rate cell for individuals in
each coverage category within a particular age range who reside in a
specific geographic area and are in households of the same size and
income range. The BHP payment rates developed are also consistent with
the State's rules on age rating. Thus, in the case of a State that does
not use age as a rating factor on an Exchange, the BHP payment rates
would not vary by age.
Under the methodology finalized in the July 2021 final BHP Payment
Notice, the rate for each rate cell is calculated in two parts. The
first part is equal to 95 percent of the estimated PTC that would have
been allowed if a BHP enrollee in that rate cell had instead enrolled
in a QHP in an Exchange. The second part is equal to 95 percent of the
estimated CSR payment that would have been made if a BHP enrollee in
that rate cell had instead enrolled in a QHP in an Exchange. These two
parts are added together and the total rate for that rate cell would be
equal to the sum of the PTC and CSR rates. As noted in the July 2021
final BHP Payment Notice, we currently assign a value of zero to the
CSR portion of the BHP payment rate calculation, because there is
presently no available appropriation from which we can make the CSR
portion of any BHP payment.
The 2023 final BHP Payment Notice provides a detailed description
of the structure of the BHP payments, including the equations, factors,
and the values of the factors used to calculate the BHP payments. We
proposed one change to the methodology regarding the premium adjustment
factor (PAF).
The PAF is used to calculate the adjusted reference premium (ARP)
that is used to calculate the BHP payment. The ARP is used to calculate
the BHP payment. The ARP is used to calculate the estimated PTC that
would be allowed if BHP-eligible individuals enrolled in QHPs through
an Exchange and is based on the premiums for the applicable second
lowest cost silver plan during the applicable plan year. The PAF
considers the premium increases in other States that took effect after
we discontinued payments to issuers for CSRs provided to enrollees in
QHPs offered through Exchanges. Despite the discontinuance of Federal
payments for CSRs, QHP issuers are required to provide CSRs to eligible
enrollees. As a result, many QHP issuers increased the silver-level
plan premiums to account for those additional costs; these premium
adjustments and how they were applied (for example, to only silver-
level plans or to all metal tier plans) varied across States. For the
States operating BHPs in 2018, the increases in premiums were
relatively minor, because the majority of enrollees eligible for CSRs
(and all who were eligible for the largest CSRs) were enrolled in the
BHP and not in QHPs on the Exchanges, and therefore, issuers in BHP
States did not significantly raise premiums to cover costs related to
HHS not making CSR payments.
In the Final Administrative Order and the 2019 through 2023 final
BHP Payment Notices, we incorporated the PAF into the BHP payment
methodologies to capture the impact of how other States responded to
HHS ceasing to make CSR payments.\17\ We also reserved the right that
in the case an appropriation for CSR payments is made for a future
year, to determine whether and how to modify the PAF in the payment
methodology.
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\17\ https://www.medicaid.gov/sites/default/files/2019-11/final-admin-order-2018-revised-payment-methodology.pdf.
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Under the Final Administrative Order, we calculated the PAF by
using information sought from QHP issuers in each State and the
District of Columbia and determined the premium adjustment that the
responding QHP issuers made to each silver level plan in 2018 to
account for the discontinuation of CSR payments to QHP issuers. Based
on the data collected, we estimated the median adjustment for silver
level QHPs nationwide (excluding those in the two BHP States). To the
extent that QHP issuers made no adjustment (or the adjustment was
zero), this was counted as zero in determining the median adjustment
made to all silver level QHPs nationwide. If the amount of the
adjustment was unknown--or we determined that it should be excluded for
methodological reasons (for example, the adjustment was negative, an
outlier, or unreasonable)--then we did not count the adjustment towards
determining the median adjustment.\18\ The median adjustment for silver
level QHPs is referred to as the nationwide median adjustment.
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\18\ Some examples of outliers or unreasonable adjustments
include (but are not limited to) values over 100 percent (implying
the premiums doubled or more because of the adjustment), values more
than double the otherwise highest adjustment, or non-numerical
entries.
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For each of the two BHP States, we determined the median premium
adjustment for all silver level QHPs in that State, which we refer to
as the State
[[Page 4434]]
median adjustment. The PAF for each BHP State equaled one plus the
nationwide median adjustment divided by one plus the State median
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adjustment for the BHP State. In other words,
PAF = (1 + Nationwide Median Adjustment) / (1 + State Median
Adjustment).
To determine the PAF described above, we sought to collect QHP
information from QHP issuers in each State and the District of Columbia
to determine the premium adjustment those issuers made to each silver
level plan offered through the Exchange in 2018 to account for the end
of CSR payments. Specifically, we sought information showing the
percentage change that QHP issuers made to the premium for each of
their silver level plans to cover benefit expenditures associated with
the CSRs, given the lack of CSR payments in 2018. This percentage
change was a portion of the overall premium increase from 2017 to 2018.
According to our 2018 records, there were 1,233 silver-level QHPs
operating on Exchanges in 2018. Of these 1,233 QHPs, 318 QHPs (25.8
percent) responded to our request for the percentage adjustment applied
to silver-level QHP premiums in 2018 to account for the discontinuance
of HHS making CSR payments. These 318 QHPs operated in 26 different
States, with 10 of those States running State Exchanges (while we
requested information only from QHP issuers in States serviced by an
FFE, many of those issuers also had QHPs in State Exchanges and
submitted information for those States as well). Thirteen of these 318
QHPs were in New York (and none were in Minnesota). Excluding these 13
QHPs from the analysis, the nationwide median adjustment was 20.0
percent. Of the 13 QHPs in New York that responded, the State median
adjustment was 1.0 percent. We believed that this was an appropriate
adjustment for QHPs in Minnesota, as well, based on the observed
changes in New York's QHP premiums in response to the discontinuance of
CSR payments (and the operation of the BHP in that State) and our
analysis of expected QHP premium adjustments for States with BHPs. We
calculated the proposed PAF as (1 + 20 percent) / (1 + 1 percent) (or
1.20/1.01), which results in a value of 1.188.
We set the value of the PAF to 1.188 for all program years for 2018
through 2024, with limited exceptions.\19\ We believe that this value
for the PAF continues to reasonably account for the increase in silver-
level premiums experienced in non-BHP States that took effect after the
discontinuance of the CSR payments.
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\19\ See the Federal Funding Methodology for Program Year 2023
and Changes to the Basic Health Program Payment Notice Process at 87
FR 77722, 77731, 77737.
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Starting in 2023, we made one limited exception in setting the
value of the PAF as part of the 2023 final BHP Payment Notice.\20\ In
the case of a State in the first year of implementing a BHP, if the
State chooses to use prior year second lowest cost silver plan (SLCSP)
premiums to determine the BHP payment (for example, the 2025 premiums
for the 2026 program year), we set the value of the PAF to 1.00. In
this case, we believe that adjustment to the QHP premiums to account
for the discontinuation of CSR payments would be included fully in the
prior year premiums, and no further adjustment would be necessary.
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\20\ Id. at 77731-32.
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We proposed to make a change to the calculation of the PAF starting
in program year 2026. There are cases in which a State may not have
fully implemented BHP for a full program year. For example, a State may
operate BHP for only a portion of the year (in other words, less than
12 months); there may be other such cases in which a State would be
deemed to have partially implemented BHP for a program year.
For a State that initially only partially implemented BHP, it is
likely that, in the year (or years) when the BHP is only partially
implemented, the percentage adjustment to the premiums for the program
year to account for the discontinuation of CSR payments may be
significantly higher than the 1 percent adjustment we determined for
BHP States in 2018. In these cases, it is probable that QHP issuers
would include a larger premium adjustment (that is, greater than 1
percent) because more individuals would be eligible for CSRs (and
individuals eligible for relatively larger CSRs) would be enrolled in a
QHP on the Exchange, for part or all of the initial implementation
year. If premiums with a larger CSR adjustment are used as a basis for
calculating the BHP payments and the current value of the PAF (1.188)
is used, it is likely that this would ``double count'' a portion of the
adjustment and lead to an effective CSR adjustment over 20 percent.
For example, assume a State implements BHP for only 6 months in a
program year. As a result, QHP issuers may include a 10 percent
adjustment to the premiums to account for the discontinuation of the
CSR for the portion of the year when CSR eligible individuals would
have QHP coverage. The issuers would be liable for roughly half of the
CSR amounts they would have had to provide if there was no BHP in
place. Under the previous BHP payment methodology, if these premiums
that already partially account for CSRs are used to calculate the BHP
payment, we would increase the reference premium by 18.8 percent for
the PAF, leading to an effective increase of 30.68 percent (1.188
multiplied by 1.10 minus 1). This is significantly larger than the 20
percent adjustment we determined as the basis for the PAF for States
that have operated their BHP for more than 2 full program years.
Under the Secretary's general authority to account for all relevant
factors necessary to determine the value of the premium and cost-
sharing reductions that would have been provided to eligible
individuals now enrolled in BHP coverage \21\ and to avoid such an
overpayment, we proposed the following changes to the PAF:
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\21\ Section 1331(d)(3)(A)(ii) of the PHS Act.
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(1) If a State has fully implemented BHP and is using SLSCP
premiums for a year in which the BHP was fully implemented, then the
value of the PAF would remain 1.188, as described above.
(2) If a State is in the first year of implementing a BHP and the
State chooses to use prior year SLCSP premiums to determine the BHP
payment (for example, the 2025 premiums for the 2026 program year), we
set the value of the PAF to 1.00. This is the same approach described
in the 2023 final BHP Payment Notice.
(3) If a State is using SLCSP premiums from a year in which BHP was
not fully implemented, then the PAF is calculated as follows:
First, the State must determine the CSR adjustment that QHP issuers
included in the SLSCP premiums for individual market Exchange plans.
The State should identify the SLSCP in each region, as defined for the
Exchange. For each SLSCP, the State should determine the CSR adjustment
that the QHP issuer included in the premium. This may be done by (1)
reviewing any materials submitted by the QHP issuer describing the
calculation of the premium; or (2) requesting that the QHP issuer
provide the adjustment, or an estimate of the adjustment used in
calculating the premium. Second, the State should report the CSR
adjustments for the SLCSP for individual market Exchange
[[Page 4435]]
plans for each region in the State to CMS. Third, CMS will take this
percentage adjustment and calculate the PAF as 1.20 divided by 1 plus
the adjustment. For example, if the percentage adjustment for the CSR
is 5 percent, the PAF would be (1.20 / 1.05), or 1.143. The maximum
value of the PAF would be 1.188, and the minimum value of the PAF would
be 1.00.
We noted in the proposed rule (89 FR 82319) that this approach
would apply based on the premium year, not necessarily the program
year. If the State has fully implemented BHP but is using the prior
year premiums and BHP was not fully implemented in that year, this
modified approach would still apply. For example, if a State partially
implemented BHP in 2026 and fully implemented BHP in 2027, when
determining the BHP payments for 2027, we would then use 1.188 for the
value of the PAF if the State elected to use 2027 QHP premiums to
determine the payment; if the State elected to use the 2026 QHP
premiums, then we would use the modified PAF calculation described in
this section. CMS would make a determination of whether or not a BHP
was fully implemented based on a review of the Blueprint and provide
that determination to the State.
We also noted in the proposed rule (89 FR 82319) that we considered
other approaches to the modified PAF. We considered whether or not CMS
would collect data on the underlying CSR adjustment in the SLCSP
premiums; however, we believe that such activities fall within States
roles as BHP administrators and States are better able to work with QHP
issuers to administer this data collection process. We also considered
if States should survey all QHP issuers (not just those with the SLSCP
premium). We believe that only using the CSR adjustment from individual
market Exchange plans with the SLCSPs would be a more reasonable
approach and would minimize the burden on States and QHP issuers by
only requiring the State to work with one issuer in each region, as
opposed to all issuers in each region. We also considered whether or
not we should make further changes to the PAF, but we believe that this
approach balances maintaining accurate BHP payments with stability and
limited burden for BHP States. We requested comments on this approach
or alternative approaches to calculating the PAF.
After consideration of comments and for the reasons outlined in the
proposed rule and this final rule, including our responses to comments,
we are finalizing the approach to calculating the PAF as proposed. We
summarize and respond to public comments received on the proposed
change to the calculation of the PAF below.
Comment: Several commenters were supportive of the change to adjust
the PAF for BHP in program years in which States have not fully
implemented BHP.
Response: We appreciate these comments in support of the proposed
change.
Comment: One commenter noted ``relying on silver CSR loads from
2018 in the development of the population adjustment factor may not
reflect actual silver loads because these 2018 premiums are based on
experience from a time when CSRs were fully funded,'' while also
acknowledging there are other factors ``including state-specified
loads, the impact of States' 1332 waivers, the effects of the COVID-19
pandemic and related Medicaid coverage policies, and other factors''
that may affect these adjustments in States.
Response: We acknowledge that there are limitations to relying on
the 2018 CSR loads for calculation of the PAF. We also agree that other
factors that may affect CSR loads and these factors complicate updating
the PAF. We did not propose and are not making any changes to the
standard calculation of the PAF in this final rule.
2. Technical Clarification for Calculation of BHP Payment Rates in
Cases of Multiple Second Lowest Cost Silver Plan Premiums in an Area
The BHP payment rates are based on the second lowest cost silver
plan premium among individual market QHPs operating on the Exchanges in
each rating area (or county) in a State. This is the basis for the
reference premium (or RP) in the BHP payment methodology.
In general, we expect that each county would have a unique second
lowest cost silver plan premium, which is used to calculate the payment
rates for residents of that county for the BHP payment. However, in
some cases, we have found that States may have more than one second
lowest cost silver plan within a county. This may occur in cases where
the State has allowed QHPs to operate in only a portion of the county
instead of the entire county on the Exchange.
In our previous BHP payment methodologies, we do not describe how
such a case would be handled for calculating BHP payments. In our
technical guidance to States,\22\ we have instructed States to report
the premiums for the second lowest cost silver plan operating in the
largest part of the county as measured by total population.
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\22\ CMS. (September 15, 2023). Basic Health Program; Federal
Funding Methodology for Program Year 2024. Accessed at: https://www.medicaid.gov/federal-policy-guidance/downloads/cib091523.pdf.
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Under the Secretary's general authority to account for all relevant
factors necessary to determine the value of the premium and cost-
sharing reductions that would have been provided to eligible
individuals now enrolled in BHP coverage,\23\ for the 2026 payment
methodology and all subsequent years, we proposed to clarify that in
cases where there are more than one second lowest cost silver plans in
a county, the BHP payment would be based on the premium of the second
lowest cost silver plan applicable to the largest portion of the county
as measured by total population. We sought comment on this approach.
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\23\ Section 1331(d)(3)(A)(ii) of the PHS Act.
---------------------------------------------------------------------------
After consideration of comments and for the reasons outlined in the
proposed rule and this final rule, including our responses to comments,
we are finalizing this policy as proposed. We summarize and respond to
public comments received on the proposed clarification of the correct
premiums to use below.
Comment: Several commenters were supportive of the clarification
for which second lower cost silver plan premiums to use in these cases
for the purposes of calculating the Federal BHP payment.
Response: We appreciate these comments in support of the proposed
change.
Comment: Two commenters noted that in one State that has operated a
BHP, the State is using a different silver plan premium (the third
lowest cost silver plan premium) in cases when there are two or more
second lowest cost silver plan premiums in an area. Commenters noted
that using the proposed approach would present operational challenges
for the State. The commenters requested flexibility on this in the BHP
payment methodology.
Response: We appreciate the comments and understand that there may
be some operational issues; however, we believe that these issues can
be easily addressed, and we note that other BHP States have been able
to determine premiums in accordance with these requirements. In
addition, we do not believe there is any basis to use any premiums
other than the second lowest cost silver plans (even if there are two
or more in an area) for the purposes of the BHP payment methodology.
[[Page 4436]]
B. 45 CFR Part 153--Standards Related to Reinsurance, Risk Corridors,
and 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 issuers of lower-than-average risk,
risk adjustment covered plans to issuers of 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.\24\ HHS did not receive any
requests from States to operate risk adjustment for the 2026 benefit
year. Therefore, HHS will operate risk adjustment in every State and
the District of Columbia for the 2026 benefit year.
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\24\ See also 42 U.S.C. 18041(c)(1).
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1. Sequestration
In accordance with the OMB Report to Congress on the Joint
Committee Reductions for Fiscal Year 2025, the HHS-operated risk
adjustment program is subject to the fiscal year 2025
sequestration.\25\ The Federal Government's 2025 fiscal year began on
October 1, 2024. Therefore, the HHS-operated risk adjustment program is
sequestered at a rate of 5.7 percent for payments made from fiscal year
2025 resources (that is, funds collected during the 2025 fiscal year).
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\25\ OMB. (2024). OMB Report to the Congress on the BBEDCA 251A
Sequestration for Fiscal Year 2025. https://www.whitehouse.gov/wp-content/uploads/2024/03/BBEDCA_251A_Sequestration_Report_FY2025.pdf.
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HHS, in coordination with OMB, has determined that, under section
256(k)(6) of the Balanced Budget and Emergency Deficit Control Act of
1985 (BBEDCA),\26\ as amended, and the underlying authority for the
HHS-operated risk adjustment program, the funds that are sequestered in
fiscal year 2025 from the HHS-operated risk adjustment program will
become available for payment to issuers in fiscal year 2026 without
further Congressional action. If the 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.
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\26\ Public Law 99-177, 99 Stat. 1037 (1985).
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Additionally, we note that the Infrastructure Investment and Jobs
Act \27\ amended section 251A(6) of the BBEDCA and extended
sequestration for the HHS-operated risk adjustment program through
fiscal year 2031 at a rate of 5.7 percent per fiscal year.\28\
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\27\ Public Law 117-58, 135 Stat. 429 (2021).
\28\ 2 U.S.C. 901a.
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One comment was received on this section of the proposed rule that
acknowledges the fiscal year 2025 sequestration rate. Therefore, after
consideration of this comment and for reasons outlined in the proposed
rule and this final rule, the HHS-operated risk adjustment program will
sequester payments made from fiscal year 2025 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 HCCs) producing a risk score. The State payment transfer
formula \29\ that is part of the HHS Federally certified 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,\30\ and prescription drug categories (RXCs)
beginning with the 2018 benefit year.\31\ 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 \32\ applicable
to certain severity and transplant HCCs.\33\
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\29\ The State payment transfer formula refers to 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.
\30\ For the 2017 through 2022 benefit years, there was a set of
11 binary enrollment duration factors in the adult models that
decreased monotonically from 1 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.
\31\ 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.
\32\ See Table 4 in the proposed rule for a list of draft
factors in the adult models, and Table 5 in the proposed rule for a
list of draft factors in the child models.
\33\ See 87 FR 27224-28. Also see Table 6 in the proposed rule.
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Infant risk scores are determined by inclusion in one of 25
mutually exclusive groups, based on the infant's maturity and the
severity of diagnoses. If applicable, the risk score for adults,
children, or infants is multiplied by a CSR adjustment 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, 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 adjustment models predict
average group costs to account for risk across plans, in keeping with
the Actuarial Standards Board's Actuarial Standards of Practice for
risk classification.
a. Data for HHS Risk Adjustment Model Recalibration for the 2026
Benefit Year
In the HHS Notice of Benefit and Payment Parameters for 2026
proposed rule (89 FR 82308, 82320 through 82321), we proposed to
recalibrate the 2026 benefit year HHS risk adjustment models with the
2020, 2021, and 2022 enrollee-level EDGE data. In the proposed rule, we
noted the history of recalibrating the risk adjustment models, the
transition to use of enrollee-level EDGE data for this purpose, and why
we use 3 years of blended data for recalibration.\34\ Given this
history and reasoning, we proposed to determine coefficients for the
2026 benefit year based on a blend of separately solved coefficients
from the 2020, 2021, and 2022 benefit years' enrollee-level EDGE data,
with the costs of services identified from the data trended between the
relevant year of data and the 2026 benefit year.\35\ We sought
[[Page 4437]]
comment on the proposal to determine 2026 benefit year coefficients for
the HHS risk adjustment models based on a blend of separately solved
coefficients from the 2020, 2021, and 2022 enrollee-level EDGE data.
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\34\ See 89 FR 82308, 82320-21.
\35\ 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
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 2026 benefit year models are appropriate for the most recent
changes in cost of care that we have seen.
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After consideration of comments and for the reasons outlined in the
proposed rule and our responses to comments, we are finalizing the
approach to use the 2020, 2021 and 2022 enrollee-level EDGE data to
calculate the 2026 benefit year coefficients 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 2026 benefit year below. Because we were unable to complete the
calculations for the final coefficients in time to publish them in this
final rule, we will publish the final 2026 benefit year coefficients in
guidance after the publication of this final rule consistent with Sec.
153.320(b)(1)(i). We will release this guidance by the spring of 2025,
in time for rate setting for the 2026 benefit year.
Comment: A few commenters supported utilizing the 2020, 2021, and
2022 enrollee-level EDGE data to recalibrate the HHS risk adjustment
models for the 2026 benefit year as proposed. Other commenters opposed
or noted concern about using these years of enrollee-level EDGE data
due to concerns about the potential impact of the COVID-19 PHE on 2020
and 2021 benefit year enrollee-level EDGE data.
Response: We are finalizing the use of the 2020, 2021, and 2022
enrollee-level EDGE data to recalibrate the 2026 benefit year HHS risk
adjustment models as proposed. As described in the proposed rule (89 FR
82308, 82320) and 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
recalibration of the HHS risk adjustment models.\36\ 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, as described in the 2026
Payment Notice proposed rule,\37\ 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. For example, in the 2024 Payment Notice proposed rule \38\ and
final rule \39\ we discussed our analysis of the 2020 benefit year data
to identify possible impacts of the COVID-19 PHE.\40\ Likewise, when we
conducted 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.\41\ We did not find any notable anomalous trends, and determined
that deviations identified in 2020 or 2021 benefit year data were
within the expected level for any individual data year. Further, we
believe the blending of the coefficients from the separately solved
models for benefit years 2020 and 2021 with benefit year 2022 for
purposes of the 2026 benefit year model recalibration sufficiently
stabilizes any differences resulting from the COVID-19 PHE in the 2020
or 2021 datasets. As the 2020 and 2021 benefit years' enrollee-level
EDGE data used to recalibrate the 2025 benefit year risk adjustment
models are identical to the 2020 and 2021 enrollee-level EDGE data used
to recalibrate the 2026 benefit year risk adjustment models, the
analyses and conclusions discussed in prior rulemaking equally apply to
the recalibration of the risk adjustment models for the 2026 benefit
year.
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\36\ 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 potential impact.
\37\ 89 FR 82308, 82320.
\38\ 87 FR 78214-18.
\39\ 88 FR 25749-54.
\40\ This analysis included assessing how the 2020 benefit year
enrollee-level EDGE recalibration data compares to 2019 benefit year
enrollee-level EDGE recalibration data.
\41\ See the 2025 Payment Notice Final Rule, 89 FR 26218, 26236-
37.
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Comment: One commenter noted decreases in the risk adjustment model
R-squared values for the 2022 benefit year enrollee-level EDGE data
relative to prior benefit years as presented in Table 10 of the
proposed rule.\42\ This commenter requested information regarding any
analysis HHS has conducted concerning the reduction in this model
performance statistic.
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\42\ 89 FR 82308, 82347.
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Response: First, as demonstrated by Table 10 of the proposed
rule,\43\ each individually solved model that contributes to the
blended HHS risk adjustment models has an R-squared statistic within
the expected range for concurrent claims-based risk scoring models \44\
such as the models used for the HHS-operated risk adjustment program.
Nevertheless, we are aware of and intend to continue monitoring the
slight decrease in the R-squared values for the HHS risk adjustment
models over the past few years of enrollee-level EDGE data which
indicates that the models are explaining slightly less of the variation
in plan liability for the 2022 benefit year enrollee-level EDGE data
compared to prior benefit years of enrollee-level EDGE data. In our
quality control assessments of the recalibration process for the
proposed draft 2026 benefit year coefficients, we explored two possible
explanations for this decrease in R-squared values--a shift in
enrollment and the presence of outlier enrollees with very high costs
in the enrollee-level EDGE data.
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\43\ See 89 FR 82308, 82347.
\44\ See 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.
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Our analysis found that the largest percentage decreases in R-
squared values between the 2022 benefit year and the 2019 (or 2020)
\45\ benefit year of enrollee-level EDGE data for adult enrollees were
for enrollees without HCCs, enrollees with only 1 month of enrollment,
and new enrollees (that is, enrollees new to an issuer, whose system
identifier was not present for the issuer in the prior year).\46\ We
interpret these results to be consistent with a hypothesis that new
enrollees and a greater proportion of relatively healthier enrollees in
2022 were partially
[[Page 4438]]
responsible for a decrease in model R-squared values between the 2022
benefit year and the 2019 through 2021 benefit years of enrollee-level
EDGE data, in that the R-squared value decreases are largest for
subgroups that are likely to contain more new enrollees or are
difficult to predict, for example, new enrollees to an issuer and
enrollees without HCCs.
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\45\ HHS was unable to incorporate an analysis of new enrollees
for the 2019 benefit year of enrollee-level of EDGE data at the time
of the analysis of R-squared changes. As such, R-squared changes for
new enrollees only considered the difference between 2020 benefit
year and 2022 benefit year R-squared values.
\46\ Ibid.
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Likewise, our analysis found that the removal of outlier enrollees
always resulted in an increase in R-squared values and the impacts were
notably higher for 2020, 2021, and 2022 enrollee-level EDGE data than
for 2019 enrollee-level EDGE data. We interpret these results to imply
that recent data years have exhibited more influential high-cost
enrollees. However, we do not see the presence of cost outliers in the
enrollee-level EDGE data to be problematic at this time because we
generally expect the number of cost outliers to vary from year to year,
and we did not find evidence that suggests a clear data error exists
related to any of these outliers.
In short, although we were able to identify likely contributing
factors to the observed slight decrease in R-squared values and will
continue to monitor the R-squared values in the future, the R-squared
values for 2026 benefit year risk adjustment model recalibration remain
high and within the expected range of R-squared values for the type of
model used for the HHS-operated risk adjustment program. We remain
confident the HHS risk adjustment models continue to operate
effectively and appropriately predict plan liability for an average
enrollee.
After consideration of comments and for the reasons outlined in the
proposed rule, this final rule, the 2024 Payment Notice, the 2025
Payment Notice,\47\ and our responses to comments above, we are
finalizing this approach as proposed. However, to account for the
incorporation of the human immunodeficiency virus (HIV) pre-exposure
prophylaxis (PrEP) affiliated cost factor (ACF) with the generic drug
exclusion and hierarchy specifications finalized in this rule, we were
unable to complete the calculations for the final coefficients in time
to publish them in this final rule. Therefore, consistent with Sec.
153.320(b)(1)(i), we are finalizing the use of the 2020, 2021 and 2022
enrollee-level data to calculate the 2026 benefit year coefficients and
will publish the final coefficients for the 2026 benefit year in
guidance after the publication of this final rule. We will release this
guidance in time for rate setting for the 2026 benefit year.
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\47\ See, supra, notes 22-24, and 26.
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b. Pricing Adjustment for the Hepatitis C Drugs
In the HHS Notice of Benefit and Payment Parameters for 2026
proposed rule (89 FR 82308, 82321), we proposed that beginning with the
2026 benefit year, we would begin phasing out the market pricing
adjustment \48\ to the plan liability associated with Hepatitis C drugs
in the HHS risk adjustment models and start trending Hepatitis C drugs
consistent with the other drugs \49\ in the HHS risk adjustment models.
Since the 2020 benefit year HHS risk adjustment models, we have
included 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.\50\ The purpose of this market
pricing adjustment was 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.\51\ For the reasons
and history described in the proposed rule, we proposed to adopt a
multi-year phase out approach to transition the Hepatitis C drugs'
trending to move away from the current unique market pricing adjustment
for these drugs and align Hepatitis C drugs' trending with the trending
approach for specialty drugs.\52\ To begin this transition for the 2026
benefit year HHS risk adjustment models, we proposed to apply the
specialty drug trend to 1 year of trending Hepatitis C treatment costs
(that is, the trend from 2025 to 2026) for all 3 years of enrollee-
level EDGE data used in recalibration (that is, 2020, 2021, and 2022
enrollee-level EDGE data). As such, 2026 benefit year recalibration
data for Hepatitis C would reflect 1 year of growth in the cost of
treatment at the same rate as other specialty drugs. To continue the
transition of phasing out the Hepatitis C drug pricing adjustment in
future benefit years' annual model recalibration, we proposed to
annually increase the number of years for which we would use the
specialty drug trend and decrease the number of years that would use
the unique market pricing adjustment for Hepatitis C drugs. We proposed
to continue this approach until such time as all enrollee-level EDGE
data years used for the recalibration of the HHS risk adjustment models
are from benefit year 2025 or later, at which time the specialty drug
cost trend would be fully applied to Hepatitis C drug costs consistent
with other specialty drugs in the HHS risk adjustment models and we
would stop applying the separate market pricing adjustment for
Hepatitis C drugs as part of the annual model recalibration.
---------------------------------------------------------------------------
\48\ For discussion relating to the Hepatitis C Pricing
Adjustment for previous benefit years, see, for example, 89 FR
26218, 26237-38.
\49\ See 81 FR 12204, 12218-19.
\50\ The Hepatitis C drugs market pricing adjustment to plan
liability is applied for all enrollees taking Hepatitis C drugs in
the data used for recalibration.
\51\ See Milligan, J. (2018). A perspective from our CEO: Gilead
Subsidiary to Launch Authorized Generics to Treat HCV. Gilead.
https://www.gilead.com/news-and-press/company-statements/authorized-generics-for-hcv. See also AbbVie. (2017). AbbVie Receives U.S. FDA
Approval of MAVYRETTM (glecaprevir/pibrentasvir) for the Treatment
of Chronic Hepatitis C in All Major Genotypes (GT 1-6) in as Short
as 8 Weeks. Abbvie. https://news.abbvie.com/news/abbvie-receives-us-fda-approval-mavyret-glecaprevirpibrentasvir-for-treatment-chronic-hepatitis-c-in-all-major-genotypes-gt-1-6-in-as-short-as-8-weeks.htm. See also Silseth, S., & Shaw, H. (2021). Analysis of
prescription drugs for the treatment of hepatitis C in the United
States [White paper]. Milliman. https://www.milliman.com/-/media/milliman/pdfs/2021-articles/6-11-21-analysis-prescription-drugs-treatment-hepatitis-c-us.ashx.
\52\ See 89 FR 82308, 82321-23.
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We sought comment on our proposal to begin to phase out the
Hepatitis C drugs market pricing adjustment and trend Hepatitis C drugs
consistent with other specialty drugs starting with the annual
recalibration of the 2026 benefit year HHS risk adjustment models.
After consideration of comments and for the reasons outlined in the
proposed rule and this final rule, including our responses to comments,
we are finalizing this policy as proposed. We summarize and respond to
public comments received on the proposal to begin to phase out the
market pricing adjustment for Hepatitis C drugs starting with the 2026
benefit year below.
Comment: Many commenters supported the proposal to begin to phase
out the market pricing adjustment and trend Hepatitis C drugs
consistent with other specialty drugs starting with the annual
recalibration of the 2026 benefit year HHS risk adjustment models. Many
of these commenters agreed with HHS' assessment that the cost trend for
Hepatitis C drugs has begun to rise alongside the expected cost of
other specialty drugs. A couple of commenters recommended close
monitoring of costs and utilization of Hepatitis C drugs to ensure that
access to these drugs is not interrupted for enrollees.
Response: We are finalizing the phasing out of the market pricing
adjustment for Hepatitis C drugs starting with the 2026 benefit year as
proposed. We agree with commenters that the cost
[[Page 4439]]
trend for Hepatitis C drugs has changed and resulted in the need to
reexamine the treatment of these drugs in the HHS risk adjustment
models, including consideration of phasing out the market pricing
adjustment for these drugs. We also note that the policy adopted in
this final rule to phase out the market pricing adjustment for these
drugs will allow Hepatitis C drug costs to increase as appropriate
alongside other specialty drugs in the simulation of plan liability
used for annual HHS risk adjustment model recalibration. Starting this
transition beginning with the 2026 benefit year and appropriately
accounting for price increases of Hepatitis C drugs in the HHS risk
adjustment models alongside other specialty drugs in the simulation of
plan liability responds to these observed emerging trends and will
better reflect the actuarial risk of an issuer's population, especially
for issuers that attract a large number of enrollees using Hepatitis C
drugs, helping to prevent adverse selection and the associated perverse
incentives. As such, we are finalizing the policy to begin phasing out
of the Hepatitis C market pricing adjustment starting with the 2026
benefit year recalibration of the HHS risk adjustment models as
proposed, but we will also continue to monitor costs and utilization of
drugs, including Hepatitis C drugs, as part of our ongoing efforts to
examine ways to continually improve the HHS risk adjustment models for
future benefit years.
Comment: One commenter requested that HHS continue to review the
costs associated with specialty drugs and consider whether market
pricing adjustments may be warranted for GLP-1 drugs, gene therapies,
or other unique, high-cost drugs that may drive the cost of treating a
particular condition in a given benefit year significantly higher than
those reflected in the enrollee-level EDGE data years used in
recalibration for that benefit year. One commenter noted recently
available expensive gene therapies for sickle cell disease as an
example of this phenomenon and requested that HHS consider a market
pricing adjustment for sickle cell disease treatments.
Response: We did not propose to change the treatment of high-cost
drugs, such as GLP-1 drugs, sickle cell disease treatments, or other
gene and cellular therapies, in the 2026 benefit year HHS risk
adjustment models and are not finalizing such updates in this final
rule. As we discussed in the 2022 Payment Notice \53\ and 2025 Payment
Notice,\54\ we recognize that the data used to recalibrate the HHS risk
adjustment models lag by several benefit years behind the applicable
benefit year for risk adjustment and therefore may 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 continue 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.
---------------------------------------------------------------------------
\53\ See 86 FR 24140, 24163.
\54\ See 89 FR 26218, 26247-48.
---------------------------------------------------------------------------
With specific regard to new gene therapies for sickle cell disease,
when we were previously analyzing the changes to the sickle cell
disorder related HCCs in the 2025 benefit year risk adjustment
models,\55\ we considered whether to add an RXC for existing high-cost
sickle cell drugs and new gene therapy treatments, but determined 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 until
December 2023.\56\ Therefore, the first full year of claims data in
which these new sickle cell disease treatments may be reflected will
not be available until the 2024 benefit year enrollee-level EDGE data
is available. We therefore continue to find that we do not have enough
information at the present time to account for these treatments in the
HHS risk adjustment models because of the general lack of data on the
utilization and cost 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 market
pricing adjustments or other changes to the risk adjustment models to
account for these treatments through notice-and-comment rulemaking, as
appropriate. 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.\57\
---------------------------------------------------------------------------
\55\ Ibid.
\56\ See https://www.fda.gov/news-events/press-announcements/fda-approves-first-gene-therapies-treat-patients-sickle-cell-disease.
\57\ For example, the new sickle cell gene therapy treatments
are expected to exceed the high-cost risk pool payment threshold.
See, DeMartino P, Haag MB, Hersh AR, Caughey AB, Roth JA. A Budget
Impact Analysis of Gene Therapy for Sickle Cell Disease: The
Medicaid Perspective. JAMA Pediatr. 2021 Jun 1;175(6):617-623. doi:
10.1001/jamapediatrics.2020.7140. Erratum in: JAMA Pediatr. 2021 Jun
1;175(6):647. PMID: 33749717; PMCID: PMC7985816. Accessed at https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7985816/.
---------------------------------------------------------------------------
Considering the absence of adequate data, we did not propose and
are not finalizing a new market pricing adjustment or other model
adjustments for sickle cell gene therapy drugs for the 2026 benefit
year. We intend to continue to assess sickle cell gene therapy drugs
and other high-cost drugs to consider whether model updates for future
benefit years are warranted.
We also intend to work with interested parties to continue to
analyze plan liability for sickle cell disease and the impact of gene
and cell therapy treatments, as well as explore the availability of
alternative data sources that could be used to monitor utilization and
costs outside of currently available enrollee-level EDGE data.
As explained in the 2025 Payment Notice (89 FR 26249), we also
recently examined the treatment of GLP-1 drugs in the HHS risk
adjustment models using the 2022 benefit year enrollee-level EDGE data
and found that, at this time, a change was not warranted to the current
mapping of GLP-1 drugs to RXC 07 (Anti Diabetic Agents, Except Insulin
and Metformin Only).\58\ We understand GLP-1 drug utilization patterns
are changing and will continue to assess these trends as additional
benefit years of enrollee-level EDGE data become available for
potential targeted refinements to the HHS risk adjustment models in
future benefit years, as appropriate.
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\58\ 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.
---------------------------------------------------------------------------
Comment: One commenter requested additional information on how HHS
defines generic and specialty drugs and what trend assumptions HHS uses
for each of these two categories, asserting that this information would
help interested parties better evaluate the proposal to begin to phase
out the Hepatitis C market pricing adjustment against costs experienced
by issuers.
Response: Since the 2017 benefit year, we have subdivided
expenditures into traditional drugs, specialty drugs, medical services,
and preventive
[[Page 4440]]
services and determine trend factors separately for each category of
expenditure.\59\ In determining these trend factors, we consult our
actuarial experts, review relevant URRT submission data, analyze
multiple years of enrollee-level EDGE data, and consult NHEA data as
well as external reports and documents \60\ published by third parties.
As described in the 2024 Payment Notice,\61\ in this process, we aim to
determine trends that reflect changes in cost of care rather than gross
growth in expenditures. We believe the trend factors we used for each
expenditure category for the 2026 benefit year are appropriate for the
most recent changes in cost of care that we have seen in the market. We
further note that, for the purposes of annual risk adjustment model
recalibration activities, our definitions of what drugs qualify as
either traditional (for example, low-cost and generic drugs) or
specialty are also informed by consultations with actuarial experts and
by reviewing price data for these drugs. Specific thresholds and
criteria may vary according to the class of drugs or the conditions
they are intended to treat, but we generally use the Part D specialty-
tier cost threshold, which is updated periodically, to differentiate
between traditional and specialty drugs.\62\
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\59\ See 81 FR 12218. See also the 2016 Risk Adjustment White
Paper, available at: https://www.cms.gov/cciio/resources/forms-reports-and-other-resources/downloads/ra-march-31-white-paper-032416.pdf.
\60\ 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 2024'' by MercerMarsh Benefits, available at https://www.marsh.com/na/services/employee-health-benefits/insights/health-trends-report.html.
\61\ See 88 FR 25740, 25754-55.
\62\ For example, the specialty-tier cost threshold specified in
the Contract Year (CY) 2023 Final Part D Bidding Instructions
(available at: https://www.cms.gov/files/document/2023partdbiddinginstructions.pdf) will be used to divide
prescription drug claims into traditional versus specialty drugs for
2023 enrollee-level EDGE data when they become available.
---------------------------------------------------------------------------
After consideration of comments and for the reasons outlined in the
proposed rule and this final rule, including our responses to comments
above, we are finalizing the proposal to begin phasing out the market
pricing adjustment for Hepatitis C drugs starting with the 2026 benefit
year, as proposed. However, to account for the incorporation of the
PrEP ACF with the generic drug exclusion and hierarchy specifications
finalized in this final rule, we were unable to complete the
calculations for the final coefficients in time to publish them in this
final rule. Therefore, consistent with Sec. 153.320(b)(1)(i), we will
publish the final coefficients for the 2026 benefit year in guidance
after the publication of this final rule. We will release this guidance
in time for rate setting for the 2026 benefit year.
c. Inclusion of Pre-Exposure Prophylaxis (PrEP) in the HHS Risk
Adjustment Adult and Child Models as an Affiliated Cost Factor (ACF)
In the HHS Notice of Benefit and Payment Parameters for 2026
proposed rule (89 FR 82308, 82323), we proposed to incorporate human
immunodeficiency virus (HIV) pre-exposure prophylaxis (PrEP) as a
separate, new type of factor called an Affiliated Cost Factor (ACF) in
the HHS risk adjustment adult and child models starting with the 2026
benefit year. As proposed, the change would reflect an evolution in our
approach to defining the factors used in the HHS risk adjustment models
to include a factor that is not indicative of an active medical
condition and would change our current policy that models the costs of
PrEP alongside other preventive services.
As explained in the proposed rule (89 FR 82324), as a general
principle, we currently incorporate preventive services (including PrEP
\63\) into the HHS risk adjustment models to ensure that 100 percent of
the cost of those services are reflected in the simulation of plan
liability. In the simulation of plan liability, services are only
counted as preventive when they occur in the recommended circumstances
(for example, age) to the extent we can identify such circumstances
from enrollee-level EDGE data. In addition to PrEP drugs, like other
preventive services,\64\ ancillary services related to PrEP care (for
example, HIV screenings) qualify as preventive services and as such are
also currently calibrated at 100 percent plan liability in the
recalibration of the HHS risk adjustment adult and child models.\65\
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\63\ See 85 FR 28164, 29185-87.
\64\ For example, colonoscopies typically require a combination
of several services between the drugs needed for the colonoscopy and
the professional and institutional claims for the visit and
procedure itself. Likewise, contraception coverage often requires a
doctor's visit to obtain a prescription for the contraception.
\65\ See 86 FR 24140, 24164.
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However, as a part of our commitment to consider ways to
continually improve the HHS risk adjustment models, we continued to
monitor and assess different ways to more accurately assess the
actuarial risk and costs associated with PrEP in the HHS risk
adjustment models. In this regard, we stated in the proposed rule (89
FR 82324) that because of PrEP's high costs relative to other
preventive services, PrEP services can pose a unique risk of adverse
selection to the extent that utilization of PrEP services differs
between plans. Our analysis of 2022 benefit year enrollee-level data
\66\ found that the costs of PrEP services remained high, in contrast
to our initial assumptions about expected pricing decreases as generics
entered the market, and that there are statistically significant,
substantial differences in PrEP prevalence between issuers in rating
areas where PrEP use is most common, indicating that the addition of a
PrEP factor in the adult and child risk adjustment models would be
appropriate and would have a meaningful impact on risk adjustment State
transfers. Our analysis also found that other considerations that
helped inform the current approach (such as the expected decrease in
costs as generics entered the market and gained market share) have not
addressed the uniquely high costs of PrEP as a preventive service as we
previously expected. For these reasons, we proposed to incorporate a
non-RXC and non-HCC model factor for PrEP in the HHS risk adjustment
adult and child models to capture differences in costs for PrEP
utilizers relative to the average enrollee. To signify that the
proposed new factor would not indicate the presence of a specific
active medical condition, we referred to the proposed new type of
factor as an ``affiliated cost factor'' (ACF), thereby distinguishing
this new type of factor from RXCs and HCCs. Furthermore, we proposed a
set of seven principles to guide our development of any new ACF
variable.
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\66\ Prior to the 2021 Benefit Year, Plan ID and Rating Area
were not included as part of the enrollee-level data extracted from
issuers' EDGE data submissions. As finalized in the 2023 Payment
Notice (87 FR 27208, 27241-51), we now extract these fields as part
of the enrollee-level EDGE dataset and are able to include them in
our analyses. As such, this recent analysis reflects our earliest
opportunity to reliably detect differences in prevalence within
rating areas for any medical and prescription drug expenditures,
including PrEP.
---------------------------------------------------------------------------
We stated in the proposed rule (89 FR 82324) that in developing an
ACF variable reflecting PrEP, we considered whether PrEP satisfies
those principles and what approaches were necessary to appropriately
balance all seven principles. As described in the proposed rule, a PrEP
ACF would easily satisfy the principles of clinical meaningfulness and
specificity,
[[Page 4441]]
meaningful and predictable costs,\67\ sufficient sample size, and low
risk of inappropriate prescribing. However, we also stated in the
proposed rule that that the creation of a PrEP ACF variable would
require further careful consideration in assessing the other three
proposed principles: specifically, the principles of hierarchical
factor definitions, monotonicity, and mutually exclusive
classification.
---------------------------------------------------------------------------
\67\ As discussed later in this section, it may be appropriate
to remove generic drugs to ensure homogeneity of costs within a PrEP
ACF.
---------------------------------------------------------------------------
We stated in the proposed rule (89 FR 82327) that to address the
HHS risk adjustment adult modeling concerns we identified regarding
these three principles; we considered two alternative approaches.
First, we could modify the current definition of RXC 1 (Anti-HIV
Agents) by treating PrEP NDCs as RXC 1 NDCs in limited circumstances
based on individual enrollee characteristics. Operationally, to capture
these cases, the adult enrollees with a PrEP prescription claim would
receive the RXC 1 flag instead of the ACF only in cases where the
enrollee has both a PrEP prescription claim and an HIV diagnosis but
does not have a typical RXC 1 prescription claim because the enrollee
did not begin treatment for HIV, or because their treatment medication
was provided at no cost to the issuer and therefore no claim was
submitted to the issuer's EDGE server. Alternatively, we explained we
could place the PrEP ACF in a hierarchy with RXC 1 but define no
hierarchical restrictions between PrEP and HCC 1 (HIV/AIDS). This
alternative would allow adult enrollees without RXC 1 to receive the
PrEP ACF along with HCC 1 in cases where the enrollee has both a PrEP
prescription claim and an HCC 1 diagnosis in their medical records for
the benefit year. We solicited comments on addressing these hierarchy,
monotonicity, and mutual exclusivity concerns, and both alternative
approaches designed to address those concerns.
We also sought comment on our proposal to create a new ACF category
of model factors for incorporation into the HHS risk adjustment models
to account for unique medical expenses or services (such as PrEP) that
do not meet the criteria to qualify as HCC or RXC factors, but impact
the actuarial risk presented to issuers of risk adjustment covered
plans. In addition, we sought comment on our proposal to modify the
treatment of PrEP in the HHS risk adjustment adult and child models
beginning with the 2026 benefit year, as well as how to
methodologically define a potential ACF category of model factors that
accounts for PrEP (or other unique medical expenses or services) and
what other considerations should be part of the analysis and modeling
for this proposed new category of model factors (such as the
availability of drug rebates \68\ or differences in medication
adherence for PrEP). Furthermore, we sought comment regarding the
principles to guide inclusion of potential ACF factors and the
alternative approaches for defining a PrEP ACF's hierarchical
relationship to HCC 1 and RXC1 to address the concerns related to
hierarchical factor definitions, violations of monotonicity, and
violations of mutually exclusive classification in the HHS risk
adjustment adult models.
---------------------------------------------------------------------------
\68\ For example, we believe there are likely substantial
rebates for Descovy that are not captured in issuers' EDGE data
submissions. See, for example, Dickson, S., Gabriel, N., and
Hernandez, I. Estimated changes in price discounts for tenofovir-
inclusive HIV treatments following introduction of tenofovir
alafenamide. AIDS. 2022 Dec 1;36(15):2225-2227. doi: 10.1097/
QAD.0000000000003401. See, also, Krakower, D. and Marcus, J.L.
Commercial Determinants of Access to HIV Preexposure Prophylaxis.
JAMA Network Open. 2023;6(11):e2342759. doi: 10.1001/
jamanetworkopen.2023.42759. See, also, McManus, K.A., et al.
Geographic Variation in Qualified Health Plan Coverage and Prior
Authorization Requirements for HIV Preexposure Prophylaxis. JAMA
Network Open. 2023;6(11):e2342781. doi: 10.1001/
jamanetworkopen.2023.42781.
---------------------------------------------------------------------------
Additionally, we solicited comments on whether generic versions of
PrEP medication should be excluded from the definition of the proposed
ACF for PrEP. As we stated in the proposed rule (89 FR 82326), we found
that a large disparity exists between the costs of generic PrEP
medication and the costs of brand name PrEP medication.\69\ We
explained that due to this disparity, if we include all PrEP
medications in the definition of an ACF, the estimated coefficient
would likely lead to overprediction for enrollees receiving generic
medications and underprediction for enrollees receiving brand name
medications. Therefore, an exclusion of low-cost generics from the PrEP
ACF could improve predictions for enrollees receiving either generic or
brand name PrEP medication and has precedent in our adoption of other
factors in the HHS risk adjustment models.\70\
---------------------------------------------------------------------------
\69\ See, supra, note 53.
\70\ We previously excluded generic drugs from RXC 9, Immune
Suppressants and Immunomodulators, due to concern over patient
access and health plan selection behavior. See the 2019 Payment
Notice (83 FR 16942).
---------------------------------------------------------------------------
Lastly, we sought comment concerning whether there are any similar
medical expenses or services that we should consider for potential new
ACFs alongside PrEP.
After consideration of comments and for the reasons outlined in the
proposed rule and this final rule, including our responses to comments,
we are finalizing the addition of PrEP as an ACF in the HHS risk
adjustment adult and child models, but are excluding generic versions
of PrEP from the ACF at this time, and are placing the PrEP ACF in the
adult models in a hierarchy below RXC 1 (Anti-HIV Agents) without
defining any hierarchical relationship between the PrEP ACF and HCC 1
(HIV/AIDS). In the child models, which do not contain RXCs, we are
finalizing the placement of the PrEP ACF in a hierarchy with HCC 1. We
summarize and respond to public comments received on the proposed
addition of PrEP as an ACF in the HHS risk adjustment adult and child
models starting with the 2026 benefit year below.
Comment: Many commenters supported the proposal to add PrEP to the
HHS risk adjustment adult and child models as an ACF. Many of these
commenters noted agreement with HHS' determination that PrEP presents a
unique risk of adverse selection among preventive services and that the
addition of PrEP to the HHS risk adjustment adult and child models
would mitigate perverse incentives for issuers to minimize their
exposure to enrollees who can benefit from PrEP despite the mandate to
cover preventive services with no enrollee cost sharing. Several
commenters stated that this addition to the HHS risk adjustment adult
and child models will better align issuers' incentives with the public
health benefit of preventing HIV transmission. A few commenters
acknowledged that PrEP may be appropriate to include in the HHS risk
adjustment adult and child models but noted doubt that a new class of
factors (that is, ACFs) was necessary.
Response: We agree with commenters that PrEP should be properly
represented in the HHS risk adjustment adult and child models to
mitigate the potential for adverse selection and appreciate the support
for the addition of a new PrEP ACF to these models beginning with the
2026 benefit year. As explained in the proposed rule (89 FR 82308,
82323-24), we believe that creating a new class of factors is necessary
and appropriate at this time to capture actuarial risks and costs that
may contribute to adverse selection but are not indicative of an active
medical condition, as is the case with PrEP, and therefore would not be
reflected in the
[[Page 4442]]
HCC and RXC factors used in the HHS risk adjustment models.
Although this new ACF class of model factors is guided by similar
principles \71\ for inclusion as the existing RXC class of model
factors,\72\ we feel that it is conceptually appropriate to distinguish
between these two classes. As stated in the 2018 Payment Notice,\73\
RXCs were specifically incorporated into the HHS risk adjustment models
as separate factors from HCCs (which indicate the presence of a
diagnosis directly) to impute a missing diagnosis or indicate severity
of a diagnosis. Because the PrEP ACF (and any potential future ACFs)
are not intended to be related to a diagnosis for any medical
condition, we believe it is appropriate to distinguish such model
factors from RXCs and HCCs.
---------------------------------------------------------------------------
\71\ See 89 FR 82308, 82324-31.
\72\ See 81 FR 94058, 94074-80. See also the 2016 HHS Risk
Adjustment White Paper. Available at https://www.cms.gov/cciio/resources/forms-reports-and-other-resources/downloads/ra-march-31-white-paper-032416.pdf.
\73\ Ibid. See also the March 31, 2016, HHS-Operated Risk
Adjustment Methodology Meeting Questions & Answers. June 8, 2016.
Available at https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/Downloads/RA-OnsiteQA-060816.pdf.
---------------------------------------------------------------------------
Comment: One commenter opposed the proposal to add PrEP to the HHS
risk adjustment adult and child models as an ACF on the basis that the
commenter believes including PrEP in the HHS risk adjustment adult and
child models is discriminatory, expressing a belief that risk
adjustment and the assignment of risk scores to enrollees based on
health conditions is discriminatory in general.
Response: HHS takes seriously our obligation to protect individuals
from discrimination and generally disagrees that the use of factors
based on enrollees' age, sex, and health conditions or utilization of
services and treatments in risk adjustment is inappropriate. Consistent
with section 1343 of the ACA, the HHS-operated risk adjustment program
reduces the incentives for issuers to avoid higher-than-average risk
enrollees, such as those with chronic conditions, by using charges
collected from issuers that attract lower-than-average risk enrollees
to provide payments to health insurance issuers that attract higher-
than-average risk enrollees. The ACA limits issuers' ability to
establish or charge premiums on the basis of age and prohibits issuers'
ability to do so on the basis of sex or any individual health
characteristic other than tobacco use.\74\ However, the cost of care
for and actuarial risk of enrollees is, in part, correlated with their
age, sex, health conditions (or severity thereof), and likelihood to
utilize services and treatments. As such, without the inclusion of
factors related to age, sex, health conditions, and use of services and
treatments in the HHS risk adjustment models, some issuers would be
incentivized to design plans that are less attractive to potential
enrollees whose age-sex category, health conditions, or use of services
and treatments is predicted to create a higher liability for the
issuer. The various factors in the HHS risk adjustment models help
alleviate this incentive by ensuring that the actuarial risk of an
issuers' enrollee population in a State market risk pool, including
issuers that enroll a higher-than-average proportion of enrollees who
fall into a high-cost age-sex category or are likely utilizers of high-
cost preventive services (PrEP, for example), are appropriately
assessed as part of the calculations under the State payment transfer
formula. The use of factors associated with age, sex, health
conditions, and the use of services and treatments (including expensive
preventive services, such as PrEP) in the HHS risk adjustment models is
therefore necessary, appropriate, and helps reduce the likelihood that
discrimination based on any of these factors will occur with respect to
health insurance coverage issued or renewed in the individual and small
group (including merged) markets.
---------------------------------------------------------------------------
\74\ See section 2701 of the Public Health Service Act (42
U.S.C. 300gg) as amended by section 1201 of the ACA. See also the
Market Rules and Rate Review final rule (78 FR 13406, 13411-13).
---------------------------------------------------------------------------
Comment: One commenter opposed the proposal due to concerns that
the addition of ACFs would increase risk adjustment model complexity. A
few commenters urged caution in implementing the proposal or requested
that HHS implement the addition of the PrEP ACF on a pilot basis. A few
commenters requested a technical paper be published on the ACF concept.
Response: We appreciate commenters' interest in carefully
considering the impact of the addition of a PrEP ACF to the HHS risk
adjustment adult and child models. We will continue to monitor the
performance of the HHS risk adjustment models, including the impact of
the new PrEP ACF. Although the HHS risk adjustment models are made more
complex by the addition of any new model factor, we believe that the
seven principles for considering new ACFs discussed in the proposed
rule,\75\ as well as the existing principles for consideration of HCCs
\76\ and RXCs,\77\ are sufficient to ensure that new model factors are
only added when appropriate. In particular, we note that the addition
of the PrEP ACF satisfies the principles of clinical meaningfulness and
specificity, meaningful and predictable costs, sufficient sample size,
and low risk of inappropriate prescribing. Therefore, we determined
that the addition of the PrEP ACF is likely to improve the predictive
validity of the models with respect to the portion of the enrollee
population that are eligible for PrEP. With the specifications
finalized in this rule to address the principles of hierarchical factor
definitions, monotonicity, and mutually exclusive factor definitions,
we believe that the benefits of adding a new PrEP ACF outweighs the
concerns about model complexity. In addition, our recent analysis of
2022 benefit year enrollee-level EDGE data confirmed there is
sufficiently robust data to justify the addition of the PrEP ACF and
calculate its coefficients for the HHS risk adjustment adult and child
models beginning with the 2026 benefit year such that a pilot period
for the PrEP ACF is unnecessary.
---------------------------------------------------------------------------
\75\ See 89 FR 82308, 82325-27.
\76\ See the 2014 Payment Notice Proposed Rule (77 FR 73118,
73128) and the 2014 Payment Notice Final Rule (78 FR 15410, 15420).
See also Kautter, J. et al (2014). The HHS-HCC Risk Adjustment Model
for Individual and Small Group Markets under the Affordable Care
Act. Medicare and Medicaid Research Review, 4(3). Available at:
https://www.cms.gov/mmrr/Downloads/MMRR2014_004_03_a03.pdf. See also
the 2016 HHS Risk Adjustment White Paper (available at: https://www.cms.gov/cciio/resources/forms-reports-and-other-resources/downloads/ra-march-31-white-paper-032416.pdf) and the 2021 RA
Technical Paper (available at: https://www.cms.gov/files/document/2021-ra-technical-paper.pdf).
\77\ See the 2018 Payment Notice Proposed Rule (81 FR 61456,
61470-71) and the 2018 Payment Notice Final Rule (81 FR 94058,
94075-80).
---------------------------------------------------------------------------
As always, as part of our ongoing efforts to continually improve
the precision of the HHS risk adjustment models, we will seek input
from interested parties through notice-and-comment rulemaking or other
appropriate vehicles (including technical papers, as appropriate) on
potential changes to the HHS risk adjustment models, including any
potential new ACFs we may consider in the future. However, in light of
the rationale and data discussed in the proposed rule, and in response
to the comments in support of adding the PrEP ACF to the HHS risk
adjustment adult and child models beginning with the 2026 benefit year,
we do not believe a technical paper is warranted before finalizing the
addition of the PrEP ACF to the HHS risk adjustment adult and child
models.
[[Page 4443]]
Comment: Several commenters expressed a preference for excluding
generic drugs from the definition of the PrEP ACF, noting the vast
difference in prices between brand name and generic drugs. One
commenter noted that their experience showed that prices for brand name
PrEP drugs can be as much as 100 times the cost of generic PrEP drugs.
A few commenters stated that excluding generics would better support
patients as advances in PrEP come to market, with a few commenters
specifically noting that newer branded forms of PrEP drugs that are
more effective, more tolerable, and long-acting will likely be the
predominant form of PrEP in the near future. Furthermore, a few
commenters were concerned that including generics in the PrEP ACF
definition would overcompensate plans that prescribe more generics than
average or would otherwise contribute to adverse selection incentives.
Several other commenters noted a preference for generic drugs to be
included in the definition of the PrEP ACF on the basis that excluding
generics may incentivize prescription of brand name drugs and
inefficient care patterns. A few of these commenters noted that issuers
are likely receiving considerable manufacturer rebates for PrEP that
may not be reflected in the enrollee-level EDGE data that HHS uses for
risk adjustment model recalibration.
One commenter who supported the exclusion of generics requested
that step-therapy requirements be instituted for PrEP drugs that have
both a generic and brand name formulation. A few commenters noted an
interest in splitting the PrEP ACF into two ACFs according to brand
name/generic status or based on oral/injectable form.
Response: We appreciate the comments and agree with the position
that the vast difference in costs between brand name and generic PrEP
drugs warrants an exclusion for generic drugs from the definition of
the PrEP ACF. Although excluding generic drugs from the definition of a
model factor may, in many cases, encourage the prescription of brand
name drugs over generic drugs and encourage inefficient care patterns,
we do not believe this is especially likely in the case of PrEP due to
the very large difference in price between the only generic form of
PrEP available on the market and the multiple brand name forms
available. Moreover, we are concerned that the inclusion of generic
drugs would lead to an overpayment for coverage of generic drugs and an
underpayment for coverage of brand name drugs, potentially
incentivizing issuers to limit access to brand name drugs. Because
there is presently only one form of generic PrEP available on the
market (a daily oral regimen), barriers to accessing brand name drugs,
including step-therapy requirements, would only limit access to newer
and more tolerable formulations, including long-acting injectable forms
of PrEP. Additionally, step-therapy requirements would be inconsistent
with recently released guidance relating to coverage of preventive
services under section 2713 of the PHS Act specifying that issuers must
cover, without cost sharing, all three FDA-approved PrEP formulations
(two oral and one injectable) and are not permitted to use medical
management techniques to direct individuals prescribed PrEP to utilize
one formulation over another.\78\ As such, to further limit the
influence of perverse incentives, to align with the recent guidance,
and in recognition of the very large difference in price between
generic and brand name forms of PrEP, beginning with the 2026 benefit
year, we are finalizing the addition of the PrEP ACF to the HHS risk
adjustment adult and child models with an exclusion of generic versions
of PrEP medication from the definition of the PrEP ACF. We will
continue to monitor the impact of the new PrEP ACF, as well as the cost
and utilization of PrEP drugs in the market, and may consider
alterations to the new PrEP ACF if the prices of generic and brand name
forms of PrEP become more comparable, additional generic forms of PrEP
enter the market, or we observe market distortions or other impacts
resulting from the addition of the new PrEP ACF to the adult and child
models that should be addressed.
---------------------------------------------------------------------------
\78\ See https://www.cms.gov/files/document/faqs-implementation-part-68.pdf.
---------------------------------------------------------------------------
We may also consider the potential addition of a separate generic
drug PrEP ACF in the future, but would need to consider whether the
inclusion of an ACF for generic drugs would satisfy the principles
finalized in this rule to guide the adoption of potential additional
ACFs in the future. In particular, we would need to consider whether a
generic drug PrEP ACF would satisfy the principle of meaningful and
predictable costs (Principle 2), as the cost of the generic version of
PrEP currently available on the market is fairly low and may not
produce a meaningful coefficient if incorporated into the HHS risk
adjustment adult and child models. As part of this future analysis, we
may also consider whether a distinction between oral and injectable
PrEP is warranted. However, we note that the annual costs of brand name
oral and injectable forms are currently similar and that the only
generic form of PrEP currently available is an oral form. Therefore,
the splitting of the PrEP ACF into oral and injectable forms may still
necessitate the exclusion of generic PrEP due to the cost disparity
between the generic and brand name oral forms, which would continue to
lead to overprediction for the generic form, incentivizing issuers to
use medical management techniques to direct individuals prescribed oral
PrEP to utilize the generic oral formulation over other branded oral
forms that may have fewer side effects or otherwise be more appropriate
for the enrollee. We would seek input from interested parties through
notice-and-comment rulemaking or other appropriate vehicles on any such
potential changes.
Regarding the comments related to manufacturer rebates, we
acknowledge that manufacturer rebates are common and may impact drug
prices for a wide variety of prescription drugs.\79\ We note that
issuers are currently instructed that they do not need to adjust the
reported Plan Paid Amount to reflect manufacturer rebates in the data
made available to HHS through issuers' EDGE servers.\80\ As such, using
enrollee-level EDGE data to precisely account for manufacturer rebates
for any prescription drugs in the HHS risk adjustment adult and child
models may necessitate changes to issuers' data submission practices.
We continue to consider these issues and different ways to potentially
account for these rebates in the HHS risk adjustment models in future
benefit years.
---------------------------------------------------------------------------
\79\ See, for example, Shepherd, Joanna. (2020). Pharmacy
benefit managers, rebates, and drug prices: conflicts of interest in
the market for prescription drugs. Yale Law & Policy Review, 38(2),
360-396. Available at: https://heinonline.org/HOL/P?h=hein.journals/yalpr38&i=390.
\80\ See the EDGE Server Business Rules, Version 25 (December
2024). Available at: https://regtap.cms.gov/reg_librarye.php?i=3765.
---------------------------------------------------------------------------
Comment: All commenters on the two hierarchy options set forth in
the proposed rule preferred the alternative approach in which HHS would
allow adult enrollees with HIV to receive credit for PrEP and place the
PrEP ACF in the adult models in a hierarchy below RXC 1 (Anti-HIV
Agents). Commenters noted that this approach is the most
straightforward approach, that it maintains a strong adherence to the
seven principles for developing a new ACF factor set forth in the
proposed rule, and that it ensures that the HHS risk adjustment models
can distinguish between preventive use of PrEP and treatment of active
HIV infection, thus mitigating overlap issues and preserving the
integrity of the classification system.
[[Page 4444]]
One commenter suggested that if the ACF for PrEP is added to the
HHS risk adjustment child models, RXC 1 (Anti-HIV Agents) should also
be added to the child models with the same hierarchy specifications as
the adult models. This commenter asserted that without this
modification, it may be difficult to differentiate enrollees subject to
the child models who are on PrEP from those who are taking
antiretrovirals to manage active HIV infections.
Response: We agree that the alternative hierarchy approach for the
adult models set forth in the proposed rule is straightforward and
would appropriately address the hierarchy concerns identified in the
proposed rule with regards to the adult models, namely the violations
of the hierarchical factor definitions principle (Principle 4), the
monotonicity principle (Principle 5), and the mutually exclusive
classification system principle (Principle 6).\81\ Because we are able
to appropriately address these violations through the adoption of the
alternative hierarchy approach, we also agree that the adult models
will be able to appropriately distinguish between the preventive use of
PrEP and the treatment of an active HIV infection. Therefore, in the
HHS risk adjustment adult models we are finalizing the hierarchy option
that places the PrEP ACF below RXC 1 in a hierarchy without defining
any hierarchical relationship between the PrEP ACF and HCC 1 (HIV/
AIDS). Under this approach, adult enrollees without RXC 1 will receive
the PrEP ACF along with HCC 1 in cases where the enrollee has both a
PrEP prescription claim and an HCC 1 diagnosis in their medical records
for the benefit year. Further, under this approach, an adult enrollee
with a PrEP prescription claim in their medical records for the benefit
year who later tests positive for HIV in the same benefit year would
have an increase in their risk score for that year as a result of the
additional diagnosis, appropriately satisfying the principles of
additivity (Principle 4) and monotonicity (Principle 5).
---------------------------------------------------------------------------
\81\ This alternative hierarchy approach satisfies the intent of
Principle 6 (mutually exclusive classification) by using similar
considerations and filtering steps to those we currently use in our
simulation of plan liability for PrEP.
---------------------------------------------------------------------------
Regarding the comment requesting the addition of RXC 1 to the child
models with the same hierarchy specifications as the adult models, we
did not propose and are not finalizing the addition of any RXCs to the
HHS risk adjustment child models. Currently, only the HHS risk
adjustment adult models include RXCs. Determining whether it is
appropriate to add any RXCs to the child models would require careful
analysis and consideration, and we would want to solicit public comment
on such analysis, which was not possible between the receipt of these
comments and publication of this final rule. For example, similar to
the development of the RXC-HCC pairs for the HHS risk adjustment adult
models, we would need to work with clinicians to analyze, select, and
tailor the RXCs that could be used to impute diagnoses and to indicate
the severity of diagnoses otherwise indicated through medical coding as
appropriate for the child models.\82\ We would also need to propose and
solicit comments on such potential draft factors in the applicable HHS
notice of benefit and payment parameters.
---------------------------------------------------------------------------
\82\ For information on the development of the RXC-HCC pairs for
the adult models, including the guiding principles and other
considerations, see the 2018 Payment Notice Proposed Rule (81 FR
61456, 61470-71), the 2018 Payment Notice Final Rule (81 FR 94058,
94075-80), and the 2019 Payment Notice Final Rule (83 FR 16930,
16941-43). Also see Chapter 4, 2016 HHS Risk Adjustment White Paper,
available at: https://www.cms.gov/cciio/resources/forms-reports-and-other-resources/downloads/ra-march-31-white-paper-032416.pdf.
---------------------------------------------------------------------------
However, we agree with the commenter that there is an important
issue with the hierarchy specification(s) related to the addition of
the PrEP ACF in the child models that needs to be addressed when
finalizing these new factors for the models. To explain, we first note
that because the HHS risk adjustment child models do not contain RXCs,
the costs of HIV treatment (inclusive of the HIV treatment medication
regimens captured in RXC 1 in the adult models) are accounted for in
the HCC 1 coefficient in the child models. As such, in contrast to the
adult models, where the RXC 1 coefficient is generally larger than the
PrEP ACF or HCC 1 coefficient, with the HCC 1 coefficient having the
smallest coefficient of the three adult model factors, the absence of
RXC 1 in the child models generally results in a higher coefficient for
HCC 1 than the PrEP ACF coefficient. As such, without a hierarchy
specification limiting the application of the PrEP ACF in the child
models, an enrollee subject to the child models who was on PrEP for
part of a benefit year, but was later diagnosed with HIV (and would
therefore likely be prescribed treatment for an active HIV infection
instead) would receive a large increase to their risk score
(approximately 3.993, per the draft silver coefficient for HCC 1 in the
child models as reflected in Table 5 of the proposed rule) \83\ because
the enrollee would be receiving risk score components associated with
both prevention and treatment of HIV. However, in the context of the
adult model PrEP ACF and hierarchy specification finalized in this
rule, a similar enrollee subject to the adult models who was on PrEP
for part of a benefit year, but was later diagnosed with HIV and
started to take an RXC 1 drug for treatment would receive a much
smaller increase to their risk score (approximately 1.962 per the
silver coefficients for the adult models as reflected in Tables 2 and 4
of the proposed rule) \84\ because the enrollee's risk score would only
reflect the difference in cost associated with treatment relative to
prevention.
---------------------------------------------------------------------------
\83\ See 89 FR 82308, 82328-41. Note that these values are
approximate and presented here only for illustrative purposes. We
note that the proposed rule estimates included generic drugs in the
definition of the PrEP ACF but in this rule we are finalizing that
generic drugs will be excluded from PrEP ACF definition for both the
adult and child models. As such, these values should be taken only
as rough estimates of the impact of the hierarchy specification on
the example enrollee.
\84\ Ibid.
---------------------------------------------------------------------------
Pending further research and consideration on the impact of adding
RXCs (such as RXC 1) to the child models, to better align the
representation of risk between the adult and child models and more
appropriately reflect the cost of enrollees who receive both PrEP and
HIV treatment in the same benefit year in the child models, we believe
that an appropriate approach would be to place the PrEP ACF below HCC 1
in a hierarchy in the child models. This would allow the risk score of
an enrollee subject to the child models who was on PrEP for part of a
benefit year but was later diagnosed with HIV to reflect only the
difference in cost associated with treatment relative to prevention
(approximately 2.719 per the silver coefficients for the child models
as reflected in Tables 3 and 5 of the proposed rule) \85\ rather than
the whole cost of both treatment and prevention.
---------------------------------------------------------------------------
\85\ Ibid.
---------------------------------------------------------------------------
We are finalizing as proposed the addition of a new PrEP ACF to the
child models and, in response to comments, we will place the PrEP ACF
in a hierarchy below HCC 1 in the child models to ensure that child
enrollees who have both a PrEP prescription claim and an HCC 1 (HIV/
AIDS) diagnosis reflected in their medical records for a benefit year
(and are therefore likely receiving active treatment) will receive an
appropriate increase to their risk score relative to enrollees in the
child models without an
[[Page 4445]]
HCC 1 diagnosis who have a PrEP prescription claim in their medical
records for that year.
We will consider if any additional changes to the child models are
necessary as we continue to monitor the impact of the new PrEP ACF and
consider potential refinements to the ACF framework in future benefit
years. As always, as part of our ongoing efforts to continually improve
the precision of the HHS risk adjustment models, we will seek input
from interested parties through notice-and-comment rulemaking or other
appropriate vehicles on potential changes to the models in future
benefit years.
Comment: Several commenters offered ideas for additional ACFs to be
added to the HHS risk adjustment models in the future. These included
ACFs for biologic drugs, GLP-1 drugs, and cellular and gene therapies.
Other commenters' suggestions requested the use of the ACF framework to
restructure how childbirth, organ transplants, end stage renal disease
(ESRD), dialysis, respirator dependance, amputations, autism spectrum
disorder, moderate forms of psychiatric illness, and prophylactic
interventions such as prophylactic mastectomy are accounted for in the
HHS-operated risk adjustment program.
A few commenters requested changes to the risk adjustment
specifications for one or more of these conditions without specifying
that the ACF framework was the proper vehicle for addressing their
concerns.
Response: We did not propose and therefore are not finalizing the
adoption of additional ACFs at this time. However, we are finalizing
the adoption of the ACF framework and the proposed principles to guide
any potential development of additional ACFs to the HHS risk adjustment
models in the future. We appreciate the suggestions regarding other
conditions or diagnoses for which it may be appropriate to leverage the
ACF framework to restructure or refine the treatment of the other
identified clinically meaningful enrollee characteristics in the HHS
risk adjustment models. As we consider potential refinements to the ACF
structure and other changes to the HHS risk adjustment models in the
future, we may further consider these suggestions and the structure of
related HCCs. As always, as part of our ongoing efforts to continually
improve the precision of the HHS risk adjustment models, if we were to
make changes to the ACF structure or other changes to the HHS risk
adjustment models in the future, we will seek input from interested
parties through notice-and-comment rulemaking or other appropriate
vehicles on such potential changes.
After consideration of comments and for the reasons outlined in the
proposed rule and this final rule, including our responses to comments
above, we are finalizing the addition of PrEP as an ACF in the adult
and child risk adjustment models beginning with the 2026 benefit year.
Furthermore, we are finalizing the exclusion of generic versions of
PrEP from the PrEP ACF and are finalizing the placement of the PrEP ACF
in the adult models in a hierarchy below RXC 1 (Anti-HIV Agents)
without defining any hierarchical relationship between the PrEP ACF and
HCC 1 (HIV/AIDS). In the child models, which do not contain RXCs, we
are finalizing the placement of the PrEP ACF in a hierarchy below HCC
1. Additionally, we are finalizing the proposed ACF framework and
principles used to determine whether it is appropriate to add a new ACF
to the HHS risk adjustment models, and how the hierarchy structure
associated with an ACF should be defined.
We were unable to complete the calculations for the final
coefficients in time to publish them in this final rule because
additional time is needed to complete the calculations needed to
account for the incorporation of the PrEP ACF with the generic drug
exclusions and hierarchy specifications finalized in this rule.
Therefore, consistent with Sec. 153.320(b)(1)(i), we will publish the
final coefficients for the 2026 benefit year in guidance after the
publication of this final rule. We will release this guidance by the
spring of 2025 in time for rate setting for the 2026 benefit year.
d. List of Factors To Be Employed in the HHS Risk Adjustment Models
(Sec. 153.320)
Consistent with Sec. 153.320(b)(1)(i), we are finalizing the use
of the 2020, 2021 and 2022 enrollee-level EDGE data to calculate the
2026 benefit year coefficients and will publish the final coefficients
for the 2026 benefit year in guidance after the publication of this
final rule, as we were unable to complete the calculations to finalize
them in time to publish them in this final rule,\86\ due to the
additional calculations needed to account for the incorporation of the
PrEP ACF with the generic drug exclusions and hierarchy specifications
as finalized in this rule. The proposed 2026 benefit year HHS risk
adjustment model factors resulting from the equally weighted (averaged)
blended factors from separately solved models using 2020, 2021, and
2022 enrollee-level data are shown in Tables 2 through 9 of the HHS
Notice of Benefit and Payment Parameters for 2026 proposed rule (89 FR
82308, 82328 through 46). As we have done for certain prior benefit
years,\87\ we will release the final 2026 benefit year coefficients in
guidance after publication of this final rule by the spring of 2025 in
time for rate setting for the 2026 benefit year. We received several
comments requesting additional changes to the HHS risk adjustment
models that we did not consider or propose in the proposed rule. We
respond to these comments below.
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\86\ See 45 CFR 153.320(b)(1)(i).
\87\ For example, the final 2018 benefit year HHS risk
adjustment model coefficients were not published in the 2018 Payment
Notice final rule (81 FR 94058, 81 FR 94084) but were instead
published on the CMS website and are available at https://www.cms.gov/cciio/programs-and-initiatives/premium-stabilization-programs/downloads/2018-benefit-year-final-hhs-risk-adjustment-model-coefficients.pdf. See also, for example, the final 2021
benefit year HHS risk adjustment model coefficients, which were not
published in the 2023 Payment Notice final rule (85 FR 29164, 29190)
but were instead published on the CMS website and are available at
https://www.cms.gov/cciio/resources/regulations-and-guidance/
downloads/final-2021-benefit-year-final-hhs-risk-adjustment-model-
coefficients.pdf.
See also, for example, the final 2023 benefit year HHS risk
adjustment model coefficients, which were not published in the 2023
Payment Notice final rule (87 FR 27208, 27235) but were instead
published on the CMS website and are available at https://www.cms.gov/files/document/2023-benefit-year-final-hhs-risk-adjustment-model-coefficients.pdf.
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Comment: One commenter suggested that HHS update the risk
adjustment models to incorporate Tepezza and Graves Disease/
Hyperthyroidism.
Response: We did not propose and are not finalizing changes to add
an RXC to the HHS risk adjustment adult models for Tepezza, which
treats thyroid eye disease, or to add a payment HCC for Graves Disease/
Hyperthyroidism. We recently discussed the approach to the treatment of
Tepezza and Graves Disease/Hyperthyroidism in the HHS risk adjustment
models in the 2025 Payment Notice final rule,\88\ explaining that
thyroid eye disease (thyrotoxicosis) is currently categorized in a
condition category (Other Endocrine/Metabolic/Nutritional Disorders)
that is not a payment HCC in the HHS risk adjustment models. Further,
all RXCs in the HHS adult risk adjustment models are associated with a
payment HCC. We therefore generally have concerns about adding thyroid
eye disease to the HHS risk adjustment models at this time as it is
currently not categorized as a payment HCC and we would need to perform
further analysis to consider whether it is appropriate and how best
[[Page 4446]]
to incorporate this condition into the models given these concerns. For
these reasons, HHS did not propose and is not finalizing any changes
with respect to the treatment of Tepezza for thyroid eye disease in the
2026 benefit year risk adjustment models. However, HHS intends to
continue analysis of Graves Disease/Hyperthyroidism and thyrotoxicosis
and the use of Tepezza as more data becomes available and consider
potential changes to the treatment of this condition and drug in the
HHS risk adjustment models for future benefit years.
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\88\ See 89 FR 26218, 26248-49.
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Comment: A few commenters identified certain conditions that they
believe are undercompensated in the risk adjustment models. These
conditions included autism spectrum disorder, ESRD, and maternal and
newborn care. These commenters requested that HHS reconsider how these
conditions and their associated costs are accounted for in the HHS risk
adjustment models. Additionally, one commenter requested that HHS
revisit the analysis in the 2021 RA Technical Paper,\89\ expressing
concern that the risk associated with the lowest-risk enrollees remains
underpredicted by the HHS risk adjustment models. One commenter
recommended that HHS study the impact of calibrating the HHS risk
adjustment models separately for the individual and small group markets
due to differences in the characteristics of the enrollee population
between the two markets. Furthermore, one commenter recommended that
HHS consider ways to account for plan design generosity as more
generous plans tend to attract enrollees with expensive chronic
conditions.
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\89\ See https://www.cms.gov/files/document/2021-ra-technical-paper.pdf.
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Response: We appreciate the suggestions regarding conditions that
commenters identified for review of how they are accounted for in the
HHS risk adjustment models. Although we did not propose and are not
finalizing changes to the treatment of the identified conditions in the
2026 benefit year risk adjustment models, we generally note that we
consistently monitor the performance of the risk adjustment models,
including through out-of-sample analysis of predictive ratios
associated with each model factor, as additional years of enrollee-
level EDGE data become available. Results of these monitoring
activities were a key impetus for several risk adjustment model changes
finalized in the 2023 Payment Notice \90\ to address the adult and
child models' underprediction for enrollees with many HCCs.
Specifically, we finalized the interacted HCC counts and HCC-contingent
enrollment duration factor model specifications to improve model
prediction for higher risk enrollees and ensure that issuers are being
accurately compensated for these enrollees. As such, the potential for
underprediction or overprediction in the HHS risk adjustment models is
an area that HHS is consistently monitoring and addressing as needed
and will continue to monitor and address in the future as part of our
ongoing efforts to continually improve the HHS risk adjustment models.
We also note that the conditions or diagnoses identified in these
comments show strong overlap with the conditions that some commenters
identified as being appropriate to be addressed by the ACF framework
and that, as stated in our response to comments about those conditions
in that section of this final rule, we will take these comments into
consideration as we consider potential refinements to the HHS risk
adjustment models in future benefit years.
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\90\ 87 FR 27208, 27221-30.
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In regard to the request to revisit the analysis in the 2021 RA
Technical Paper, we appreciate the commenter's concern. As noted in the
2023 Payment Notice,\91\ our analysis of the addition of the interacted
HCC counts factors in the adult and child models, the removal of the
former adult model severity illness factors, and the replacement of the
former enrollment duration factors with the HCC-contingent enrollment
duration factors in the adult models found that the combined impact of
these changes would significantly improve predictions across most
deciles and HCC counts for the very highest-risk enrollees, as well as
the lowest-risk enrollees without HCCs.\92\ These model specification
updates were implemented starting with the 2023 benefit year HHS risk
adjustment models and we intend to monitor the impact of these updates
as part of future benefit years' model recalibrations using additional
years of available enrollee-level EDGE data.
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\91\ Ibid.
\92\ Ibid. See also Figure 4.2. HHS-Operated Risk Adjustment
Technical Paper on Possible Model Changes. (2021, October 26). CMS.
https://www.cms.gov/files/document/2021-ra-technical-paper.pdf.
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As we consider potential refinements to the HHS risk adjustment
models in the future, we will also continue to monitor the specific
conditions identified by commenters, along with the structure of
related model factors, and the impact of recent model specification
updates on the ability of the models to predict risk across all
subgroups of enrollees and enrollees with chronic conditions who are
more likely to enroll in plans with more generous coverage. We also
will continue to study whether differences in the characteristics of
the enrollee population between the individual and small groups markets
would warrant calibrating the HHS risk adjustment models separately for
the individual and small group markets. As always, as part of our
ongoing efforts to continually improve the precision of the HHS risk
adjustment models, if we were to pursue changes to the risk adjustment
models in the future, we will seek input from interested parties
through notice-and-comment rulemaking or other appropriate vehicles.
Comment: Several commenters requested clarification regarding how
medically administered injectable drugs are accounted for in the HHS
risk adjustment models. These commenters were concerned that these
drugs appear to be filtered out of enrollee claims data for the purpose
of calculating risk scores.
Response: We appreciate commenters bringing this concern to our
attention. Although not expressly stated by commenters, we believe
these concerns stem from the commenters' interpretation of language in
guidance document(s) such as the Risk Adjustment DIY Software
Instructions.\93\ To clarify, for RXC eligibility (including medically
administered injectable claims), a professional or outpatient medical
claim does not need to have a risk adjustment eligible service code or
bill type code. Instead, the professional or outpatient claim simply
needs to have a service code that maps to an RXC for selection and
inclusion in enrollee claims data for purposes of calculating risk
scores. We intend to update language in these guidance document(s) in
future releases to clarify this point.
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\93\ For example, see the 2024 Benefit Year Risk Adjustment
Updated HHS-Developed Risk Adjustment Model Algorithm ``Do It
Yourself (DIY)'' Software Instructions, available at: https://www.cms.gov/files/document/cy2024-diy-instructions-09062024.pdf.
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e. Cost-Sharing Reduction Adjustments
In the 2025 Payment Notice (89 FR 26252 through 26254), we
finalized the updated CSR adjustment factors for American Indian/Alaska
Native (AI/AN) zero-cost sharing and limited cost sharing CSR plan
variant enrollees for the 2025 benefit year, and for all future benefit
years, unless changed through notice-and-comment rulemaking. In the
2025 Payment Notice (89 FR 26252 through 26254), we also finalized
maintaining the existing CSR
[[Page 4447]]
adjustment factors for silver plan variant enrollees (70 percent, 73
percent, 87 percent, and 94 percent AV plan variants) \94\ for the 2025
benefit year and beyond, unless changed through notice-and-comment
rulemaking.
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\94\ See 83 FR 16930, 16953; 84 FR 17454, 17478-79; 85 FR 29164,
29190; 86 FR 24140, 24181; 87 FR 27208, 27235-36; 88 FR 25740,
25772-74; and 89 FR 26218, 26252-54.
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For the 2026 benefit year, we did not propose to change the CSR
adjustment factors as finalized in the 2025 Payment Notice and we will
maintain the existing CSR adjustment factors for the 2026 benefit
year.\95\ We summarize and respond to the public comments received on
the CSR adjustment factors for the 2026 benefit year below.
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\95\ See CSR adjustment factors finalized in the 2025 Payment
Notice at 89 FR 26252 through 26254.
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Comment: We received a few comments asking that HHS revisit the CSR
factors for Massachusetts wraparound plans, specifically for wrap-
around plans with AVs above 94 percent. These commenters stated that
the wrap-around plans with AVs above 94 percent warrant higher CSR
factors than the current 1.12 values. One of these commenters compared
the current CSR factor used for Massachusetts wrap-around plans with
AVs above 94 percent to those used in Arkansas for plans the commenter
identified as having similar AVs.
Response: 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. As we identify unique State-specific
plans that have higher plan liability than the standard plan variants,
such as those in Massachusetts and Arkansas, we work with the relevant
State Departments of Insurance and other relevant State agencies to
identify the applicable CSR adjustment factor that corresponds to the
unique State-specific plan's AV.
Regarding the comparison between Massachusetts' wrap-around plans
and Arkansas' Medicaid expansion plans, 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. In contrast, in Massachusetts, the higher cost sharing wrap-
around plans are variations of lower cost sharing plans and do not have
the same AVs as their comparable plans.
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. As of the release of this
final rule, the Massachusetts Division of Insurance, which is the
regulating body for the State, has not identified changes to the AVs of
the State's wrap-around plans. As such, we are maintaining our general
approach to determining the CSR factors for State-specific plans,
including Massachusetts wrap-around plans, for the 2026 benefit year.
f. 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, which calculates the percentage
of individual variation noted by a model, measures the predictive
accuracy of the model overall. The PR for each of the HHS risk
adjustment models is the ratio of the weighted mean predicted plan
liability for the model sample population to the weighted mean actual
plan liability for the model sample population. The PR represents how
well the model does on average at predicting plan liability for that
subpopulation.
A subpopulation that is predicted perfectly would have a PR of 1.0.
For each of the current and proposed HHS risk adjustment models, the R-
squared statistic and the PRs are in the range of published estimates
for concurrent HHS risk adjustment models.\96\ Because we are
finalizing a blend the coefficients from separately solved models based
on the 2020, 2021 and 2022 benefit years' enrollee-level EDGE data, we
publish the R-squared statistic for each model separately to verify
their statistical validity. We will include the R-squared statistics
for the final 2026 benefit year models when we publish the final
coefficients for the 2026 benefit year in guidance after publication of
this final rule. We will release this guidance by the spring of 2025,
in time for rate setting for the 2026 benefit year.
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\96\ 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.
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We received one comment noting the decreases in the risk adjustment
model R-squared values for the 2022 enrollee-level EDGE data relative
to prior benefit years as presented in Table 10 of the proposed rule
and provide a response to that comment in the section on Data for HHS
Risk Adjustment Model Recalibration for the 2026 Benefit Year above.
3. Overview of the HHS Risk Adjustment Methodology: State Payment
Transfer Formula
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
did not propose any changes to the formula in the proposed rule, and
therefore, did not republish the formulas in the proposed rule. We
therefore will continue to apply the formula as finalized in the 2021
Payment Notice (86 FR 24183 through 24186) in the States where HHS
operates the risk adjustment program in the 2026 benefit year.
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 2026 benefit year; therefore, we will
maintain the $1 million threshold and 60 percent coinsurance rate.\97\
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\97\ See 81 FR 94058, 94081. See also 84 FR 17454, 17467.
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We did not receive any comments in response to the overview of the
HHS risk adjustment methodology applicable to the 2026 benefit year.
4. Solicitation of Comments--Time Value of Money in HHS-Operated Risk
Adjustment Program
In the HHS Notice of Benefit and Payment Parameters 2026 proposed
rule (89 FR 82347, 82348), HHS solicited comments on the impact of the
time value of money on the HHS-operated risk adjustment program,
including the impact of the time value of money on issuers' assessment
of actuarial risk and the incentives for adverse selection, and what
possible solutions or mitigating steps we should consider to address
the impact of the time value of money on
[[Page 4448]]
the HHS-operated risk adjustment program in future rulemaking. HHS
noted in the proposed rule that it received feedback in the past from
some interested parties that issuers of risk adjustment covered plans
were more impacted by the time value of money for benefit year 2023
than in any previous benefit years. Therefore, HHS solicited comment on
the impact of the 8-to-10-month gap between the end of the benefit year
when claims are incurred and the issuance of risk adjustment charges
and allocation of payments for that benefit year. We thank commenters
for their feedback and will take these comments into consideration in
future rulemaking as applicable.
5. HHS Risk Adjustment User Fee for the 2026 Benefit Year (Sec.
153.610(f))
In the HHS Notice of Benefit and Payment Parameters for 2026
proposed rule (89 FR 82308, 82348), we proposed an HHS risk adjustment
user fee for the 2026 benefit year of $0.18 PMPM. Section 153.610(f)(2)
provides that, where HHS operates a risk adjustment program on behalf
of a State, an issuer of a risk adjustment covered plan must remit a
user fee to HHS equal to the product of its monthly billable member
enrollment in the plan and the PMPM risk adjustment user fee specified
in the annual HHS notice of benefit and payment parameters for the
applicable benefit year.
For the 2026 benefit year, HHS proposed to use the same methodology
used in the 2025 Payment Notice (89 FR 26218) to estimate our
administrative expenses to operate the program. These costs cover
development of the models and methodology, collections, payments,
account management, data collection, data validation, program integrity
and audit functions, operational and fraud analytics, interested
parties training, operational support, and administrative and personnel
costs dedicated to HHS-operated risk adjustment program activities. To
calculate the risk adjustment user fee, we divided HHS' projected total
costs for administering the program on behalf of States by the expected
number of BMMs in risk adjustment covered plans in States where the
HHS-operated risk adjustment program will apply in the 2026 benefit
year.\98\
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\98\ HHS did not receive any requests from States to operate
risk adjustment for the 2026 benefit year. Therefore, HHS will
operate risk adjustment in every State and the District of Columbia
for the 2026 benefit year.
---------------------------------------------------------------------------
We estimated that the total costs for HHS to operate the risk
adjustment program on behalf of States within the 2026 calendar year
will be approximately $65 million, roughly the same as the amount
estimated for the 2025 calendar year. Based on these costs and because
we did not estimate increased enrollment in the 2026 benefit year
beyond the 2024 benefit year level, we proposed an HHS risk adjustment
user fee of $0.18 PMPM for the 2026 benefit year. We sought comment on
the proposed HHS risk adjustment user fee for the 2026 benefit year.
After consideration of comments and updating our projections based
on the most recent available data, which impacted our enrollment
estimates, we are finalizing a risk adjustment user fee rate of $0.20
PMPM for the 2026 benefit year. We summarize and respond to public
comments received on the proposed 2026 benefit year risk adjustment
user fee rate below.
Comment: Several commenters supported the proposed 2026 benefit
year risk adjustment user fee rate but noted that the user fee rate may
require modification if enhanced premium tax credit (PTC) subsidies are
not extended into the 2026 benefit year. A few commenters requested
more information on the assumptions we made if enhanced PTC subsidies
expire or are extended.
Response: We are finalizing an HHS risk adjustment user fee rate
for the 2026 benefit year of $0.20 PMPM. We proposed a risk adjustment
user fee rate of $0.18 PMPM for the 2026 benefit year based on our
estimates at the time in the proposed rule (89 FR 82348), and we
explained that we may modify the risk adjustment user fee rate in the
final rule if there were events resulting in larger than expected
enrollment growth or some other deviation from our expectations of
current conditions that would significantly change our estimates around
costs, enrollment projections or the finalization of the proposed risk
adjustment policies between the proposed and final rule. The final 2026
benefit year risk adjustment user fee rate adopted in this final rule
assumes that, consistent with current law, the enhanced PTC subsidies
will expire at the end of 2025. Though we project a similar budget to
operate the HHS-operated risk adjustment program, the final user fee
rate reflects updates to enrollment projections in individual, small
group, and merged market risk pools based on the latest data available
that was not available at the time of the proposed rule, such as PY
2025 open enrollment data \99\ and estimated health insurance coverage
changes \100\ due to the expiration of enhanced PTC subsidies. We
explained the assumptions used when determining the risk adjustment
user fee in the 2026 Payment Notice proposed rule (89 FR 82349).
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\99\ See Marketplace 2025 Open Enrollment Period Report National
Snapshot, as of December 4, 2024: https://www.cms.gov/newsroom/fact-sheets/marketplace-2025-open-enrollment-period-report-national-snapshot-0.
\100\ See CBO June 2024 projections of health insurance coverage
via https://www.cbo.gov/system/files/2024-06/51298-2024-06-healthinsurance.pdf.
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As we noted in the proposed rule (89 FR 82348), similar to prior
benefit years, we projected risk adjustment enrollment scenarios for
the 2026 benefit year, considered the impact of the expiration of the
enhanced PTC subsidies established in section 9661 of the ARP and
extended in section 12001 of the IRA through the 2025 benefit year on
enrollment in the individual, small group, and merged market risk pools
for the 2026 benefit year of risk adjustment, and used those estimates
to calculate the proposed 2026 benefit year HHS risk adjustment user
fee rate. While our updated projections show a decrease in enrollment
in risk adjustment covered plans in States where the HHS-operated risk
adjustment program will apply in the 2026 benefit year, we continue to
estimate that the total costs for HHS to operate the risk adjustment
program on behalf of States within the 2026 benefit year will be
approximately $65 million. Therefore, we are finalizing a risk
adjustment user fee rate for benefit year 2026 of $0.20 PMPM to ensure
adequate funding for the HHS-operated risk adjustment program.
6. Risk Adjustment Data Validation Requirements When HHS Operates Risk
Adjustment (HHS-RADV) (Sec. Sec. 153.350 and 153.630)
HHS conducts risk adjustment data validation under Sec. Sec.
153.350 and 153.630 in any State where HHS is responsible for operating
the risk adjustment program.\101\ The purpose of risk adjustment data
validation is to ensure issuers are providing accurate high-quality
information to HHS, which is crucial for the proper functioning of the
HHS-operated risk adjustment program. HHS-RADV also ensures that risk
adjustment transfers calculated under the State payment transfer
formula reflect verifiable actuarial risk differences among issuers,
rather than risk score calculations that are based on poor quality
data, thereby helping to ensure that the HHS-operated risk adjustment
program assesses charges to
[[Page 4449]]
issuers with plans with lower-than-average actuarial risk while making
payments to issuers with plans with higher-than-average actuarial risk.
HHS-RADV consists of an initial validation audit (IVA) and a second
validation audit (SVA).
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\101\ Since the 2017 benefit year, HHS has operated the risk
adjustment program in all 50 States and the District of Columbia.
---------------------------------------------------------------------------
a. Initial Validation Audit (IVA) Sampling Methodology--Enrollees
Without HCCs, Finite Population Correction, and Neyman Allocation
(Sec. 153.630(b))
To better align the IVA sampling methodology with the HHS-RADV
error estimation methodology that estimates HCC error rates and to
improve overall sampling precision, in the HHS Notice of Benefit and
Payment Parameters for 2026 proposed rule (89 FR 82308, 82349), we
proposed to exclude enrollees without HCCs \102\ from IVA sampling, to
remove the FPC, and to replace the source of the Neyman allocation
\103\ data used for IVA sampling purposes with 3 years of available
HHS-RADV data beginning with benefit year 2025 HHS-RADV.\104\
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\102\ As explained in the proposed rule, adult enrollees with
only RXCs do not have any HCCs, and therefore would be excluded from
IVA sampling under this policy. See 89 FR 82308 at 82351.
\103\ Neyman allocation is a method to allocate samples to
strata based on the strata variances. A Neyman allocation scheme
provides the most precision for estimating a population mean given a
fixed total sample size. See http://methods.sagepub.com/reference/encyclopedia-of-survey-research-methods/n324.xml.
\104\ Activities related to the 2025 benefit year of HHS-RADV
will generally begin in Spring 2026, when issuers can start
selecting their IVA entity, and IVA entities can start electing to
participate in HHS-RADV for the 2025 benefit year. Changes to the
IVA sampling methodology need to be finalized before HHS-RADV
activities begin; therefore, we proposed these IVA sampling changes
begin with 2025 benefit year HHS-RADV due to the timing of this
rulemaking. For the most recently published annual HHS-RADV
timeline, see the 2023 Benefit Year HHS-RADV Activities Timeline.
https://regtap.cms.gov/uploads/library/2023_RADV_Timeline_5CR_072424.pdf. We note that there were delays in
the 2023 Benefit Year HHS-RADV Activities Timeline in recognition of
issuers facing challenges related to EDGE server operations after
the Change Healthcare Cybersecurity Incident.
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For a discussion of the background of the HHS-RADV IVA sampling
methodology and the proposed changes to the IVA sampling methodology,
see the proposed rule (89 FR 82308, 82349). We summarize and respond to
public comments on each of these three IVA sampling methodology changes
below.
1. Proposal To Exclude Enrollees Without HCCs From IVA Sampling
In the HHS Notice of Benefit and Payment Parameters for 2026
proposed rule (89 FR 82308, 82351), we proposed to modify IVA sampling
to exclude stratum 10 enrollees, which would exclude enrollees that do
not have HCCs nor RXCs, and adult enrollees in strata 1 through 3 that
have RXCs only, from IVA sampling beginning with benefit year 2025 HHS-
RADV. For a full discussion of the proposed changes to exclude
enrollees without HCCs from the HHS-RADV IVA sampling methodology, see
the proposed rule (89 FR 82308, 82351). We sought comment on this
proposal to exclude enrollees without HCCs from IVA sampling.
After consideration of comments and for the reasons outlined in the
proposed rule and this final rule, including our responses to comments,
we are finalizing this policy as proposed. We summarize and respond to
public comments received on the proposal to exclude enrollees without
HCCs from IVA sampling beginning with benefit year 2025 HHS-RADV below.
Comment: Many commenters supported the proposal to exclude
enrollees without HCCs from IVA sampling with several of these
commenters suggesting that the proposal would enhance the accuracy of
HHS-RADV. A few commenters agreed that excluding enrollees without HCCs
would ensure that the IVA sample reflects enrollees who most directly
impact risk scores and HHS-RADV error rates, and one commenter
suggested that including only enrollees with HCCs in the IVA sample
would streamline the IVA validation and medical record retrieval
processes, making the IVA less resource intensive.
Other commenters agreed that excluding enrollees without HCCs would
better align the IVA sampling methodology with the HHS-RADV error
estimation methodology and the policies finalized in the 2024 Payment
Notice to discontinue the use of the lifelong permanent condition
(LLPC) list and non-EDGE claims in HHS-RADV. One commenter noted
concern that stratum 10 enrollees were included under the current IVA
sampling methodology and suggested that these enrollees have no
variance of error and therefore cannot have Neyman allocation-
calculated sample sizes.
Response: We are finalizing the exclusion of enrollees without HCCs
from IVA sampling, which excludes stratum 10 enrollees that do not have
HCCs nor RXCs and adult enrollees in strata 1 through 3 that have RXCs
only, beginning with benefit year 2025 HHS-RADV as proposed. We agree
with commenters that finalizing this change, in combination with the
other IVA and SVA methodological changes finalized in this rule, will
improve the accuracy of HHS-RADV results. Moreover, finalizing the
exclusion of enrollees without HCCs will better align our IVA sampling
methodology with the error estimation methodology established in the
2019 Payment Notice, which calculates HCC-associated error rates and
applies these error rates to the HCC-related portion of issuers' plan
liability risk scores. Finalizing this policy will also better align
our IVA sampling methodology with the HHS-RADV policies finalized in
the 2024 Payment Notice to discontinue the LLPC list and no longer
allow non-EDGE claims beginning with the 2022 benefit year of HHS-RADV,
which emphasize HHS-RADV's focus on validating enrollee HCCs on
EDGE.\105\ We also agree with commenters that excluding enrollees
without HCCs will ensure that issuers, IVA Entities, and the SVA Entity
(as applicable) focus audit resources on enrollees who have a more
direct impact on Super HCC failure rates, issuers' group failure rates,
and issuers' error rates in HHS-RADV.
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\105\ See 88 FR 25790 through 88 FR 25798.
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We disagree with commenters' concerns about stratum 10 enrollees
being included under the current IVA sampling methodology as stratum 10
enrollees have stratum sample sizes calculated with the Neyman
allocation in the current HHS-RADV IVA sampling methodology.\106\ The
current methodology assumes that the variance of net risk score error
for stratum 10 used in the Neyman allocation is equal to the variance
of net risk score error for the low-risk strata, which is a non-zero
variance. Moreover, if we were to remove this assumption, it would
still be possible to calculate a non-zero variance of net risk score
errors for these stratum 10 enrollees because net risk score error is
measured as the difference between the enrollee's calculated risk score
using the HCCs validated during audit and the enrollee's calculated
risk score using HCCs on EDGE. Therefore, the proposed change to
exclude enrollees in stratum 10 was not driven by being unable to
calculate stratum 10's variance of net risk score error or sample size.
Rather, the change was driven by the desire to continue to make
incremental improvements to the HHS-operated risk adjustment program,
including HHS-RADV, and make IVA sampling more targeted and efficient.
As previously noted, this change also better
[[Page 4450]]
aligns the IVA sampling methodology with the error estimation
methodology and the policies finalized in the 2024 Payment Notice to
discontinue the use of the LLPC list and no longer allow non-EDGE
claims in HHS-RADV.\107\
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\106\ In the initial years of HHS-RADV, we constrained the
``10th stratum'' of the IVA sample--that is, enrollees without HCCs
selected for the IVA sample--to be one-third of the sampled IVA
enrollees. In the 2020 Payment Notice, we finalized the extension of
the Neyman allocation sampling methodology to the 10th stratum to
improve sample precision and permit for a larger portion of the
sample to be allocated to the HCC strata. See 84 FR 17494 through
17495.
\107\ See 88 FR 25790 through 88 FR 25798.
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Comment: Some commenters that supported the proposal to exclude
enrollees without HCCs from the IVA sampling methodology suggested that
HHS should not include enrollees without HCCs in IVA sampling because
audits should investigate whether issuers are overstating sickness in
their population and enrollees without HCCs do not have sickness
reflected in their risk adjustment risk scores. Another commenter
suggested that including enrollees without HCCs in the IVA sample
advantages lower-risk issuers that have more enrollees without HCCs and
will face less administrative burden in the medical record retrieval
and review process. This commenter expressed concerns that these lower-
risk issuers get more opportunities for HCCs to be found while also
getting fewer opportunities to fail to validate HCCs under the current
methodology, which could limit HHS-RADV's ability to identify lower-
risk issuers that are engaging in upcoding and therefore undermine the
accuracy of HHS-RADV adjustments to risk adjustment State transfers.
Another commenter similarly suggested that the proposal to exclude
enrollees without HCCs from IVA sampling would help prevent upcoding.
Response: The purpose of HHS-RADV is to ensure that issuers are
submitting accurate, high-quality information to their EDGE servers to
be used in the risk adjustment State transfer calculations. We
recognize that lower-risk issuers may face less administrative burden
than higher-risk issuers when performing HHS-RADV under the current IVA
sampling methodology if these issuers have more enrollees without HCCs,
and therefore more enrollees without medical records proportionately
affecting the Neyman allocation and stratum 10's sample size. However,
lower-risk issuers may continue to have less burden than higher-risk
issuers under the revised IVA sampling methodology finalized in this
rule that excludes enrollees without HCCs. This is because the Neyman
allocation will continue to calculate the optimal number to be sampled
from each stratum, proportional to each stratum's contribution to the
total standard deviation of risk score error in the issuer's
population. Each stratum's contribution to the total standard deviation
of risk score error in the issuer's population is determined by the
stratum's population size, mean risk score, and variance of net risk
score error. Therefore, compared to lower-risk issuers, higher-risk
issuers may still have relatively more enrollees selected for higher-
risk strata if the higher-risk strata contribute relatively more to the
total standard deviation of risk score error in the issuer's
population. Conversely, lower-risk issuers may still have relatively
more enrollees in their IVA samples from lower-risk strata with less
HCCs to validate or medical records to review if the lower-risk strata
contribute relatively more to the total standard deviation of risk
score error in the issuer's population, and therefore would experience
a lower burden than higher-risk issuers with respect to medical record
retrieval and review. As we explain in more detail later in this final
rule, we estimate that issuer burden will decrease on average across
all issuers as a result of the finalized changes to the IVA sampling
methodology.
In addition, we agree that excluding enrollees without HCCs from
the IVA sampling methodology will further ensure that issuers are
submitting accurate, high-quality information to their EDGE servers to
be used in the risk adjustment State transfer calculations and
disincentivize inaccurate coding practices, such as upcoding. However,
we note that we have not seen conclusive evidence of upcoding on EDGE.
We also believe that the HHS-RADV program serves as a safeguard against
upcoding by auditing the issuer's EDGE data and reviewing the
supporting medical records to validate enrollee health status. In
addition, we note that there are risk adjustment model specifications
to mitigate the potential for upcoding, such as the HCC coefficient
estimation groups, which reduce risk score additivity within disease
groups and limit the sensitivity of the risk adjustment models to
upcoding,\108\ and we have developed HHS-RADV's error estimation
methodology to appropriately account for these model specifications
(such as., the HCC coefficient estimation groups).\109\
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\108\ See, for example, Section 2.3 of the Potential Updates to
HHS-HCCs for the HHS-operated Risk Adjustment Program White Paper
(June 17, 2019) available at: https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Potential-Updates-to-HHS-HCCs-HHS-operated-Risk-Adjustment-Program.pdf. Note that ``HCC Group
constraints'' is synonymous with ``HCC coefficient estimation
groups.''
\109\ The 2020 HHS-RADV Amendments Rule finalized a policy to
ensure that HCCs that share a coefficient estimation group used in
the risk adjustment models are sorted into the same failure rate
groups by first aggregating any HCCs that share a coefficient
estimation group into Super HCCs before applying the HHS-RADV
failure rate group sorting algorithm beginning with benefit year
2019 HHS-RADV. See 85 FR 76984 through 76989. The 2023 Payment
Notice finalized to extend the application of Super HCCs to also
apply to coefficient estimation groups throughout the HHS-RADV error
rate calculation beginning with benefit year 2021 HHS-RADV. See 2023
Payment Notice, 87 FR 27208, 27253 through 27256.
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Comment: Several commenters opposed the proposal to exclude
enrollees without HCCs from IVA sampling and some commenters disagreed
with or questioned whether the proposal would improve the accuracy of
HHS-RADV results. Some of these commenters noted that enrollees without
HCCs may be under-coded and HHS-RADV should validate appropriate coding
by issuers for all diagnoses--including diagnoses that were not
originally submitted to issuers' EDGE servers or supplemental files or
HCCs that were not on EDGE--in the sampled enrollees' medical records
to appropriately adjust issuers' risk scores. A few commenters
suggested that the accurate assessment of a plan's risk score depends
on sampling from the issuer's full population during HHS-RADV. One of
these commenters noted that many enrollees in issuers' populations have
no documented HCCs and noted concern that removing enrollees without
HCCs would lead to greater volatility or even increase the number of
outlier issuers. One commenter expressed concern that HHS-RADV was only
validating HCCs and excluding other components of the risk score, such
as RXCs, from validation. Another commenter suggested that removing
enrollees without HCCs from HHS-RADV could encourage upcoding and
inaccurate risk adjustment coding because issuers would not be able to
get failure rate credit for diagnoses identified in HHS-RADV but
unreported on EDGE. This commenter also suggested that HHS-RADV
encourages coding to the industry average rather than coding with
accuracy and noted that if issuers engage in upcoding at similar rates,
industry failure rates will increase, coding accuracy will decrease,
but HHS-RADV results could remain the same. Other commenters who
opposed the proposal suggested that excluding enrollees without HCCs
from the IVA sample could unfairly penalize or reward plans based on
the risk profile of their high-cost patients and may be short-sighted,
as HHS-RADV should help ensure that the actuarial risk and risk scores
for both high-risk and low-risk plans are appropriately calculated
[[Page 4451]]
and reflected in risk adjustment State transfers.
Response: As explained in the proposed rule (89 FR 82308, 82351),
we anticipate that excluding enrollees without HCCs from IVA sampling
will improve the precision of issuers' group failure rates for any
given sample size by increasing the number of observations used to make
statistical inferences. The precision of group failure rates is
important as we identify outliers in HHS-RADV based on whether their
group failure rates are statistically different from the national
benchmarks. As previously noted, the purpose of HHS-RADV is to ensure
that issuers are submitting accurate, high-quality information to their
EDGE servers as that data is used to calculate risk adjustment State
transfers. While it is possible that enrollees without HCCs may be
missing diagnoses, issuers are responsible for submitting data to EDGE
in accordance with the EDGE Server Business Rules for the applicable
benefit year by the established deadline.110 111 The
validation of HCCs in HHS-RADV aligns with the policies in the EDGE
Server Business Rules stating that a risk adjustment eligible diagnosis
must be supported by appropriate medical record documentation and
linked to a risk adjustment eligible claim accepted by the issuer's
EDGE server to validate an HCC in HHS-RADV. Since we finalized
discontinuing the use of the LLPC list and non-EDGE claims beginning
with 2022 benefit year HHS-RADV, IVA and SVA Entities cannot abstract
diagnoses that are not linked to an accepted risk adjustment eligible
claim on issuers' EDGE servers. Therefore, it is unlikely that HHS-RADV
would identify any missing HCCs for enrollees without HCCs if these
enrollees remained in the IVA sample. Furthermore, we clarify that the
changes finalized to the IVA sampling methodology in this rule will not
affect the review of demographic and enrollment information, as we will
continue to validate demographic and enrollment information for a
subsample of up to 50 enrollees from the IVA sample, or RXC review, as
the HHS-RADV requires review of RXCs for all adult enrollees in the IVA
sample with at least one RXC, and we continue to assume that a review
will be performed on approximately 50 RXCs per issuer.\112\ As
explained in the proposed rule (89 FR 82308, 82351), an analysis of
available enrollee-level EDGE data from benefit years 2019 through 2022
shows that on average less than 12 percent of an issuer's adult
enrollee population with RXCs has no HCCs. Therefore, the vast majority
of adult enrollees with RXCs also have HCCs and will therefore still be
captured in strata 1 through 3 in the IVA sample and eligible for
inclusion in the HHS-RADV RXC validation.
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\110\ As explained in 45 CFR 153.730, issuers of risk adjustment
covered plans must submit data to be considered for risk adjustment
payments and charges for the applicable benefit year by April 30 of
the year following the applicable benefit year or, if such date is
not a business day, the next applicable business day.
\111\ Issuers of risk adjustment covered plans remain
responsible for ensuring the completeness and accuracy of the data
submitted to their respective EDGE servers by the data submission
deadline. CMS does not permit issuers to submit additional data or
correct data already submitted to their EDGE servers after the
applicable benefit year's data submission deadline.
\112\ In the 2020 Payment Notice, we finalized piloting the
incorporation of RXCs into the HHS-RADV process in the 2018 benefit
year, which was the first year that RXCs were incorporated into the
risk adjustment models. We also finalized incorporating RXC
validation into HHS-RADV as a method of discovering materially
incorrect EDGE server data submissions in a manner similar to how we
address demographic, and enrollment errors discovered during HHS-
RADV beginning with the 2019 benefit year. See 84 FR 17501. We later
extended the pilot years of incorporating RXCs into HHS-RADV to the
2019 and 2020 benefit years of HHS-RADV to increase consistency
between the operations of these benefit years' HHS-RADV and
facilitate the combination of the HHS-RADV adjustments for these
benefit years as we transitioned to a concurrent application of HHS-
RADV results. See 85 FR 77002 through 77005.
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Under the finalized methodology, any enrollees inappropriately
coded with diagnoses that map to payment HCCs would fall within the
population of enrollees with HCCs and may be selected in the IVA
sample. Therefore, we believe this policy ensures that HHS-RADV remains
focused on ensuring issuers submit accurate, high-quality information
to their EDGE servers to be used in the risk adjustment State transfer
calculations and further disincentivizes inaccurate coding practices,
such as upcoding. However, as previously noted, we have not seen
conclusive evidence of upcoding on EDGE and believe that the HHS-RADV
program serves as a safeguard against upcoding by auditing the issuer's
EDGE data and reviewing the supporting medical records to validate
enrollee health status. In addition, while we acknowledge that issuers
are compared to industry coding averages when comparing issuer group
failure rates to national benchmarks, issuers with statistically
significant group failure rates that are below these national
benchmarks may receive negative group adjustment factors to calculate
IVA sampled enrollees' adjusted risk scores in error estimation and may
be assigned negative error rates such that their more accurate coding
practices are reflected in their HHS-RADV results.\113\ We therefore
continue to believe that the HHS-RADV program encourages accurate
coding in issuer EDGE data. In addition, we also believe that some
variation and error should be expected in the compilation of data for
risk scores, because providers' documentation of enrollee health status
varies across provider types and groups, so it may not be reasonable to
assume that issuers can achieve group failure rates equal to zero. As
such, the primary purpose of identifying statistically meaningful
differences between issuers' group failure rates and national
benchmarks in HHS-RADV is to avoid the unwarranted application of risk
score adjustments.
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\113\ We also note that the 2020 HHS-RADV Amendments Rule
adopted a negative failure rate constraint to mitigate the impact of
adjustments that result from outlier issuers with negative failure
rates that are driven by newly identified Super HCCs (rather than by
high validation rates) beginning with 2019 benefit year HHS-RADV.
See 85 FR 76994 through 76998. The 2023 Payment Notice expanded the
application of the negative failure rate constraint to constrain the
failure rate of any failure rate group in which an issuer is a
negative failure rate outlier to zero when calculating the group
adjustment factor, regardless of whether the outlier issuer has a
negative or positive error rate, beginning with 2021 benefit year
HHS-RADV. See 87 FR 27255 through 27256.
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We also disagree that excluding enrollees without HCCs from the IVA
sampling methodology would lead to unfair HHS-RADV results based on the
risk profile of issuers' high-cost patients as enrollees with HCCs in
the issuer-specific low-risk and medium-risk strata will continue to be
sampled and included in the IVA. Moreover, we anticipate that the
average proportion of issuers' IVA samples from low-risk strata will
generally increase from finalizing the policy to use HHS-RADV data
rather than MA-RADV data as the source for the Neyman allocation for
IVA sampling.
Finally, we note that the refinements to the IVA sampling
methodology, including the policy to exclude enrollees without HCCs,
further advance program integrity goals of validating the actuarial
risk of enrollees in risk adjustment covered plans to ensure that the
HHS-operated risk adjustment program accurately assesses charges to
issuers with plans with lower-than-average actuarial risk while making
payments to issuers with plans with higher-than-average actuarial risk.
We therefore believe that HHS-RADV will continue to help ensure that
the risk scores and risk adjustment State transfers for issuers of
high-risk and low-risk plans are calculated consistent with the
established methodology and
[[Page 4452]]
requirements based on the data made available to HHS by the applicable
benefit year's deadline.
Comment: A few commenters requested clarification on how this
change would impact the error rate calculation. One of these commenters
requested HHS further investigate the impact of this policy as the
commenters believed the impact would vary across issuers depending on
the proportion of their enrollee population with HCCs. This commenter
requested HHS apply the error rate such that only the plan liability
risk score associated with enrollees with HCCs, and not with the total
enrollee population, would be adjusted.
Response: Excluding enrollees without HCCs from the IVA sampling
methodology does not impact the formula used to calculate issuers' HCC-
associated error rates during error estimation. As described in the
HHS-RADV protocols, HHS estimates an issuer's HCC-associated error rate
using sampled enrollees' adjusted HCC-associated risk scores and HCC-
associated EDGE risk scores.\114\ Although enrollees without HCCs are
currently included in issuers' audit samples, these enrollees have HCC-
associated EDGE risk scores equal to zero and cannot have adjusted HCC-
associated risk scores. Therefore, enrollees without HCCs are already
excluded from the calculation of the HCC-associated error rate, which
was explained as one of the reasons for implementing this IVA sampling
change in the proposed rule (89 FR 82351).
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\114\ See Section 13.3.1.3.3 Calculate Error Rates of the BY23
HHS-RADV Protocols available at https://regtap.cms.gov/uploads/library/HHS-RADV_2023_Benefit_Year_Protocols_v1_5CR_060424.pdf.
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However, we also note that excluding enrollees without HCCs from
IVA sampling will have an impact on the steps in the error estimation
methodology during which HCC-associated error rates are applied to
adjust issuers' plan liability risk scores. Under the current error
estimation methodology finalized in the 2019 Payment Notice \115\ and
the 2020 HHS-RADV Amendments Rule,\116\ and as described in the HHS-
RADV Protocols,\117\ the HCC-associated error rate, which only
describes the proportion of the HCC-related components of the risk
score that are believed to be in error, is scaled to apply only to the
HCC portion of an issuer's total plan liability risk score, which
includes non-HCC and HCC components. To accomplish this, HHS uses the
issuer's audit sample, which includes enrollees with and without HCCs
under the current IVA sampling methodology, to calculate an HCC-
associated PLRS weight and estimate how much of the issuer's plan
liability risk score is HCC-related in the issuer population.
Therefore, removing enrollees without HCCs from IVA sampling beginning
with 2025 benefit year HHS-RADV implies that issuers' audit samples can
no longer be used to calculate the appropriate HCC-associated PLRS
weight according to the existing formula. As such, before 2025 benefit
year HHS-RADV error estimation begins,\118\ we intend to continue to
consider the impact of the IVA sampling methodology changes in this
rule on the HHS-RADV error estimation methodology and will seek
comments from interested parties on potential modifications to the
intermediate steps in the error estimation methodology to ensure that
the HCC-associated error rate continues to apply to only the proportion
of the total plan liability risk score that is associated with HCC-
components of EDGE risk scores.
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\115\ See the Notice of Benefit and Payment Parameters for 2019;
Final Rule, 83 FR 16930 at 16961-16965 (April 17, 2018) (2019
Payment Notice).
\116\ See the Amendments to the HHS-Operated Risk Adjustment
Data Validation (HHS-RADV) Under the Patient Protection and
Affordable Care Act's HHS-Operated Risk Adjustment Program; Final
Rule; 85 FR 76979 at 76998-77001 (December 1, 2020) (2020 HHS-RADV
Amendments Rule).
\117\ See Section 13.3.1.3.3 Calculate Error Rates of the BY23
HHS-RADV Protocols available at https://regtap.cms.gov/uploads/library/HHS-RADV_2023_Benefit_Year_Protocols_v1_5CR_060424.pdf.
\118\ Error estimation for 2025 benefit year HHS-RADV is
anticipated to begin in Spring 2027 after IVA and SVA Entities
submit audit findings for the 2025 benefit year.
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Comment: One commenter requested that HHS allot additional time for
issuers to complete HHS-RADV, as excluding enrollees without HCCs from
the IVA sample will require issuers to validate more HCCs and RXCs,
impacting operational resources and capacity.
Response: We do not anticipate that excluding enrollees without
HCCs from IVA sampling will prevent issuers from meeting the current
timeline associated with HHS-RADV activities. Issuers have complied
with the timeline for HHS-RADV activities under the current IVA
sampling methodology and should be able to maintain compliance under
the finalized IVA sampling methodology where issuer burden is estimated
to decrease on average. As discussed in the proposed rule, under the
revised IVA sampling methodology, we estimate that issuers will have to
submit approximately 2 medical records per enrollee in the IVA sample
for IVA review, which is a decrease from the current burden estimates
under the existing IVA sampling methodology of 5 medical record
requests per enrollee in the IVA sample. In addition, as explained in
the Collection of Information section of this rule, we do not
anticipate that these changes will affect RXC review, as HHS-RADV
requires review of RXCs for all adult enrollees in the IVA sample with
at least one RXC, and we continue to assume that a review will be
performed on approximately 50 RXCs per issuer.\119\
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\119\ For more details on RXC validation, see Section 10.4
Validation of the BY23 HHS-RADV Protocols available at https://regtap.cms.gov/uploads/library/HHS-RADV_2023_Benefit_Year_Protocols_v1_5CR_060424.pdf.
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2. Proposal To Remove the Finite Population Correction (FPC)
In the HHS Notice of Benefit and Payment Parameters for 2026
proposed rule (89 FR 82308, 82351), we proposed to remove the FPC from
the IVA sampling methodology such that, with the exclusion of enrollees
without HCCs from IVA sampling, all issuers with at least 200 enrollees
with HCCs in their enrollee population would have an IVA sample size of
200. Under this proposal, all issuers with fewer than 200 enrollees
with HCCs would have an IVA sample size equal to their population of
enrollees with HCCs. See the proposed rule (89 FR 82308, 82351) for a
full discussion of the proposal to remove the FPC from the IVA sampling
methodology.
As noted in the proposed rule (89 FR 82308, 82352), by including
more enrollees with HCCs in these smaller issuers' IVA samples, we
would increase these issuers' probability of meeting the 30 Super HCC
constraint and improve the precision of group failure rates during
error estimation, as well as improve the precision of net risk score
error as discussed below. In addition, for small issuers that meet the
30 Super HCC threshold, this proposal would further allow these
issuers' risk scores to be appropriately adjusted if they are
identified as outliers, and it would allow them to gain additional
insights from a richer set of data elements reported in their HHS-RADV
results to improve coding practices and EDGE data submission procedures
(as applicable). For these reasons, we proposed to remove the FPC
beginning with 2025 benefit year HHS-RADV.
We sought comment on the proposal to remove the FPC from the IVA
sampling methodology.
After consideration of comments and for the reasons outlined in the
proposed rule and this final rule, including our
[[Page 4453]]
responses to comments, we are finalizing this proposal as proposed. We
summarize and respond to public comments received on the proposal to
remove the FPC from the IVA sampling methodology beginning with 2025
benefit year HHS-RADV below.
Comment: Many commenters supported the proposal to remove the FPC
from IVA sampling. Several of these commenters suggested that this
proposal would contribute to improving sampling precision and the
accuracy and integrity of HHS-RADV.
A few commenters were opposed the proposal to remove the FPC. One
of these commenters expressed concern that the combined impact of this
policy and the policy to exclude enrollees without HCCs from IVA
sampling would significantly disadvantage smaller issuers. This
commenter noted that smaller issuers are already burdened by a
significantly higher per member per month audit cost than larger
issuers and stated that these changes would not apply the same audit
standard equitably and consistently across issuers. This commenter
suggested that a smaller issuer with a total population of 600
enrollees with HCCs could end up with 33 percent of their enrollee
population with HCCs sampled for audit by sampling 200 enrollees
whereas a larger issuer in the same market might have a total
population of 37,000 enrollees with HCCs and end up with less than 1
percent of their enrollee population of HCCs sampled for audit. Another
commenter noted that the proposal would likely burden smaller issuers
that currently have modified IVA sample sizes less than 200 enrollees
by increasing the number of sampled enrollees and medical records.
Response: We are finalizing the proposal to remove the FPC from IVA
sampling as proposed and anticipate that this policy will improve the
precision of net risk score error and group failure rates. We disagree
that the removal of the FPC, combined with the finalization of the
proposals to exclude enrollees without HCCs from IVA sampling and
replace the source of the Neyman allocation data, will disadvantage
smaller issuers over larger issuers. While we recognize that smaller
issuers incur costs to hire an IVA Entity and undergo the HHS-RADV,
there are other HHS-RADV provisions intended to limit administrative
and cost burden on small issuers. Specifically, at Sec. 153.630(g)(1)
and (2), we established exemptions from HHS-RADV for issuers with 500
or fewer billable member months (BMMs) Statewide and we established
random and targeted sampling for issuers at or below a materiality
threshold \120\ for the benefit year being audited.\121\ For issuers at
or below the HHS-RADV materiality threshold, which is set at 30,000
total BMMs Statewide, these costs are only realized for the benefits
years that the smaller issuer is selected for HHS-RADV, which is
approximately once every 3 years (barring any risk-based triggers that
would warrant more frequent audits) under the materiality threshold
provision at Sec. 153.630(g)(2).\122\ Under the very small issuer
exemption at Sec. 153.630(g)(1), an issuer that has 500 or fewer BMMs
of enrollment in the individual, small group, and merged market (as
appliable) for the applicable benefit year, calculated on a Statewide
basis, and elects to establish and submit data to an EDGE server is not
subject to the requirement to hire an IVA Entity or submit IVA audits
for that benefit year.\123\
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\120\ Beginning with the 2022 benefit year of HHS-RADV, the
materiality threshold under Sec. 153.630(g)(2) was defined as
30,000 total BMMs Statewide, calculated by combining an issuer's
enrollment in the individual non-catastrophic, catastrophic, small
group, and merged markets (as applicable), in the benefit year being
audited. See the 2024 Payment Notice, 88 FR 25740, 25788 through
25790.
\121\ See Sec. 153.630(g)(1) and (2). Also see 81 FR 94058 at
94104, 83 FR 16930, 16966, and 84 FR 17454, 17508.
\122\ An issuer who meets the criteria and is exempt from the
IVA requirements for a benefit year of HHS-RADV under the
materiality threshold for random and targeted sampling may be
required to make their records available for review and comply with
an audit by the Federal Government under Sec. 153.620.
\123\ 45 CFR 153.630(g)(1).
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To further explain, we adopted these policies in response to
concerns regarding the regulatory burden and costs associated with HHS-
RADV, particularly for smaller issuers. For example, we explained in
prior rulemakings that HHS was adopting a materiality threshold for
HHS-RADV to ease the burden of annual audit requirements for small
issuers of risk adjustment covered plans.\124\ We further explained
that we believed this provision was appropriate because the fixed costs
associated with hiring an IVA Entity and conducting the audit may be
disproportionately high for smaller issuers, and may even constitute a
large portion of their administrative costs.\125\ Also, we estimated
that issuers of risk adjustment covered plans at or below this
threshold would represent less than 1.5 percent of enrollment in risk
adjustment covered plans nationally, so the effect of the provision on
HHS-RADV would not be material. We similarly explained that exempting
very small issuers under Sec. 153.630(g)(1) is appropriate because
they will have a disproportionally high operational burden for
compliance with HHS-RADV.126 127 These provisions remain
applicable.
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\124\ See the 2020 Payment Notice, 84 FR 17508 through 17511.
Also see the 2019 Payment Notice, 83 FR 16966 through 19697, and the
2018 Payment Notice, 81 FR 94104 through 94105.
\125\ See the 2020 Payment Notice, 84 FR 17510. Also see the
2018 Payment Notice, 81 FR 94104 through 94105, and the 2019 Payment
Notice, 83 FR 16966 through 19697.
\126\ See the 2019 Payment Notice, 83 FR 16966. Also see the
2020 Payment Notice, 84 FR 17508.
\127\ These very small issuers who are eligible for the
exemption under Sec. 153.630(g)(1) are also not subject to random
sampling under the materiality threshold, and therefore would
continue to not be subject to the requirement to hire an IVA Entity
or submit IVA results for that benefit year. See the 2020 Payment
Notice, 84 FR 17508. Issuers who qualify for this exemption are not
subject to enforcement action for noncompliance with HHS-RADV
requirements and are not assessed the default data validation charge
under Sec. 153.630(b)(10) for the applicable benefit year.
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In addition, we believe the removal of the FPC will benefit smaller
issuers by giving them a better opportunity to increase the count of
Super HCCs reviewed in HHS-RADV and gain additional insights from more
informative HHS-RADV results to improve coding practices and EDGE data
submission procedures. As explained in the proposed rule, we found in
recent years of HHS-RADV results that issuers with IVA sample sizes
less than 200 enrollees are less likely to meet the 30 Super HCC
constraint for outlier identification in a failure rate group. This
constraint was first established in the 2021 Payment Notice \128\ as
standard statistical practice states that sample sizes below 30
observations could result in violations of the assumptions of
statistical testing or lead to the detection of more apparent outliers
than would be desirable. Because the requirements to participate in
HHS-RADV do not depend on issuers' count of Super HCCs, issuers
selected for HHS-RADV may incur the costs to participate without having
sufficient Super HCCs to make statistical inferences. By increasing the
count of Super HCCs, we
[[Page 4454]]
increase the precision of the group failure rates that are used to
determine national benchmarks and the probability that issuers will be
able to meaningfully compare their calculated group failure rates to
the national benchmarks. More specifically, as noted in the proposed
rule (89 FR 82308, 82352) we estimate that any issuers receiving the
FPC under the current methodology and whose IVA sample sizes would
increase under the finalized IVA sampling methodology would see a 35
percent increase in Super HCC count in their IVA samples and a 26
percent increase in group failure rate precision on average across all
three failure rate groups.
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\128\ Under the outlier identification policy finalized in the
2021 Payment Notice, when HCCs were the unit of analysis of failure
rates, an issuer could not be identified as an outlier in any
failure rate group in which that issuer had fewer than 30 Super
HCCs. See 85 FR 29196 through 29198. In the 2023 Payment Notice,
when the unit of analysis of failure rates was altered to de-
duplicated Super HCCs, we finalized the policy to not consider an
issuer as an outlier in any failure rate group in which that issuer
has fewer than 30 de-duplicated EDGE Super HCCs. Issuers with fewer
than 30 de-duplicated EDGE Super HCCs in a failure rate group may
still be considered an outlier in other failure rate groups in which
they have 30 or more de-duplicated EDGE Super HCCs. See 87 FR 27254.
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We also recognize that because IVA sample sizes are limited to 200
enrollees, larger issuers will inherently have smaller proportions of
their populations subject to audit, but we disagree that this creates
an unequal application of audit standards across issuers. Given the
variance in issuer size across issuers of risk adjustment covered
plans, it would not be possible to audit equal proportions of issuers'
populations. The IVA sampling methodology recognizes this by using the
Neyman allocation to optimally allocate each issuer's IVA sample across
strata. In addition, while it is possible that a smaller issuer may be
burdened by an increased number of sampled enrollees under the
finalized policy to remove the FPC, we estimate a decrease in aggregate
issuer burden across all issuers as the total estimated number of
medical records reviewed per sampled enrollee will decrease, and we
note that sample size will not increase for all issuers currently
subject to the FPC as some of these issuers have a smaller population
of enrollees with HCCs than their previously assigned modified IVA
sample sizes that included enrollees without HCCs. For example, an
issuer with a total enrollee population of 1,000 would be assigned a
sample size of 160 enrollees under the current methodology and using
the FPC formula. If this issuer only has a population of 100 enrollees
with HCCs, then, under the methodology being finalized in this rule,
the issuer's IVA sample size would decrease to 100 enrollees. In
addition, we anticipate that the vast majority of issuers who would see
increased IVA sample sizes after the removal of the FPC are at or below
the materiality threshold for random and targeted sampling and would
therefore only be selected for audit approximately once every 3 benefit
years (barring any risk-based triggers based on experience that will
warrant more frequent audits).129 130 Therefore, we believe
that the benefits a smaller issuer gains from increased group failure
rate precision, as described above, outweigh potential increases in IVA
sample size.
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\129\ 45 CFR 153.630(g)(2).
\130\ Beginning with the 2022 benefit year of HHS-RADV, the
materiality threshold under Sec. 153.630(g)(2) is defined as 30,000
total BMMs Statewide, calculated by combining an issuer's enrollment
in the individual non-catastrophic, catastrophic, small group, and
merged markets (as applicable), in the benefit year being audited.
See the 2024 Payment Notice, 88 FR 25740, 25788 through 25790.
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3. Proposal To Source the IVA Sampling Neyman Allocation With HHS-RADV
Data
In the HHS Notice of Benefit and Payment Parameters for 2026
proposed rule (89 FR 82308, 82352), we also proposed to change the
current IVA sampling methodology to replace the source of the Neyman
allocation data with HHS-RADV data to determine IVA sample strata
allocation. To do this, we proposed to no longer use MA-RADV data to
calculate the standard deviation of risk score error(Si,h) for use in
the Neyman allocation and instead use a 3-year rolling-window of
available HHS-RADV data beginning with 2025 benefit year HHS-RADV.
As noted in the proposed rule, under this proposal, for a given
benefit year of HHS-RADV, we would use the 3 most recent consecutive
years of HHS-RADV data with results that have been released before that
benefit year's HHS-RADV activities begin as the source data for the
Neyman allocation and would continue to combine enrollees in each
stratum across all issuers to create a national variance of net risk
score error to calculate the standard deviation of risk score error
(Si,h).131 132 We proposed to continue calculating Si,h with
a national variance of net risk score error, but to use a 3-year
rolling window of HHS-RADV data rather than the MA-RADV data as the
source data for the Neyman allocation. Under the proposed approach, we
would re-calculate Si,h during each benefit year of HHS-RADV to use the
3 most recent consecutive years of HHS-RADV data with results that have
been released before each benefit year's HHS-RADV activities begin. In
the context of HHS-RADV, a 3-year rolling window would capture
population changes that occur over time while promoting stability in
the estimates of Si,h in HHS-RADV year over year.
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\131\ A new benefit year of HHS-RADV activities generally begins
in the spring the year following the applicable benefit year when
issuers can start selecting their IVA entity and IVA entities can
start electing to participate in HHS-RADV for that benefit year.
See, for example, the 2023 Benefit Year HHS-RADV Activities
Timeline. https://regtap.cms.gov/uploads/library/2023_RADV_Timeline_5CR_072424.pdf. We note that there were delays in
the 2023 Benefit Year HHS-RADV Activities Timeline in recognition of
issuers facing challenges related to EDGE server operations after
the Change Healthcare Cybersecurity Incident.
\132\ As an example, finalizing this policy as proposed, we
anticipate using HHS-RADV data from benefit years 2021, 2022 and
2023 for the Neyman allocation for benefit year 2025 HHS-RADV.
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In the proposed rule (89 FR 82353), we noted that the proposal to
use HHS-RADV data rather than the MA-RADV data as the source data for
the Neyman allocation would decrease burden on issuers and IVA
Entities. More specifically, our analysis found that the MA-RADV data
yields considerably different sample sizes for each stratum than the
HHS-RADV data, and that using the HHS-RADV data rather than the MA-RADV
data is likely to increase the proportion of the sample in the lower-
risk groups and decrease the proportion of the sample in the high-risk
group. The estimated change in sampled enrollees means that, under this
proposal, issuers would have relatively fewer medical records to review
because of the increase in the proportion of sampled enrollees in the
lower-risk strata and the decrease in the proportion of enrollees in
higher-risk strata. To further explain, this decrease in estimated
medical record review would occur because higher-risk enrollees tend to
have relatively more medical records to review than lower-risk
enrollees. Issuers and their IVA Entities spend time and resources on
retrieving, reviewing, and submitting medical records and documentation
for HHS-RADV, so the estimated decrease in the average number of
medical records reviewed per enrollee in the IVA sample that our
analysis found would result from replacing MA-RADV data with HHS-RADV
data is expected to lead to a decrease in issuer burden. We further
address the estimated aggregate burden impact of all IVA sampling
policies being finalized in section III.B.6.a.4 below and the
Collection of Information section of this rule.
We sought comment on the proposal to replace the source of the
Neyman allocation data for IVA sampling source with HHS-RADV data.
After consideration of comments and for the reasons outlined in the
proposed rule and this final rule, including our responses to comments,
we are finalizing this proposal as proposed. We summarize and respond
to public comments received on the proposal to replace the MA-RADV data
used in the Neyman allocation for IVA sampling purposes with HHS-RADV
data below.
[[Page 4455]]
Comment: Many commenters supported the proposal to replace the MA-
RADV data used in the Neyman allocation for IVA sampling purposes with
HHS-RADV data and suggested that the proposal would improve sampling
precision or the accuracy of HHS-RADV. A few commenters agreed that
using the HHS-RADV data for this purpose would lead to the stratum
allocation shifts described in the proposed rule and suggested that the
MA-RADV data may lead to oversampling enrollees from the high-risk
score groups relative to other groups. One of these commenters stated
that the shift to lower-risk strata will be more reflective of the true
population and another commenter noted that this shift may reduce
administrative burden for issuers with a greater volume of HCCs to
validate in their IVA samples. One commenter suggested that this shift
may incentivize issuers to focus chart reviews on enrollees with lower
risk scores but also recognized that the timing of HHS-RADV may make it
difficult for issuers to determine whether these are effective
strategies for chart reviews. One commenter expressed general
opposition to the proposal to replace the MA-RADV data with HHS-RADV
data in the Neyman allocation for IVA sampling.
Response: We agree with commenters that replacing the MA-RADV data
used to calculate the standard deviation of risk score error (Si,h) in
the Neyman allocation for IVA sampling with HHS-RADV data would
increase sampling precision, and we are finalizing this change as
proposed beginning with 2025 benefit year HHS-RADV. Under this new
approach, for a given benefit year of HHS-RADV, we will use the 3 most
recent consecutive years of HHS-RADV data with results that have been
released before that benefit year's HHS-RADV activities begin to
calculate a national variance of net risk score error and issuer's
standard deviation of risk score error in the Neyman allocation for IVA
sampling purposes. For example, for 2025 benefit year HHS-RADV
sampling, we anticipate using the 2021, 2022 and 2023 benefit years of
HHS-RADV data for this purpose as they would represent the 3 most
recent consecutive years of HHS-RADV whose results would be released
before that benefit year's HHS-RADV activities began.\133\
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\133\ Activities related to the 2025 benefit year of HHS-RADV
will generally begin in Spring 2026, when issuers can start
selecting their IVA entity, and IVA entities can start electing to
participate in HHS-RADV for the 2025 benefit year. For the most
recently published annual HHS-RADV timeline, see the 2023 Benefit
Year HHS-RADV Activities Timeline. https://regtap.cms.gov/uploads/library/2023_RADV_Timeline_5CR_072424.pdf. Note that there were
delays in the 2023 Benefit Year HHS-RADV Activities Timeline in
recognition of the challenges some issuers were facing related to
EDGE server operations after the Change Healthcare Cybersecurity
Incident.
---------------------------------------------------------------------------
As explained in the proposed rule (89 FR 82308, 82350), we
initially chose to use MA-RADV data when calculating a national
variance of net risk score error and issuers' standard deviation of
risk score error because HHS-RADV data was not available and the MA-
RADV program utilizes a similar HCC-based methodology. We reconsidered
the use of MA-RADV data in the IVA sampling methodology in the 2019
HHS-RADV White Paper, but we only had data from 1 year of non-pilot
HHS-RADV at the time, and we determined that we would need to gather
more data from future years of HHS-RADV to perform further
analysis.\134\ Now, as noted in the proposed rule, we have several
years of HHS-RADV data and our recent analysis found that the MA-RADV
data yields considerably different sample sizes for each stratum than
the HHS-RADV data and using the HHS-RADV data would better capture the
true variance in net risk score error in the risk adjustment
population. The HHS-RADV data supports sampling low-risk strata more
intensely than the MA-RADV data because the HHS-RADV data estimates a
greater variance for these groups than the MA-RADV data, so a
relatively smaller proportion of the IVA sample will be assigned to the
higher-risk strata. Consequentially, we anticipate this change to the
source data used for the Neyman allocation for IVA sampling would
result in relatively fewer HCCs to validate and medical records to
review per enrollee during the IVA for all issuers, on average. We also
note that while the Neyman allocation optimizes strata sample size by
sampling strata with greater variance more intensely, the number of
enrollees sampled from each stratum also depends on each stratum's
relative size in the issuer's population. Enrollees will continue to be
sampled from low, medium and high-risk strata as we calculate non-zero
national variances of net risk score error for strata 1-9.\135\
Therefore, issuers should continue to focus on the appropriate coding
of all enrollees regardless of enrollee risk score as the purpose of
HHS-RADV is to ensure that issuers are providing accurate, high-quality
information to their EDGE servers to be used in the risk adjustment
State transfer calculations. While HHS sets the standards for HHS-RADV
and validates IVA results through the SVA, issuers have different
structures, systems and contracts with their IVA Entities which may
determine how they prioritize chart retrievals and reviews.
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\134\ See Chapter 2: HHS-RADV Initial Validation Audit (IVA)
Sampling of the HHS Risk Adjustment Data Validation (HHS-RADV) White
Paper (December 6, 2019).
\135\ As noted above, we are also finalizing the proposal to
exclude enrollees without HCCs from IVA sampling.
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Comment: A few commenters expressed concerns with difficulty
retrieving documentation to validate newborn birthweight and noted that
this may impact calculating the variance of net risk score error for
infant strata in HHS-RADV. One of these commenters requested HHS to
exclude the newborn birthweight HCCs when calculating the variance of
error for infant strata.
Response: While we recognize commenters' concerns with retrieving
documentation to validate newborn birthweight, issuers are required to
have the appropriate documentation to substantiate any risk adjustment
eligible diagnoses submitted to EDGE. Moreover, we disagree with
excluding the newborn birthweight HCCs when calculating the variance of
infant strata. The average number of infant enrollees selected in the
IVA sample is relatively low and excluding birthweight HCCs could
artificially reduce the variance in the infant low, medium and high-
risk strata, which in turn would further reduce the representation of
infant enrollees in the IVA sample. We believe that using HHS-RADV data
to derive stratum variance without excluding any HCCs will ensure that
issuers' IVA sample sizes best reflect the relevant risk adjustment
population. We therefore decline to exclude the newborn birthweight
HCCs when calculating the variance of error for infant strata.
Comment: One commenter who supported the general proposal to no
longer use MA-RADV data and begin using HHS-RADV data opposed using a
3-year rolling average and requested HHS instead use the most recent
year of HHS-RADV data. This commenter suggested that HHS-RADV policy
goals should not aim to make HHS-RADV audits predictable year-to-year
and using the most recent year of HHS-RADV data available would help
identify any evolving data integrity issues before they lead to
competitive disequilibrium. This commenter also stated that continuing
to use the MA-RADV data in the Neyman allocation may reduce transfer
accuracy and requested HHS to recalibrate IVA sampling using the HHS-
RADV data as soon as possible rather than waiting to the 2025 benefit
year of HHS-RADV.
[[Page 4456]]
Response: We are finalizing the proposal to replace MA-RADV data as
the source data for the Neyman allocation for IVA sampling and use of
the 3 most recent consecutive years of HHS-RADV data with results that
have been released before that benefit year's HHS-RADV activities to
calculate the standard deviation of risk score error ) in the Neyman
allocation starting with the 2025 benefit year of HHS-RADV. As
explained in the proposed rule (89 FR 82308, 82353), the purpose of
using 3 years of HHS-RADV data is to capture population changes that
occur over time while promoting stability in the estimates of the
standard deviation of risk score error in HHS-RADV year over year and
to ensure that all issuers, including smaller issuers that are at or
below the materiality threshold at Sec. 153.630(g)(2) that are
generally subject to HHS-RADV approximately once every 3 years, are
captured when estimating strata variance. The 3-year rolling average
for sample design is not intended to make HHS-RADV predictable.
Furthermore, using a rolling-window of the 3 most recent consecutive
years of HHS-RADV data means that the set of 3 years informing the
calculation of stratum variance would change from one benefit year of
HHS-RADV to the next. Predicting these annually calculated stratum
variance values years in advance would be more difficult under the
finalized methodology than the current methodology, which relies on a
static year of MA-RADV data to estimate the variance of net risk score
error.\136\ In addition, the stratum variance would continue to be
calculated at a national level, so the impact of any one issuer's
behavior on stratum variance is limited. Moreover, using this 3-year
rolling-window should capture any new trends in variance that could
reflect data integrity issues without immediately abandoning the trends
in variance observed in the recent past.
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\136\ The HHS-RADV protocols include an estimate for the stratum
variance calculated from MA-RADV data and used in the Neyman
allocation. See, for example, Section 8.3.3 Validating the IVA
Sample Generated by CMS in the 2023 Benefit Year HHS-RADV Protocols.
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While we anticipate the transition to HHS-RADV data in the Neyman
allocation to better reflect the relevant risk adjustment population,
we disagree with concerns that continuing to use the MA-RADV data
before the 2025 benefit year of HHS-RADV will reduce transfer accuracy.
Our analysis of the current HHS-RADV methodology supports acceptable
levels of error rate precision, and we are finalizing improvements to
the IVA sampling methodology in this final rule to further our program
integrity goals of validating the actuarial risk of enrollees in risk
adjustment covered plans to ensure that the HHS-operated risk
adjustment program accurately assess charges to issuers with plans with
lower-than-average actuarial risk while making payments to issuers with
plans with higher-than-average actuarial risk. In addition, the
finalized changes to use HHS-RADV data in the Neyman allocation for IVA
sampling will require sufficient lead time for HHS to derive coding
changes to calculate the national variance of net risk score error for
each stratum and issuers' standard deviations of risk score error for
each stratum, which are used as an input to the Neyman allocation
formula, and to perform testing and quality reviews of the
calculations. In addition, as we explained in the proposed rule (89 FR
82406), we considered implementing the change to use HHS-RADV data in
the Neyman allocation without the other proposed IVA sampling
modifications, and we found that making these modifications in
combination would lead to greater improvements in sampling precision
and would allow more than 95 percent of issuers to pass the 10 percent
sampling precision target at a two-sided 95 percent confidence level.
Therefore, we need sufficient lead time to build all changes to the IVA
sampling methodology finalized in this rule before issuers' IVA samples
can be generated under the methodology finalized in this rule. There
would be insufficient time to complete these tasks and implement this
change to generate 2024 benefit year IVA samples as 2024 benefit year
HHS-RADV activities will generally begin in early 2025. We therefore
are finalizing the proposed applicability date and will implement this
change beginning with the 2025 benefit year HHS-RADV.
4. Impact of IVA Sampling Proposals
In the HHS Notice of Benefit and Payment Parameters for 2026
proposed rule (89 FR 82308, 82353) we noted that in preparation for
these proposed changes to HHS-RADV IVA sampling, HHS conducted several
analyses to evaluate the impact of these proposals. Our analyses
revealed that the proposed modifications to switch data for the Neyman
allocation to use the 3 most recent consecutive years of HHS-RADV data
with results that have been released before HHS-RADV activities begin
for the given benefit year, combined with the proposals to remove
enrollees without HCCs from IVA sampling and to remove the FPC from the
IVA sampling methodology, would improve our ability to reach the 10
percent sampling precision target for net risk score error for a
greater proportion of issuers in HHS-RADV.\137\ More specifically, when
we evaluated the proposed IVA sampling methodology reflecting the
changes outlined in the proposed rule, which excludes enrollees without
HCCs, removes the FPC, and replaces the MA-RADV data with available
HHS-RADV data as the source data for the Neyman allocation, using HHS-
RADV data from the 2022 benefit year, we found that more than 99
percent of issuers met the 10 percent sampling precision target for net
risk score error at a two-sided 95 percent confidence level.
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\137\ The precision of net risk score error reflects the ability
of the IVA sampling methodology to consistently estimate the percent
difference between enrollees' audit risk scores and EDGE risk
scores. We provided details on how the 10 percent sampling target
was derived in the proposed rule. See 89 FR 82349 through 82350.
---------------------------------------------------------------------------
Our analyses also focused on the impact of the policies on group
failure rate precision. Under the proposed changes to the IVA sampling
methodology in the proposed rule, our analysis found that approximately
91 percent of all issuers in HHS-RADV would meet the 10 percent group
failure rate precision in all three Super HCC groups. Moreover,
approximately 87 percent of issuers with IVA sample sizes less than 200
would also meet the 10 percent group failure rate precision target in
all three Super HCC groups.
In addition, we anticipated that the proposed changes to the IVA
sampling methodology in the proposed rule would result in an overall
decrease in the number of medical records reviewed by IVA Entities.
Although every enrollee sampled for the IVA would have HCCs, the
proportion of enrollees sampled from strata 1 through 9 would change
such that enrollees that generally have more medical records are
sampled less intensely due to the replacement of MA-RADV data with HHS-
RADV data for the Neyman allocation. As mentioned in the proposed rule,
the median sample proportion of high-risk adult enrollees, who have
more medical records to review on average, could decrease from 39
percent of the sample to 19 percent under the updated IVA sampling
methodology reflecting the proposed changes in the proposed rule. We
described our estimates of the proposed methodology on issuer burden in
more detail in the Collection of Information section of the proposed
rule.
As noted in the proposed rule (89 FR 82308, 82354), removing
enrollees without HCCs and the FPC, and updating the source of the IVA
sampling Neyman allocation data to use HHS-
[[Page 4457]]
RADV data, leads to an IVA sample that improves sampling precision
while decreasing burden on issuers and IVA Entities on average.
Therefore, we proposed to exclude enrollees without HCCs from IVA
sampling such that each enrollee in an issuer's IVA sample must have at
least one HCC, remove the FPC, and change the source of the Neyman
allocation data used to calculate the standard deviation of risk score
error from MA-RADV data to the 3 most recent consecutive years of HHS-
RADV data with results that have been released before HHS-RADV
activities for the benefit year begin.
We sought comment on the estimated impact of all proposed changes
to the IVA sampling methodology. After consideration of comments and
for the reasons outlined in the proposed rule and this final rule,
including our responses to comments below and on the proposals to
exclude enrollees without HCCs from IVA sampling, remove the FPC from
the IVA sampling methodology, and replace the source of data in the
Neyman allocation from MA-RADV data with HHS-RADV data, we are
finalizing all proposed IVA sampling policies as proposed. We summarize
and respond to public comments received on the estimated impact of
these proposals below.
Comment: Several commenters suggested that the three proposed
changes to the IVA sampling methodology would improve the overall
accuracy and precision of HHS-RADV results. In addition, several
commenters agreed that all proposed changes to the IVA sampling
methodology would improve sampling and group failure rate precision.
One of these commenters suggested that finalizing the proposed changes
would provide a more accurate and inclusive threshold for outlier
identification. Another commenter suggested that the IVA sampling
proposals would improve the predictability of HHS-RADV.
Response: We appreciate these comments in support of the three
proposed changes to the IVA sampling methodology and are finalizing all
of these proposed changes as proposed to align sampling with the error
estimation methodology and improve sampling precision. We anticipate
that the changes will also improve the precision of group failure
rates, the national benchmarks used to determine outlier status in each
failure rate group, the net risk score error calculations, and will
therefore improve the precision of HHS-RADV results used to adjust risk
adjustment State transfers. Improving the precision of the IVA sampling
methodology with the adoption of the changes finalized in this rule
will also further promote the overall integrity of HHS-RADV and
confidence in the HHS-operated risk adjustment program.
Comment: One commenter agreed with HHS' assessment that issuer and
IVA Entity burden would decrease as a result of the proposed changes to
the IVA sampling methodology. However, a few commenters questioned HHS'
assessment of burden associated with the proposed changes. One of these
commenters suggested that the proposals would unnecessarily increase
the administrative burden for issuers and another commenter suggested
that there would be a significant burden increase associated with
collecting more records from enrollees in lower-risk strata as these
enrollees will likely be more heavily sampled if the proposed changes
are finalized. This commenter noted that enrollees in lower-risk strata
are more likely to see providers who do not provide issuers with direct
access to medical records, which could make it more burdensome for
issuers to retrieve medical records for these enrollees, especially for
smaller issuers. Another commenter noted concern that compliance with
the added HHS-RADV audit requirements could place a greater burden on
smaller issuers without clarity on how these proposed changes would
help patients. One commenter urged HHS to monitor the impact of these
changes on burden and consider future changes if there is an undesired
impact on HHS-RADV adjustments to risk adjustment State transfers.
Response: As noted in the proposed rule, we estimate that the
impact of finalizing all proposed modifications to the IVA sampling
methodology will decrease issuer burden on average. Although every
enrollee sampled for the IVA would have HCCs, the proportion of
enrollees sampled from strata 1 through 9 would change such that
enrollees with more medical records are sampled less intensely, and we
estimate this would lead to an average decrease in the number of HCCs
and medical records reviewed per enrollee. We recognize the commenter's
concern that some providers for enrollees from lower-risk strata may
provide issuers with less direct access to medical records, but we note
that enrollees in lower risk strata are enrollees with fewer HCCs or
relatively lower-risk HCCs, for whom issuers should be able to provide
supporting medical records for risk adjustment eligible diagnoses
submitted to EDGE as required by the EDGE Server Business Rules.\138\
The principles for including an HCC in the risk adjustment models
require that each HCC represents a well-specified, clinically
significant, chronic or systematic medical condition, and therefore,
any enrollees with HCCs, regardless of if they are in a lower-risk
stratum or higher risk stratum, have conditions that should have
supporting medical records.\139\ Furthermore, if it is more burdensome
to retrieve medical records for enrollees from lower-risk strata, any
increase in burden from retrieving these medical records would be
offset, at least in part, by the decrease in burden from retrieving
fewer medical records for enrollees from higher-risk strata. We also
note that enrollees from low, medium, and high-risk strata will
continue to be sampled for the IVA and the actual number of enrollees
sampled from each stratum will depend on that stratum's contribution to
the total standard deviation of net risk score error in the issuer's
population.
---------------------------------------------------------------------------
\138\ See, for example, the EDGE Server Business Rules (ESBR)
Version 25.0 (December 2024) available at https://regtap.cms.gov/uploads/library/DDC-ESBR-v25-5CR-120624.pdf.
\139\ See CMS. (2021). HHS-Operated Risk Adjustment Technical
Paper on Possible Model Changes. Section 1.2.1 (Principles of Risk
Adjustment). https://www.cms.gov/files/document/2021-ra-technical-paper.pdf.
---------------------------------------------------------------------------
In addition, we estimate that smaller issuers whose IVA sample
sizes may increase under the IVA sampling methodology finalized in this
rule are also likely to see the greatest increases in Super HCC counts
and group failure rate precision on average across all three failure
rate groups. Overall, this contributes to more precise HHS-RADV results
and ensures that risk adjustment State transfers reflect verifiable
actuarial risk differences between issuers. Moreover, as explained in
section III.3.B.6.a.2 above, we anticipate that the vast majority of
issuers who would see increased IVA sample sizes after the removal of
the FPC are at or below the materiality threshold for random and
targeted sampling and would only be selected for audit approximately
once every 3 benefit years (barring any risk-based triggers based on
experience that will warrant more frequent audits). Therefore, we
believe that the benefits a smaller issuer gains from increased group
failure rate precision and the estimated overall average decrease in
the number of HCCs and medical records reviewed per enrollee outweigh
any potential increases in IVA sample size. We also clarify that HHS-
RADV does not directly impact patients. The HHS-RADV program helps
ensure the integrity of data used in the HHS-operated risk adjustment
program to calculate risk adjustment State transfers. The risk
adjustment program helps
[[Page 4458]]
stabilize premiums across the individual, merged, and small group
markets, and thereby helps provide consumers with affordable health
insurance coverage options. As with any finalized modifications to HHS-
RADV, we will monitor the implementation and impact of these policies.
While these changes to the IVA sampling methodology could affect the
adjustments to risk adjustment State transfers for an individual
issuer, we anticipate that any changes to HHS-RADV adjustments will
reflect more accurate actuarial risk differences between issuers.
Comment: One commenter requested HHS to apply the proposed IVA
sampling methodology changes to the 2024 benefit year of HHS-RADV and
stated that waiting to implement these changes until the 2025 benefit
year would allow issuers to adjust their strategies in advance of the
audit which would undermine the impact of the audit on data integrity.
This commenter also suggested that the typical one-year delay between
the year in which HHS-RADV changes are proposed and the applicable
benefit year of HHS-RADV should not apply as HHS-RADV adjustments are
not relevant to rate setting.
Response: We proposed the IVA sampling methodology changes to apply
beginning with the 2025 benefit year of HHS-RADV to reflect the
timeline for HHS-RADV activities and the anticipated time needed to
test and implement these changes. We disagree that waiting to implement
these changes beginning with 2025 benefit year HHS-RADV would undermine
the impact of the audit on data integrity. While issuers and their IVA
Entities may vary in how they choose to approach changes to HHS-RADV,
we believe these policies maintain HHS-RADV's focus on ensuring issuers
submit accurate, high-quality information to their EDGE servers to be
used in the risk adjustment State transfer calculations. We also
clarify that we are not delaying the implementation of these policies
to benefit year 2025 because of issuers' timelines for rate setting.
Rather, the finalized changes to exclude enrollees without HCCs and use
HHS-RADV data in the Neyman allocation for IVA sampling will require
sufficient lead time for HHS to derive coding changes to generate
samples from EDGE server data that exclude enrollees without HCCs and
coding changes to calculate the national variance of net risk score
error for each stratum and issuers' standard deviations of risk score
error for each stratum, which are used as inputs to the Neyman
allocation formula. These IVA sampling changes will also require HHS to
update the Audit Tool and perform testing before issuers' IVA samples
can be generated under the IVA sampling methodology finalized in this
rule. In addition, as we explained in Section III.B.6.a.3 above, we
found that making the IVA sampling modifications to exclude enrollees
without HCCs, remove the FPC, and replace the MA-RADV data used in the
Neyman allocation in unison would lead to greater improvements in
sampling precision. Therefore, we need sufficient lead time to build
all changes to the IVA sampling methodology finalized in this rule
before issuers' IVA samples can be generated under the methodology
finalized in this rule. There would be insufficient time to complete
these tasks and implement these changes to generate 2024 benefit year
IVA samples as 2024 benefit year HHS-RADV activities will generally
begin in early 2025. We therefore are finalizing the proposed
applicability date and will implement this change beginning with the
2025 benefit year HHS-RADV.
b. Second Validation Audit (SVA) Pairwise Means Test (Sec. 153.630(c))
To improve the sensitivity of the SVA pairwise means test, in the
HHS Notice of Benefit and Payment Parameters for 2026 proposed rule (89
FR 82308, 82354), we proposed to modify the test, which currently uses
a paired sample t-test methodology, to use a bootstrapping methodology,
and to increase the initial SVA subsample size from 12 enrollees to 24
enrollees beginning with 2024 benefit year HHS-RADV.\140\
---------------------------------------------------------------------------
\140\ These changes to the SVA framework do not impact or change
issuer or IVA Entity obligations or requirements; therefore, we
proposed to implement the proposed changes to the SVA pairwise means
test starting with the 2024 benefit year HHS-RADV. Activities
related to the 2024 benefit year of HHS-RADV will generally begin in
March 2025, when issuers can start selecting their IVA entity, and
IVA entities can start electing to participate in HHS-RADV for the
2024 benefit year. The SVA typically starts the January 2 years
after the applicable benefit year (January 2026 for the 2024 benefit
year of HHS-RADV) once issuers' IVA results have been submitted. See
HHS. (2024, March 27). For the most recently published annual HHS-
RADV timeline, see the 2023 Benefit Year HHS-RADV Activities
Timeline. https://regtap.cms.gov/uploads/library/2023_RADV_Timeline_5CR_072424.pdf. We note that there were delays in
the 2023 Benefit Year HHS-RADV Activities Timeline in recognition of
the challenges some issuers were facing related to EDGE server
operations after the Change Healthcare Cybersecurity Incident.
---------------------------------------------------------------------------
As noted in the proposed rule (89 FR 82354), based on our
experience operating HHS-RADV for the past several benefit years, we
have reassessed the sensitivity of our pairwise means testing
procedure, meaning the ability of the statistical test to identify
statistically significant differences between IVA and SVA risk scores
when they exist, to see whether changes are needed. Based on our
reassessment, we noted that we believe the pairwise means testing
procedure should be modified to use a 90 percent bootstrapped
confidence interval, rather than a t-test with a 95 percent confidence
interval, and to increase the initial SVA subsample level from 12
enrollees to 24 enrollees beginning with 2024 benefit year HHS-RADV to
improve the sensitivity of the pairwise means test, improve the false
negative rate and promote the integrity of HHS-RADV.\141\ For a full
discussion of the proposed changes to the SVA pairwise means test, see
the proposed rule (89 FR 82308, 82354).
---------------------------------------------------------------------------
\141\ As explained in the proposed rule, ``false negatives'' are
a detection error that occurs when there are significant differences
between IVA and SVA results, but the statistical test does not
identify a statistically significant difference between IVA and SVA
enrollee risk scores. The conventional minimum power desired for
most research settings is 80 percent, which implies a false negative
rate of 20 percent. See Cohen, Jacob (1988). Statistical Power
Analysis for the Behavioral Sciences. Routledge. ISBN 978-1-134-
74270-7. pp. 25-27.
---------------------------------------------------------------------------
As we explained in the proposed rule (89 FR 82308, 82355), at a
given SVA subsample level, the proposed pairwise bootstrapping
methodology would perform 10,000 iterations of resampling with
replacement from the enrollees in the issuer's SVA subsample at that
level. The average difference between enrollees' IVA and SVA risk
scores would be calculated for each resample to build an issuer-
specific confidence interval for statistical testing of enrollee's IVA
and SVA risk scores. Like the current pairwise means test, if the
bootstrapped confidence interval contains zero, the bootstrapping
procedure would show non-significant differences between IVA and SVA
risk scores, and the issuer would pass pairwise means testing at that
SVA subsample level and IVA results would be used in error estimation.
If the bootstrapped confidence interval does not include zero, the
differences between IVA and SVA risk scores identified would be
statistically significant, and the issuer would fail pairwise means
testing at that SVA subsample level. In these circumstances, the SVA
subsample would be expanded and the pairwise means test conducted at
that new SVA subsample level. If the issuer continues to fail the
pairwise means test at the SVA 100-level, a precision analysis would be
performed to determine whether the SVA audit results from the SVA 100
subsample can
[[Page 4459]]
be used in error estimation or if the SVA sample needs to expand to the
full IVA sample of 200 enrollees with the SVA 200 results used in error
estimation.142 143 We sought comment on the proposal to
modify the SVA pairwise means testing procedure to use a bootstrapped
90 percent confidence interval and to increase the initial SVA
subsample size from 12 enrollees to 24 enrollees beginning with 2024
benefit year HHS-RADV.
---------------------------------------------------------------------------
\142\ See Section 11.6.2 Pairwise Means Test to Determine
Accepted Results (IVA vs. SVA) of the 2023 Benefit Year PPACA HHS
Risk Adjustment Data Validation (HHS-RADV) Protocols (June 4, 2024)
available at https://regtap.cms.gov/uploads/library/HHS-RADV_2023_Benefit_Year_Protocols_v1_5CR_060424.pdf.
\143\ As explained in the proposed rule (89 FR 82308, 82354),
all issuers are subject to the same SVA subsample sizes, but the
maximum SVA subsample for pairwise testing is one half of the
issuer's IVA sample size. Under the IVA policies finalized in this
rule beginning with benefit year 2025 HHS-RADV, issuers with less
than 200 enrollees with HCCs would continue to follow the standard
SVA subsample sizes with a maximum SVA subsample size for pairwise
testing equal to one half of the issuer's IVA sample size. If the
issuer fails at the maximum SVA subsample size for pairwise testing,
a precision analysis is performed to determine whether the SVA audit
results from that maximum SVA subsample size can be used in error
estimation or if the SVA sample needs to expand to the full IVA
sample.
---------------------------------------------------------------------------
After consideration of comments and for the reasons outlined in the
proposed rule and this final rule, including our responses to comments,
we are finalizing the modification to the SVA pairwise means test to
use a bootstrapped 90 percent confidence interval and to increase the
initial SVA subsample size to 24 enrollees beginning with the 2024
benefit year HHS-RADV as proposed. We summarize and respond to public
comments received on modifying the SVA pairwise means testing procedure
and increasing the SVA sample size below.
Comment: Several commenters supported the proposal to modify the
SVA pairwise means test to use a bootstrapping methodology and to
increase the initial SVA subsample size from 12 enrollees to 24
enrollees. Two commenters suggested these modifications would improve
the accuracy and precision of HHS-RADV results. One of these commenters
stated that the modelling assumptions under the proposed methodology
would produce more accurate statistics when the underlying distribution
is unknown. This commenter also recognized the effort to balance false
negatives and false positives to increase the overall integrity of HHS-
RADV.
Response: We agree with the comments in support of this proposal
and are finalizing the proposal to modify the SVA pairwise means
testing procedure to use a bootstrapped 90 percent confidence interval
and to increase the initial SVA subsample size from 12 enrollees to 24
enrollees beginning with 2024 benefit year HHS-RADV to improve the
sensitivity of the SVA pairwise means test, reduce the false negative
rate, and further promote the overall integrity of HHS-RADV. We agree
that building confidence intervals using bootstrapping rather than t-
intervals is better suited for the SVA pairwise means test as issuers'
population distribution of IVA and SVA risk score differences is
unknown when conducting the test at any SVA subsample level. As noted
in the proposed rule (89 FR 82308, 82355), there is a tradeoff between
decreasing the false negative rate and the false positive rate when
reducing the size of the confidence interval from 95 percent to 90
percent, but we believe that the benefits in achieving an acceptable
rate of false negatives outweighs the potential impacts for any
increase in the false positive rate. This is because the SVA
methodology provides the opportunity for false positives to be
addressed at a later stage of the SVA review process as an issuer
failing the SVA pairwise at a given subsample size results in an
incremental increase in that issuer's SVA subsample size for further
review by the SVA Entity whereas false negatives result in the issuer
passing the SVA pairwise test at the subsample size where no
significant differences are detected between IVA and SVA results.
Comment: Some commenters opposed the proposed changes to the SVA
pairwise means test. One commenter noted that the current SVA
methodology has provided consistent results and noted concern that
changing the methodology would create unpredictability in HHS-RADV.
Another commenter stated that they could not appropriately evaluate the
impact of the proposed changes because issuers and IVA entities have
little transparency into SVA outcomes because issuers who pass pairwise
do not receive SVA results. A few commenters also urged HHS to provide
more transparency by releasing SVA results to issuers and their IVA
entities when there is sufficient agreement between the IVA and SVA in
the SVA pairwise means test. One of these commenters suggested that the
current process prevents IVA entities from evaluating their own coding
practices and specifically requested that HHS release calculated z-
scores with SVA results so that issuers can understand where coding
differences occurred that triggered additional levels of SVA review. A
few commenters requested that HHS and interested parties take
additional time to evaluate the impact of the IVA sampling methodology
changes before pursuing changes to the SVA pairwise means testing
procedure and sample size approach.
Response: We are finalizing the modifications to the SVA pairwise
means test to use a bootstrapped 90 percent confidence interval and to
increase the SVA subsample size from 12 to 24 enrollees beginning with
benefit year 2024 HHS-RADV as proposed. In the proposed rule (89 FR
82355), we recognized that the increased sensitivity of the
bootstrapping methodology could result in more issuers being expanded
to larger SVA subsample sizes during pairwise means testing. However,
issuers with IVA entities that continue to code according to the
relevant coding guidelines and validate HCCs in accordance with the
EDGE Server Business Rules and for whom the current pairwise test
correctly identifies no significant differences between IVA and SVA
results should continue to pass pairwise testing under the modified
pairwise testing procedure and SVA subsample size approach finalized in
this rule. We encourage all issuers to coordinate with their IVA
Entities to study and learn from their HHS-RADV results and experience.
In particular, issuers that fail pairwise testing should work with
their IVA entities to review the IVA diagnosis abstraction and identify
differences from SVA results.
Thus, we also disagree that issuers and IVA entities have
insufficient transparency into SVA outcomes to evaluate the impact of
the proposed changes to the SVA pairwise testing procedure or their own
coding practices. In the proposed rule (89 FR 82308, 82355), we
explained the impact of the proposed modifications to increase the
initial SVA subsample size to 24 enrollees and use a bootstrapped 90
percent confidence interval on the false negative rate, false positive
rate and the overall sensitivity of the pairwise means test, and we
sought comment on these proposals. In addition, we disagree that
issuers have insufficient transparency into SVA outcomes. HHS does not
provide SVA results to issuers or IVA entities that pass pairwise
testing because passing signifies that the SVA findings do not
significantly differ from IVA findings and that the IVA findings, which
issuers review and sign off on, can be used during error estimation as
issuers' final accepted audit results.
[[Page 4460]]
Issuers and IVA Entities that pass pairwise testing and do not receive
an SVA findings report are still able to review key SVA findings, such
as the most commonly miscoded HCCs for SVA reviewed sampled enrollees,
from each benefit year of HHS-RADV in the results memo.\144\ Issuers
that do not pass pairwise testing receive SVA findings reports that
include details on the enrollee-level HCCs that differed between IVA
and SVA review.
---------------------------------------------------------------------------
\144\ See, for example, Table 1 of the 2022 Benefit Year HHS-
RADV Results Memo (May 14, 2024) available at https://www.cms.gov/files/document/by22-hhs-radv-results-memo-appendix-pdf.pdf.
---------------------------------------------------------------------------
Lastly, we note that in finalizing these changes to the SVA
processes, we recognize that the paired t-test with a 95 percent
confidence interval has been consistently used as the SVA pairwise
testing procedure since we started conducting HHS-RADV, but we also
note that the consistency or predictability of an issuer's SVA pairwise
means test results from one benefit year to the next is not indicative
of the effectiveness of the methodology. The SVA pairwise means test is
intended to identify whether significant differences exist between an
issuer's IVA and SVA results in a given benefit year of HHS-RADV and to
determine which audit results should be used for that year's error
estimation. We also further clarify that HHS does not calculate z-
scores during the current SVA pairwise testing methodology as the
current statistical test is a paired t-test.\145\ HHS will not
calculate z-scores under the finalized SVA pairwise testing methodology
beginning with benefit year 2024 HHS-RADV as this statistical test will
build bootstrapped confidence intervals.\146\
---------------------------------------------------------------------------
\145\ For more information on the paired t-test, see Section
11.6.2 Pairwise Means Test to Determine Accepted Results (IVA vs.
SVA) of the 2023 Benefit Year PPACA HHS Risk Adjustment Data
Validation (HHS-RADV) Protocols (June 4, 2024) available at https://regtap.cms.gov/uploads/library/HHS-RADV_2023_Benefit_Year_Protocols_v1_5CR_060424.pdf.
\146\ As explained above, the pairwise bootstrapping methodology
would perform 10,000 iterations of resampling with replacement from
the enrollees in the issuer's SVA subsample at that level. The
average difference between enrollees' IVA and SVA risk scores would
be calculated for each resample to build an issuer-specific
confidence interval for statistical testing of enrollee's IVA and
SVA risk scores. If the bootstrapped confidence interval contains
zero, the issuer would pass pairwise means testing at that SVA
subsample level. If the bootstrapped confidence interval does not
include zero, the issuer would fail pairwise means testing at that
SVA subsample level. More detail on the pairwise bootstrapping
methodology will be provided in the applicable benefit year's HHS-
RADV protocols.
---------------------------------------------------------------------------
For these reasons, we disagree with delaying the finalization of
changes to the SVA methodology after the finalized changes to the IVA
methodology take place as the changes to the SVA methodology are
intended to improve the sensitivity of the pairwise means test and the
finalized changes to the IVA methodology are specific to IVA sampling
and do not address the pairwise means test.
Comment: One commenter inquired about how the estimated costs and
estimated improvement in the false negative rate were attributed to
modifying the SVA subsample size as opposed to modifying the pairwise
means testing procedure. This commenter noted concern that
bootstrapping would not address underlying issues associated with
smaller sample sizes or could create a false sense of precision at
smaller sample sizes and stated that the current t-test is better
suited to handle small sample size uncertainty. However, this commenter
also suggested that bootstrapping may be appropriate if CMS observes
that the rate of false negatives reliably decreases when switching from
the t-test to bootstrapping and keeping the confidence interval and
sample size constant.
Response: We estimate that approximately 20 percent of the
estimated improvement in the false negative rate will be attributable
to modifying the initial SVA subsample size to 24 enrollees and
approximately 80 percent will be attributable to modifying to pairwise
means test to a bootstrapped 90 percent confidence interval.\147\ We
also estimate that approximately 33 percent of the costs associated
with making these changes in 2024 benefit year HHS-RADV will be
attributed to transitioning from the current t-test pairwise means
testing procedure to the bootstrapped procedure and coding the changes
to test and execute the bootstrapping methodology, and the remaining
costs will be attributed to increasing the initial SVA subsample size
to 24 enrollees.
---------------------------------------------------------------------------
\147\ The rate of improvement in the false negative rate and how
this is attributed to the initial SVA subsample size or the
statistical methodology differs depending on the effect size, or the
magnitude of the true difference between IVA and SVA results. For
these estimates, we use the Cohen's D effect size measure and assume
a small effect size. See Cohen, Jacob (1988). Statistical Power
Analysis for the Behavioral Sciences. Routledge. ISBN 978-1-134-
74270-7. pp 25-27.
---------------------------------------------------------------------------
We are not concerned with a false sense of precision at smaller
sample sizes because we are increasing the initial SVA subsample size
from 12 to 24 enrollees and our analysis comparing the updated SVA
pairwise means test to the current test indicates a lower incidence of
false negatives at smaller sample sizes. Moreover, if there is an
increase in false positives at smaller sample sizes, the incremental
review structure of the SVA allows the opportunity for those false
positives to be corrected and for issuers to pass SVA pairwise testing
at larger sample sizes such that their IVA results could be used for
error estimation.
c. HHS-RADV Materiality Threshold for Rerunning HHS-RADV Results (Sec.
156.1220(a)(2))
In the HHS Notice of Benefit and Payment Parameters for 2026
proposed rule (89 FR 82308, 82356), we proposed to amend Sec.
156.1220(a) to codify a new materiality threshold for HHS-RADV appeals,
hereafter referred to as the materiality threshold for rerunning HHS-
RADV results.\148\ We proposed to amend Sec. 156.1220 to add a new
paragraph (a)(2)(i) to provide that HHS would rerun HHS-RADV results in
response to a successful appeal when the impact to the issuer who
submitted the appeal (that is, the filer's) HHS-RADV adjustments to
State transfers is greater than or equal to $10,000. We are finalizing
these amendments as proposed; the discussion of comments pertaining to
this proposal are below in part 156 (Sec. 156.1220).
---------------------------------------------------------------------------
\148\ For purposes of this proposal, rerunning HHS-RADV results
involves recalculating all national program benchmarks and issuers'
error rate results, reissuing issuers' error rate results,
conducting discrepancy reporting and appeal windows for the reissued
results, applying the reissued error rates to the applicable benefit
year's State transfers, and invoicing, collecting, and distributing
any additional changes to the HHS-RADV adjustments to State
transfers.
---------------------------------------------------------------------------
C. Part 155--Exchange Establishment Standards and Other Related
Standards
1. Solicitation of Comments--Navigator, Non-Navigator Assistance
Personnel, and Certified Application Counselor Program Standards
(Sec. Sec. 155.210, 155.215, and 155.225)
In the HHS Notice of Benefit and Payment Parameters for 2026
proposed rule (89 FR 82356), we solicited comment regarding how
assisters who perform their assister duties in a hospital and hospital
system may, within the bounds of the statute, refer consumers to
programs designed to reduce medical debt. We thank commenters for their
feedback and will take comments into consideration in future
rulemaking.
[[Page 4461]]
2. Ability of States To Permit Agents and Brokers and Web-Brokers To
Assist Qualified Individuals, Qualified Employers, or Qualified
Employees Enrolling in QHPs (Sec. 155.220)
a. Engaging in Compliance Reviews and Taking Enforcement Actions
Against Lead Agents for Insurance Agencies
In the HHS Notice of Benefit and Payment Parameters for 2026
proposed rule (89 FR 82357), we addressed our authority under Sec.
155.220 to address misconduct or noncompliance occurring at an agency-
level,\149\ by undertaking compliance reviews of and enforcement action
against an insurance agency's (agency's) lead agent(s), and discussed
how we propose to utilize this authority to hold agencies accountable
for misconduct or noncompliance with applicable HHS Exchange standards
and requirements under Sec. 155.220. We noted that the term lead agent
generally refers to any person who registers or maintains a business
within a State and/or any person who registers a business NPN with the
Exchange, who typically is an executive or person with a leadership
role within an agency.
---------------------------------------------------------------------------
\149\ For purposes of this policy, ``agency-level'' misconduct
or noncompliance refers to misconduct or noncompliance with HHS
Exchange standards and requirements under Sec. 155.220 associated
with an eligibility application or enrollment transaction that lists
an agency's National Producer Number (NPN) or that the agency was
involved in or facilitated the submission of, or misconduct or
noncompliance with HHS Exchange standards and requirements under
Sec. 155.220 that involves the agency's lead agent(s) or that the
agency endorsed or is otherwise involved in.
---------------------------------------------------------------------------
Section 155.220 currently applies to an agent, broker, or web-
broker that assists with or facilitates enrollment of qualified
individuals, qualified employers, or qualified employees in a QHP in a
manner that constitutes enrollment through the Exchange or assists
individuals in applying for APTC and CSRs for coverage offered through
an Exchange. ``Web-broker'' is defined in 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.\150\ Section
155.20 defines ``agent or broker'' as a person or entity licensed by
the State as an agent, broker or insurance producer.
---------------------------------------------------------------------------
\150\ The term also includes an agent or broker direct
enrollment technology provider. See Sec. 155.20.
---------------------------------------------------------------------------
In the proposed rule (89 FR 82357), we did not propose amendments
to our existing regulations to codify our approach to hold agencies,
through their lead agents, accountable for misconduct or noncompliance
with applicable standards and requirements in Sec. 155.220 because
they can reasonably be interpreted to apply to agencies that are
involved in Exchange enrollment transactions, since agencies are
entities licensed by a State as an agent, broker, or insurance
producer. As such, agencies fall under the current definitions of
``agent or broker'' and ``web-broker'' under Sec. 155.20.
We proposed to rely on the same authorities under Sec. 155.220 to
address misconduct or noncompliance occurring at an agency-level, by
undertaking compliance reviews of and enforcement action against an
insurance agency's lead agent(s). These authorities subject agents,
brokers, and web-brokers to compliance reviews and enforcement actions
under Sec. 155.220, which allow HHS to periodically monitor and audit
an agent, broker, or web-broker to assess their compliance with the
applicable requirements of Sec. 155.220.\151\ This means that
agencies, through their lead agents, would also be subject to section
155.220(g), which sets forth standards for suspension and termination
of an agent's, broker's, or web-broker's Exchange Agreements for cause,
which ends their participation in the FFEs.\152\ These enforcement
actions may be taken in three situations: (1) for specific findings or
patterns of noncompliance,\153\ (2) failure to maintain proper
licensure in all States where the agent, broker, or web-broker is
assisting consumers,\154\ and (3) for engaging in fraud or abusive
conduct.\155\ Likewise, through their lead agents, agencies would be
subject to section 155.220(k), which sets forth penalties other than
suspension or termination of the agent's, broker's, or web-broker's
Exchange Agreements for the current plan year. If an agent, broker, or
web-broker fails to comply with the requirements of Sec. 155.220, HHS
may deny an agent, broker, or web-broker the right to enter into
Exchange Agreements in future years \156\ or impose a civil money
penalty as described in Sec. 155.285.\157\
---------------------------------------------------------------------------
\151\ 45 CFR 155.220(c)(5).
\152\ We notify State Departments of Insurance when we suspend
or terminate the Exchange Agreement(s) of an agent, broker, or web-
broker under Sec. 155.220(g), per Sec. 155.220(g)(6). We also
maintain and publish the Agent and Broker Federally-facilitated
Marketplace (FFM) Registration Termination List, which allows QHP
issuers, consumers, and other interested parties to search for NPNs
associated with agents, brokers, and web-brokers whose Exchange
Agreement(s) have been terminated or suspended. See https://data.healthcare.gov/ab-suspension-and-termination-list.
\153\ 45 CFR 155.220(g)(1).
\154\ 45 CFR 155.220(g)(3)(ii).
\155\ 45 CFR 155.220(g)(5).
\156\ 45 CFR 155.220(k)(1)(i).
\157\ 45 CFR 155.220(k)(1)(ii).
---------------------------------------------------------------------------
Lastly, HHS may immediately impose a system suspension against an
agent or broker if HHS discovers circumstances that pose unacceptable
risk to Exchange operations or Exchange information technology
systems.158 159 We explained that under this proposal
agencies, through their lead agents, would be subject to these
enforcement actions too.
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\158\ 45 CFR 155.220(k)(3). HHS also authority to temporarily
suspend the ability of a web-broker to make its non-Exchange website
available to transact information with HHS, if HHS discovers a
security and privacy incident or breach, for the period in which HHS
begins to conduct an investigation and until the incident or breach
is remedied to HHS' satisfaction. See 45 CFR 155.220(c)(4)(ii).
\159\ As detailed in III.C.2.b. of this rule, we are finalizing
the proposal to amend Sec. 155.220(k)(3) such that an agent's or
broker's ability to transact information with the Exchange in
instances in which HHS discovers circumstances that pose
unacceptable risk to the accuracy of the Exchange's eligibility
determinations, Exchange operations, applicants, or enrollees, or
Exchange information technology systems, including but not limited
to risk related to noncompliance with the standards of conduct under
Sec. 155.220(j)(2)(i), (ii) or (iii) or the privacy and security
standards at Sec. 155.260, until the circumstances of the incident,
breach, or noncompliance are remedied or sufficiently mitigated to
HHS' satisfaction.
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The NPN is a unique identifier for an agent, broker, web-broker, or
agency that the National Association of Insurance Commissioners assigns
during the State licensing application process. The NPN can be recorded
as part of the consumer's Exchange eligibility application and is used
to track which individual agents, brokers, or web-brokers and agencies
assisted Exchange consumers. QHP issuers use the NPN to identify the
agent, broker, web-broker, or agency for compensation purposes. Either
the NPN of the individual agent, broker, or web-broker assisting the
consumer, or the business NPN of the agency, may be listed on the
consumer's eligibility application submitted to an FFE or SBE-FP. In
the most recent Open Enrollment survey, approximately 4 percent of
respondents attested to using a business NPN for all their
enrollments.\160\ That means at least 640,000 enrollments \161\
contained an NPN that did not belong to an individual agent, broker, or
web-broker. The NPN, when provided, is a key identifying element in any
compliance review under Sec. 155.220(c)(5) or enforcement action by
HHS under
[[Page 4462]]
Sec. 155.220(c)(4)(ii), (g)(1), (g)(3)(ii), (g)(5), (k)(1)(i),
(k)(1)(ii), and (k)(3).
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\160\ Open Enrollment Survey, conducted between January 29,
2024, and February 14, 2024.
\161\ Based on the PY 2024 enrollment total of 16 million
consumers.
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Under the approach described in the proposed rule (89 FR 82358),
when information suggests there is agency-level misconduct or
noncompliance, an investigation or compliance review would occur, and
enforcement action may be taken. Any such compliance review, or
enforcement action would be directed at the agency's lead agent(s), and
any other agent, broker, or web-broker who is discovered to be involved
in the misconduct or noncompliant activity. When the misconduct or
noncompliant activity is occurring at the agency-level, as stated in
the proposed rule (89 FR 82358), we believe it is appropriate for the
lead agents to be subject to the compliance review, or enforcement
action, in addition to the agents, brokers, or web-brokers working at
or for an agency that may have been involved in the misconduct or
noncompliant activity, as those lead agents are the individuals
responsible for directing and/or overseeing their employees' and
contractors' behavior and activity. Engaging in compliance reviews and
taking enforcement actions against lead agents in these circumstances
would ensure that the individuals who are directing and/or overseeing
the misconduct or noncompliance are held accountable.
We sought comment on these proposals. In particular, we solicited
comments from States as to the specific or unique characteristics of
their agency oversight policies and procedures, including how they
define or describe the term ``lead agent,'' or whatever term of art
each State uses to capture the same individuals who would fall under
our definition of ``lead agent'' in this preamble, as well as
suggestions from States for ways to enhance collaboration and alignment
of our oversight and enforcement of agencies that assist consumers
applying for and enrolling in QHPs through the FFEs and SBE-FPs. We
also solicited comments from Classic DE and EDE partners, issuers, and
other interested parties regarding whether we should consider an agent,
broker, or web-broker that allows their NPN to be used by other agents,
brokers, or web-brokers to be a lead agent and potentially held
responsible for misconduct or noncompliant behavior or activities
committed by another agent, broker, or web-broker using their NPN.
After consideration of comments and for the reasons outlined in the
proposed rule and this final rule, including our responses to comments,
we are finalizing this approach as proposed. We summarize and respond
to public comments received on the proposed approach to address
misconduct or noncompliance occurring at an agency-level by undertaking
compliance reviews of and enforcement action against agencies through
their lead agents below.
Comment: Many commenters stated this change would protect consumers
from noncompliant and fraudulent behavior and support the integrity of
the Exchange.
Response: We agree with commenters that this change will better
protect consumers and support the integrity of the Exchange. This
change will allow HHS to undertake targeted actions--compliance reviews
and enforcement actions--against lead agents to address misconduct or
noncompliance occurring at an agency-level. Engaging in compliance
reviews and taking enforcement actions against lead agents in these
circumstances will ensure that the individuals who are directing and/or
overseeing the misconduct or noncompliance are held accountable. This,
in turn, will help protect consumers on the FFEs and SBE-FPs
(Exchanges), reduce fraud and other misconduct and noncompliance on the
Exchanges, and improve public trust in the Exchanges as a whole.
Comment: We received one comment noting that a single complaint of
potential fraud or misconduct by an agent, broker, or web-broker should
be enough to trigger an investigation.
Response: We agree with the commenter in that, depending on the
nature of and facts underlying a complaint, one complaint of misconduct
or noncompliance by an agent, broker, or web-broker could be enough to
warrant an investigation and possible enforcement action under our
existing authorities at Sec. 155.220. We have also had conversations
with interested parties, including State Departments of Insurance
(DOIs), that share that view. We currently investigate and may take
enforcement actions in situations where there was only a single
complaint of misconduct or noncompliance by an individual agent,
broker, or web-broker. For example, we use our authority under Sec.
155.220(g)(3)(ii) to terminate the Exchange Agreements of agents,
brokers, and web-brokers where there has only been one licensure
complaint directed at them.\162\
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\162\ Sections 155.220(g)(3)(ii) and (l) allow HHS to
immediately terminate the Exchange Agreements of an agent, broker,
or web-broker for cause if they fail to maintain the appropriate
license under State law as an agent, broker, or insurance producer
in every State they actively assist consumers with applying for APTC
or CSRs or with enrolling in QHPs through the Exchanges.
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We note that our proposal in the proposed rule concerned when we
would engage in compliance reviews and take enforcement actions against
lead agents for agency-level misconduct and noncompliance, as well as
any other individual agents, brokers, and web-brokers involved in that
agency-level misconduct and noncompliance. We refer readers to
discussion in the proposed rule (89 FR 82358 through 82360) for a more
detailed explanation of how we determine whether to engage in
compliance reviews and take enforcement actions in these circumstances.
Comment: One commenter expressed concern about taking enforcement
actions against lead agents and the implications this would have on
downline agents, including downline agents' ability to receive
commissions and complete enrollments. These commenters requested that
CMS only engage in enforcement actions against lead agents when CMS is
sure they were involved in the agency-level misconduct or
noncompliance.
Response: We are mindful of the impact that enforcement actions
under this proposal may have on an agency's downline agents.\163\ We
understand that there are different structures and relationships
between agencies and their downline agents, brokers, and web-brokers,
including single-level call centers, multi-level call centers, as well
as agents, brokers, and web-brokers who work for multiple agencies, and
that investigating and taking an enforcement action against a lead
agent may disrupt some of these relationships.\164\ Our goal is not to
disrupt these structures, but we understand there may be impact on
downline agents, brokers, and web-brokers, including single-level call
centers, multi-level call centers, as well as agents, brokers, and web-
brokers who work for multiple agencies, while we investigate and
potentially suspend and terminate the Exchange Agreements of lead
agents engaged in agency-level misconduct or noncompliance. However, as
we explained in the proposed rule (89 FR 82357), we believe this
enforcement framework is necessary to protect the integrity of the
Exchanges, as well as to protect
[[Page 4463]]
consumers from agency-level misconduct that threatens their PII,
Exchange coverage, and trust in the Exchanges and the many compliant
agents, brokers, and web-brokers who operate on them.
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\163\ In this context, ``downline agents'' refers to agents,
brokers, and web-brokers who are working for, or with, a lead agent
against whom we take an enforcement action, and who may be impacted
by that compliance action.
\164\ Such disruptions may include forcing an agent, broker, or
web-broker to change agencies if the agency stopped working on the
Exchanges due to a compliance action, or requiring an agent, broker,
or web-broker to use their NPN on instead of an agency's NPN when
actively assisting Exchange consumers with enrollment.
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In addition, we note that even if we took enforcement action
against an agency's lead agent(s) and terminated their Exchange
Agreements, agents, brokers, and web-brokers employed by that lead
agent's agency would still be able to assist consumers with Exchange
enrollment using their own NPNs or their agency's NPN, assuming the
licenses associated with those NPNs have not been suspended or revoked.
We appreciate the commenter's suggestion that we only take
enforcement actions against lead agents when we are certain they were
involved in the agency-level misconduct or noncompliance at issue.
Under the approach we are finalizing, we will take enforcement action
against a lead agent when we determine that the lead agent was involved
in the misconduct or noncompliance at issue--whether by directing,
overseeing, or otherwise participating in it. In addition, we will take
enforcement action against a lead agent when we determine that there
was agency-level endorsement of or involvement in the misconduct or
noncompliance issue. We refer readers to the proposed rule (89 FR
82357) for discussion about why we believe it is appropriate to do so.
In either case, we will only consider taking enforcement action against
a lead agent when we have discovered information or evidence that
indicates the lead agent's involvement in the misconduct or
noncompliant behavior or activity at issue.
We will not permit a lead agent to engage in agency-level
misconduct or noncompliant behavior or activity merely because there
are downline agents or entities that may be impacted by their Exchange
Agreement suspension or termination or other enforcement action against
them. Doing so would run counter to the consumer protection and program
integrity goals that underlie many of our agent, broker, and web-broker
enforcement policies, including under Sec. 155.220(g) and (k) in
particular. See for example, the 2017 Payment Notice (81 FR 12259),
which codified our ability to suspend and terminate an agent, broker,
or web-broker's Exchange Agreements under Sec. 155.220(g)(5)(i) ``in
cases involving potential fraud or abusive conduct,'' and the 2020
Payment Notice (84 FR 17553), which codified our authority to system-
suspend agents and brokers in instances where ``. . . there is a need
to take immediate action to protect sensitive consumer data or Exchange
systems and operations'' under Sec. 155.220(k)(3). Similar to this
proposal, we finalized these policies to protect consumers, their PII,
and the integrity of the Exchanges.
Comment: A commenter recommended that CMS consider the volume of
consumer complaints submitted to CMS about an agency relative to the
volume of Exchange consumer enrollments that the agency is associated
with before taking enforcement action against the agency's lead agent.
Response: We appreciate commenter's input. Under our approach, we
will consider the volume and subject matter of consumer complaint(s)
and other complaints that name or are directed at a lead agent as we
determine whether to engage in enforcement action against or a
compliance review of the lead agent. In particular, complaints that
name an agency's lead agent(s), especially for unauthorized enrollments
or other potentially fraudulent or noncompliant activity, could trigger
a compliance review or enforcement action against the lead agent(s), as
they could indicate agency endorsement of or involvement in misconduct
or noncompliant behavior or activities, including inaction by the
agency to try to curb the misconduct or noncompliant behavior or
activities. We will also look to see if complaints against a lead agent
are similar to complaints received against the agency's other agents,
brokers, or web-brokers, which could indicate agency-level endorsement
of or involvement in the misconduct or noncompliant behavior or
activities. We refer readers to the proposed rule (89 FR 82357) for
further discussion on the criteria we will consider as we determine
whether to initiate a compliance review of or enforcement action
against a lead agent and why we believe these criteria are appropriate.
With respect to considering the volume of complaints submitted
against an agency relative to the volume of Exchange consumer
enrollments the agency is associated with prior to investigating and
taking compliance action against a lead agent, we decline to adopt this
approach at this time. We currently investigate and take enforcement
actions in situations where there was only a single complaint made
about an agency or its agents, brokers, and web-brokers, including
agencies associated with relatively few Exchange enrollments. We have
consistently found that many of these cases involve serious risks to
Exchange consumer coverage and PII and the integrity of the Exchange
that require immediate action by CMS. We note that ignoring complaints
against an agency because the volume of complaints is small relative to
the agency's total book of business would be a disservice to consumers
and not achieve our program integrity goals of promoting a safe and
secure Exchange and reducing fraud and abuse. However, as we develop
experience implementing this enforcement framework, we will further
consider the commenter's recommendation in future rulemaking as
applicable.
Comment: Some commenters expressed concern that we are no longer
allowing agents, brokers, and web-brokers to assist consumers with
enrolling in Exchange coverage and are allowing unlicensed persons to
enroll consumers in Exchange coverage. These commenters were also
concerned that we are eliminating the ability of an agent, broker, or
web-broker to assist consumers with enrollment face-to-face. Commenters
noted that agents, brokers, and web-brokers play a crucial role in
helping consumers enroll in Exchange coverage and answering complicated
health insurance questions consumers may have.
Response: We agree with commenters that agents, brokers, and web-
brokers play a crucial role in helping to enroll consumers in Exchange
coverage. Agents, brokers, and web-brokers guide consumers through the
Exchange enrollment process, answer questions, and build personal
relationships with consumers along the way. Accordingly, as we explain
earlier in this final rule, our approach with respect to compliance
review and enforcement actions against agencies through their lead
agents will not limit the ability of an agent, broker, or web-broker to
assist consumers with enrolling in Exchange coverage, including face-
to-face whether through a DE pathway or the ``Exchange Pathway''
(whereby an agent, broker, or web-broker sits ``side-by-side'' to
assist the consumer with enrollment using the HealthCare.gov website).
Instead, this approach clarifies that our current standards and
requirements in Sec. 155.220 can reasonably be interpreted to apply to
agencies that are involved in Exchange enrollment transactions, since
these agencies are entities licensed by the State as an agent, broker,
or insurance producer and fall under the current definitions of ``agent
or broker'' and ``web-broker'' in Sec. 155.20. Addressing these issues
in this rulemaking also clarifies and provides notice to interested
parties that we will rely on those same authorities under Sec. 155.220
to address misconduct or
[[Page 4464]]
noncompliance occurring at an agency-level by undertaking compliance
reviews of and enforcement actions against an insurance agency's lead
agent(s).
Similarly, this approach will not allow unlicensed persons to
enroll consumers in Exchange coverage. Consistent with Sec. 155.220(a)
and the definitions of ``agent or broker'' and ``web-broker'' in Sec.
155.20, agents, brokers, and web-brokers can assist consumers with
enrolling in Exchange coverage in a manner that constitutes enrollment
through the Exchange only if they are properly licensed in any State
they are conducting business as an agent, broker, or insurance
producer. Likewise, consistent with the definition of ``web-broker'' in
Sec. 155.20 and Sec. 155.221(a)(2), web-brokers who are agents or
brokers can only assist consumers with direct enrollment if they are
properly licensed in any State they are conducting business as an
agent, broker, or insurance producer in and meet the applicable
requirements of Sec. Sec. 155.220 and 155.221.\165\ We will continue
to monitor consumer enrollments on the Exchange to ensure that agents,
brokers, and web-brokers who assist consumers with enrollment in
Exchange coverage are properly licensed, and we will continue to
leverage our authority under Sec. 155.220(g)(3)(ii) to promptly
terminate the Exchange Agreements of any such unlicensed individuals.
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\165\ This framework will not directly impact the existing
abilities of issuer and direct enrollment entity application
assisters to assist individuals in the individual market with
applying for a determination or redetermination of eligibility for
coverage through the Exchange or for insurance affordability
programs. See 45 CFR 155.20. Those assisters remain subject to
regulatory requirements at Sec. Sec. 155.221(d) and 155.415(b). See
also Patient Protection and Affordable Care Act; Program Integrity:
Exchange, SHOP, and Eligibility Appeals final rule (78 FR 54074
through 54075, 54086 through 54087, and 54125 through 54126); and
2020 Payment Notice (84 FR 17525 through 17526).
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Comment: A commenter requested CMS expand the definition of ``lead
agent'' to include any agent, broker or web-broker who willingly allows
another agent, broker, or web-broker to use their NPN.
Response: We appreciate receiving this comment but have elected not
to expand our proposed definition of ``lead agent'' to include agents,
brokers, and web-brokers who allow another agent, broker, or web-broker
to use their NPN at this time.
The definition of lead agent we are finalizing in this rule
includes persons who register and/or maintains a business with a State
and/or any person who registers a business NPN with the Exchanges. We
developed this definition to identify agents, brokers, and web-brokers
at an agency who are typically an executive or in a leadership role. We
believe expanding the definition of lead agent as the commenter
suggests will expand the pool of potential lead agents subject to
compliance reviews and enforcement actions under this framework too
greatly; we have observed that it is common for agents, brokers, and
web-brokers to allow other agents, brokers, and web-brokers at their
agencies to use their NPNs, such as where multiple agents, brokers, and
web-brokers actively assist a consumer but use the NPN of the writing
agent (one of the aforementioned agents, brokers, or web-brokers) on
the eligibility application. Potentially subjecting such a high volume
of lead agents to compliance reviews or enforcement actions to address
agency-level misconduct or noncompliance may unduly interfere with
agency operations and the ability of compliant agents, brokers, and
web-brokers to assist consumers with Exchange enrollment, which would
run counter to our goals of consumer protection and encouraging
Exchange enrollment.
b. System Suspension Authority
In the HHS Notice of Benefit and Payment Parameters for 2026
proposed rule (89 FR 82360), we proposed to amend Sec. 155.220(k)(3),
which currently outlines our authority to immediately suspend an
agent's or broker's ability to transact information with the Exchange
if we discover circumstances that pose unacceptable risk to Exchange
operations or Exchange information technology systems until the
incident or breach is remedied or sufficiently mitigated to HHS'
satisfaction.\166\ Specifically, we proposed to add language to reflect
that Sec. 155.220(k)(3) system suspensions may be imposed in instances
in which we discover circumstances that pose unacceptable risk to the
accuracy of the Exchange's eligibility determinations, Exchange
operations, applicants, or enrollees, or Exchange information
technology systems, including but not limited to risk related to
noncompliance with the standards of conduct under Sec.
155.220(j)(2)(i), (ii) or (iii) or the privacy and security standards
at Sec. 155.260,\167\ \168\ until the circumstances of the incident,
breach, or noncompliance are remedied or sufficiently mitigated to HHS'
satisfaction. As stated in the proposed rule (89 FR 82360), we believe
these amendments are necessary and appropriate Exchange program
integrity measures to support the efficient administration of Exchange
activities, reduce fraud and abuse, and protect Exchange applicant or
enrollee's PII. We also explained in the proposed rule (89 FR 82361)
that we were pursuing these amendments in the interest of transparency
regarding when HHS may invoke this authority.
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\166\ We did not propose to add a reference to web-brokers in
Sec. 155.220(k)(3) as part of these amendments because as DE
entities, web-brokers are subject to the system suspension authority
at Sec. 155.221(e). See Sec. 155.221(a)(2). As amended in this
final rule, Sec. 155.220(k)(3) will be similar to the authority
captured at Sec. 155.221(e) that applies to DE entities and permits
HHS to immediately suspend the DE entity's ability to transact
information with the Exchange if HHS discovers circumstances that
pose unacceptable risk to the accuracy of the Exchange's eligibility
determinations, Exchange operations, or Exchange information
technology systems until the incident or breach is remedied or
sufficiently mitigated to HHS' satisfaction.
\167\ Section 155.220(d)(3) requires agents, brokers, and web-
brokers to enter into a Privacy and Security Agreement pursuant to
which they agree to comply with Exchange privacy and security
standards adopted consistent with Sec. 155.260. There are two
Privacy and Security Agreements between CMS and the agent, broker,
and web-broker for FFEs and SBE-FPs: (1) one is for the individual
market FFEs and SBE-FPs, and (2) one is for the FF-SHOPs and SBE-FP-
SHOPs.
\168\ When consumers call the Marketplace Call Center to report
unauthorized enrollments, we resolve their complaints through a
combination of the following: (1) we review the complaint to verify
that the consumer's plan switch was unauthorized and identify the
plan that the consumer wants to be enrolled in; (2) we instruct the
issuer offering the plan the consumer wants to be enrolled in to
reinstate the consumer's enrollment in that plan as if it had not
been terminated. The issuer is instructed to cover all eligible
claims incurred and accumulate all cost sharing toward applicable
deductibles and annual limits on cost sharing; and/or (3) consumers
receive information via an IRS Form 1095-A that is generated by HHS
and which the enrollee may send to the IRS to prevent adverse tax
implications as a result of the unauthorized plan switch activity.
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In the proposed rule (89 FR 82360), we stated that we continuously
monitor for behaviors or activities related to Exchange operations or
access to Exchange systems and Exchange enrollee or applicant PII that
we believe, based on our experience overseeing agents and brokers on
the FFEs and SBE-FPs, may be indicative of misconduct or noncompliance
with applicable HHS Exchange standards or requirements. Our experience
overseeing agents and brokers on the FFEs and SBE-FPs includes past
completed agent, broker, and web-broker investigations and enforcement
actions, and observations of behavior by agents and brokers that may
not comply with the standards of conduct at Sec. 155.220(j)(2)(i),
(ii) or (iii) or the privacy and security standards at Sec. 155.260
and that could endanger the accuracy of Exchange eligibility
[[Page 4465]]
determinations, applicant or enrollee PII, or Exchange operations or
systems in a number of ways.
Consistent with the existing framework, in circumstances where we
would impose a system suspension under the proposed amendments to Sec.
155.220(k)(3), in the proposed rule, we explained that we would notify
the agent or broker of the suspension and they would have an
opportunity to submit evidence and information or to demonstrate that
the circumstances of the incident, breach, or noncompliance are
remedied or sufficiently mitigated to HHS' satisfaction to warrant
lifting the suspension to reinstate their system access. We further
noted that we would review such evidence and information submitted by
the agent or broker to determine if the circumstances of the incident,
breach, or noncompliance are remedied or sufficiently mitigated to
warrant lifting the suspension to reinstate their system access. For
example, we anticipate receiving documentation of consumer consent and/
or review and confirmation of the accuracy of the Exchange eligibility
application information and assessing whether the documentation
complies with Sec. 155.220(j)(2)(ii) and (iii) for consumers cited in
the suspension notice from agents and brokers whose system access we
would suspend under Sec. 155.220(k)(3). If such evidence or
information remedies or sufficiently mitigates the incident, breach, or
noncompliance to our satisfaction, we explained that we would lift the
suspension and reinstate Exchange system access for the agent or
broker.
In cases where such evidence and information does not remedy or
sufficiently mitigate the circumstances of the incident, breach or
noncompliance to HHS' satisfaction (including situations where there is
no response from the agent or broker), we explained that we would not
lift the suspension under Sec. 155.220(k)(3) to reinstate the agent's
or broker's system access and would pursue a suspension or termination
of the agent's or broker's Exchange Agreements under Sec. 155.220(g).
We also noted that agents and brokers whose ability to transact
information with the Exchange is suspended under Sec. 155.220(k)(3)
remain registered with the FFEs and are authorized to assist consumers
using the Exchange (or side-by-side) pathway and the Marketplace Call
Center, unless and until their Exchange Agreements are suspended or
terminated under Sec. 155.220(f) or (g).
We stated in the proposed rule (89 FR 82362) that we are pursuing
these amendments at this time in light of recent increases in behavior
and activity by agents and brokers that indicate potential violations
of Sec. 155.220(j)(2)(i), (ii) or (iii) or the privacy and security
standards at Sec. 155.260 and endangers applicant or enrollee PII or
Exchange program integrity in a manner that poses unacceptable risk to
the accuracy of Exchange eligibility determinations, Exchange
operations, applicants, enrollees, or Exchange information technology
systems.
At the beginning of PY 2024 Open Enrollment, we saw an increase in
complaints from enrollees, applicants, and other individuals and
entities to the Agent/Broker Help Desk regarding enrollments submitted
without enrollee or applicant consent, enrollee or applicant
eligibility applications submitted with incorrect information and
without enrollee or applicant review or confirmation of the eligibility
application information, and changes to enrollee or applicant
eligibility applications made without enrollee or applicant consent.
These complaints continued to be submitted at a high volume until we
implemented system changes targeted at preventing these issues.\169\ A
significant portion of these complaints have involved unauthorized
changes to the plans in which enrollees or applicants were enrolled,
impacting the ability of enrollees or applicants to utilize their
desired coverage and access care.\170\
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\169\ CMS. (2024, July 19). CMS Statement on System Changes to
Stop Unauthorized Agent and Broker Marketplace Activity. https://www.cms.gov/newsroom/press-releases/cms-statement-system-changes-stop-unauthorized-agent-and-broker-marketplace-activity.
\170\ When consumers call the Marketplace Call Center to report
unauthorized enrollments, we resolve their complaints through a
combination of the following: (1) we review the complaint to verify
that the consumer's plan switch was unauthorized and identify the
plan that the consumer wants to be enrolled in; (2) we instruct the
issuer offering the plan the consumer wants to be enrolled in to
reinstate the consumer's enrollment in that plan as if it had not
been terminated. The insurer is instructed to cover all eligible
claims incurred and accumulate all cost sharing toward applicable
deductibles and annual limits on cost sharing; and/or (3) consumers
receive information via an updated IRS Form 1095-A that is generated
by HHS and which the enrollee may send to the IRS to prevent adverse
tax implications as a result of the unauthorized plan switch
activity.
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Unauthorized plan changes may harm enrollees or applicants by
removing them from their selected plan and placing them in another plan
that may not provide coverage that meets their needs (for example,
different plans can have different formularies and provider networks).
Unauthorized enrollments can also involve situations where individuals
are enrolled in an Exchange plan without having an existing Exchange
plan. Being enrolled in an Exchange plan, including in the case of an
unauthorized enrollment, may impact a consumer's future ability to
enroll in health insurance through the Exchange or enroll in Medicare
or Medicaid, as a consumer generally may not enroll in more than one
plan simultaneously. Unauthorized enrollments may also create premium
costs for the consumer if the unauthorized enrollment is in a non-zero-
dollar premium plan. Unauthorized plan changes and enrollments cost the
consumer time to learn about and resolve the discrepancy and either (1)
unenroll from a plan they did not want, or (2) change the plan to one
that better meets their needs.
Additionally, submission of eligibility applications with
inaccurate enrollee or applicant data, such as an incorrect income, may
cause harm by providing the enrollee or applicant with an incorrect
APTC amount. For example, an incorrect APTC amount can result in a
consumer erroneously receiving a zero-dollar monthly premium. Because
the consumer does not receive monthly billing notifications due to the
zero-dollar premiums, they may not know they were enrolled or that
their eligibility application information was incorrect. However, once
the consumer files their taxes, a reconciliation may reveal that the
consumer must repay the incorrect APTC amount they were receiving. By
their nature, these unauthorized enrollments and plan changes, as well
as inaccurate eligibility application information submissions, also
involve the misuse of enrollee or applicant PII, and they threaten the
efficient administration of the Exchange and the accuracy of Exchange
eligibility determinations.
Our experience monitoring compliance with the new requirements in
Sec. 155.220(j)(2)(i), (ii), and (iii) has also shown that some
agents, brokers, and web-brokers \171\ are engaging in misconduct or
noncompliant behavior or activities. For example, their consumer
consent and eligibility application information review documentation
often lacks the required content specified in Sec. 155.220(j)(2)(ii)
or (iii) that demonstrates the applicant or enrollee has taken an
action to provide consent or confirm the accuracy of the eligibility
application information prior to submission to the Exchange. For
example, we have seen consent documentation that solely lists numbers
[[Page 4466]]
that the agent, broker, or web-broker claims tie back to the consumer's
IP address, which we cannot verify and does not meet the consent
documentation requirements of Sec. 155.220(j)(2)(iii). Additionally,
we have received consent documentation that is merely a name, typed
using a cursive script, with no indication or evidence demonstrating
the consumer took an action to confirm their consent to the assistance
provided by the agent, broker, or web-broker, such as a text message
response, email response, or signature.\172\ The proposed amendments to
Sec. 155.220(k)(3) to permit immediate system suspensions would
support HHS' efforts to take immediate action to prevent further
enrollee, applicant, Exchange operational, Exchange information
technology, or Exchange program integrity harm caused by agents and
brokers engaged in these types of misconduct or noncompliant behaviors
or activities.
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\171\ We did not propose to add a reference to web-brokers as
part of the amendments to Sec. 155.220(k)(3) because web-brokers
are subject to the system suspension authority at Sec. 155.221(e)
applicable to DE entities. See Sec. 155.221(a)(2).
\172\ A typed name using a cursive script, alone, makes it
impossible for HHS to determine if the consumer, or their authorized
representative, provided consent and typed the signature. In these
situations, supplemental documentation is required for CMS to assess
compliance with the consent requirements of Sec.
155.220(j)(2)(iii).
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Though, as stated in the proposed rule (89 FR 82362), we believe
our current authority in Sec. 155.220(k)(3) allows HHS to implement
system suspensions broadly based on circumstances that pose
unacceptable risk to Exchange operations or Exchange information
technology systems, in light of the increasing complaints about
unauthorized enrollments, we proposed amendments to Sec. 155.220(k)(3)
to increase transparency concerning the reach and application of system
suspensions and capture in regulation when HHS may invoke this
authority. These proposed amendments would allow HHS to immediately
respond to circumstances discovered by HHS that pose unacceptable risks
to the accuracy of Exchange eligibility determinations, Exchange
operations, applicants, or enrollees, or Exchange information
technology systems. They would also provide agents and brokers with an
increased understanding of our approach to implement system
suspensions. The proposed amendments would also better encapsulate the
original intent of the Sec. 155.220(k)(3) suspension authority, which
included protecting against unacceptable risk to consumer Exchange
data.
We noted in the proposed rule (89 FR 82363) that the types of
misconduct or noncompliant behaviors or activities that could lead to a
system suspension under Sec. 155.220(k)(3) could also lead to an
enforcement action under Sec. 155.220(g). However, there are important
distinctions between these authorities. For example, system suspensions
under Sec. 155.220(k)(3) allow HHS to immediately suspend an agent or
broker's system access. These system suspensions differ from agreement
suspensions or terminations under Sec. 155.220(g) because system
suspensions do not suspend or terminate the agent's or broker's
Exchange Agreement(s).\173\ Rather, system suspensions prevent agents
or brokers from submitting Exchange applications and enrollments
through the Direct Enrollment Pathways, whether Classic DE or EDE.
However, while a system suspension is in place, the agent or broker
remains registered with the FFEs, unless and until their Exchange
Agreements are suspended or terminated under Sec. 155.220(f) or (g).
As such, a system suspension does not prohibit the agent or broker from
assisting FFE and SBE-FP enrollees or applicants via the Marketplace
Call Center on a three-way call with the enrollees or applicants or
side-by-side with an enrollee or applicant on HealthCare.gov (also
known as the ``Exchange Pathway'').\174\ In cases where there is
imminent danger to applicants' or enrollees' PII or to Exchange program
integrity in such a manner that poses unacceptable risk to the accuracy
of Exchange eligibility determinations, Exchange operations,
applicants, or enrollees, or Exchange information technology systems
from the misconduct or noncompliant behaviors or activities of agents
or brokers, system suspensions under the proposed amendments to Sec.
155.220(k)(3) would provide a more immediate action to protect
applicants' or enrollees' PII and the efficient administration of the
Exchange, as well as reduce potential fraud, abuse, and consumer harm.
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\173\ Consistent with Sec. 155.220(d), there are currently
three Exchange Agreements with CMS that extend to agents or brokers
assisting consumers in the FFEs and SBE-FPs: (1) the Agent Broker
General Agreement for Individual Market FFEs and SBE-FPs, (2) the
Agent Broker Privacy and Security Agreement for Individual Market
FFEs and SBE-FPs, and (3) the Agent Broker SHOP Privacy and Security
Agreement. Web-brokers assisting consumers in the FFEs and SBE-FPs
are required to sign the Web-broker General Agreement, and web-
brokers who are primary Enhanced Direct Enrollment (EDE) entities
that assist consumers in the FFEs and SBE-FPs are required to sign
the EDE Business Agreement and the Interconnection Security
Agreement. In addition, each individual agent or broker who wishes
to include the business entity NPN on Exchange eligibility
applications must also complete the annual registration process,
take the required trainings, and sign the applicable Exchange
Agreements with CMS for the applicable plan year using their
individual NPN.
\174\ In this pathway, registered agents and brokers help a
consumer obtain an eligibility determination and select a plan
directly on HealthCare.gov. The consumer creates an account, logs in
to the HealthCare.gov website with a consumer account, and
``drives'' the process; the agent or broker does not log in to
HealthCare.gov. Generally, the Exchange Pathway requires the agent
or broker to be sitting side-by-side with the consumer because the
consumer must sign in to HealthCare.gov without sharing their log-in
credentials with the agent or broker.
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In contrast, an enforcement action under Sec. 155.220(g) to
suspend or terminate an agent's, broker's, or web-broker's Exchange
Agreement(s) results in the agent, broker, or web-broker no longer
being registered with the FFEs.\175\ When an agent's, broker's, or web-
broker's Exchange Agreements are suspended, or following the
termination of the agent's, broker's, or web-broker's Exchange
Agreements, the agent, broker, or web-broker is also no longer
permitted to assist with or facilitate enrollment of qualified
individuals, qualified employers, or qualified employees in coverage in
a manner that constitutes enrollment through an FFE or SBE-FP, or
assist individuals in applying for APTC and CSRs for QHPs. As such,
these agents, brokers, and web-brokers cannot submit Exchange
applications and enrollments through any of the available pathways--
through Classic DE, EDE, the Marketplace Call Center, and/or through
the Exchange pathway.
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\175\ See Sec. 155.220(g)(4) and (5)(iii).
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Though we would only initiate system suspensions under Sec.
155.220(k)(3) against agents and brokers based on data or other
information that suggest noncompliance or misconduct, we stated in the
proposed rule (89 FR 82363) that we recognize that data or other
information could suggest there is noncompliance or misconduct by a
compliant agent or broker. For example, in some instances, this could
occur if an agent or broker works largely or exclusively with a
specific group of consumers, including those who live in low-income
communities, communities where life changes necessitating eligibility
application changes may be more common, or communities where some
consumers may not have Social Security Numbers (SSNs) but are
nonetheless eligible for Exchange coverage. Consistent with the
existing framework, when pursuing system suspensions, agents and
brokers would be notified of the system suspension and would have an
opportunity to submit evidence or other information (such as
documentation of consumer consent, or documentation demonstrating
consumer review and confirmation of the accuracy of the eligibility
application information
[[Page 4467]]
that was created before the application was submitted to the Exchange
that is compliant with Sec. 155.220(j)(2)(ii) and (iii)) to
demonstrate that the circumstances of the incident, breach, or
noncompliance concerns are remedied or sufficiently mitigated to HHS'
satisfaction to merit reinstatement of their system access. We noted
that where there is clear evidence of compliance, compliant agents and
brokers would be able to quickly respond to or otherwise remediate the
risks identified by HHS that led to the system suspension under Sec.
155.220(k)(3) such that their system access could be reinstated more
swiftly than the lifting of a suspension or reinstatement of an agent's
or broker's Exchange Agreement(s) following an enforcement action under
Sec. 155.220(g).
We sought comment on this proposal.
After consideration of comments and for the reasons outlined in the
proposed rule and this final rule, including our responses to comments,
we are finalizing the amendments to the system suspension authority
under Sec. 155.220(k)(3) as proposed. We summarize and respond to
public comments received on these proposed amendments below.
Comment: Many commenters supported expanding Sec. 155.220(k)(3) as
it would reduce noncompliant behavior and protect consumers.
Response: We agree with commenters who supported these proposed
amendments and agree it would help reduce noncompliant behavior and
protect consumers. As we explained in the 2020 Payment Notice (84 FR
17517),\176\ to promote information technology system security in the
FFEs and SBE-FPs, including the protection of consumer data, we
codified Sec. 155.220(k)(3) to capture HHS' authority to immediately
suspend an agent's or broker's ability to transact information with the
Exchange if HHS discovers circumstances that pose unacceptable risk to
Exchange operations or Exchange information technology systems until
the incident or breach is remedied or sufficiently mitigated to HHS'
satisfaction. We explained this provision was necessary and appropriate
to ensure that HHS can take immediate action to stop unacceptable risks
to Exchange operations or systems posed by agents and brokers, as well
as take immediate action to protect sensitive consumer data.\177\
Finalizing the proposed amendments to the system suspension authority
in this final rule at Sec. 155.220(k)(3) more closely aligns with this
original intent and will better allow us to implement system
suspensions in situations that pose unacceptable risk to consumer PII.
The amendments to Sec. 155.220(k)(3), which we are finalizing in this
rule, will also allow HHS to impose a system freeze suspension in
situations where there is noncompliance with the standards of conduct
under Sec. 155.220(j)(2)(i), (ii), or (iii) and the privacy and
security standards under Sec. 155.260, as well as when there is risk
to the accuracy of Exchange eligibility determinations, operations,
applications, enrollees, or information technology systems. Each of
these different situations may cause consumer harm, impact the
efficient administration of Exchange activities, and reduce public
trust in the Exchange itself.
---------------------------------------------------------------------------
\176\ Also see the 2020 Payment Notice proposed rule, 84 FR 272.
\177\ Ibid.
---------------------------------------------------------------------------
Comment: Some commenters suggested we consider changing the data
metrics and analytics used to engage in system suspensions under Sec.
155.220(k)(3), be more transparent in the process, and resolve these
suspensions more quickly. Commenters also expressed concern about the
impact our data metrics may have on minority groups and minority agents
and brokers, citing potential equity issues and biases in the system.
Response: As explained in the proposed rule (89 FR 82361), we
continuously monitor for behaviors or activities related to Exchange
operations or access to Exchange systems and enrollee or applicant PII
that we believe, based on our experience overseeing agents and brokers
on the FFEs and SBE-FPs, may be indicative of misconduct or
noncompliance with applicable HHS Exchange standards or requirements.
In the interest of transparency, we also shared a non-exhaustive list
of data that we currently use to monitor and identify behaviors or
activities that may be indicative of misconduct or noncompliance with
applicable HHS Exchange standards or requirements, which includes: (1)
the number of Exchange transactions submitted to the FFEs or SBE-FPs to
change enrollee or applicant eligibility application information or
plan selections, (2) the volume of unsuccessful person search
activities, (3) the number of submitted eligibility applications with
missing SSNs, (4) the number of enrollments submitted within a
specified time-frame, and (5) the volume of submitted eligibility
applications with NPN changes. We also review and consider complaints
from enrollees, applicants, and other individuals or entities
concerning agent and broker activities.\178\ While none of these items
alone may ultimately indicate misconduct or noncompliant behavior or
activities, each represents a piece of evidence that we currently
utilize to identify behaviors or activities that may be indicative of
misconduct or noncompliance and help decide whether a system suspension
or other enforcement action is warranted in a particular circumstance.
Furthermore, our history of investigations has revealed these data
points are good indicators of noncompliant behavior and circumstances
that pose unacceptable risk to Exchange operations or Exchange
information technology systems. For example, a high volume of
submissions made during a short timeframe is sometimes the result of
scripting or automation, which is prohibited by regulation unless
approved in advance by CMS.\179\ Allowing agents or brokers to utilize
scripting or automation may cause risk to the Exchange information
technology systems. Unauthorized activity may cause the system to lag
or present security risks to consumer PII. These same data points also
offer good indicators of noncompliant behavior and circumstances that
pose unacceptable risks to the accuracy of Exchange eligibility
determinations, as well as Exchange applicants or enrollees. For
example, a high volume of submissions made during a short timeframe may
indicate unauthorized enrollments because it is not feasible to discuss
this volume of enrollments with that many consumers during this period
of time. This could lead to unauthorized enrollments for consumers or
cause the consumer to incur future tax liabilities due to incorrect
eligibility determinations and an incorrect APTC being applied to their
application and enrollment. While the specific data points used would
evolve over time in response to changes in the behaviors and activities
that create circumstances that pose unacceptable risk to Exchange
consumers, Exchange operations, and Exchange systems, we continue to
believe that use of these types of data metrics and analytics are
necessary and appropriate to protect consumers, reduce fraud and abuse,
and support the efficient administration of Exchange activities.
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\178\ Complaints may be submitted to the Marketplace Call
Center. See https://www.cms.gov/files/document/agent/broker-help-desks.pdf.
\179\ See 45 CFR 155.220(j)(2)(vi).
---------------------------------------------------------------------------
Our experience monitoring and investigating agent and broker
noncompliance on the Exchanges that use the Federal platform has shown
that
[[Page 4468]]
minority or disadvantaged groups are more likely to be targeted by
agents and brokers engaged in misconduct or noncompliant activities,
including in circumstances that pose unacceptable risk to the accuracy
of the Exchange's eligibility determinations, Exchange operations,
applicants, or enrollees, or Exchange information technology systems.
For example, noncompliant agents and brokers may target a population
segment that does not speak English as a first language and use this
language barrier to their advantage. This inevitably can lead to system
suspensions against agents and brokers working with these groups.
We further note that we strive to resolve all system suspensions
under Sec. 155.220(k)(3) in a timely manner and are committed to
expeditiously reviewing the response and information provided by agents
and brokers to demonstrate compliance or explain the remedial or
mitigation steps taken to address the circumstances identified by HHS
that pose unacceptable risks. When a system suspension is imposed under
Sec. 155.220(k)(3), the agent or broker receives a notification
outlining the circumstances and reasons for the system suspension, as
well as offering details on how they may submit a response to remedy or
mitigate the identified concerns. As with the existing framework, when
pursuing system suspensions under Sec. 155.220(k)(3), as amended, we
would continue to notify an agent or broker if a system suspension is
imposed and the notice would include information on the circumstances
and reasons for the system suspension, as well as their opportunity to
submit evidence or other information to remedy or mitigate the
circumstances of the incident, breach, or noncompliance concerns. The
agent or broker may then submit evidence and information (such as, for
example, documentation of consumer consent and documentation of
consumer review and confirmation of the eligibility application
information that is compliant with Sec. 155.220(j)(2)(ii) and (iii))
to HHS to show that the incident, breach, or noncompliance is remedied
or sufficiently mitigated such that reinstatement of system access is
warranted.
In addition, we expect that compliant agents and brokers would be
able to quickly respond and provide compelling evidence that
demonstrates compliance or otherwise offer information on remedial or
mitigation steps that address the circumstances identified by HHS that
pose the unacceptable risks that led to the system suspension under
Sec. 155.220(k)(3) such that their system access would be reinstated
swiftly and the length of the system freeze suspension would be
relatively short. We also encourage the timely submission of a response
with evidence demonstrating compliance or offering information on the
remedial or mitigation steps taken to address the circumstances
identified by HHS that pose the unacceptable risks to help limit the
length of the suspension period. We also remind readers that, as
detailed above, system suspensions under Sec. 155.220(k)(3) only
restrict an agent's or broker's access to the Classic DE and EDE
pathways and the system suspended agent or broker may still help enroll
consumers in Exchange coverage using the Marketplace Call Center on a
three-way call with the enrollees or applicants, or side-by-side with
an enrollee or applicant on HealthCare.gov.
After consideration of comments, we are finalizing these amendments
as proposed. We continue to believe that system suspensions under Sec.
155.220(k)(3) are a necessary and appropriate program integrity measure
that strikes the appropriate balance among the competing interests.
Under this framework, the agent or broker has an opportunity to respond
and can continue to assist FFE and SBE-FP consumers with the submission
of Exchange applications and enrollments during the suspension period,
and HHS has the ability to take immediate action to address
circumstances that pose unacceptable risks to the accuracy of the
Exchange's eligibility determinations, Exchange operations, applicants,
or enrollees, or Exchange information technology systems. This
oversight and enforcement provision will be used to stop further FFE
and SBE-FP enrollments through the Classic DE and EDE pathways to
protect consumers and their data, as well as Exchange operations and
systems.
Comment: Commenters suggested we allow agents and brokers to
provide evidence prior to initiating system suspensions.
Response: We did not propose and decline to adopt changes to our
system suspension process to allow an agent or broker to provide
evidence prior to imposing a system suspension under Sec.
155.220(k)(3) as that would defeat the purpose of this temporary
enforcement measure that provides HHS the ability to immediately
respond to circumstances HHS discovers that pose unacceptable risk to
the accuracy of the Exchange's eligibility determinations, Exchange
operations, applicants, or enrollees, or Exchange information
technology systems.
As previously explained, the original intent behind Sec.
155.220(k)(3) was to promote Exchange information technology system
security and protect consumer data. The proposed amendments, which we
are finalizing in this rule as proposed, help further achieve these
goals by allowing system suspensions to be immediately implemented when
we discover circumstances that pose unacceptable risk to the accuracy
of the Exchange's eligibility determinations, Exchange operations,
applicants, or enrollees, or Exchange information technology systems,
including but not limited to risk related to noncompliance with the
standards of conduct under Sec. 155.220(j)(2)(i), (ii) or (iii) or the
privacy and security standards at Sec. 155.260.\180\ \181\
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\180\ Section 155.220(d)(3) requires agents, brokers, and web-
brokers to enter into a Privacy and Security Agreement pursuant to
which they agree to comply with Exchange privacy and security
standards adopted consistent with Sec. 155.260. There are two
Privacy and Security Agreements between CMS and the agent, broker,
and web-broker for FFEs and SBE-FPs: (1) one is for the individual
market FFEs and SBE-FPs, and (2) one is for the FF-SHOPs and SBE-FP-
SHOPs.
\181\ When consumers call the Marketplace Call Center to report
unauthorized enrollments, we resolve their complaints through a
combination of the following: (1) we review the complaint to verify
that the consumer's plan switch was unauthorized and identify the
plan that the consumer wants to be enrolled in; (2) we instruct the
issuer offering the plan the consumer wants to be enrolled in to
reinstate the consumer's enrollment in that plan as if it had not
been terminated. The issuer is instructed to cover all eligible
claims incurred and accumulate all cost sharing toward applicable
deductibles and annual limits on cost sharing; and/or (3) consumers
receive updated information via an IRS Form1095-A that is generated
by HHS and which the enrollee may send to the IRS to prevent adverse
tax implications as a result of the unauthorized plan switch
activity.
---------------------------------------------------------------------------
Offering an opportunity to provide evidence prior to a system
suspension being implemented would leave consumers and the Exchanges
that use the Federal platform vulnerable in situations where HHS has
identified circumstances that pose unacceptable risk to consumers and
the Exchanges that use the Federal platform. System suspensions under
Sec. 155.220(k)(3) allow HHS to immediately suspend an agent's or
broker's system access and prevents the agent or broker from utilizing
the Classic DE or EDE pathways to assist with FFE and SBE-FP
applications and enrollments. As previously explained, this program
integrity measure offers an enforcement tool that permits HHS to
immediately respond to circumstances HHS identifies that pose
unacceptable risks as soon as they are discovered. While the option to
assist FFE and SBE-FP consumers to apply for or enroll in Exchange
coverage using the
[[Page 4469]]
Marketplace Call Center or HealthCare.gov would continue to be
available to system suspended agents and brokers, these enrollment
avenues have additional safeguards against misconduct and noncompliant
behavior and activities, as the Marketplace Call Center requires the
consumer to be on the call with the agent or broker and the agent or
broker would need to be sitting with the consumer when using the
Exchange pathway.
We believe our system suspension process is efficient, provides
sufficient due process to the system suspended agent or broker, and
strikes the appropriate balance by allowing the agent or broker to
continue to assist FFE and SBE-FP consumers with the submission of
Exchange applications and enrollments during the suspension period
while also providing HHS authority to take immediate action to address
circumstances HHS identifies that pose unacceptable risks to consumers
and the Exchanges that use the Federal platform until the circumstances
of the breach, incident, or noncompliance are remedied or sufficiently
mitigated to HHS' satisfaction. When a suspension under Sec.
155.220(k)(3) is imposed, the agent or broker will receive a notice
informing them of the suspension and providing information on the
circumstances and reasons for the suspension, as well as the process
for submitting evidence or other information to show that the
circumstances of the incident, breach, or noncompliance concerns are
remedied or sufficiently mitigated such that reinstatement of their
system access is warranted. Our system suspension process is designed
to be a narrowly tailored and temporary enforcement approach that stops
further FFE and SBE-FP enrollments through the Classic DE and EDE
pathways during the suspension period to protect consumers and their
data, as well as Exchange operations and systems.
Comment: One commenter expressed concern that system suspensions
are not a good enforcement method. The commenter explained that system
suspending an innocent agent or broker would cause them harm even
though enrollments are permissible using HealthCare.gov or by calling
the Marketplace Call Center. The commenter further explained their
concern was that it is more burdensome to work through these
alternative enrollment channels.
Response: We recognize that working with a consumer using
HealthCare.gov or by calling the Marketplace Call Center may require
more coordination, time, and effort than the Classic DE and EDE
pathways, however, we continue to believe this trade-off is necessary
and appropriate in the context of system suspensions. Section
155.220(k)(3) is designed as a narrowly tailored and temporary
enforcement approach that allows HHS in certain circumstances to take
immediate action and stop further FFE and SBE-FP enrollments through
the Classic DE and EDE pathways during the suspension period to protect
consumers and their data, as well as Exchange operations and systems,
until such time that the circumstances of the incident, breach, or
noncompliance are remedied or sufficiently mitigated to HHS'
satisfaction. We continue to believe it is an important program
integrity and consumer protection measure that strikes the appropriate
balance between the agent's and broker's interests and desire to
continue working with FFE and SBE-FP consumers, and HHS' interests in
reducing fraud and abuse, protecting Exchange consumers and their data,
and promoting Exchange information technology system security. In
addition, as noted above, we expect that compliant agents and brokers
would be able to quickly respond and provide compelling evidence that
demonstrates compliance or offers information on how they addressed the
circumstances identified by HHS that pose unacceptable risks that led
to the system suspension under Sec. 155.220(k)(3) such that their
system access would be reinstated swiftly and the length of the system
freeze suspension would be relatively short.
Comment: A few commenters expressed concern that allowing a
noncompliant agent or broker to continue to assist FFE and SBE-FP
consumers submit application and enrollments during the suspension
period allows them to continue committing further misconduct or
noncompliant behavior or activity using the Marketplace Call Center.
Response: We believe the system suspension framework under Sec.
155.220(k)(3), which allows HHS to take immediate action in response to
circumstances HHS identifies that pose unacceptable risk to the
accuracy of the Exchange's eligibility determinations, Exchange
operations, applicants, or enrollees, or Exchange information
technology systems, is a necessary and appropriate program integrity
approach that strikes the appropriate balance between the different
interests involved. It is designed as a narrowly tailored and temporary
enforcement approach that stops further FFE and SBE-FP enrollments
through the Classic DE and EDE pathways during the suspension period to
protect consumers and their data, as well as Exchange operations and
systems, until such time that the circumstances of the incident,
breach, or noncompliance are remedied or sufficiently mitigated to HHS'
satisfaction. While the option to assist FFE and SBE-FP consumers to
apply for or enroll in Exchange coverage using the Marketplace Call
Center or the Exchange pathway remains available to system suspended
agents and brokers, these enrollment avenues have additional safeguards
against misconduct and noncompliant behavior and activities. For
example, the Marketplace Call Center requires the consumer to be on the
call for the agent or broker to be able to assist the consumer with the
Exchange application or enrollment. Similarly, the Exchange pathway
requires the agent or broker to be working side-by-side with the
consumer to assist with an Exchange application or enrollment. These
enrollment avenues therefore do not pose the same risks to consumers
and their data, the accuracy of the Exchange eligibility
determinations, or Exchange operations and systems.
Comment: Several commenters stated we need to protect agents who
report noncompliant behavior from being suspended themselves.
Response: We encourage any agent, broker, agency, or other entity
to report fraud, abuse, and noncompliant behavior or activities that
occurs with respect to applications or enrollments to HealthCare.gov
Exchanges to the Agent and Broker Help Desk, as well as their State
DOI, or its equivalent.\182\ We take tips seriously and investigate
claims of fraud, abuse, and noncompliant behavior or activities
involving the HealthCare.gov Exchanges. We affirm that we do not engage
in compliance actions against individuals for submitting such reports.
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\182\ The agent broker help desk email is: [email protected].
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Comment: Some commenters stated we should leave all oversight and
enforcement of agents and brokers to States and QHP issuers unless we
have clear authority from Congress to conduct such oversight and
enforcement.
Response: The proposed amendments to Sec. 155.220(k)(3) that we
are finalizing in this rule pertains to an agent's or broker's ability
to use the Classic DE and EDE pathways to assist consumers with
enrollments through the FFEs and SBE-FPs. These proposed amendments are
rooted in the authority provided to HHS under the ACA, including
section 1312(e), which provides HHS the
[[Page 4470]]
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 APTC and CSRs for QHPs sold through an Exchange. This
enforcement tool and regulatory provision is also authorized by section
1313(a)(5)(A) of the ACA, which 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, and section 1321(a) of the ACA, which
provides the Secretary authority 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. As previously
detailed, we continue to believe the system suspension framework in
Sec. 155.220(k)(3), including the amendments finalized in this rule,
is a necessary and appropriate program integrity measure for HHS to
adopt and apply in Exchanges that use the Federal platform. It strikes
the appropriate balance between the different interests involved and is
narrowly tailored to protect consumers and their data, as well as
Exchange operations and systems, until such time that the circumstances
of the incident, breach, or noncompliance are remedied or sufficiently
mitigated to HHS' satisfaction. We affirm that it does not otherwise
interfere with State authority to oversee or monitor compliance and
take enforcement actions with respect to agents and brokers who are
licensed to do business in their jurisdiction. However, HHS is
responsible for protecting Exchange consumers and promoting Exchange
information technology system security, which extends to ensuring
compliance with applicable HHS Exchange standard and requirements by
agents and brokers participating in the FFEs and SBE-FPs. We therefore
generally disagree with the comments suggesting that we should leave
all oversight and enforcement of agents and brokers to the States, but
we intend to continue to conduct our investigations and enforcement
related to the conduct of agents and brokers with respect to
applications and enrollments submitted to the FFEs and SBE-FPs in
coordination with States.
In response to the comment about QHP issuer responsibility with
respect to their affiliated agents and brokers, we affirm that,
consistent with Sec. 156.340, each QHP issuer maintains responsibility
for its compliance and the compliance of any of its delegated or
downstream entities with all applicable Federal standards related to
the Exchanges. For QHP issuers participating in Exchanges that use the
Federal platform, this includes being responsible for their downstream
and delegated entities' compliance with the standards of Sec. 155.220.
Section 156.430(b)(5) also makes it clear that downstream and delegated
entity are obligated to maintain Exchange-related records and comply
with the relevant Exchange authority's demand to receive the entity's
books, contracts, computers or other electronic systems relating to the
QHP issuer's obligations in accordance with applicable Federal Exchange
standards. Similar to our approach with the States, we intend to
continue to coordinate with QHP issuers participating in Exchanges and
share information, as appropriate, regarding our agent and broker
enforcement and oversight activities.
Comment: Some commenters recommended that we should report system
suspensions to State DOIs, QHP issuers, and the public. Commenters also
recommended mandating that agents and brokers who are system suspended
disclose this to consumers they are working with.
Response: We appreciate these comments and are committed to
coordinating with the States and QHP issuers with respect to
enforcement and oversight of agents and brokers, as well as sharing
information with the public about these activities, as appropriate. Our
regulations currently require HHS to notify to the State DOIs or
equivalent State licensing authorities in cases of Exchange agreements
suspensions or terminations under Sec. 155.220(g).\183\ Information on
the status of an agent or broker's registration and Exchange Agreements
is also made available to the public, updated on a monthly basis, and
may be used or disclosed for certain limited purposes.\184\ Our
regulatory framework, however, does not currently provide for the
sharing of information on system suspensions under Sec.
155.220(k)(3).We further note that we currently work closely with State
DOIs to coordinate our enforcement activities when we identify an
agent's or broker's behavior or activities that poses unacceptable risk
to the accuracy of the Exchange's eligibility determinations, Exchange
operations, applicants or enrollees, or Exchange information technology
systems. Furthermore, if the agent or broker does not respond to our
outreach or their response does not sufficiently mitigate the
circumstances that led to the system suspension, we would likely move
to terminate or suspend the agent's or broker's Agreements under Sec.
155.220(g)(1) or (g)(5), respectively. If the issue is not resolved to
HHS' satisfaction after sending the notice of intent to terminate under
Sec. 155.220(g)(1), or at the time we send the Exchange Agreement
suspension or termination notice under Sec. 155.220(g)(5), we would
notify the State DOIs or other equivalent State licensing authorities
as required by Sec. 155.220(g)(6).
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\183\ 45 CFR 155.220(g)(6).
\184\ The Suspension and Termination List can be found here:
https://data.healthcare.gov/ab-suspension-and-termination-list.
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We respectfully disagree with commenters who believe agents or
brokers who are system suspended should be required to disclose this
fact to consumers. Requiring such disclosure at this point in the
process may confuse consumers or cause unwarranted concerns. By system
suspending the agent or broker, we have helped reduce the risk of
noncompliant behavior by requiring the agent or broker to assist
consumers working side-by-side through the consumer pathway on
HealthCare.gov or via a three-way call with the Marketplace call
center. We believe restricting access to the Classic DE and EDE
pathways during the suspension period mitigates the concern
sufficiently while we investigate the circumstances that led to the
system suspension. Since these agents and brokers are still permitted
to assist consumers with enrolling in coverage through the FFEs and
SBE-FPs through the consumer pathway on HealthCare.gov and a three-way
call with the Marketplace call center, it would be confusing for
consumers to be notified about the system suspension. Furthermore, if
the agent or broker does not respond to our outreach or their response
does not sufficiently mitigate the circumstances that led to the system
suspension, we would likely move to terminate or suspend the agent's or
broker's Exchange Agreements under Sec. 155.220(g)(1) or (g)(5),
respectively. If the issue is not resolved to HHS' satisfaction after
sending the notice of intent to terminate under Sec. 155.220(g)(1), or
at the time we send the Exchange Agreement suspension or termination
notice under Sec. 155.220(g)(5), we would notify the State DOIs or
other equivalent State licensing authorities as required by Sec.
155.220(g)(6).
Comment: We received comments stating that when an agent is system
suspended under Sec. 155.220(k)(3), we
[[Page 4471]]
should ensure they are unable to utilize State Exchanges.
Response: We appreciate these comments and generally encourage
State Exchanges that elect to operate a DE program, as part of their
oversight of the agents and brokers assisting consumers in their
respective States apply for and enroll in coverage in a manner that
constitutes enrollment through their Exchange, to adopt a system
suspension framework similar to Sec. 155.220(k)(3). It is one of the
important features of HHS' oversight of agents and brokers
participating in the FFEs and SBE-FPs that protects consumers data,
safeguards Exchange operations and systems, and helps reduce fraud and
abuse. When HHS imposes a system suspension under Sec. 155.220(k)(3),
a system suspended agent or broker is unable to utilize the Classic DE
or EDE pathways available in FFE and SBE-FP States to enroll consumers
in coverage in a manner that constitutes enrollment through the
Exchange. State Exchanges that do not use the Federal platform utilize
their own systems and are responsible for overseeing and ensuring
compliance by the agents and brokers assisting Exchange consumers in
their State, including participation in any DE program the State
Exchange elects to establish.\185\ We therefore did not propose and are
not finalizing the extension of the system suspension framework under
Sec. 155.220(k)(3) to State Exchanges that do not use the Federal
platform; however, we continue to encourage adoption of a similar
framework if a State Exchanges that does not use the Federal platform
elects to establish a DE program.
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\185\ In the 2025 Payment Notice, we finalized the extension of
certain HHS minimum standards governing web-broker and DE entities
across all Exchanges to newly apply them to State Exchanges that do
not use the Federal platform. See 89 FR 26276 through 26298. The
framework adopted in the 2025 Payment Notice also provided State
Exchanges with continued flexibility and discretion to decide
whether and how to structure their respective web-broker and direct
enrollment programs. Ibid. It also affirmed the State Exchange's
role with respect to oversight and enforcement with respect to the
entities it permits to assist its consumers, and HHS' role
overseeing the Exchange's compliance with the applicable Federal
requirements. See 89 FR 26276 through 26298.
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Comment: Some commenters expressed concern that suspensions may
prevent them from being paid commissions and that we should keep any
withheld commissions in a trust that would be payable to the agent or
broker upon the suspension being lifted.
Response: We appreciate these comments and generally note that the
system suspensions implemented under Sec. 155.220(k)(3) do not result
in the suspension or termination of the agent's or broker's Exchange
Agreements. As such, a system suspension by HHS under Sec.
155.220(k)(3) should not have an impact on the agent's or broker's
ability to receive commissions for FFE and SBE-FP enrollments. In
addition, HHS does not set compensation levels or pay commissions to
agents or brokers for assistance provided to Exchange consumers. Agents
and brokers who participate in the Exchanges receive compensation
directly from the QHP issuers they are affiliated with in accordance
with their agreements with those issuers and any applicable State-
specific requirements. Agents and brokers should work directly with
their QHP issuers to resolve any questions or concerns with respect to
commissions or other compensation they believe they are owed. We did
not propose and decline to adopt an approach whereby we would start
collecting and holding in trust commissions withheld by QHP issuers.
c. Model Consent Form Updates
In the HHS Notice of Benefit and Payment Parameters for 2026
proposed rule (89 FR 82363), we proposed to modify the model consent
form that was created as part of the 2024 Payment Notice (88 FR 25809
through 25811).\186\ Our proposed modifications included updating the
model consent form to include a section for documentation of consumer
review and confirmation of the accuracy of their Exchange eligibility
application information under Sec. 155.220(j)(2)(ii)(A)(1)-(2), as
well as scripts agents, brokers, and web-brokers could use when meeting
the requirements codified at Sec. 155.220(j)(2)(ii)(A) and
(j)(2)(iii)(A)-(C) via an audio recording.
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\186\ CMS. (2022, December 14). CMS model consent form for
Marketplace Agents and Brokers. PRA package (CMS-10840, OMB 0938-
1438). https://www.cms.gov/files/document/cms-model-consent-form-marketplace-agents-and-brokers.pdf.
---------------------------------------------------------------------------
Agents, brokers, and web-brokers are required to obtain consumer
consent prior to assisting with and facilitating enrollment in coverage
through FFEs and SBE-FPs or assisting an individual with applying for
APTC and CSRs for QHPs. Until we finalized new requirements related to
consumer consent in the 2024 Payment Notice, there was no mandate to
document the receipt of consent of the consumer or their authorized
representative, or to maintain such documentation. The absence of a
consent documentation requirement led to disputes between consumers and
agents, brokers, and web-brokers that were difficult for us to
adjudicate because neither party had documentary proof of consent. In
the 2024 Payment Notice (88 FR 25809 through 25811), we finalized
regulations requiring receipt of consent of the consumer or their
authorized representative to be documented.\187\ Under these
regulations, the consent documentation must contain certain minimum
elements as enumerated in Sec. 155.220(j)(2)(iii)(B) and must be
retained by the assisting agent, broker, or web-broker for a minimum of
10 years and produced to HHS upon request in response to monitoring,
audit, and enforcement activities pursuant to Sec.
155.220(j)(2)(iii)(C). Our goal in codifying these consent
documentation requirements was to minimize the risk of fraudulent
activities, such as unauthorized enrollments, and help us resolve
disputes and adjudicate claims related to the provision of consumer
consent.
---------------------------------------------------------------------------
\187\ 45 CFR 155.220(j)(2)(iii).
---------------------------------------------------------------------------
We also finalized regulations in the 2024 Payment Notice (88 FR
25804 through 25809) requiring agents, brokers, and web-brokers
assisting with and facilitating enrollment in coverage through FFEs and
SBE-FPs or assisting an individual with applying for APTC and CSRs for
QHPs to document that eligibility application information has been
reviewed by and confirmed to be accurate by the consumer or their
authorized representative prior to application submission.\188\ Under
these regulations, this documentation must contain certain minimum
elements as enumerated in Sec. 155.220(j)(2)(ii)(A)(1) and must be
retained by the assisting agent, broker, or web-broker for a minimum of
10 years and produced to HHS upon request in response to monitoring,
audit, and enforcement activities pursuant to Sec.
155.220(j)(2)(ii)(A)(2). Our goal in codifying these requirements was
to minimize the risk of fraudulent activities, such as providing false
information to the Exchange, help us resolve disputes and DMIs and
adjudicate claims related to inaccurate eligibility information on
submitted applications, and ensure consumers receive accurate
eligibility determinations and do not receive incorrect APTC
determinations, which may result in consumers owing money during tax
reconciliation.
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\188\ See Sec. 155.220(j)(2)(ii).
---------------------------------------------------------------------------
The model consent form \189\ created and provided to agents,
brokers, and
[[Page 4472]]
web-brokers on June 30, 2023, has been used by agents, brokers, and
web-brokers, either as is or as a starting point for creating their own
consent documentation. However, no model consent form was created for
agents, brokers, and web-brokers to use to meet the documentation of
consumer review and confirmation of the accuracy of the eligibility
application information requirements enumerated in Sec.
155.220(j)(2)(ii)(A)(1). Since the 2024 Payment Notice requirements
went into effect, agents, brokers, and web-brokers have asked us to
provide a model documentation that they could use to meet these
requirements under Sec. 155.220(j)(2)(ii). In the proposed rule, (89
FR 82364), we proposed to update the model consent form to include a
section for documentation of consumer review and confirmation of the
accuracy of their Exchange eligibility application information in
response to these requests. This addition to the model consent form is
meant to provide clarity to agents, brokers, and web-brokers on how to
meet the regulatory requirements under Sec. 155.220(j)(2)(ii) and help
them comply with this regulation by providing a standardized form they
may use to do so. Furthermore, we stated in the proposed rule (89 FR
82364) that we believe providing a clearly written model consent form
would provide more consumer clarity and assurance that the agent,
broker, or web-broker they are working with is complying with Sec.
155.220(j)(2)(ii).
---------------------------------------------------------------------------
\189\ CMS. (2022, December 14). CMS model consent form for
Marketplace Agents and Brokers. PRA package (CMS-10840, OMB 0938-
1438). https://www.cms.gov/files/document/cms-model-consent-form-marketplace-agents-and-brokers.pdf.
---------------------------------------------------------------------------
Because the requirements of Sec. 155.220(j)(2)(ii)(A) and
(j)(2)(iii) can be met via an audio recording, we also proposed (89 FR
82364) to create appendices to the model consent form that would
contain scripts agents, brokers, and web-brokers may use to document
compliance with these requirements via an audio recording. We stated in
the proposed rule (89 FR 82364) that our goal is to provide agents,
brokers, and web-brokers who assist consumers verbally with guidance on
meeting the consent and eligibility application review documentation
requirements contained in Sec. 155.220(j)(2)(iii) and (j)(2)(ii)(A),
respectively, similar to how the current model consent form helps
agents, brokers, and web-brokers documenting consent via a physical
document with handwritten signatures demonstrate compliance with the
new consent documentation requirements.
In the proposed rule (89 FR 82364), we stated that the proposed
scripts, to the extent they are utilized by agents, brokers, and web-
brokers, would help ensure agents, brokers, and web-brokers are
following the regulatory requirements when enrolling consumers. We
further stated that we believe this would reduce consumer harm by
reducing unauthorized enrollments, which can result in financial harm
if a consumer receives an improper APTC amount upon enrollment. We also
stated that we believe this proposal would clarify and simplify how
regulated entities can meet regulatory requirements. The proposal did
not involve any revisions to Sec. 155.220(j)(2)(ii)(A) and
(j)(2)(iii)(A) through (C). Lastly, we stated that if finalized as
proposed, it would not be mandatory for agents, brokers, or web-brokers
to use the amended model consent form or new scripts to comply with the
requirements set forth in Sec. 155.220(j)(2)(ii)(A) and (j)(2)(iii)(A)
through (C).
We sought comment on these proposals.
After consideration of comments and for the reasons outlined in the
proposed rule and this final rule, including our responses to comments,
we are finalizing the modifications to the model consent form as
proposed. We summarize and respond to public comments received on the
modifications to the model consent form below.
Comment: Some commenters supported updating the model consent form,
stating this would provide clarity to agents, brokers, and web-brokers,
and help ensure consumers' enrollment applications include correct
information.
Response: We agree with commenters that these updates will provide
more clarity and assurance to agents, brokers, web-brokers, and
agencies on how to meet the applicable regulatory requirements and more
consumer clarity and assurance that the agent, broker, or web-broker
they are working with is complying with the applicable regulatory
requirements.
Comment: Some commenters stated that we should not mandate audio
recording of enrollments and should not require agents, brokers, or
web-brokers to use our scripts as this would be especially burdensome
to smaller agents, brokers, web-brokers, or agencies.
Response: While agents, brokers, and web-brokers can meet the
requirements of Sec. 155.220(j)(2)(ii)(A) and (j)(2)(iii) via an audio
recording, this is just one type of documentation that is considered to
be acceptable under these sections, and there is no mandate that an
audio recording be used to meet these requirements. Agents, brokers,
and web-brokers may use any method they wish to meet the consent
documentation requirement and review and confirmation of the accuracy
of eligibility application information requirement, provided the
minimum information required by the regulations is captured in this
documentation and the documentation can be maintained for a minimum of
10 years and produced to CMS upon request. In addition, as noted in the
proposed rule (89 FR 82364), it would not be mandatory for agents,
brokers, or web-brokers to use the amended model consent form or new
scripts to comply with the requirements set forth in Sec.
155.220(j)(2)(ii)(A) and (j)(2)(iii)(A) through (C).
Comment: A commenter requested clarification on whether the updated
model consent form, if finalized, would invalidate consumer consent
obtained and documented using the previous model consent form.
Response: If an agent, broker, or web-broker obtained consumer
consent using the previously released model consent form, the consent
and the documentation of such consent would still be valid if the
consent documentation complies with the regulatory requirements at
Sec. 155.220(j)(2)(iii) and the consent has not expired or been
rescinded.
3. Requirement for Notification of Tax Filers and Consumers Who Have
Failed To File and Reconcile APTC for 2 Consecutive Tax Years (Sec.
155.305)
In the HHS Notice of Benefit and Payment Parameters for 2026
proposed rule (88 FR 82308 through 82411), we proposed changes and
updates to the failure to file and reconcile (FTR) process at Sec.
155.305(f)(4). Specifically, we proposed that all Exchanges, including
State Exchanges, would be required to send notices to tax filers or
their enrollees for the second, consecutive tax year in which they or
their tax filer failed to reconcile APTC. This notice, when sent to the
tax filer, would serve as an additional warning to inform and educate
tax filers that they need to file their Federal income taxes and
reconcile their APTC or risk being determined ineligible for APTC if
they fail to file and reconcile for a second consecutive tax year. The
notice, when sent to enrollees, would indicate the importance of filing
Federal income taxes and reconciling APTC on Form 8962 in order to
remain eligible for APTC, without disclosing tax information about an
individual tax filer. We are finalizing this policy as proposed.
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
[[Page 4473]]
ineligible for APTC due to their FTR status after a tax filer (or a tax
filer's spouse, if married) has failed to file a Federal income tax
return and reconcile their APTC for 2 consecutive years (specifically,
years for which tax data will be utilized for verification of household
income and family size). In the 2025 Payment Notice (89 FR 26218
through 26426), we imposed a requirement for Exchanges to send direct
or indirect notices for the first year in which the tax filer was
determined to have failed to file and reconcile. A direct notice to the
tax filer provides a warning to inform and educate the tax filer 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. An indirect notice, also sometimes referred to as a
``combined notice,'' contains general, broad language regarding FTR
that complies with the prohibition on sending Federal tax information
(FTI) in circumstances where the household contact or enrollee is not
the tax filer. However, in the 2025 Payment Notice, we did not impose a
requirement for Exchanges to send a direct or indirect notice enrollees
or their tax filer about the second consecutive year that the
applicable tax filer failed to file and reconcile. In the HHS Notice of
Benefit and Payment Parameters for 2026 proposed rule (89 FR 82364), we
proposed to revise Sec. 155.305(f)(4) to require Exchanges to send a
direct or indirect notice to enrollees or their tax filer who have not
filed their Federal income tax return and reconciled their APTC for 2
consecutive tax years.
Under the policy finalized in this rule, Exchanges on the Federal
platform will continue to send notices to enrollees or their tax filers
for the second consecutive tax year in which the tax filer has failed
to reconcile APTC. State Exchanges that operate their own eligibility
and enrollment platforms will be required to send either one of these
notices and may send an indirect 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 2 consecutive tax years are
adequately educated on the file and reconcile requirement, and have
ample opportunity to file their Federal taxes and reconcile APTC before
they lose APTC. 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 because they
were unaware of the requirement to file and reconcile. Additionally,
this policy better aligns State Exchanges' FTR processes with that of
the Exchanges on the Federal platform by ensuring that consumers will
receive at least one FTR notice per year before being found ineligible
for APTC. 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 at Sec. 155.305(f)(4)(ii) to require all
Exchanges to send direct notices to a tax filer alerting them of their
FTR status, or to send informative indirect 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 2 consecutive tax years.
Section 155.305(f)(4)(ii)(A) describes the requirements for sending the
direct notice to the tax filer, including that Exchanges must send the
notice consistent with the standards applicable to the protection of
FTI. Section 155.305(f)(4)(ii)(B) describes the requirements for
sending the indirect notice, which must not convey 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 2
consecutive tax years. Several of these commenters cited its positive
impact on continuity of coverage for consumers enrolled in Exchange
coverage.
Response: We agree with commenters that the proposed FTR policy
will have a positive impact on enrollee retention of APTC and Exchange
coverage by ensuring enrollees and their tax filers are informed of the
tax reconciliation requirement or of a potential FTR status.
Comment: A few commenters opposed the proposal requiring Exchanges
to send FTR notices to enrollees who have a 2-year FTR status. These
commenters believe that it is not the role of Exchanges, but rather of
the Internal Revenue Service (IRS), to conduct FTR because the IRS has
the ability to send direct notices that more specifically address a tax
filer's FTR status. These commenters stated that indirect notices are
less effective because they cannot disclose FTI.
Response: We disagree with commenters that the IRS is the correct
agency to provide FTR notifications. Exchanges are well-suited to send
FTR notices because they already send a variety of notices about
Exchange coverage to QHP enrollees, both through mail and Exchange
portals, including direct and indirect notices to enrollees or their
tax filer who have failed to file and reconcile for 1 tax year. These
notices sent by the Exchange have proven effective, as, historically,
the majority of consumers identified in the failure to file and
reconcile process have successfully filed and reconciled to prevent the
loss of their APTC. State Exchanges are afforded the flexibility to
choose to send direct notices in certain situations, but also can
choose to send indirect notices in situations where sending a direct
notice that protects FTI is not feasible.
Comment: A few commenters supported the proposal but stated that
the FTR process overall is flawed, overly punitive to consumers by
removing APTC, and a threat to continuity of coverage. They also stated
that the IRS already has the adequate tax enforcement tools and, as
such, these commenters recommended repealing the FTR process entirely.
Response: We acknowledge the concerns that commenters have raised
that FTR is overly punitive to consumers. However, the changes that HHS
has implemented in this rule, as well as the changes finalized in the
2024 Payment Notice and the 2025 Payment Notice, properly balance
consumer protections and program integrity protections. Therefore, we
maintain that we should continue to improve the FTR process rather than
repeal FTR entirely.
Comment: A few commenters stated that HHS should fully repeal FTR
processes because there is no statutory authority for it.
Response: We disagree with commenters that there is no statutory
authority for Exchanges to conduct FTR. Consumers who receive APTC are
required to file income taxes pursuant to Sec. 6011(a) of the Code and
regulations prescribed by the Secretary of Treasury. Section 36B(f) of
the Code requires taxpayers to reconcile their APTC under section 1412
of the ACA with their PTC allowed under section 36B of the Code. FTR
regulations, implemented pursuant to the Secretary's general rulemaking
authority under section 1321(a) of the
[[Page 4474]]
ACA, facilitate compliance with those requirements.
Comment: A few commenters stated that requiring Exchanges to
provide a direct FTR notification to their consumers would be overly
burdensome.
Response: We understand the concern raised by commenters regarding
increased burden for Exchanges to provide these FTR notifications.
However, States have flexibility under Sec. 155.305(f)(4)(ii)(B) to
provide either a direct notice that discloses FTI or an indirect notice
that does not disclose FTI to their consumers, and we are not requiring
Exchanges to provide direct notices in this final rule.
Comment: One commenter requested that HHS provide technical
guidance on developing indirect notices for Exchanges that do not want
to store any FTI. In addition, the commenter also requested HHS to
consider a phased implementation approach that accounts for varying
State capabilities and resources.
Response: We are allowing Exchanges to choose whether they want to
send direct or indirect notices and have provided Exchanges with
technical guidance and sample notice for both types of notices. These
are available at https://www.cms.gov/marketplace/in-person-assisters/applications-forms-notices/notices. Additionally, Exchanges have
experience sending direct and indirect notices for consumers whose tax
filer has failed to file and reconcile APTC for 1 tax year, so they
should have the capability to send notices as required in this final
rule. For these reasons, we have provided sufficient time for Exchanges
to implement the notice required described in this final rule and will
not be providing a phased implementation.
4. Timeliness Standard for State Exchanges To Review and Resolve
Enrollment Data Inaccuracies Sec. 155.400(d)(1)
In the HHS Notice of Benefit and Payment Parameters for 2026
proposed rule (89 FR 82308, 82365 through 82366), we proposed to add
Sec. 155.400(d)(1) to codify HHS guidance \190\ that, within 60
calendar days after a State Exchange receives a data inaccuracy from an
issuer operating in an State Exchange (hereinafter referred to as
``State Exchange issuer'') that includes a description of an inaccuracy
that meets the requirements at Sec. 156.1210(a)-(c) and all the
information that the State Exchange requires or requests to properly
assess the inaccuracy, the State Exchange must review and resolve the
State Exchange issuer's enrollment data inaccuracies and submit to HHS
a description of the resolution of any inaccuracies described by the
State Exchange issuer that the State Exchange confirms to be
inaccuracies in a format and manner specified by HHS.\191\
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\190\ CMS. (2024, Aug. 14). Reporting and Reviewing Data
Inaccuracy Reports in State-based Exchanges (SBE) Frequently Asked
Questions (FAQs). https://www.cms.gov/cciio/programs-and-initiatives/health-insurance-marketplaces/downloads/faqs-SBE-reporting-enrollment-data-inaccuracies.pdf.
\191\ OMB Control No: 0938-1312 and 0938-1341.
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In the proposed rule, we explained that, under existing rules, the
State Exchange issuer must work with its State Exchange to ensure
resolution of any inaccuracy impacting APTC payment. If a State
Exchange issuer is directed by its State Exchange to submit
inaccuracies directly to HHS, the State Exchange issuer should follow
those submission instructions, but any information HHS shares in
response to the submission is informational. If the inaccuracy remains
unresolved, the State Exchange issuer must follow up with its State
Exchange to identify and rectify the reason for non-resolution. In
accordance with Sec. 155.400(b), a State Exchange must submit all
enrollment data that HHS then uses to calculate APTC payments to State
Exchange issuers. Therefore, in instances when a State Exchange does
not address State Exchange issuer data inaccuracies in a timely manner,
HHS cannot directly assist the State Exchange issuer in addressing
these data inaccuracies.
In accordance with this policy, the proposed rule (89 FR 82308,
82365 through 82366) proposed to codify the guidance titled Reporting
and Reviewing Data Inaccuracy Reports in State-based Exchanges (SBE)
Frequently Asked Questions (FAQs). This guidance directs State
Exchanges to review descriptions of data inaccuracies submitted by
State Exchange issuers, resolve them, and submit to HHS a description
of the resolution of the inaccuracies when the State Exchange issuer
submits a description of a data inaccuracy within the 90-calendar day
deadline, or reasonably after the 90-calendar day deadline but before
the 3-year deadline pursuant to Sec. 156.1210(b) and (c).\192\ The
guidance directs State Exchanges to submit the resolution of these
inaccuracies to HHS via the State Based Marketplace Inbound File (SBMI)
within 60 calendar days after receiving from a State Exchange issuer a
description of a data inaccuracy that includes all the information that
the State Exchange requires or requests to properly assess the
inaccuracy.
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\192\ CMS. (2024, Aug. 14). Reporting and Reviewing Data
Inaccuracy Reports in State-based Exchanges (SBE) Frequently Asked
Questions (FAQs). https://www.cms.gov/cciio/programs-and-initiatives/health-insurance-marketplaces/downloads/faqs-SBE-reporting-enrollment-data-inaccuracies.pdf.
---------------------------------------------------------------------------
We stated in the proposed rule (89 FR 82308, 82365 through 82366)
that this proposed timeline for resolution of enrollment data
inaccuracies would require State Exchanges to timely review and resolve
enrollment data inaccuracies; clarify the resolution process for State
Exchange issuers; and ensure the accurate payment of APTCs, as
enrollment data is the basis of APTC payments to State Exchange issuers
in the automated policy-based payments (PBP) system. We will monitor
State Exchanges' efforts to implement the policy and continue to
consider whether modifying the State-based Marketplace Annual Reporting
Tool (SMART) to have State Exchanges outline their process for timely
resolving data inaccuracies in accordance with the requirement may be
appropriate for tracking State Exchanges' efforts to meet the 60-
calendar day requirement for submission inaccuracies to HHS.
We sought comments on this proposal.
After consideration of comments and for the reasons outlined in the
proposed rule and this final rule, including our responses to comments,
we are finalizing this policy as proposed. We summarize and respond to
public comments received on the codification that, within 60 calendar
days after a State Exchange receives a data inaccuracy from a State
Exchange issuer that includes a description of an inaccuracy that meets
the requirements at Sec. 156.1210(a)-(c) and all the information that
the State Exchange requires or requests to properly assess the
inaccuracy, the State Exchange must review and resolve the State
Exchange issuer's enrollment data inaccuracies and submit to HHS a
description of the resolution of any inaccuracies described by the
State Exchange issuer that the State Exchange confirms to be
inaccuracies in a format and manner specified by HHS.\193\
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\193\ OMB Control No: 0938-1312 and 0938-1341.
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Comment: Some commenters supported the proposal, noting that
enrollment inaccuracies impact consumers, and ensuring timely
resolution of data inaccuracies will minimize impacts on consumers'
APTC payments. Other commenters opposed the policy, expressing various
operational and financial concerns for State Exchanges. These concerns
[[Page 4475]]
included: system restrictions and limitations; limited resources; the
anticipated need to divert staff from essential functions like
outreach, enrollment assistance, and plan certification; being held
accountable for a timeframe based on required actions by issuers, which
are outside of State Exchanges' direct control; increased risk of
errors or incomplete reviews in resolving disputes resulting from
rushed decision-making to meet the 60-calendar day requirement; and
other unforeseen circumstances. Some commenters requested that this
regulation be effective no earlier than PY 2026 and the 60-calendar day
window restart when State Exchanges need additional information from
issuers to resolve inaccuracies. Some commenters suggested that HHS
allow extensions and in doing so sought clarification on the difference
between responding to versus resolving data inaccuracies.
Response: We acknowledge commenters' concerns regarding operational
and financial burdens such as system, human capital, procedural
constraints, and other unforeseen circumstances. However, we do not
believe codifying a timeliness standard represents a significant
increase in operational and financial burden given this policy aligns
with existing guidance \194\ and, as stated in the proposed rule (89 FR
82365 through 82366), builds on the existing requirement at Sec.
155.400(d) that a State Exchange must reconcile enrollment information
with issuers and HHS no less than on a monthly basis. Further, because
State Exchanges provide the enrollment data that HHS uses as the basis
of APTC payments to State Exchange issuers, timely and accurate
resolution between State Exchanges and State Exchange issuers is
necessary for accurate payment of Federal dollars. This policy also
provides certainty for State Exchange issuers by providing a timeline
for State Exchanges to act upon enrollment data inaccuracies submitted
to the State Exchange by a State Exchange issuer that meets the
requirements at Sec. 156.1210(a)-(c). As such, we believe that any
potential operational or financial burden faced by State Exchanges is
outweighed by the benefits of ensuring more timely and more accurate
APTC payments, and for these same reasons, we are finalizing this
policy to be effective as of the effective date of this final rule.
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\194\ CMS. (2024, Aug. 14). Reporting and Reviewing Data
Inaccuracy Reports in State-based Exchanges (SBE) Frequently Asked
Questions (FAQs). https://www.cms.gov/cciio/programs-and-initiatives/health-insurance-marketplaces/downloads/faqs-SBE-reporting-enrollment-data-inaccuracies.pdf.
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Further, we are clarifying in this rule that there are generally no
exceptions to the 60-calendar day window for State Exchanges to review,
resolve, and submit data inaccuracies to HHS. However, as described in
the proposed rule (89 FR 82365 through 82366) and in the guidance,\195\
the 60-calendar day window begins after the receipt of a complete
inaccuracy submission from a State Exchange issuer that includes all
the information that a State Exchange requires or requests to properly
assess the amount of APTC paid to the issuer.\196\ If a State Exchange
requires additional information needed to address the APTC payment or
enrollment data inaccuracy after a State Exchange issuer reports the
inaccuracy to the State Exchange or HHS (as required by the State
Exchanges), the State Exchange may respond to the State Exchange issuer
to request that information. The 60-calendar day window to review,
resolve, and submit the data inaccuracy to HHS would start only after
the State Exchange receives all necessary information. Resolving
inaccuracies, as opposed to responding to inaccuracies, includes taking
any warranted action to address the inaccuracy and submit to HHS as
described in the guidance.\197\ Because the 60-calendar day time period
does not begin until the State Exchange has all the information it
needs (that is, a complete inaccuracy submission), we have not
identified any situations that warrant an extension of this deadline.
---------------------------------------------------------------------------
\195\ Id.
\196\ Id.
\197\ Id.
---------------------------------------------------------------------------
Comment: Some commenters sought clarification regarding the
separate 90-calendar days for issuers to report inaccuracies and the
60-calendar day requirement in this rule for State Exchanges to address
disputes.
Response: We clarify that these are two separate time frames. State
Exchange issuers must submit enrollment data and APTC payment
inaccuracies to the State Exchange or HHS (as required by the State
Exchanges) within 90 calendar days after the date HHS sends a payment
and collections report to State Exchanges and State Exchange issuers
\198\ or, in limited circumstances, within 15 calendar days of
identifying the inaccuracy, within the 3-year period beginning at the
end of the plan year to which the inaccuracy relates.\199\ This
timeframe is unaffected by this final rule. The policy being finalized
in this rule requires State Exchanges to review and resolve data
inaccuracies and send them to HHS within 60 calendar days after receipt
of a complete inaccuracy submission from a State Exchange issuer. HHS
reiterates the 90-calendar day window applies to issuers and the 60-
calendar day window applies to State Exchanges.
---------------------------------------------------------------------------
\198\ 45 CFR 156.1210(a).
\199\ 45 CFR 156.1210(c).
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5. Establishment of Optional Fixed-Dollar Premium Payment Threshold and
Total Premium Threshold (Sec. 155.400(g))
In the HHS Notice of Benefit and Payment Parameters for 2026
proposed rule (89 FR 82366), we proposed to codify a provision related
to the premium payment threshold policies under Sec. 155.400(g) that
would allow additional issuer flexibility to decide when amounts
collected from an enrollee would be considered to satisfy their
obligation to pay the enrollee-responsible portion of the premium for
certain purposes. Specifically, this would provide issuers with
additional flexibility to not place an enrollee in a grace period for
failure to pay the full amount of their portion of premiums due, and to
not terminate enrollment through the Exchange after the applicable
grace period ends without outstanding premiums being paid in full. We
stated in the proposed rule (89 FR 82366) that this proposal would
reduce the number of coverage terminations for enrollees who owe only a
small amount of premium within the threshold. Specifically, we proposed
that issuers be permitted to set a fixed-dollar threshold of $5 or
less, which would be adjusted for inflation by annual agency guidance.
In the proposed rule (89 FR 82366), we stated that we were also
considering permitting issuers to adopt a threshold that is based on
the gross premium owed by the enrollee, rather than net premium. We
also proposed to modify the threshold of the existing premium payment
threshold policy at Sec. 155.400(g) from a reasonable amount to 95%
for clarity. We further proposed to allow issuers to adopt only one of
the three thresholds. Finally, we proposed to limit application of the
fixed-dollar premium payment threshold and gross premium-payment
threshold to payments made after coverage is effectuated, so that it
could not apply to the binder payment. Based on comments received, we
are finalizing this policy with the following modifications: we are
increasing the fixed-dollar threshold to $10, adjusted annually for
inflation, from $5 as proposed; decreasing the gross premium
percentage-based threshold to 98
[[Page 4476]]
percent, from 99 percent as proposed; and allowing issuers to select a
fixed-dollar threshold in tandem with one of the two percentage-based
thresholds.
Currently, issuers have the option under Sec. 155.400(g) to adopt
a percentage-based premium payment threshold which allows issuers to
effectuate coverage in accordance with binder payment rules at Sec.
155.400(e) for enrollees who pay an amount of the enrollee-responsible
portion of the premium that is less than 100 percent but within the
threshold, provided that the level is reasonable and that the level and
the policy are applied in a uniform manner to all enrollees (we have
historically recommended a percentage equal to or greater than 95
percent).\200\ This permits an issuer to avoid triggering a grace
period for non-payment under Sec. 156.270(d) or a grace period under
State rules, and to avoid terminating enrollment for non-payment of
premiums. Under this policy, if the total amount of premium owed by an
enrollee (including aggregate amounts over multiple months) exceeds the
threshold set by the issuer, the issuer is required to place the
enrollee in a grace period: either the grace period for enrollees
receiving APTC described at Sec. 156.270(d), or a grace period under
State authority, as applicable. Any amount that is unpaid but within
the reasonable premium payment threshold established by an issuer
remains an amount owed by the enrollee and cannot be forgiven by the
issuer.\201\
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\200\ See CMS. (2024, Aug. 19). Federally-facilitated Exchange
(FFE) Enrollment Manual. Section 6.2, pp. 92-94. https://www.cms.gov/files/document/ffe-enrollment-manual-2024-5cr-082024.pdf.
\201\ 2017 Payment Notice, 81 FR 12203, 12272.
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In the 2017 Payment Notice (81 FR 12271 through 12272), in which
HHS established the option for issuers to implement a percentage-based
premium payment threshold, we received a comment requesting that
issuers be allowed to establish a flat dollar amount threshold. At that
time, we stated that we did not consider implementing such a threshold
because there may be cases in which even a low flat dollar amount may
represent a large percentage of an enrollee's portion of the premium
less APTC (81 FR 12272).
However, after implementation of the percentage-based threshold, we
have realized that the percentage-based premium threshold policy does
not always adequately enable enrollees who owe small amounts of premium
to avoid triggering a grace period or termination of enrollment through
the Exchange. For example, an enrollee whose portion of the premium was
$1 after APTC, and who failed to make a premium payment, would be
placed into a grace period even if the issuer had adopted a 95 percent
payment threshold, despite being delinquent by only $1. In an analysis
of Exchange data for PY 2023, we found that there were 81,383 total
policies terminated for non-payment in which $5 or less was owed by the
enrollee, representing approximately 5.4 percent of the total number of
policies terminated for non-payment that year. In addition, 102,728
policies in which enrollees owed premiums of $5.01 to $10 were
terminated for non-payment, representing approximately 6.84 percent of
the total number of policies terminated for non-payment. Even though $5
may represent a large percentage of an enrollee's portion of the
premium less APTC, we stated in the proposed rule (89 FR 82367) that we
believe that triggering a grace period or terminating enrollment
through the Exchange is too severe a consequence for non-payment of
such limited dollar amounts.
In the proposed rule (89 FR 82367), we noted our concern about
situations in which an issuer would be willing to avoid termination of
enrollment through the Exchange if the enrollee owed only small amounts
of premium but are prevented from doing so by the lack of flexibility
in the current regulation. In addition, many of the enrollees who enter
a grace period because they owe de minimis amounts of premium are
likely low or moderate-income enrollees and thus might be especially
hurt by disruptions in coverage. We stated in the proposed rule (89 FR
82367) that we recognize that issuers have historically implemented
various premium payment thresholds, and we believe there is value in
providing flexibility to issuers regarding whether to adopt a fixed-
dollar payment threshold and the amount of the threshold.
We thus proposed to modify Sec. 155.400(g) to allow issuers to
adopt a fixed-dollar premium payment threshold of $5 or less, adjusted
for inflation by annual agency guidance, under which they could provide
additional flexibility to enrollees who fail to pay the full amount of
their portion of premium owed. We proposed to limit the fixed-dollar
premium threshold to $5 or less because, unlike the current percentage-
based threshold, a fixed-dollar threshold would allow enrollees, in
some cases, to pay $0 in premium without the issuer triggering a grace
period or terminating enrollment through the Exchange. Such a limit
would ensure that enrollees who owe large amounts of premium do not
remain enrolled in coverage through the Exchange and would serve to
limit the number of times an enrollee may fail to pay premium and avoid
triggering a grace period or termination of enrollment through the
Exchange. As we stated in the proposed rule (89 FR 82367), we believe
that a limit of $5 is sufficiently large to enable issuers to allow
enrollees who owe de minimis amounts of premium to remain enrolled,
while ensuring that enrollees do not accumulate excessive amounts of
premium owed prior to triggering a grace period or termination of
enrollment through the Exchange. We also stated that we recognize that
this amount might be lower than the threshold enrollees might be
afforded under a percentage-based threshold. However, we also stated
that we recognize that within a percentage-based threshold, the
enrollee must pay a certain amount of their premium to avoid triggering
a grace period or termination of enrollment through the Exchange,
whereas with a fixed-dollar threshold, an enrollee may not have paid
any other amount than the binder payment. Other factors such as the
amount the enrollee has paid for their premium to date is not
considered when applying the fixed-dollar payment threshold. We
requested comment on whether this is a reasonable limit for the fixed-
dollar threshold, or whether an alternative amount (such as $10) would
be more appropriate and in line with our goal of enabling enrollees who
owe small amounts of premiums, while avoiding excessive accumulation of
premium debt, to avoid triggering a grace period or termination of
enrollment through the Exchange. In the proposed rule (89 FR 82367), we
stated that if adopted, we would publish annual updates through
subregulatory guidance to this $5 limit to adjust for inflation, using
the National Health Expenditure Forecast published annually by CMS'
Office of the Actuary.\202\
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\202\ See CMS. (n.d.). National health expenditure data--
Projected. https://www.cms.gov/data-research/statistics-trends-and-reports/national-health-expenditure-data/projected.
---------------------------------------------------------------------------
Issuers that adopt such a policy could permit enrollees who owe
less than the specified amount of premium to avoid triggering a grace
period and termination of enrollment through the Exchange. However, we
proposed to limit application of this threshold to premium payments
made after coverage is effectuated, so that it could not apply to the
binder payment. Issuers have the option under the current percentage
threshold policy at Sec. 155.400(g)(1) of applying a percentage-based
threshold
[[Page 4477]]
to the binder payment, but under that policy, enrollees are required to
pay some amount of premium, even if it less than the total. By
contrast, under a fixed-dollar premium payment threshold, enrollees
could have their coverage effectuated without making any payment if
their portion of the binder payment is under the threshold amount. Due
to concerns about program integrity, we stated in the proposed rule (89
FR 82367) that we believe it is important to ensure that, when a binder
payment is required, enrollees must always pay some amount of premium
to effectuate coverage as an important signal that the coverage is
desired by the enrollee. In addition, as under the current policy (81
FR 12272), any amount that is unpaid but within the reasonable premium
payment threshold established by an issuer remains an amount owed by
the enrollee and cannot be forgiven by the issuer. This remains true
whether the premium payment threshold is utilized for any of the
following payments: binder payments, regularly billed payments, or
amounts owed by an enrollee while in a grace period.
To illustrate how a fixed-dollar premium threshold would work, we
provided the following example in the proposed rule (82368):
Example 1: During the annual Open Enrollment Period, a consumer
selects a QHP with a total monthly premium amount of $300, and the
consumer is determined eligible for $299 in APTC and elects to receive
the entire amount. The consumer's enrollee-responsible portion of
premium will thus be $1. The QHP issuer has adopted a fixed-dollar
premium payment threshold policy under which it will not terminate
enrollment of enrollees who owe $5 or less of the enrollee-responsible
portion of premium. The issuer has set a binder payment deadline of
January 30, and the consumer sends the binder payment of $1 ahead of
the deadline and effectuates coverage effective January 1.
Subsequently, the consumer does not make a payment for February, March,
April, May, or June, and, as a result, the enrollee owes $5 in
outstanding premiums. Because the issuer has adopted a $5 premium
payment threshold, the issuer would not put the consumer into a grace
period, since the total amount owed does not exceed $5. However, the
issuer would not be permitted to write off the $5 owed, and if the
consumer does not pay the premium for July in full, the issuer must put
the consumer into a 3-month grace period since the total amount of
premium owed would exceed the threshold set by the issuer. However, if
within the grace period the consumer paid the full amount owed or a
portion of the full amount owed that brings the amount owed under $5,
the issuer could terminate the grace period without terminating
enrollment through the Exchange.
Finally, under the current percentage-based threshold policy, the
percentage is calculated based on the percentage paid of the enrollee's
portion of the premium (that is, the total premium minus any APTC). In
the proposed rule (89 FR 82368), we stated that we were considering
whether to further amend Sec. 155.400(g) to also permit issuers to set
a threshold that is a percentage of the policy's total premium and not
just the enrollee's portion of premium, thus allowing APTC paid on the
consumer's behalf to count toward the threshold.
In the 2017 Payment Notice (81 FR 12271 through 12272), we
established the option for issuers to adopt a premium payment threshold
based on net premium owed by the enrollee. At that time, we did not
consider establishing a threshold based on gross premium, nor have we
done so since then. We stated in the proposed rule (89 FR 82368) that
we now recognize that this option may provide issuers with an
alternative method of keeping consumers enrolled in coverage that
issuers may prefer, either because it is simpler to implement or
because it is percentage-based and therefore more similar to the
premium payment threshold that is currently allowed under Sec.
155.400(g).
Establishing an option for issuers to adopt a percentage threshold
based on gross premium owed by the enrollee with APTC counting toward
the threshold would, in some cases, allow enrollees to remain enrolled
in coverage or avoid triggering a grace period or termination of
enrollment through the Exchange for owing small amounts of the
enrollee-responsible portion of the premium. For example, an enrollee
whose gross premium was $600, and was receiving $595 in APTC, could
avoid triggering a grace period or termination of enrollment through
the Exchange or termination of coverage even without paying the $5
enrollee-responsible portion of the premium if the issuer had adopted a
99 percent premium threshold based on gross premium because 99 percent
of the gross premium ($594) would have been paid on the enrollee's
behalf in the form of APTC. With the current 95 percent threshold based
on net premium, by contrast, the enrollee would be required to pay at
least $4.75 to avoid triggering a grace period or termination of
enrollment through the Exchange. While historically we have not defined
a specific threshold for the premium threshold based on net premium, we
stated in the proposed rule (89 FR 82368) that we would implement a
threshold for the premium threshold based on gross premium that is 99
percent or more of the gross premium. We stated that we believe the
gross premium threshold should be higher than the net premium threshold
to avoid the enrollee accumulating a much larger amount of premium
debt, and to keep to a similar de minimis amount of premium owed as the
net premium percentage-based and fixed-dollar thresholds allow. Because
this threshold would also, in some circumstances, allow enrollees to
temporarily avoid paying any premium, we also proposed to limit
application of this threshold to premium payments made after coverage
is effectuated, so that it could not apply to the binder payment (due
to operational and program integrity concerns, as discussed earlier in
this section).
A percentage threshold based on gross premium may be simpler to
implement, since it is similar to the type of threshold issuers are
already allowed to adopt. However, in the proposed rule (89 FR 82368),
we stated that we recognize that there may also be drawbacks to this
approach, including that enrollees could accumulate more than $5 in
premium debt, which the enrollee would continue to owe even if coverage
were eventually terminated due to non-payment of premiums. Based on our
experience with the current, net premium-based payment threshold, we
stated that we do not believe this would result in significant premium
debts accumulated by enrollees, since we would be limiting the gross
percentage-based threshold to be 99 percent or more of the gross
premium. We further stated that we recognize that a gross premium
amount higher than the average gross premium (which was $604.78 in
February 2023) \203\ might allow enrollees to accrue more than the $5
debt that could be accrued under the fixed-dollar threshold, but this
is true under the existing net premium payment threshold as well. We
also noted in the proposed rule (89 FR 82368) that issuers are
prohibited from attributing premiums owed to prior debts and not to
binder payments, and thus issuers may not refuse to enroll enrollees in
coverage based on failure to
[[Page 4478]]
pay their binder payment by attributing binder payments to prior debts.
---------------------------------------------------------------------------
\203\ See CMS (2024). Effectuated Enrollment: Early 2024
Snapshot and Full Year 2023 Average. https://www.cms.gov/files/document/early-2024-and-full-year-2023-effectuated-enrollment-report.pdf.
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To illustrate how a premium threshold based on gross premium would
work, we provided the following example in the proposed rule (89 FR
82368):
Example 2: During the annual Open Enrollment Period, a consumer
selects a QHP with a total monthly premium amount of $500, and the
consumer is determined eligible for $495 in APTC and elects to receive
the entire amount. The consumer's enrollee-responsible portion of
premium will thus be $5. The QHP issuer has adopted a percentage-based
premium payment threshold policy under which it will not trigger a
grace period or termination of enrollment through the Exchange for
enrollees who pay at least 99 percent of gross premium (including
payments of APTC made on the enrollee's behalf), which here would be
$5. The issuer has set a binder payment deadline of January 30, and the
consumer sends the binder payment of $5 ahead of the deadline and
effectuates coverage effective January 1. Subsequently, the consumer
pays $1 in February and owes $4 in past due premium; because the
consumer's payment is within the 99 percent threshold established by
the issuer, the issuer would not place the enrollee in a grace period.
The following month, the consumer does not pay any premium, and now
owes $9 in past due premium. Since the $9 now owed after application of
the $495 APTC paid on the consumer's behalf for March represents more
than 1 percent of the $500 gross premium, the issuer must put the
consumer into a 3-month grace period starting March 1. The issuer would
not be permitted to write off the $9 owed, and the consumer must pay
all outstanding premium owed before the end of the grace period (May
31) to avoid exhaustion of the grace period and remain enrolled in
coverage.
We sought comments on this proposal. Specifically, we requested
comment on whether a fixed-dollar threshold, as proposed, or a
percentage threshold based on gross premium, would better meet our goal
of providing flexibility to issuers to allow enrollees to avoid
triggering a grace period or termination of enrollment through the
Exchange for owing small amounts of premium.
We also proposed changing the premium payment threshold based on
net premium owed by the enrollee from being a ``reasonable'' standard
to a specifically defined threshold of 95 percent or higher of the net
premium. We stated in the proposed rule (89 FR 82369) that we believe
this would provide clarity for issuers and Exchanges.
We also proposed limiting issuers to utilize one premium payment
threshold, such that a fixed-dollar threshold cannot be adopted and
utilized in tandem with a percentage-based policy, either net or gross.
We stated in the proposed rule (89 FR 82369) that we believe that
limiting this flexibility would allow issuers to choose and apply the
threshold that works best for their payment operations but prevents
complex situations that may arise from allowing multiple thresholds to
be used simultaneously. We sought comment on whether we should allow
issuers to adopt both a fixed-dollar and percentage-based threshold and
requested commenters to consider the administrative feasibility of
applying both thresholds, and how such a policy could be applied
uniformly and consistently across enrollees.
After consideration of comments and for the reasons outlined in the
proposed rule and this final rule, including our responses to comments,
we are finalizing this policy with the following modifications: we are
increasing the fixed-dollar threshold to $10, lowering the gross
premium percentage-based threshold to 98 percent, and allowing issuers
to select multiple thresholds: a fixed-dollar threshold in tandem with
one of the two percentage-based thresholds. We summarize and respond to
public comments received on the proposed premium payment thresholds
below.
Comment: Many commenters supported the proposal overall and stated
that providing additional flexibilities to issuers would allow
consumers who owe small premium amounts, especially those with lower
incomes, to keep their coverage and prevent disruptions in care.
Response: We agree that the additional flexibilities would allow
issuers to implement a premium payment threshold that meets the needs
of their enrollees and allow enrollees to maintain their coverage when
they owe minimal premium.
Comment: The majority of commenters supported the premium payment
threshold but recommended that the fixed-dollar threshold be increased
from the proposed $5 limit. Most recommended that it be increased to
$10 and stated that the proposed $5 limit would be too low to afford
consumers the desired protection from triggering a grace period or
termination over a minor payment issue. One commenter stated that $10
was less than 2 percent of the average premium in their State, which
operates a State Exchange, and that carriers in their State had higher
fixed-dollar thresholds for non-Exchange plans. One commenter, an
issuer, stated that a fixed-dollar threshold of $5 was too low as it
translated to approximately 99.9 percent of their premiums, which they
stated is a very high bar for underpayments.
Response: We agree with commenters that a fixed-dollar threshold of
$10, adjusted for inflation by annual agency guidance, would provide
more protection to consumers who owe small amounts of premium. We also
note that $10 would represent less than 2 percent of the average
monthly premium across all Exchanges. Based on FFE data from PY 2023,
102,728 policies in which enrollees owed premiums of $5.01 to $10 were
terminated for non-payment, representing approximately 6.84 percent of
the total number of policies terminated for non-payment. Increasing the
maximum fixed-dollar threshold to $10 would allow more consumers to
avoid termination of their coverage, while ensuring that most enrollees
will still be required to pay the majority of their premium to maintain
coverage. While we maintain that the fixed-dollar threshold should
remain at a de minimis amount to prevent enrollees from accruing too
much debt, based on comments received, we believe that the additional
$5 an enrollee could accrue would not place them in substantially more
debt.
Comment: Many commenters stated that the fixed-dollar threshold and
gross premium percentage-based thresholds should also apply to the
binder payment. Some commenters stated that expanding the proposal in
this way would allow issuers to maintain enrollment for consumers, many
of whom are living paycheck to paycheck. One commenter stated that
applying the proposed policy to binder payments was unlikely to have a
meaningful effect on the number of fraudulent enrollments: many plans
already have a $0 premium for consumers at certain income levels, and a
broker willing to engage in fraud could simply choose a plan and
fabricate an income estimate to get a $0 enrollment. Another commenter
suggested that the fixed-dollar and gross premium payment thresholds
should be applied to the binder payment, but only for policies with an
enrollee responsible amount, which would help maintain effectuation
rates. Finally, one commenter supported our proposal to not apply the
fixed-dollar and gross premium percentage-based thresholds to the
binder payment and stated that enrollees should continue to be required
to pay a premium to effectuate coverage.
[[Page 4479]]
Response: While we understand that some enrollees will have a
difficult time paying the binder payment, we believe that when a
premium is required, it is best practice to require consumers to pay
some portion of it to indicate their desire to effectuate coverage to
promote the integrity of the Exchanges and to reduce the potential for
fraud and abuse. This policy may also minimize the opportunities for
agents, brokers, and web-brokers to enroll consumers in an Exchange
plan without their consent because all consumers who owe a premium
would be required to pay some of their binder payment if the issuer
adopted a net premium percentage-based threshold, or all of their
binder payment if the issuer adopted a fixed-dollar or gross premium
percentage-based threshold in order to effectuate coverage. We have
found that some agents, brokers, and web brokers may target consumers
who do not have to make a binder payment because it is harder for those
consumers to detect the unauthorized enrollment when they do not have
to pay to effectuate coverage. Given the pattern of unauthorized
enrollments and our efforts to curb them,\204\ we think it is prudent
to further protect consumers and the Exchanges by making it harder for
agents, brokers, and web-brokers to enroll consumers in Exchange
coverage without their consent, to the extent possible. As such, at
this time we are finalizing that the binder payment will be excluded
from the fixed-dollar and gross premium-based thresholds.
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\204\ See CMS (2024). CMS Update on Actions to Prevent
Unauthorized Agent and Broker Marketplace Activity. https://www.cms.gov/newsroom/press-releases/cms-statement-system-changes-stop-unauthorized-agent-and-broker-marketplace-activity. See also
the revisions in this final rule to 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.''
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Comment: Some commenters stated that issuers should be able to
apply more than one threshold to improve continuity of coverage, as
long as the issuer applied both thresholds consistently and in a non-
discriminatory manner. Commenters also disagreed that allowing issuers
to implement more than one threshold would introduce too much
complexity for both issuers and consumers. Commenters stated that if an
issuer was concerned about the complexity of implementing two
thresholds, they have the option to only apply one threshold, or none
at all. Lastly, some commenters noted that while consumers may be
confused about the existence of multiple thresholds, the benefit of
avoiding being put into a grace period would outweigh any potential
confusion.
Response: We agree that allowing issuers to apply multiple
thresholds would allow more consumers to avoid being placed into a
grace period and thereby avoid termination of their coverage for owing
nominal amounts of premium, which would increase the effectiveness of
the proposed policy. We also agree that if an issuer is concerned about
the complexity of implementing multiple thresholds, they have the
option to only implement one threshold or none at all. As such, we are
finalizing the option for issuers to implement multiple thresholds: a
fixed-dollar threshold and either the net premium or gross premium
percentage-based threshold. We would limit an issuer to only applying
one of the percentage-based thresholds to ensure that the
implementation and application of the premium payment threshold does
not become too operationally complex for issuers and for CMS in
reviewing audits of premium payment activity. To illustrate how a
fixed-dollar and percentage-based threshold might be implemented, we
are providing the following example: During the annual Open Enrollment
Period, a consumer selects a QHP with a total monthly premium amount of
$200. The consumer is determined ineligible for APTC and thus
responsible for paying the full amount of the premium. The QHP issuer
has adopted both a fixed-dollar premium payment threshold policy, under
which it will not terminate coverage of enrollees who owe $8 or less of
the enrollee-responsible portion of premium, and a net premium
percentage-based threshold policy, under which it will not terminate
coverage of enrollees who pay at least 95 percent of the enrollee-
responsible portion of the premium. The issuer has set a binder payment
deadline of January 30, and the consumer sends the binder payment of
$200 ahead of the deadline and effectuates coverage effective January
1. Subsequently, the consumer makes a payment of $190 for February's
premium, only 95 percent of the total amount owed. Although the
remainder of the amount owed, $10, is above the issuer's fixed-dollar
premium payment threshold of $8, it falls within the percentage-based
threshold of 95 percent set by the issuer, and thus the enrollee's
coverage would not be terminated. If the enrollee makes another payment
of $190 for March's premium, the issuer would then terminate coverage,
subject to a State's grace period if applicable, because the premium
owed would exceed both the 95 percent and $8 thresholds.
Comment: Some issuers, while supportive of the premium payment
threshold proposal, specifically opposed the gross premium percentage-
based threshold and stated that it could be confusing for consumers who
likely consider the premium payment to be the individual responsibility
amount, rather than the premium amount owed before the application of
APTC. One commenter stated that more time was needed to review the
gross premium percentage-based threshold.
Response: While we agree that most consumers likely consider the
net premium (their portion of the premium after APTC) to be their
premium amount, we encourage issuers who adopt the gross premium
percentage-based threshold to include the full premium amount and the
applied APTC on member invoices so that the enrollee is made aware of
the gross premium amount and whether they have paid enough of their
portion due to avoid being placed into a grace period. Because
establishment of a premium payment threshold is optional, issuers that
are concerned about implementation of a gross premium percentage-based
threshold could wait or opt not to implement one.
Comment: A few commenters opposed the premium payment threshold
policy entirely. One commenter was concerned that implementation of the
proposal may lead to unintended consequences, particularly if the
threshold is set by the issuer, such as issuers undermining the rate
review process and providing an incentive for issuers to take more
credit risks and incorporate the additional costs into premiums. The
commenter was also concerned that the fixed-dollar threshold could
incentivize fraudulent activity directed at the most flexible premium
payment threshold policies, and that a flexible threshold would also
lead to brokers leveraging these unique carrier-specific policies as a
marketing lever. One commenter was concerned that the proposal would
modify the grace period because consumers would be allowed to continue
coverage without making any of their premium payments, which the
commenter stated would extend grace period coverage. Additionally, the
commenter stated this would lead to a costly tax bill for consumers who
expected their coverage to terminate for non-payment.
Response: We disagree that the additional flexibilities provided in
the premium payment threshold proposal might drive issuers to take
additional credit risks since all of the premium
[[Page 4480]]
payment thresholds allow enrollees to owe a de minimis amount of debt.
In addition, issuers that do not want to take on the risk associated
with adopting a premium payment threshold would not have to, since the
policy is optional. We also disagree that any premium payment threshold
policy set by an issuer would undermine the rate review process,
because there is already a current existing net premium percentage-
based threshold which is optional for issuers to implement and must
currently be set at a reasonable de minimis level, and which has not,
to our knowledge, impacted the rate review process. We also disagree
that the fixed-dollar threshold would incentivize fraudulent activity
directed at the most flexible premium payment threshold policies and
that a flexible threshold would lead to agents, brokers, or web-brokers
leveraging these unique carrier-specific policies as a marketing lever.
The commenter seems to suggest that agents, brokers, or web-brokers
would be incentivized to enroll consumers in an Exchange plan with a
generous premium policy threshold(s) to secure a commission. However,
we are not convinced that consumers would be persuaded to enroll in an
Exchange plan, or to enroll in a specific Exchange plan over another,
because of a de minimis premium payment threshold, especially when any
unpaid amounts remain a debt owed to the issuer. If the commenter is
suggesting that an agent, broker, or web-broker might pay a binder
payment on a consumer's behalf in order to secure an unauthorized
enrollment, we note that the fixed-dollar and gross premium percentage-
based thresholds will not apply to the binder payment, and that the
current net percentage-based threshold, which does apply to the binder
payment, has not, to our knowledge, induced unauthorized enrollments.
With regard to the comment that the proposal would modify the grace
period, we clarify that the premium payment threshold, which already
exists as the net premium percentage-based threshold, would not extend
the grace period. Per Sec. 156.270(g), and issuer guidance, a consumer
must pay the full amount due once they are placed into the grace
period, and the grace period does not reset if partial payments are
made.
Comment: Some commenters recommended a lower threshold for the
gross premium percentage-based threshold.
Response: We agree that the gross premium percentage-based
threshold should be lowered, and as such, we are finalizing a 98
percent or above threshold for the gross premium percentage-based
threshold. Since we are also increasing the fixed-dollar threshold to
$10, which is almost 2 percent of the average premium in the FFE,
increasing the allowed gross premium percentage-based threshold would
allow more consistency to the definition of a de minimis amount, though
we note that any percentage-based threshold may be higher than $10 if
the gross premium is higher than the average premium.
Comment: Several commenters stated that CMS should establish clear
guidelines for issuers on how the premium payment threshold should be
implemented uniformly across all plans.
Response: Issuers that select any threshold must apply it in the
same manner to all enrollees in a plan. For example, an issuer may not
impose a $10 threshold for some enrollees and a $5 threshold for
others, even though both thresholds would be within the permitted
fixed-dollar threshold of $10. We note that we already provide
guidelines for implementing the current net premium percentage-based
threshold through the FFE Enrollment Manual and will also do so for the
fixed-dollar and gross premium percentage-based thresholds in the same
manner in a future revision of the FFE Enrollment Manual.\205\
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\205\ CMS. (2024, Aug. 19). Federally-facilitated Exchange (FFE)
Enrollment Manual. Section 6.2, pp. 92-94. https://www.cms.gov/files/document/ffe-enrollment-manual-2024-5cr-082024.pdf.
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Comment: Some commenters requested clarification on whether State
Exchanges would be limited to permitting only the premium payment
threshold options specifically described in the proposed regulation, or
whether State Exchanges have the authority to permit issuers in their
State to offer additional flexibility.
Response: State Exchanges have the option to permit their issuers
to implement only the flexibilities available after finalization of
this rule. Similar to the current premium payment rules, State
Exchanges would not be permitted to provide additional flexibility.
Consistent with the current rules on premium payment thresholds, the
FFE and SBE-FPs will provide the flexibilities specified in the
regulation.
6. General Eligibility Appeals Requirements (Sec. 155.505)
In the HHS Notice of Benefit and Payment Parameters for 2026
proposed rule (89 FR 82369), we proposed revising Sec. 155.505(b) to
codify an option for application filers to file appeals on behalf of
applicants and enrollees on the application filer's Exchange
application.
The Exchanges on the Federal platform allow application filers as
defined under Sec. 155.20 to file applications on behalf of an
applicant. However, the appeals regulation at Sec. 155.505(b) states
that only applicants and enrollees may submit appeal requests to the
HHS appeals entity or a State Exchange appeals entity. Appeal requests
submitted online to the HHS appeals entity are linked to a consumer's
HealthCare.gov account, which is controlled by the application filer.
Thus, an application filer who has authority to apply for coverage
through HealthCare.gov on behalf of an applicant under Sec. 155.20,
does not have parallel authority under Sec. 155.505(b) to appeal a
contested eligibility determination on behalf of that applicant through
the same HealthCare.gov account.
In the proposed rule (89 FR 82369), we stated that this limitation
under Sec. 155.505(b) puts a burden on consumers, as appeals filed by
application filers who are neither an applicant or enrollee are
considered invalid based on lack of standing, requiring either that the
applicant or enrollee resubmit their appeal or that they designate the
application filer as an authorized representative in writing. These
extra steps not only add unnecessary complications for the applicant or
enrollee, but also serve to delay an appeal resolution that may grant
or restore QHP coverage and financial assistance.
The proposed change would allow application filers to file appeals
through the HHS appeals entity or a State Exchange appeals entity on
behalf of applicants and enrollees on their Exchange application,
streamlining the appeals process and ensuring operational consistency
throughout the application and appeals processes. In the proposed rule
(89 FR 82369), we stated that we did not anticipate that this would
impose any additional substantial burden on any Exchanges, including
State Exchanges that operate their own platform, as this should not
materially increase the number of appeals filed, or add complexity to
appeals processes.
We sought comment on this proposal.
After consideration of comments and for the reasons outlined in the
proposed rule and this final rule, including our responses to comments,
we are finalizing this policy as proposed. We summarize and respond to
public comments received on the proposed policy to allow application
filers to file appeals on behalf of applicants and enrollees below.
[[Page 4481]]
Comment: The majority of commenters supported allowing application
filers to file appeals on behalf of applicants and enrollees on the
application filer's Exchange application. Several commenters noted that
application filers have the authority to apply for coverage in the
Exchange on behalf of applicants and that this change ensures
operational consistency throughout the application and appeals process
while reducing burden on appellants. One commenter noted that the
change will particularly help reduce the burden on those appellants
with disabilities and limited English proficiency who rely on household
members to assist them. A few commenters stated that health center
staff are already knowledgeable in navigating HealthCare.gov and the
appeals process, and that this proposed change would benefit the
patients they serve. Lastly, one commenter noted that the proposed
regulation would support continuous health insurance coverage and
prevent unnecessary gaps in coverage by removing administrative hurdles
faced by applicants and enrollees.
Response: We agree that this change ensures operational consistency
throughout the application and appeals process while reducing burden on
consumers.
Comment: One commenter suggested that CMS clarify that the
regulation applies only to FFEs, noting that if a consumer needs
assistance filing an appeal with a State Exchange appeals entity, the
appeal form provides a space in which the consumer can appoint an
authorized representative. The commenter stated that allowing
application filers to file appeals rather than attempting to resolve
the appeal through customer support pathways may increase the number of
appeals filed for issues that could be resolved without an appeal. The
commenter also stated that appeals may be delayed in the State Exchange
system if the system does not recognize application filer data.
Response: We clarify that the change to Sec. 155.505(b) applies to
State Exchanges as well. We agree that it is important to not make a
change that may unnecessarily delay the appeals process for a consumer.
However, we believe that the current process requiring the consumer to
designate the application filer as an authorized representative in
writing creates a burden that potentially delays adjudicating and
resolving an appeal. We appreciate that a State Exchange may need to
make adjustments to accommodate application filers, however we expect
these adjustments to be minimal and ultimately in the best interest of
the consumer and the efficiency of the appeals process. Finally, we
acknowledge that State Exchanges may have multiple paths to resolve
eligibility determination issues, but we note that this change should
not hinder consumers' use of those alternative paths or incentivize
consumers to pursue a formal appeal over an informal resolution.
Comment: One commenter suggested CMS include additional appeal
consent language confirming that the applicant gives consent to have
the application filer file an appeal on their behalf. The commenter
noted concern that application filers may file appeals on behalf of
applicants that do not wish to appeal.
Response: We acknowledge the concern that an application filer may
file an appeal on behalf of an applicant who does not wish to appeal.
However, Exchanges allow application filers, as defined under Sec.
155.20, to file applications on an applicant's behalf and therefore it
is consistent to allow an application filer to appeal an eligibility
determination related to such application on the applicant's behalf.
While there is a low risk that an application filer may submit an
application for coverage or appeal the eligibility determination
created in response to that application without the consumer's consent,
the application and appeal request are both submitted under penalty of
perjury to guard against any misuse of authority. We further believe
that the benefit created for both the application filer and consumer in
streamlining these processes and providing operational consistency
outweighs such a risk.
Comment: One commenter suggested that CMS provide guidance on the
scope and role of the application filer after filing an appeal and that
CMS explore the ramifications of this change further before making it.
Response: As per the proposed regulation, the application filer
would have the same standing to file an appeal and participate in the
adjudicatory process as an applicant or enrollee. We have considered,
but have not identified, any unintended consequences of this policy.
Comment: One commenter suggested that CMS expand the language to
allow agents and brokers to file appeals on behalf of consumers,
stating it would be consistent with other actions they perform.
Response: We clarify that an agent, broker, or web-broker would
have authority to file an appeal on behalf of a consumer if the agent,
broker, or web-broker has been designated as an authorized
representative by the consumer (or if the agent, broker, or web-broker
is acting in their personal capacity and otherwise meets the definition
of application filer). Given our efforts to address misconduct and
noncompliance by agents, brokers, and web-brokers, as described in more
detail in section III.C.2. of this final rule, we decline to further
extend the authority for agents, brokers, and web-brokers to file
consumer appeals.
7. Certification Standards for QHPs (Sec. 155.1000)
In the HHS Notice of Benefit and Payment Parameters for 2026
proposed rule (89 FR 82369), we proposed to amend Sec. 155.1000 by
adding a new paragraph (e) stating that an Exchange may deny
certification of any health plan as a QHP that does not meet the
general certification criteria at Sec. 155.1000(c).
Section 1311(e)(1) of the ACA grants an Exchange the authority to
certify a health plan as a QHP if the health plan meets the
requirements for certification promulgated by the Secretary under
section 1311(c)(1) of the ACA, and the Exchange determines that making
the plan available through the Exchange is in the interests of
qualified individuals and qualified employers in the State.\206\ In the
Exchange Establishment Rule (77 FR 18310, 18404 through 18405), we
codified the responsibilities of an Exchange to certify QHPs at Sec.
155.1000 and, Sec. 155.1000(b), required Exchanges to only offer
health plans which have in effect a certification issued or are
recognized as health plans deemed certified for participation in an
Exchange as a QHP. In that final rule, we also codified general
certification criteria, consistent with section 1311(e)(1)(A) and (B)
of the ACA, at Sec. 155.1000(c): an Exchange may certify a plan as a
QHP if: (1) the health insurance issuer provides evidence during the
certification process that it complies with the applicable minimum
certification requirements outlined in subpart C, part 156 of our
regulations; and (2) the Exchange determines that making the health
plan available through the Exchange is in the interest
[[Page 4482]]
of qualified individuals and qualified employers.\207\
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\206\ Section 1311(c)(1)(B) of the ACA and Sec. 155.1000(c)(2)
further provide that an Exchange may not exclude a health plan (i)
on the basis that such plan is a fee-for-service plan, (ii) through
the imposition of premium price controls, or (iii) on the basis that
the plan provides treatments necessary to prevent patients' deaths
in circumstances the Exchange determines are inappropriate or too
costly.
\207\ In that rule, we outlined a number of non-exhaustive
strategies an Exchange may employ to determine whether the offering
of a health plan is in the interest of qualified individuals and
qualified employers (77 FR 18406).
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However, an Exchange's authority to deny certification is not
explicitly referenced in 45 CFR part 155. Several regulations,
including Sec. Sec. 155.1000(c) and 155.1090, illustrate that an
Exchange may deny certification of a health plan that does not meet the
requirements of Sec. 155.1000(c). Moreover, a plain reading of section
1311(e)(1) of the ACA makes clear that an Exchange, as the entity
statutorily responsible for determining whether a plan meets the
minimum QHP certification standards, has the implied authority to deny
certification of plans that do not meet these standards. Any contrary
read of section 1311(e)(1) of the ACA would mean that an Exchange does
not have any statutory authority to take any action for plans that do
not meet minimum certification standards, which is not a reasonable
result and would be contrary to congressional intent.
We sought in the proposed rule (89 FR 82369) to revise our
regulations so that they more fully and accurately reflect the
discretion that Exchanges have to deny certification of any plan that
does not meet the general certification criteria at Sec. 155.1000(c).
Accordingly, we proposed to use the authorities under section 1311(c)
of the ACA (which gives HHS the authority to establish criteria for the
certification of health plans as QHPs), section 1311(d)(4)(A) (which
provides that Exchanges shall implement procedures for the
certification, recertification, and decertification of QHPs consistent
with the guidelines HHS develops under section 1311(c)), and section
1321(a)(1)(B) (which provides HHS with broad rulemaking authority to
issue regulations setting standards for meeting the requirements under
title I of the ACA (which includes section 1311) for the establishment
and operation of Exchanges and the offering of QHPs through the
Exchanges) to add new paragraph (e) to Sec. 155.1000 to formalize the
implicit authority that an Exchange, including State Exchanges and SBE-
FPs, may deny certification to any plan that does not meet the general
certification criteria at Sec. 155.1000(c). We proposed that an
Exchange may deny certification if the issuer does not provide evidence
during the certification process in Sec. 155.1010 that it complies
with the minimum certification requirements (under Sec.
155.1000(c)(1)), or if the Exchange determines that making the health
plan available is not in the interest of the qualified individuals and
qualified employers (under Sec. 155.1000(c)(2)).
In the proposed rule (89 FR 82370), we stated that we were not
proposing to require Exchanges, including State Exchanges and SBE-FPs,
to implement any specific procedures or processes for the denial of a
QHP certification application. We stated that we did not intend for
this proposal to amend the existing, implied authority of an Exchange
to deny certification. We stated that we only intended this proposal to
make that authority more explicit in our regulations, which would
provide greater certainty to Exchanges, issuers, and consumers on an
Exchange's role, which we expected would only improve the efficiency of
the Exchanges.
We sought comment on this proposal.
After consideration of comments and for the reasons outlined in the
proposed rule and this final rule, including our responses to comments,
we are finalizing this policy as proposed. We summarize and respond to
public comments received on the proposal to amend Sec. 155.1000 below.
Comment: We received a small number of comments on the proposal,
with most commenters supporting and agreeing with HHS that the proposal
is consistent with the text of the ACA and that it provides a clear
articulation of an Exchange's existing authority. These commenters
noted the proposal is imperative to ensuring that plans that do not
meet the certification criteria at Sec. 155.1000(c) are denied
certification.
Response: We appreciate these commenters' support of the proposal
and of the rationale that we provided in the proposed rule.
Comment: One commenter opposed the proposal as unnecessary, stating
the current regulations provide no uncertainty with respect to an
Exchange's authority to not certify plans that do not meet the
certification criteria at Sec. 155.1000(c). This commenter maintains
that HHS should not expand certification regulations without due cause
and, in this case, current regulations have served all Exchanges well
in providing authority to certify or not certify plans as QHPs.
Finally, this commenter stated that the proposed regulatory text
providing that an Exchange may deny certification ``if the Exchange
determines that making the health plan available is not in the interest
of the qualified individuals and qualified employers'' introduces
subjectivity and therefore ambiguity for certification denial that does
not currently exist in QHP certification criteria.
Response: We appreciate this commenter's position that the current
regulatory text already encompasses the implied authority of an
Exchange to deny certification of any plan that does not meet the
general certification criteria at Sec. 155.1000(c). To HHS' knowledge,
no Exchanges have interpreted Sec. 155.1000(c) to preclude them from
denying certification to plans that do not meet the general
certification criteria. The proposed rule (89 FR 82369) explained that
this proposal is intended to codify an Exchange's existing and implicit
certification denial authority. This revision is not without due cause,
as it provides a reader of this regulatory text, including Exchanges,
issuers, and consumers, greater certainty with respect to an Exchange's
role, which we continue to expect will only improve the efficiency of
the Exchanges. In addition, we disagree with this commenter's
characterization that the proposal introduces subjectivity that does
not currently exist in the QHP certification criteria with reference to
the ``interest standard.'' This proposal did not seek to revise the QHP
certification criteria at Sec. 155.1000(c), which include a
determination by the Exchange that making the health plan available is
in the interest of the qualified individuals and qualified employers.
Given this, we do not expect any change in an Exchange's approach in
assessing whether plans meet certification criteria, including for
States with an FFE.\208\
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\208\ See the discussion in the 2017 Payment Notice (81 FR
12289) for more information on HHS' approach for the denial of
certification on the FFEs (stating ``HHS expects to continue to
certify the vast majority of plans that meet certification
standards. HHS will focus denials of certification in the FFEs based
on the `interest of the qualified individuals and qualified
employers' standard on cases involving the integrity of the FFEs and
the plans offered through them.'')
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8. Request for the Reconsideration of Denial of Certification Specific
to the FFEs (Sec. 155.1090)
In the HHS Notice of Benefit and Payment Parameters for 2026
proposed rule (89 FR 82370), we proposed to amend Sec. 155.1090 to
revise the standards for an issuer to request the reconsideration of
denial of certification as a QHP specific to the FFEs.
Section 1311(e)(1) of the ACA grants an Exchange the authority to
certify a health plan as a QHP if the health plan meets the
requirements for certification promulgated by the Secretary under
section 1311(c)(1) of the ACA, and the Exchange determines that making
the plan available through the Exchange is
[[Page 4483]]
in the interests of qualified individuals and qualified employers in
the State.\209\ In the 2018 Payment Notice (81 FR 94137), we finalized
Sec. 155.1090 to allow an issuer to request the reconsideration of a
denial of certification of a plan as a QHP for sale through an FFE.
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\209\ Section 1311(c)(1)(B) of the ACA and Sec. 155.1000(c)(2)
further provide that an Exchange may not exclude a health plan (i)
on the basis that such plan is a fee-for-service plan, (ii) through
the imposition of premium price controls, or (iii) on the basis that
the plan provides treatments necessary to prevent patients' deaths
in circumstances the Exchange determines are inappropriate or too
costly.
---------------------------------------------------------------------------
HHS, as operator of the FFEs, is responsible for ensuring that
health plans offered through the FFEs meet all Federal requirements for
certification as QHPs under Sec. 155.1000(c). Starting with PY 2014,
HHS has certified numerous health plans as QHPs on the FFEs. During
this time, HHS has also determined that a small number of applications
submitted by issuers for the certification of health plans as QHPs on
the FFEs did not meet minimum certification criteria under Sec.
155.1000(c), and HHS denied certification to these plans. Some of these
issuers submitted reconsideration requests to HHS under Sec.
155.1090(a)(1). HHS ultimately sustained its denial determinations for
these issuers' certification applications upon reconsideration review.
Based on our experience reviewing these certification application
reconsideration requests, we stated in the proposed rule (89 FR 82370)
that we believe that it would be appropriate to amend Sec. 155.1090 to
codify more structure for the FFEs' process for conducting a
reconsideration of denial of certification. Accordingly, we proposed to
use the authorities under section 1311(c) of the ACA (which gives HHS
the authority to establish criteria for the certification of health
plans as QHPs), section 1311(d)(4)(A) (which provides that Exchanges
shall implement procedures for the certification, recertification, and
decertification of QHPs consistent with the guidelines HHS develops
under section 1311(c)), and section 1321(a)(1)(B) (which provides HHS
with broad rulemaking authority to issue regulations setting standards
for meeting the requirements under title I of the ACA (which includes
section 1311) for the establishment and operation of Exchanges and the
offering of QHPs through the Exchanges) to require that an issuer's
reconsideration request meet a specified burden of proof. Specifically,
we proposed revising Sec. 155.1090(a)(2) to state that the burden is
on an issuer that is denied certification to provide evidence that HHS'
determination that the plan does not meet the certification criteria at
Sec. 155.1000(c) was in error.
As we stated in the Exchange Establishment Rule (76 FR 41891),
offering only QHPs through an Exchange assures consumers that the
coverage options presented through the Exchange meet certain minimum
Federal standards. Given the voluntary nature of QHP certification, the
FFEs utilize a process for QHP certification whereby the burden of
proof is on issuers to provide sufficient evidence that they comply
with those minimum Federal standards to obtain certification.\210\
Consistent with this general approach towards QHP certification, we
stated in the proposed rule (89 FR 82370) that we believe it is
appropriate to propose formalizing that the burden of proof involved in
a reconsideration request is also on issuers. Under this proposal, we
stated that an issuer that is denied certification on an FFE would be
responsible for submitting a request to HHS, as operator of the FFEs,
for reconsideration of a denial determination.
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\210\ See Sec. 155.1000(c)(1): ``The health insurance issuer
provides evidence during the certification process in Sec. 155.1010
that it complies with the minimum certification requirements
outlined in subpart C of part 156, as applicable.''
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In the proposed rule, we also proposed to revise Sec.
155.1090(a)(2) to require that, as part of a reconsideration request,
an issuer would be required to submit clear and convincing evidence
that HHS' determination that the plan does not meet the general
certification criteria at Sec. 155.1000(c) was in error. We noted in
the 2017 Payment Notice (81 FR 12289) that HHS expects to certify the
vast majority of plans that meet the certification standards. To
maximize this amount of time for health plans to prepare, submit, and
revise QHP applications to the FFEs, HHS provides as much time as it
can for issuers to demonstrate that they comply with the certification
standards. In the proposed rule, we explained that the FFE's QHP
certification timeline provides at least three opportunities for
issuers to submit application materials to demonstrate that it meets
minimum certification standards for a given plan year (four
opportunities, if the issuer avails itself of an optional early bird
submission). As such, by the time it issues a denial of certification,
HHS will have typically already received substantial factual
information from the issuer over the period of several months upon
which it will have based its denial determination. It is unlikely that
any additional evidence that the issuer would seek to provide upon
reconsideration request that they had not already provided during the
three or four rounds of application submissions would meaningfully
weigh in favor of certification unless it clearly and convincingly
establishes that HHS' determination that the plan does not meet the
general certification criteria at Sec. 155.1000(c) was in error.
In the proposed rule (89 FR 82370), we stated that under this
proposal, we would expect evidence to be clear and convincing that HHS'
determination was in error if the issuer demonstrates that HHS clearly
misunderstood or misinterpreted facts or data already provided by the
issuer in previously submitted application materials (such as network
adequacy calculation errors). We stated that we would not expect
evidence to be clear and convincing in this regard if it is
substantially based on new information (such as the inclusion of new
ECPs that the issuer did not include in previously submitted
application materials) or is comprised of disputes of HHS' authority to
ensure compliance with certification standards (such as a determination
that making the plan available is not in the interest of the qualified
individuals and qualified employers, under section 1311(e)(1)(B) of the
ACA and Sec. 155.1000(c)(2)) that would require HHS to perform de novo
analysis before open enrollment.
Finally, we proposed to revise the title of Sec. 155.1090 to
state, ``Request for the reconsideration of a denial of certification''
and the subtitle of Sec. 155.1090(a) to state, ``Request for the
reconsideration of a denial of certification specific to a Federally-
facilitated Exchange.''
We sought comment on this proposal.
After consideration of comments and for the reasons outlined in the
proposed rule and this final rule, including our responses to comments,
we are finalizing this policy as proposed. We summarize and respond to
public comments received on the proposal to revise the standards for an
issuer to request reconsideration of denial of certification as a QHP
specific to the FFEs below.
Comment: We received a small number of comments on this proposal.
Most commenters were in support, agreeing that the burden should be on
the issuer receiving a denial of certification to provide HHS with
``clear and convincing'' evidence that its determination was in error.
Response: We are appreciative of these commenters' support of the
proposal and of the rationale that we provided in the proposed rule.
[[Page 4484]]
Comment: One commenter opposed the proposal due to the complexity
of the QHP certification process and requirements and stated consumers
are best served from increased issuer participation, and therefore, HHS
should create more lenient certification standards to allow for the
certification of plans with more innovative benefit designs.
Response: We agree with this commenter that increased issuer
participation and innovation on the Exchanges serves consumers
generally. However, the certification criteria are minimum requirements
established by the ACA and CMS regulations for a plan to be offered on
an Exchange, and innovation is not a substitute for compliance with
these minimum requirements. Permitting issuers to offer Exchange plans
that do not meet those requirements would run counter to our goal of
ensuring that all QHPs provide essential health benefits, maintain
reasonable cost-sharing limits, include adequate provider networks, and
meet other requirements that help ensure Exchange consumers have access
to a range of quality, affordable plans meeting their health needs.
With respect to the commenter's point that the QHP certification
process is complex, the proposed rule noted that, in addition to
providing robust technical guidance to issuers,\211\ HHS provides as
much time as it can for issuers to demonstrate that they comply with
the certification standards. For example, HHS provides issuers with
three separate opportunities to submit certification application
materials to demonstrate that their plan meets minimum certification
standards for a given plan year.\212\ These opportunities have proven
more than sufficient for issuers to demonstrate compliance with minimum
certification requirements while still having the ability to innovate,
as only a small number of issuers have been denied certification of all
of the plans they submitted for certification on the FFEs since 2014.
The denial of certification of a small fraction of plans that HHS has
certified since 2014 has not had a material negative impact on
consumers, as they had many other QHP options on the impacted FFEs to
choose from that offered benefits comparable to the plans that were not
certified.
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\211\ See, for example, https://www.qhpcertification.cms.gov/s/QHP.
\212\ The proposed rule (89 FR 82370) explained that issuers
have four opportunities (instead of three) to submit certification
application materials to demonstrate that their plan meets minimum
certification standards if the issuer avails itself of an optional
early bird submission opportunity. HHS is planning to enhance the
application submission process in order to provide more
contemporaneous results to issuers as soon as they submit their
applications. As a result, HHS no longer intends to offer an early
bird submission deadline in the certification process for PY 2026 or
future plan years.
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9. General Program Integrity and Oversight Requirements (Sec.
155.1200)
We currently collect certain information and data from State
Exchanges and SBE-FPs under Sec. 155.1200 to monitor their performance
and compliance. In the HHS Notice of Benefit and Payment Parameters for
2026 proposed rule (89 FR 82369), we proposed under our authority under
section 1321(a)(1)(D) of the ACA to promulgate appropriate requirements
related to Exchanges, to also use this information and data to increase
transparency into State Exchange operations and to promote program
improvements.
Under Sec. 155.1200, State Exchanges must report to HHS on certain
Exchange-related activities and performance monitoring data. State
Exchanges must also engage an independent qualified auditing entity
which follows generally accepted government auditing standards (GAGAS)
to annually compile a financial statement and conduct a financial audit
and a programmatic audit.
To meet these requirements, under section 1313(a)(1) of the ACA,
State Exchanges and SBE-FPs are required to submit a State Marketplace
Annual Reporting Tool (SMART) to CMS, which CMS uses to monitor and
evaluate State Exchange compliance with Exchange requirements under
Title I of the ACA.\213\ Through the SMART, State Exchanges and SBE-FPs
attest to compliance with specific regulations, provide supporting
documentation including, if applicable, a redetermination plan for the
upcoming plan year, an oversight and monitoring plan with fraud, waste,
and abuse policies and procedures, nondiscrimination policies and
standards, and an operating budget with a financial statement.
Additionally, the Exchanges submit the financial and programmatic
audits with corrective action plans for any identified audit or
findings. Following review, we provide State Exchanges and SBE-FPs with
a SMART summary letter based on the observations and action items
identified and monitor State Exchange completion of any open findings.
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\213\ State-based Marketplace Annual Reporting Tool (SMART). OMB
Control Number: 0938-1244. https://www.hhs.gov/guidance/sites/default/files/hhs-guidance-documents/smart_2017_5.pdf.
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State Exchanges that operate their own eligibility and enrollment
platform also report enrollment and Exchange activity data to CMS
weekly during Open Enrollment and twice a year outside of Open
Enrollment.\214\ We publish Exchange Open Enrollment data
annually.\215\ We utilize the programmatic data received from State
Exchanges to identify program risks and provide technical assistance to
State Exchanges on corrective actions or strategies to mitigate risks,
as well as to inform the development of new or updated policies as part
of our annual rule-making processes to address known risks.
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\214\ OMB Control Number: 0938-1119.
\215\ See, for example, CMS. (2024, March 22). 2024 Marketplace
Open Enrollment Period Public Use Files. https://www.cms.gov/data-research/statistics-trends-reports/marketplace-products/2024-marketplace-open-enrollment-period-public-use-files.
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In the HHS Notice of Benefit and Payment Parameters for 2026
proposed rule we explained our intention to use the information and
data that State Exchanges and Exchanges on the Federal platform (SBE-
FPs) submit to HHS under Sec. 155.1200 to increase transparency into
State Exchanges and to promote program improvements. Specifically, we
described our plan to publicly release the State Exchange and SBE-FP
annual State Marketplace Annual Reporting Tool (SMART) submitted to CMS
annually and to expand on current Open Enrollment data reporting by
publishing additional metrics on State Exchange operations and
functionality that we currently collect from State Exchanges but do not
currently report to external audiences. We also stated our intention
that any public reporting of State Exchange operations and
functionality would include the public release of comparable metrics
for the FFE and SBE-FPs.
After consideration of comments and for the reasons outlined in the
proposed rule and this final rule, including our responses to comments,
we are finalizing this policy with a modification. Commenters expressed
support for increased transparency in Exchanges and agreement that any
data released should include comparable data from the Exchanges on the
Federal platform. State Exchange commenters raised challenges with
posting the SMARTs since they contain non-public operational and
business processes employed by Exchanges to maintain program integrity
and combat fraud, such as procedures used for verifying consumer
information. State Exchange
[[Page 4485]]
commenters described the value the SMARTs provide as an oversight tool
through which they are held to meeting Federal Exchange requirements
but also receive technical assistance. They were concerned that
restricting their responses to protect the release of sensitive
operational issues would devalue the SMARTs and limit its effectiveness
as an oversight mechanism. Commenters also questioned the value of
indiscriminately releasing data in the format of individual SMARTs and
instead encouraged us to identify standard metrics that could be
presented to meaningfully compare across all Exchanges.
After further consideration, we will not release the SMARTs.
Commenters raised valid concerns and we do not want to inadvertently
expose Exchange system operations that could be susceptible to misuse
or to constrain the efficacy of the SMARTs. We also recognize that
there may be better ways to provide Exchange data than posting
individual reports. For that reason, as proposed, we intend to expand
our current Open Enrollment data reporting by publishing additional
metrics on State Exchange operations and functionality. We intend, as
resources permit, to proceed with preparing for the release of
additional customer service data elements already described.
Specifically, we will, at a minimum, publish the following data
elements that we currently collect from State Exchanges but do not
currently report to external audiences:
Exchange actual expenditures on consumer marketing,
education, and outreach for the most recent fiscal year available,
Exchange actual expenditures on Navigator program, total
allocation and per grantee,
Exchange call center metrics during Open Enrollment:
++ Total number of incoming calls received by the call center.
++ The average wait time for each incoming call to the call center.
++ The number of incoming calls terminated while waiting to speak
to a call center representative.
++ The average amount of time spent by call center representative
on each individual call.
Exchange website (eligibility and enrollment application
and/or consumer) visitors during Open Enrollment:
++ Number of website and mobile application visits.
++ Number of unique visitors requesting the website and mobile
application.
We will work with States in advance to evaluate the metric
definitions and methodologies and provide technical assistance prior to
publishing this data. We reaffirm that we will also publish reasonably
comparable customer metrics from Exchanges on the Federal platform if
data is available. This data will be released publicly by CMS.
We summarize and respond to public comments received on the
proposed public release of Exchange data below.
Comment: Generally, all commenters supported increased transparency
of Exchange operations; however, several commenters expressed concerns
about the scope and breadth of the information to be published.
Specifically, several State Exchanges cited concerns over potential
fraud or security risks if certain operational data, particularly the
information that is collected in the SMARTs, is made public.
Response: We agree that increased transparency is necessary to
monitor the performance of Exchanges and promote program improvements.
However, because of these concerns raised by State Exchanges, we will
not be releasing the SMARTs.
Comment: Commenters were split on what data should or should not be
included and how the data should be presented. Several commenters
believed the data State Exchanges currently make public is sufficient
for current oversight requirements. Many commenters, however,
recommended identifying standard metrics across both State Exchanges
and the Exchanges on the Federal platform to meaningfully compare
across all Exchanges rather than indiscriminately releasing data we
currently collect, and that any State Exchange information or data
released should include comparable FFE data from Exchanges on the
Federal platform. Many commenters recommended specific metrics that
they would like to see reported by State Exchanges and the Exchanges on
the Federal platform. A few commenters recommended ways CMS could
display data including creating a centralized reporting website;
developing an Exchange performance measurement tool to assess Exchange
quality and consumer experience; working with interested parties to
identify set metrics and publish a joint State Exchange/Exchanges on
the Federal platform data report; and adding data elements to the
current PUF files.
Response: We recognize that regulations exist requiring State
Exchanges to make certain data public and that some State Exchanges
offer data above and beyond the regulatory requirements in various
formats. We believe, however, that releasing additional data metrics
will increase the public's understanding of State Exchanges and provide
more transparency into our compliance activities. We also appreciate
the recommendations on what specific data metrics could be identified,
and how we should present data to the public. We will take these
recommendations into consideration when it is time to publish data in
the future. Initially, we intend to post most data through public
communication channels to be determined by CMS. We intend to release
the metrics originally proposed, if data from the Exchanges on the
Federal platform is also available, and we will work with States
through technical assistance to further identify and refine the
additional metrics for public reporting that will be released for both
State Exchanges and Exchanges on the Federal platform.
D. Part 156--Health Insurance Issuer Standards Under the Affordable
Care Act, Including Standards Related to Exchanges
1. Solicitation of Comments--Reducing the Risk That Issuer Insolvencies
Pose to the Integrity of the FFEs
In the HHS Notice of Benefit and Payment Parameters for 2026
proposed rule (89 FR 82308, 82371), we solicited comments on methods
that HHS, as operator of the FFEs, could potentially employ, in
partnership with State regulators, to reduce the risk that issuer
insolvencies pose to the integrity of the FFEs. We will take comments
received into consideration in future rulemaking.
2. FFE and SBE-FP User Fee Rates for the 2026 Benefit Year (Sec.
156.50)
In the HHS Notice of Benefit and Payment Parameters for 2026
proposed rule (89 FR 82308, 82373), we proposed an FFE user fee rate of
2.5 percent of total monthly premiums and an SBE-FP user fee rate of
2.0 percent of total monthly premiums for the 2026 benefit year. We
also proposed a 2026 benefit year FFE user fee rate range between 1.8
and 2.2 percent of total monthly premiums and an SBE-FP user fee rate
range between 1.4 and 1.8 percent of total monthly premiums, with each
of these ranges to be set at a single rate in this final rule, if the
enhanced PTC subsidies at the level currently enacted \216\ or at a
higher level are extended through the 2026 benefit year by March 31,
2025. We sought comment
[[Page 4486]]
on whether March 31, 2025 would provide sufficient time and whether we
should select an earlier or later date.
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\216\ ARP, Public Law 117-2, 135 Stat. 4 (2021). These enhanced
subsidies were extended under the IRA, Public Law 117-169, 136 Stat.
1818 (2022) and are scheduled to expire after the 2025 calendar
year.
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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 provide 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.\217\ 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.
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\217\ See OMB. (n.d.) Circular No. A-25 Revised. https://www.whitehouse.gov/wp-content/uploads/2017/11/Circular-025.pdf.
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a. FFE User Fee Rates for the 2026 Benefit Year
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. As in benefit years 2014 through 2025,
issuers seeking to participate in an FFE in the 2026 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 2026
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.
As discussed in detail in the proposed rule (89 FR 82373 through
82375), the proposed user fee rate reflected our estimates for the 2026
benefit year of costs for operating the FFEs, premiums, enrollment, and
transitions in Exchange models from the FFE and SBE-FP models to either
the SBE-FP or State Exchange models. We proposed a 2026 benefit year
FFE user fee rate of 2.5 percent of total monthly premiums, which is
greater than the 2025 benefit year fee rate of 1.5 percent of total
monthly premiums. We noted that if any events occurred between the
proposed rule and the final rule that significantly changed our
estimated costs to operate the FFEs or the Federal platform or our
projections of premiums or enrollment, we may finalize FFE and SBE-FP
user fee rates that differ from the proposed rates to reflect those
changes.
In addition to proposing a FFE user fee rate that assumed the
expiration of enhanced PTC subsidies, we proposed a 2026 benefit year
FFE user fee rate range between 1.8 and 2.2 percent of total monthly
premiums, to be set at a single rate in this final rule, if the current
level or a higher level of enhanced PTC subsidies is extended through
the 2026 benefit year by March 31, 2025. We sought comment on the
proposed 2026 benefit year FFE user fee rate of 2.5 percent of total
monthly premiums and the alternative proposed 2026 benefit year FFE
user fee rate range between 1.8 and 2.2 percent of total monthly
premiums.
We refer readers to the proposed rule (89 FR 82373 through 82376)
for further discussion of the proposed 2026 benefit year FFE user fee
rate and the alternative proposed 2026 benefit year FFE user fee rate
range, including the factors considered in developing the proposed user
fee rates and the rationale for our proposals.
b. SBE-FP User Fee Rates for the 2026 Benefit Year
Section 156.50(c)(2) requires 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. SBE-FPs enter into a Federal platform agreement with HHS to
leverage the systems established for the FFEs to perform certain
Exchange functions and enhance efficiency and coordination between
State and Federal programs. The benefits provided to issuers in SBE-FPs
by the Federal Government include use of the FFE information technology
and call center infrastructure used in connection with eligibility
determinations for enrollment in QHPs and other applicable State health
subsidy programs, as defined at section 1413(e) of the ACA, and QHP
enrollment functions under 45 CFR part 155, subpart E. The user fee
rate for SBE-FPs is calculated based on the proportion of total FFE
costs associated with Federal activities that provide these benefits to
the SBE-FP issuers.
To calculate the proposed SBE-FP rates for the 2026 benefit year,
we used the same assumptions related to contract costs, enrollment, and
premiums as we used for the proposed FFE user fee rates. Based on this
methodology, we proposed a 2026 benefit year SBE-FP user fee rate of
2.0 percent of total monthly premiums, which is greater than the user
fee rate of 1.2 percent of total monthly premiums that we established
for the 2025 benefit year. As discussed in the proposed rule (89 FR
82373 through 82376), we also proposed an alternative SBE-FP user fee
range between 1.4 percent and 1.8 percent of total monthly premiums, to
be set at a single rate in this final rule, if the current level or a
higher level of enhanced PTC subsidies is extended through the 2026
benefit year by March 31, 2025. We sought comment on the proposed 2026
benefit year SBE-FP user fee rate of 2.0 percent of total monthly
premiums and the alternative proposed 2026 benefit year SBE-FP user fee
rate range between 1.4 percent and 1.8 percent of total monthly
premiums.
We refer readers to the proposed rule (89 FR 82373 through 82376)
for further discussion of the proposed 2026 benefit year SBE-FP user
fee rate and the alternative proposed 2026 benefit year SBE-FP user fee
rate range, including the factors considered in developing the proposed
user fee rates and the rationale for our proposals.
We are finalizing two sets of FFE and SBE-FP user fee rates
accounting for the
[[Page 4487]]
expiration and extension of enhanced PTC subsidies. If enhanced PTC
subsidies expire as currently set forth in the IRA,\218\ we are
finalizing as proposed the 2026 benefit year user fee rate for all
issuers offering QHPs through an FFE to be 2.5 percent of the monthly
premium charged by the issuer for each policy under FFE plans, and the
2026 benefit year user fee rate for all issuers offering QHPs through
an SBE-FP to be 2.0 percent of the monthly premium charged by the
issuer for each policy under SBE-FP plans. If enhanced PTC subsidies at
the level currently enacted \219\ or at a higher level, are extended
through the 2026 benefit year by July 31, 2025, we are finalizing an
alternative set of 2026 benefit year FFE and SBE-FP user fee rates of
2.2 percent and 1.8 percent of total monthly premiums, respectively,
which are both within the range set forth in the final rule. Both sets
of user fee rates have been finalized after consideration of comments,
and for the reasons outlined in the proposed rule and this final rule,
including our responses to comments. The finalized, alternative user
fee rates were informed by updates to our projected enrollment \220\
and premium growth estimates based on the most recent data (along with
our latest budget projections). Additionally, after consideration of
the comments, we are finalizing July 31, 2025, as the date by which the
enhanced subsidies must be extended in order to trigger the alternate
user fees, instead March 31, 2025, as proposed.
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\218\ ARP, Public Law 117-2 (2021). These enhanced subsidies
were extended under the IRA, Public Law 117-169 (2022) and are
scheduled to expire after the 2025 calendar year.
\219\ ARP, Public Law 117-2 (2021). These enhanced subsidies
were extended under the IRA, Public Law 117-169 (2022) and are
scheduled to expire after the 2025 calendar year.
\220\ As described in the proposed rule (89 FR 82373 through
82376), user fee rates are based, in part, on projected enrollment
during the 2025 open enrollment period and may change between the
publication of the proposed rule and final rule. At the time of this
final rule, more data is available about the 2025 open enrollment
period and about the projected 2025 open enrollment numbers to
determine user fee rates than we had for the proposed rule. Thus,
after accounting for updated open enrollment data, we have finalized
single FFE and SBE-FP user fee rates within the proposed ranges if
enhanced PTC subsidies are extended at the level currently enacted
or at a higher level and finalized the proposed FFE and SBE-FP user
fee rates if enhanced PTC subsidies expire as enacted. See
Marketplace 2025 Open Enrollment Period Report National Snapshot, as
of December 4, 2024: https://www.cms.gov/newsroom/fact-sheets/marketplace-2025-open-enrollment-period-report-national-snapshot-0.
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We summarize and respond to public comments received on the
proposed 2026 benefit year FFE and SBE-FP user fee rates below.
Comment: Most commenters supported the 2026 benefit year user fee
rates, with several of these commenters supporting user fee rates that
adequately fund Federal programs. Some commenters supported maintaining
the 2025 user fee rates or lowering the proposed 2026 user fee rates.
These commenters stated that a higher user fee rate could lead to
increased premiums and affect competitiveness of Exchange plans
compared to off-Exchange plans, thereby impacting the affordability of
health insurance.
Many commenters also expressed concern about the impact of the
expiration of enhanced PTC subsidies on user fees and Exchange
enrollment, as well as specifically how the expiration may impact
enrollment projections or other factors used to determine 2026 benefit
year user fee rates. One commenter stated that the proposed 2026
benefit year user fee rates may be lower than required to sufficiently
fund costs if enrollment declines more than expected as a result of the
expiration of enhanced PTC subsidies.
Response: We are finalizing the 2026 benefit year FFE and SBE-FP
user fee rates as proposed. While we acknowledge that FFE and SBE-FP
user fee rates impact the costs of plans offered in the FFEs and SBE-
FPs, and by extension may impact premiums, we continue to calculate and
set these FFE and SBE-FP user fee rates annually in a manner that
ensures sufficient funding for operations of the FFEs and SBE-FPs.
We recognize commenters' concerns about the expiration of enhanced
PTC subsidies, and in the proposed rule (89 FR 82373 through 82376), we
noted the uncertainty around the expiration or extension of these
enhanced subsidies and the potential impact on enrollment and premium
growth in the Exchanges. In the proposed rule (89 FR 82375), we
explained that if enhanced PTC subsidies expire, we project that the
total enrollment through FFEs and SBE-FPs would decrease, and in turn,
issuers would likely rate for the uncertainty associated with the
expected decreased enrollment in the risk pool and increased premiums
for 2026. We maintain this projection, and anticipate a decrease in
enrollment beginning in 2026, which may exert upward pressure on
premiums. Despite this uncertainty, we must set user fee rates that
will allow us to sufficiently fund and operate the FFEs and the Federal
platform based on the latest budget projections. Our data suggests that
the user fees being finalized in this rule--which account for the
possibility that enhanced PTC subsidies may expire or be extended--
would do so.
Comment: Commenters had mixed opinions regarding the proposed March
31, 2025 deadline to apply a set of alternative user fee rates if
enhanced PTC subsidies are extended. Some of these commenters wanted
final user fee rates to be known by or before March 31, 2025 to allow
sufficient time for issuers to set premiums and comply with State and
Federal filing deadlines. Other commenters suggested the deadline could
be later than March 31, 2025, as all States do not need to submit 2026
benefit year rate filings until August 2025. One commenter suggested
that HHS should put the user fee rates in guidance or allow for
multiple rate filing submissions.
Response: After considering comments, we are finalizing a revised
deadline of July 31, 2025, for determining whether the alternative FFE
and SBE-FP user fee rates will apply. The alternative 2026 benefit year
user fee rates finalized in this rule will only take effect if enhanced
PTC subsidies are extended through the 2026 benefit year at the current
level or a higher level by July 31, 2025. While we proposed a March 31,
2025, deadline to provide issuers sufficient time to request rates and
States sufficient time to review rate requests, we agree with
commenters that the proposed March 31, 2025 deadline could be later, as
issuers can submit changes to their benefit year 2026 QHP Applications,
including updated rate data in the Rates Table Template of an issuer's
QHP Application, as late as August 13. In finalizing the July 31, 2025,
deadline, we recognize that many States allow issuers to file multiple
rate filings to justify proposed rate increases depending on the
uncertainty of factors applicable to the filing under review. In
addition, we have previously provided flexibility on filing deadlines
to allow States to account for rating changes in response to uncertain
circumstances. For example, when issuers of silver-level QHPs were
facing increased liability for enrollees in cost-sharing reduction plan
variations after HHS stopped making cost-sharing reduction payments to
issuers, we accounted for this change in single risk pool rate setting
by extending the issuer filing deadline for QHPs and non-QHPs.
Similarly, to provide the latest possible deadline that would allow
issuers sufficient time to account for the uncertainty surrounding the
expiration of enhanced PTC subsidies and allow issuers and States to
set and approve rates under the existing filing deadlines, we are
finalizing this revised July 31, 2025, deadline to establish the
[[Page 4488]]
alternative user fee rates. We believe this deadline will also help
reduce uncertainty, and by extension any upward pressure on premiums,
and help ensure that we do not impose higher user fees than necessary
to fund the operations of the FFEs and the Federal platform.
Comment: A few commenters suggested 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. 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 through the Exchanges that use the Federal
platform.
Comment: One commenter requested increased transparency on user
fees and wanted additional information on how user fee collections
support HHS' policy goals for the Exchanges. The same commenter
requested enumerated costs of providing Federal eligibility and
enrollment platform service and infrastructure to each State.
Response: HHS collects user fees in accordance with Section
1311(d)(5)(A) of the ACA which permits an Exchange to charge
assessments or user fees on participating health insurance issuers as a
means of generating funding to support its operations. Therefore, our
goal in collecting user fees is to collect user fees at a rate that
will allow us to sustain the operations of the FFEs and SBE-FPs. In the
proposed rule (89 FR 82373 through 82376, 82402), we provided
information on the assumptions used to calculate the 2026 benefit year
user fee rates.
3. CSR Loading (Sec. 156.80)
In response to the termination of CSR payments to issuers in
2017,\221\ State DOIs generally permitted or instructed their issuers
to increase premiums only, or primarily, on silver-level QHPs, to
compensate for the cost of offering CSRs, since the vast majority of
eligible enrollees receiving CSRs are enrolled in silver plans. The
proposed rule (89 FR 82376) reiterated that practices to increase
premiums to offset amounts of unpaid CSRs \222\ that are permitted by
State regulators are permissible under Federal law to the extent that
they are reasonable and actuarially justified. We further stated that
we were considering codifying this by amending the single risk pool
regulations at Sec. 156.80(d)(2)(i) to state that the plan-specific
factors by which issuers may adjust the market-wide index rate include
adjustments that reflect the costs associated with providing CSRs to
the eligible enrollee population, to the extent that such adjustments
are reasonable and actuarially justified. We sought comment on whether
and how to codify this policy at Sec. 156.80. We refer readers to the
proposed rule (89 FR 82376 through 82377) for a detailed discussion,
including the history of CSR payments to QHP issuers.
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\221\ See discussion in the proposed rule of the history of CSR
payments to QHP issuers (89 FR 82376). As discussed in the proposed
rule, on October 11, 2017, the Attorney General of the United States
provided HHS and the Department of the Treasury with a legal opinion
indicating that the permanent appropriation at 31 U.S.C. 1324 could
not be used to fund CSR payments to issuers.
\222\ Rating practices to increase premiums to offset amounts of
unpaid CSRs are referred to as ``silver loading'' (if premiums are
increased on silver-level plans only), ``broad loading'' (if
premiums are increased on all plans in the relevant State market,
not just silver-level plans), or ``CSR loading'' generally. For
purposes of this preamble, we use the term ``CSR loading'' to refer
to any rating practices to increase premiums to offset amounts of
unpaid CSRs.
---------------------------------------------------------------------------
After consideration of comments and for the reasons outlined in the
proposed rule and this final rule, including our responses to comments,
we are finalizing amendments to Sec. 156.80(d)(2)(i) to specify that
the actuarially justified plan-specific factors by which an issuer may
vary premium rates for a particular plan from its market-wide index
rate include the actuarial value and cost-sharing design of the plan,
including, if permitted by the applicable State authority, accounting
for CSR amounts provided to eligible enrollees under Sec. 156.410,
provided the issuer does not otherwise receive reimbursement for such
amounts. We summarize and respond below to public comments received on
the amendments considered in the proposed rule.
Comment: Most commenters generally supported amending Sec.
156.80(d)(2)(i) to explicitly note that plan-specific adjustments to
the market-wide index rate that account for CSR loading, as permitted
by State regulators, are permissible, stating that codifying this would
promote market stability and provide greater clarity for issuers. One
commenter supported the continuation of the practice of CSR loading but
noted that codifying the allowability of this practice in regulation
may not be necessary, as it is not altering the position that CMS has
already provided in written guidance. In contrast, one commenter
opposed codifying language regarding the practice of CSR loading in
Sec. 156.80(d)(2)(i), stating that CSR loading is a temporary measure
that creates significant market distortions and increases Federal PTC
spending.
Response: We agree with commenters that supported codifying
language specifying in Sec. 156.80(d)(2)(i) that CSR loading is
permissible under Federal premium rating requirements. We agree that
the practice of CSR loading has helped to promote market stability, as
evidenced by the adoption of CSR loading in most States.\223\ While we
understand that many States intended to permit loading practices that
specifically reimburse issuers for unpaid CSRs, we recognize that CSR
loading practices vary and may not be critical to promoting market
stability under all market conditions. For this reason, we have
consistently deferred to States, as the traditional regulators of
insurance and rating practices, to provide issuers with pricing
guidance on how to account for unpaid CSRs in an actuarially-justified
manner. This codification does not change our deference to States.
---------------------------------------------------------------------------
\223\ Uccello, CE, American Academy of Actuaries,
``Considerations for Calculating Cost-Sharing Reduction Load
Factors,'' Society of Actuaries Virtual Health Meeting Session 3C,
available at https://www.actuary.org/sites/default/files/2023-07/2023_SOA_Session_3C_Uccello.pdf.
---------------------------------------------------------------------------
States have provided guidance to issuers absent express language in
Sec. 156.80(d)(2) for years. We have concluded that it is appropriate
to codify language regarding CSR loading in regulatory text because
such amendments will provide greater clarity. Since the cessation of
CSR payments in 2017, States and issuers have requested that we clarify
how the single risk pool rules at Sec. 156.80 apply with regard to CSR
loading. We released guidance responsive to such requests in 2018 \224\
and have consistently repeated that the ACA permits States' rating
practices for CSR loading, as long as the resulting rate adjustments
are actuarially justifiable pursuant to Sec. 156.80. Because we
continue to receive questions about permissible CSR loading practices,
we have determined it is appropriate to codify that CSR loading is
permitted under Federal
[[Page 4489]]
rules, provided any such adjustments are actuarially justified and the
issuer does not otherwise receive reimbursement for such amounts.
---------------------------------------------------------------------------
\224\ See, CMS. (2018, Aug. 3). Center for Consumer Information
& Insurance Oversight, Insurance Standards Bulletin Series--
Information, Offering of plans that are not QHPs without CSR
``loading,'' https://www.cms.gov/cciio/resources/regulations-and-guidance/downloads/offering-plans-not-qhps-without-csr-loading.pdf.
---------------------------------------------------------------------------
We also recognize that CSR loading leads to higher PTCs and other
pricing impacts that can alter how markets function. However, in light
of the continued absence of Congressional action to fund CSRs, CSR
loading continues to promote market stability, and we are codifying
Federal policy that permits such premium rating under Federal premium
rating requirements.
Comment: Some commenters encouraged CMS to affirm deference to
State regulators to determine if and how CSR loading practices exist in
their State, and other commenters, while supporting amendments to Sec.
156.80(d)(2)(i), recommended against adoption of any further
requirements on State approaches to CSR loading. Several commenters
that supported amending Sec. 156.80 encouraged HHS to avoid language
that may, inadvertently or otherwise, limit State flexibilities, roll
back State progress in pursuing innovative solutions, or undermine
State methodologies to lower the cost of care. One commenter was
concerned that a strict interpretation of the changes discussed in the
proposed rule may require States to make significant changes to their
strategic health policy initiatives related to CSR loading, which may
have a destabilizing impact on the individual market. That commenter
sought clarification regarding whether HHS intends to impose a test of
reasonableness or actuarial justification that may override existing
CSR loading practices permitted by States. Another commenter requested
that CMS amend regulations to recognize the existing authority of
States to establish rating rules for their markets. One commenter, who
appears to have interpreted the discussion in the proposed rule to
suggest that HHS was considering codifying a requirement that issuers
use CSR loading when setting rates,\225\ noted concern that codifying
the practice of CSR loading in Federal regulation would undermine State
authority to regulate insurance and stated that unfunded CSRs should be
addressed through a Congressional appropriation, not regulatory
codification of a workaround.
---------------------------------------------------------------------------
\225\ Nothing in this final rule requires a State to allow CSR
loading.
---------------------------------------------------------------------------
Response: Recognizing States' traditional role in regulating
insurance and rating practices, this final rule codifies longstanding
statements that, in light of the continued absence of Congressional
action to fund CSRs and given States' well-established role as the
primary regulators of insurance, the ACA permits States' rating
practices for CSR loading, as long as the resulting rate adjustments
are actuarially justifiable and otherwise comply with the requirements
in Sec. 156.80. The final rule codifies this deference to State
regulators to determine if and how CSR loading practices exist in their
State by permitting CSR loading ``if permitted by the applicable State
authority (as defined in Sec. 144.103 of this subchapter).''
States may determine how to implement CSR loading in their State.
However, there is no requirement for States to do so. Likewise, in
those States that have an Effective Rate Review Program,\226\ the State
has the responsibility to determine whether an issuer's adjustments to
the market-wide index rate for plan-specific factors (including
accounting for CSR amounts) are actuarially justified.
---------------------------------------------------------------------------
\226\ State authority to maintain an Effective Rate Review
Program, including establishing rating rules for their markets, is
codified in 45 CFR 154.210(b), 154.225(b) and 154.301.
---------------------------------------------------------------------------
Comment: Many commenters that supported the regulatory codification
made recommendations regarding amendatory language in Sec.
156.80(d)(2)(i). For example, some commenters suggested adding
``including cost-sharing reductions under subpart E of this part 156 if
not paid for under Sec. 156.430,'' while another commenter suggested
adding ``including adjustments for CSRs if not otherwise reimbursed.''
One commenter, noting that HHS uses both ``CSR loading'' and
``actuarial loading'' to describe the premium loads arising due to the
lack of Federal funding for CSRs, suggested that the term ``CSR
loading'' is more appropriate because it is more specific. The
commenter noted that ``actuarial loading'' could refer to a broader
range of premium loads, including those related to new benefits or
administrative expenses. Another commenter that supported the
regulatory codification noted that current requirements for plan-level
adjustments in Sec. 156.80(d) require all such adjustments to be
``actuarially justified,'' but not ``reasonable,'' and therefore, urged
HHS to define ``reasonable'' if included in amendments to Sec.
156.80(d).
Response: Section 156.80(d)(2)(i) provides that an issuer may vary
premium rates for a particular plan from its market-wide index rate for
a relevant State market based on the actuarial value and cost-sharing
design of the plan. We are finalizing amendments to Sec.
156.80(d)(2)(i) specifying that adjustments related to the actuarial
value and cost-sharing design of the plan may include, if permitted by
the applicable State authority (as defined in Sec. 144.103 of this
subchapter), accounting for CSR amounts provided to eligible enrollees
under Sec. 156.410, provided the issuer does not otherwise receive
reimbursement for such amounts. We note that these amendments do not
use the shorthand terms ``CSR loading,'' ``silver loading'' or
``actuarial loading.'' With respect to the comments regarding the use
of the term ``reasonable'' in regulatory text, Sec. 156.80(d) requires
all permitted plan-level adjustments to be ``actuarially justified''
and does not apply a separate ``reasonableness'' standard to permitted
plan-level adjustments. We therefore have not included the word
``reasonable'' in the amendments to Sec. 156.80(d)(2)(i). We note that
States with an Effective Rate Review Program or CMS will continue to
review rates to determine whether rate increases subject to review are
unreasonable, pursuant to section 2794 of the PHS Act and 45 CFR part
154.
Comment: One commenter noted concern that the discussion in the
preamble of the proposed rule could be read to require the portion of
silver premiums associated with CSRs to be experience-rated. The
commenter therefore requested that HHS clarify that however a State
approaches CSR loading, metal-level pricing must meet single risk pool
requirements, and rates for individual plans must be set using methods
that are actuarially justified.
Response: Section 156.80(d)(2)(i), as amended, does not require
States or issuers to follow a specific methodology when accounting for
unpaid CSRs, so long as any such adjustments are actuarially justified.
When we issued guidance regarding CSR loading in 2018, we confirmed
that, under Federal law, States may allow or require their issuers to
apply a premium load that would cover the cost of amounts of unpaid
CSRs. We recognize that States have directed or permitted issuers to
adjust rates to reflect unreimbursed CSRs using a range of
methodologies.\227\
---------------------------------------------------------------------------
\227\ Uccello, CE, American Academy of Actuaries,
``Considerations for Calculating Cost-Sharing Reduction Load
Factors,'' Society of Actuaries Virtual Health Meeting Session 3C,
available at https://www.actuary.org/sites/default/files/2023-07/2023_SOA_Session_3C_Uccello.pdf.
---------------------------------------------------------------------------
Comment: Some commenters recommended actions HHS should take in
recognition of the absence of an appropriation to pay CSRs, the
existence of the practice of CSR loading, and the attendant impact of
CSR loading on the
[[Page 4490]]
level of APTC paid. For example, one commenter recommended further
action, such as the authorization of a pooled CSR fund, to address
market distortions. A few commenters recommended further consideration
of how silver loading interacts with risk adjustment, including
potential modifications to the risk adjustment State payment transfer
formula to account for the impact of CSR loading. One commenter noted
that CSR loading will result in higher APTCs and requested that CMS
allow consumers to apply such higher APTC amounts toward adult and
pediatric dental care when included in silver-level QHPs as well as
premiums for stand-alone dental plans (SADPs).
Response: We appreciate commenters' recommendations. We lack a
specific appropriation to create a pooled CSR fund to address market
distortions as one commenter recommended.
We recognize that the HHS-operated risk adjustment program serves
as an important market stabilizing tool, but we did not propose and are
not adopting in this final rule any changes to the risk adjustment
State payment transfer formula that applies in States where HHS is
responsible for operating the program to account for the impact of CSR
loading. Instead, we are continuing to study these issues and their
impact on HHS-operated risk adjustment to consider whether potential
updates are needed to risk adjustment, including changes to the State
payment transfer formula and the CSR adjustment factors discussed in
section III.B.2.e of this final rule. If any updates are needed, we
would propose them through notice-and-comment rulemaking.
With respect to the comment regarding permitting consumers to use
excess APTC to pay for dental benefits, this is permitted to the extent
that dental care is an EHB.\228\
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\228\ Pediatric dental benefits are an EHB. Beginning in PY
2027, States can choose to make adult dental care an EHB when
updating their EHB-benchmark plan. In States that update their EHB-
benchmark plan to include adult dental care, it will be an EHB and
therefore APTC can go towards that benefit. APTCs cannot go toward
adult dental SADP premiums at this time.
---------------------------------------------------------------------------
Comment: A few commenters requested that issuers no longer be
required to notify the Secretary of any reduced CSR amounts for QHPs.
Response: In accordance with Sec. 156.430(d), in the absence of an
appropriation for HHS to make advance CSR payments to issuers, the
submission of CSR data under Sec. 156.430 is optional.
4. Publication of the 2026 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(e))
As established in part 2 of the 2022 Payment Notice (86 FR 24238),
for benefit years in which we are not making changes to the methodology
to calculate the premium adjustment percentage, the required
contribution percentage, and maximum annual limitations on cost sharing
and reduced maximum annual limitation on cost sharing, we will publish
these parameters in guidance annually starting with the 2023 benefit
year. Therefore, because we did not propose to change the methodology
for calculating these parameters for the 2026 benefit year, these
parameters are not included in this rulemaking. Instead, on October 8,
2024, we published these 2026 benefit year parameters \229\ in guidance
in accordance with our 2022 Payment Notice regulations.
---------------------------------------------------------------------------
\229\ Available at https://www.cms.gov/files/document/2026-papi-parameters-guidance-2024-10-08.pdf.
---------------------------------------------------------------------------
5. AV Calculation for Determining Level of Coverage (Sec. 156.135)
In the HHS Notice of Benefit and Payment Parameters for 2026
proposed rule (89 FR 82308, 82377), we stated that we intend to revise
the method for updating the AV Calculator, starting with the 2026 AV
Calculator.
Section 2707(a) of the PHS Act and section 1302 of the ACA direct
issuers of non-grandfathered individual and small group health
insurance coverage, including QHPs, to ensure that plans meet a level
of coverage, or metal tier, specified in section 1302(d)(1) of the ACA.
Each level of coverage corresponds to an AV calculated based on the
cost-sharing features of the plan. On February 25, 2013, HHS published
the EHB Rule (78 FR 12834), implementing section 1302(d) of the ACA,
which requires at subsection (d)(2)(A) that, to determine the level of
coverage for a given metal tier, the calculation of AV be based upon
the provision of EHB to a standard population. Section 156.135(a), as
finalized in the EHB Rule, provides that an issuer must use the AV
Calculator developed and made available by HHS for the given benefit
year to calculate the AV of a health plan, subject to the exception in
paragraph (b).
In the 2015 Payment Notice (79 FR 13744), we established at Sec.
156.135(g) provisions for updating the AV Calculator in future plan
years. We stated in the preamble of the 2015 Payment Notice that we
intend to release a draft version of the AV Calculator and AV
Calculator Methodology through guidance for public comment each plan
year before releasing the final version. In that same rule, we noted
that interested parties could submit feedback on changes to the AV
Calculator, and that we would consult as needed with the American
Academy of Actuaries and the National Association of Insurance
Commissioners on changes to the AV Calculator.
In the 2017 Payment Notice (81 FR 12204), we reiterated this
approach and amended Sec. 156.135(g) to allow for additional
flexibility in our approach and options for updating the AV Calculator
each year, which include trend factor updates, algorithms changes, user
interface changes, updates to the claims data and demographic
distribution being used in the AV Calculator, and an update to the AV
Calculator's annual limitation on cost sharing. We also stated that we
intend to release the final AV Calculator for a respective plan year no
later than the end of the first quarter of the preceding plan year.
Since this time, we have largely fulfilled this intention. However,
we have received feedback that we should strive to release the final
version of the AV Calculator even sooner, in anticipation of State
filing deadlines. SBE-FPs have also provided feedback explaining that
they could benefit from an earlier release of the final version of the
AV Calculator to design standardized plan options that satisfy the AV
de minimis ranges. We stated in the proposed rule that we believe these
requests are reasonable and that we can accommodate them in most years
when there are no material changes between the draft and final versions
of an AV Calculator for a respective plan year.
Therefore, in the proposed rule (89 FR 82377), we stated that we
intend to revise the current method whereby we release a draft version
of the AV Calculator for a respective plan year through guidance for
public comment and then release the final version of the AV Calculator
for that plan year no later than the end of the first quarter of the
preceding plan year after considering any comments received. We stated
that we intend to only release the single, final version of the AV
Calculator for a respective plan year. We noted that under this
approach, we would still solicit public comments on the AV Calculator
for a plan year generally, but we would only plan to incorporate this
[[Page 4491]]
feedback into the development and release of the following plan year's
AV Calculator, rather than to specifically inform the potential
revision of the final version of the upcoming plan year's AV
Calculator. We noted that this approach would allow us to release the
final AV Calculator sooner and that we anticipated issuers would have
the final version of the AV Calculator 3 to 6 months sooner than the
end of the first quarter of the preceding plan year.
We also noted that this approach would not sacrifice the quality of
the AV Calculator. We stated that the stability and functionality of
the AV Calculator has improved every year, and that we believe there
are diminishing returns to receiving public comments on specific
versions of it at this time. We noted that this is particularly evident
given that we receive fewer than 10 comments on average each year on
the draft AV Calculator. In addition, we noted that since the first AV
Calculator was released for PY 2014, we have never made substantive
changes in a final version of the AV Calculator for a plan year based
on comments received on the draft version for that plan year, though
this feedback is valuable to us and informs our decisions to update the
AV Calculator in subsequent plan years. We added that this decision to
not make substantive changes to the final version of the AV Calculator
is also partly influenced by the limited timeframe we would have to
make substantive changes to the final AV Calculator.
Thus, changes from the draft to the final version of the AV
Calculator have historically only included non-substantive amendments
to correct and clarify language in the AV Calculator Methodology or to
add frequently asked questions to the AV Calculator User Guide. We
stated that since these changes have historically been so minor, we
believe the time delay required to effectuate those changes and release
the final AV Calculator by the end of the first quarter of the
preceding plan year is less valuable to issuers than releasing the
final version sooner. We noted that under this approach, we would leave
open the rare possibility that we could reissue another final version
of the AV Calculator for a plan year if we discover the AV Calculator
contains an error that materially impacts the functionality or accuracy
of that version of the AV Calculator. We noted that although this has
never happened to date, under the current framework of releasing both a
draft and final version of the AV Calculator, if we had discovered a
material error in the final version, we also would have reissued a
corrected, final version.
We also noted that under this approach, we would still seek public
comment on the AV Calculator for a plan year generally and would still
consult with the American Academy of Actuaries, as well as the National
Association of Insurance Commissioners. We further stated that we would
consider this feedback for incorporation into the following year's AV
Calculator.
In addition, we stated that to maximize the benefits of this
approach, we intended to make this change effective starting with the
release of the 2026 AV Calculator. We noted that we believe there would
be minimal effect in effectuating this change with the 2026 AV
Calculator because we intend to base the 2026 AV Calculator
substantially on the final 2025 AV Calculator, and do not plan to make
any material changes to it.
We sought comment on this approach.
After consideration of comments and for the reasons outlined in the
proposed rule and this final rule, including our responses to comments,
we are finalizing this approach to release only the single, final
version of the AV Calculator for a respective plan year. We summarize
and respond to public comments received on this approach below.
Comment: Many commenters supported the approach to release only the
single, final version of the AV Calculator for a respective plan year.
These commenters noted that an earlier release of the final AV
Calculator provides States and issuers with additional time to prepare
plan designs ahead of rate and form filing deadlines. Several
commenters mentioned that this earlier release will give Exchanges more
time to finalize their State-specific standardized plan designs. A few
commenters also noted that this revised approach is more efficient and
reduces duplicative work and administrative burden for issuers.
Some commenters provided feedback on the timing of the release of
the final AV Calculator. One commenter requested that the final AV
Calculator be released in October in future years, on a similar
timeline to this year. Other commenters requested that the final AV
Calculator be released no later than 13 or 14 months before the
applicable plan year, while several commenters requested that the AV
Calculator be released as early as possible. Lastly, a commenter
requested we clarify that once the final version of the AV Calculator
is released, issuers and States will have certainty that it is the
final version.
Response: We agree with commenters that finalizing this revised
approach for releasing the AV Calculator will create efficiencies and
reduce administrative burden for issuers, States, and Exchanges.
While we cannot commit to specific timeframes for the release of
future final AV Calculators, we stated in the proposed rule (89 FR
82377) that we expect to release the final version of the AV Calculator
3 to 6 months sooner than when we have historically published the final
AV Calculator for the forthcoming plan year. In connection with this
rule, we released the final 2026 AV Calculator on October 16, 2024,
more than 14 months before the plans that use it would become
effective.
Once we release the final version of the AV Calculator for a
particular plan year, issuers, States, and Exchanges can expect that,
except in rare circumstances, we would not thereafter release a
subsequent version of the AV Calculator for that plan year. As stated
in the proposed rule (89 FR 82377 through 82378), we leave open the
rare possibility that we could reissue another final version of the AV
Calculator for a plan year if we discover the AV Calculator contains an
error that materially impacts the functionality or accuracy of that
version of the AV Calculator. However, this has never happened to date.
Under the current framework of releasing both a draft and final version
of the AV Calculator, if we had discovered a material error in the
final version, we also would have reissued a corrected, final version,
so this revised approach is in line with precedent.
Comment: A few commenters suggested that we could achieve the same
goal of releasing the final version of the AV Calculator sooner by
releasing the draft version earlier as well. One commenter specifically
requested that the draft AV Calculator be released in the spring, while
two others requested that the draft AV Calculator generally be released
earlier to provide even more time to analyze changes to that plan
year's AV Calculator.
Response: Releasing a draft version of the AV Calculator in the
spring is not technically possible. As discussed in the 2015 Payment
Notice (79 FR 13811), certain updates to the AV Calculator are
dependent on the timeline of availability of the necessary data
elements. These data elements are unavailable in the spring for the
plan year 2 years in the future (for example, spring 2024 for PY 2026).
This includes the trend factors based on data collected through the
Unified Rate Review
[[Page 4492]]
Templates and the maximum annual limitation on cost sharing, published
annually in the PAPI parameters guidance. Both these data elements are
unavailable until late summer or early fall. So, we cannot release the
draft AV Calculator in the spring or even the summer. The earliest we
could release a draft AV Calculator is in the fall as we have in
previous years. It is not technically possible for us to receive and
analyze this data, incorporate it into the next build of the AV
Calculator, perform quality assurance, release a draft version, solicit
public feedback, and make revisions to the final AV Calculator based on
that feedback and still release a final version 13 or 14 months before
the plans that use it would become effective.
Comment: Many commenters noted the ongoing importance of collecting
and incorporating public feedback on the AV Calculator, despite no
longer releasing the draft version. A few commenters agreed with our
rationale to condense this process since we have received fewer than 10
comments on average each year on the draft AV Calculator and agreed
that eliminating the draft version to release the final version earlier
is an acceptable tradeoff to gain access to the final AV Calculator
earlier.
Several commenters provided feedback on the process to collect
input on the AV Calculator. One commenter noted that this change will
allow issuers to provide feedback throughout the year. Conversely,
several commenters requested that HHS establish a formal AV Calculator
comment period that does not overlap with the Payment Notice comment
period. The commenters stated that establishing a comment period would
ensure that we receive input from all interested parties before
starting work on the next year's AV Calculator, and creating a comment
period distinct from the Payment Notice comment period would give
interested parties more time to thoughtfully prepare feedback. In
addition, one commenter distinguished between minor updates to the AV
Calculator, such as updating the maximum out-of-pocket limits, that may
not necessitate a formal comment period, versus more material changes
when a comment and response period would be more appropriate.
Response: Public feedback on the AV Calculator is essential to its
accuracy and functionality. Under this revised approach, we will still
solicit public comments on the AV Calculator but will only seek to
incorporate this feedback into the development and release of the
following plan year's AV Calculator, rather than into the development
of the same plan year's AV Calculator. As we noted in the proposed rule
(89 FR 82379), this revised approach is justified given that the
stability and functionality of the AV Calculator has improved every
year, and we believe there are diminishing returns to receiving public
comments on a draft version for incorporation into a final version for
a particular plan year. We also noted that we receive fewer than 10
comments on average each year on the draft AV Calculator. We agree that
collecting and incorporating public feedback on the AV Calculator is
valuable, and we encourage and welcome feedback from all interested
parties on the 2026 final AV Calculator and future final AV
Calculators.
Given this revised approach, we do not believe it is necessary to
set a specific deadline by which public comments on a particular
version of the AV Calculator must be submitted, so we will accept
public comments on a continuous rolling basis until the following plan
year's AV Calculator is released. Without a specific deadline,
interested parties can review the final AV Calculator without a timing
constraint or competing priorities, such as reviewing and commenting on
that year's Payment Notice.
Comment: Some commenters noted significant concerns with
eliminating the draft version of the AV Calculator as a mechanism to
solicit feedback. Several of these commenters urged CMS to continue a
formal process to solicit feedback on the AV Calculator. A few
commenters opposed our implementation of this approach for the 2026 AV
Calculator, stating it was inappropriate to go forward with this
approach without first seeking public comment. Another commenter stated
that this approach introduces a dangerous precedent if applied to other
guidance.
One commenter stated that reviewing the draft version of the AV
Calculator is the only opportunity to provide feedback. This commenter
stated that the receipt of a small number of comments in prior years
does not justify doing away with the draft version of the AV Calculator
and that we ignored the comments on the draft version in prior years.
This commenter also found the process of accepting rolling comments
impractical and pointed out that the 2026 AV Calculator did not provide
instructions on how to submit comments.
Response: We reiterate our commitment to collecting feedback from
all interested parties on the AV Calculator. In fact, we adopted this
revised approach directly in response to consistent feedback we have
received over the years to provide issuers, States, and Exchanges with
access to the AV Calculator sooner. Releasing only the final version of
the AV Calculator fulfills this request without jeopardizing its
accuracy or functionality.
We believe it is reasonable to move forward with this revised
approach for the final 2026 AV Calculator given the AV Calculator's
stability over the last few years. Considering the many process
improvements in recent years, including the switch to the masked
enrollee-level EDGE data starting with the 2025 AV Calculator and other
changes to make the standard population more representative of the
individual and small group markets, the AV Calculator has improved
every year, so we believe it has achieved a mature state. Given this
stability, the benefit of releasing a draft version of the AV
Calculator no longer outweighs the corresponding delay to release the
final AV Calculator after the draft version.
Although we will no longer receive feedback on a draft version to
incorporate into the final AV Calculator, the same process to submit
feedback on the AV Calculator remains available throughout the year.
Since this process is the same as previous years when we have collected
feedback on the AV Calculator, but without a specific deadline to
submit comments, we disagree that accepting comments on the final AV
Calculator on a rolling basis is impractical.
We disagree that it was inappropriate to move forward with this
revised approach before seeking public comment, since this revised
approach was in response to numerous public comments that we have
received in the past. We also disagree that this revised approach
introduces a dangerous precedent of no longer seeking public comment on
draft versions of guidance. As stated, we revised the approach to
release only a final version of the AV Calculator in response to
specific feedback on the timing of the release of the AV Calculator,
and as such, we clarify that this revised approach applies only to the
AV Calculator and to no other guidance.
In addition, as we noted in the proposed rule (89 FR 82379), we
believe there will be minimal effect in effectuating this change with
the 2026 AV Calculator because we based the 2026 AV Calculator
substantially on the final 2025 AV Calculator, and did not make any
material changes to it.
We note that the 2026 AV Calculator Methodology erroneously omitted
a contact method for interested parties to
[[Page 4493]]
submit comments on the final 2026 AV Calculator, but all prior draft AV
Calculators have included the same contact information, which has
remained available. We apologize for this oversight. Interested parties
may submit comments to HHS via email at [email protected].
Comment: A few commenters mentioned other ideas for soliciting
feedback on the AV Calculator, such as forming an advisory work group,
seeking input from Navigators, community-based organizations,
regulators, and patients, publishing a white paper and/or hosting a
webinar, and reporting on how we incorporate feedback into future
versions of the AV Calculator.
Response: We again emphasize that feedback on the AV Calculator
from all interested parties is essential. We appreciate the commenters'
suggestions on other strategies to solicit feedback on the AV
Calculator. We note that we already share updates and invite discussion
on the AV Calculator at several venues, including at an annual webinar
hosted for issuers and at the annual American Academy of Actuaries
meeting. We will continue to do so, as well as explore other avenues
and meetings throughout the year to engage with interested parties.
However, a white paper explaining changes to the AV Calculator would be
duplicative of the AV Calculator Methodology already published. The AV
Calculator Methodology describes in detail all changes to that year's
AV Calculator, as well as changes that were considered but not made. We
will continue to use the AV Calculator Methodology document to describe
such changes and considerations.
Comment: Some commenters opposed the proposed approach, stating
that eliminating the draft version of the AV Calculator would not
provide enough time to prepare plan designs. They stated that having
earlier access to the draft version of the AV Calculator enabled them
to plan ahead, and eliminating the draft version would make it
difficult to meet key deadlines.
Response: These commenters misunderstood the primary goal of this
revised approach. We want to clarify that this revised approach will
not shorten the time that users have access to the AV Calculator.
Rather, the revised approach will enable earlier access to the final AV
Calculator. It is our understanding that having the final AV Calculator
3 to 6 months sooner than we have historically released it will only
benefit plan design preparation.
Comment: Several commenters provided technical feedback on the 2026
final AV Calculator.
Response: We thank commenters for providing this feedback on the
2026 final AV Calculator. We have noted this feedback and will consider
it in the development of the 2027 AV Calculator.
6. Standardized Plan Options (Sec. 156.201)
In the HHS Notice of Benefit and Payment Parameters for 2026
proposed rule (89 FR 82308, 82378), we proposed to exercise our
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 2026. We
also proposed to amend Sec. 156.201 by adding paragraph (c) to provide
that an issuer that offers multiple standardized plan options within
the same product network type, metal level, and service area must
meaningfully differentiate these plans from one another in terms of
included benefits, provider networks, and/or formularies.
In the proposed rule (89 FR 82378), we proposed minor updates to
the plan designs for PY 2026 to ensure these plans continue to have AVs
within the permissible de minimis range for each metal level. We
proposed to otherwise generally maintain continuity regarding the
approach to standardized plan options finalized in the 2023, 2024, and
2025 Payment Notices. Our proposed updates to plan designs for PY 2026
were detailed in Tables 11 and 12 in the proposed rule.
We proposed to maintain this high degree of continuity in
standardized plan options for several reasons. We stated that
primarily, we believe maintaining a high degree of continuity will
reduce the risk of disruption for all involved interested parties,
including issuers, agents, brokers, States, and consumers. We further
stated that we continue to believe that making major departures from
the standardized plan option designs finalized in the 2023, 2024, and
2025 Payment Notices could result in significant changes that may
create undue burden for interested parties.
We refer readers to the proposed rule (89 FR 82378 through 82382)
for further discussion of the background and rationale regarding our
proposed approach to standardized plan options, and to the preambles of
the 2023, 2024, and 2025 Payment Notices discussing Sec. 156.201 (87
FR 27310 through 27322, 88 FR 25847 through 25855, and 89 FR 26357
through 26362, respectively) for a detailed discussion regarding the
approaches to standardized plan options finalized in those Payment
Notices.
In addition, we proposed a meaningful difference standard for PY
2026 and subsequent plan years at Sec. 156.201(c) because several
issuers in recent years have offered indistinguishable standardized
plan options, and we believe issuers may continue to do so in future
plan years partly because the number of non-standardized plan options
that issuers can offer is limited in accordance with Sec. 156.202(b).
We stated that we do not believe it benefits consumers for issuers to
offer identical standardized plan options, or standardized plan options
that do not differ in meaningful ways, within the same product network
type, metal level, and service area. In addition, we noted that
permitting issuers to offer identical standardized plan options or
standardized plan options that do not differ in meaningful ways runs
counter to our goals of enhancing the consumer experience, increasing
consumer understanding, and simplifying the plan selection process. We
also stated that allowing issuers to offer duplicative standardized
plan options could cause significant consumer confusion and unnecessary
plan proliferation if the trend continues unabated.
As such, we stated that under this proposal, although issuers would
continue to be permitted to offer multiple standardized plan options
within the same product network type, metal level, and service area,
these standardized plan options would be required to have meaningfully
different benefit coverage, provider networks, and/or formularies. For
the purposes of the proposed standard, for PY 2026 and subsequent plan
years, we stated that we would consider a standardized plan option with
a different product, provider network, and/or formulary ID to be
meaningfully different, similar to the version of the standard from the
2017 Payment Notice (81 FR 12312 and 12331).
In the proposed rule (89 FR 82380), we stated that if an issuer
submitted two standardized plan options within the same product network
type, metal level, and service area both with the same product,
provider network, and formulary IDs, we would not certify both of these
plans. We explained that we anticipated we would seek feedback from the
issuer regarding which plan to certify, assuming the issuer meets all
other certification requirements. We also noted that for the purposes
of the proposed standard, we would not consider differences in plan
variant marketing names, the availability of different language access
features, or the administration of the plan by different
[[Page 4494]]
vendors in determining whether two or more standardized plan options
are meaningfully different, similar to the version of the standard from
the 2017 Payment Notice.
We further stated that if this policy were finalized as proposed,
we would monitor whether issuers are seeking certification of plans
that technically meet this standard but are nearly identical. We noted
that if we determined that issuers were attempting to circumvent this
standard in this manner, we would consider proposing in future
rulemaking a version of this meaningful difference standard that would
require greater variation among plans beyond product, provider network,
and/or formulary IDs. We noted that we were not proposing such a
standard for PY 2026 and subsequent plan years at that time because,
assuming issuers do not attempt to circumvent this standard as noted
above, we believe that the proposed policy would likely be sufficient
to ensure that issuers' standardized plan options continue to support
our goals of enhancing the consumer experience, increasing consumer
understanding, and simplifying the plan selection process.
We refer readers to the proposed rule (89 FR 82378 through 82380)
for further discussion of the background and rationale regarding our
proposal to require an issuer that offers multiple standardized plan
options within the same product network type, metal level, and service
area to meaningfully differentiate these plans from one another in
terms of included benefits, provider networks, and/or formularies.
We sought comment on our proposed approach to standardized plan
options for PY 2026, including amending Sec. 156.201 to add paragraph
(c).
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TR15JA25.053
[[Page 4495]]
[GRAPHIC] [TIFF OMITTED] TR15JA25.054
BILLING CODE 4120-01-C
After consideration of comments and for the reasons outlined in the
proposed rule and this final rule, including our responses to comments,
we are finalizing our proposed approach with respect to standardized
plan options, with several modifications to both sets of plan designs
at the expanded bronze metal level.
In particular, for both sets of plan designs at the expanded bronze
metal level, we reduced the coinsurance rate for all benefit categories
that had coinsurance subject to the deductible as the form of cost
sharing from 60 percent to 50 percent. We also reduced the copayments
exempt from the deductible for the primary care visit benefit category
from $60 to $50; for the urgent care benefit category from $90 to $75;
for the specialist visit benefit category from $120 to $100; for the
mental health and substance use disorder outpatient office visit
benefit category from $60 to $50; for the speech therapy benefit
category from $60 to $50; and for the occupational and physical therapy
benefit category from $60 to $50. To counterbalance this subsequent
increase in AV, we increased the annual limitation on cost sharing
value from $9,200 to $10,000. Altogether, these modifications resulted
in a reduction in AV from 64.42 percent in the proposed plan designs to
64.12 percent in the plan designs finalized in this rule.
We made these modifications primarily to maintain continuity in
plan designs, to minimize the risk of coverage disruption and
unexpected financial costs for consumers already enrolled in these
plans, and to allow issuers to design standardized plans in a manner
that conforms to State laws. We are otherwise finalizing the plan
designs as proposed. There were no other modifications to any of the
other benefit categories in either set of plan designs at the expanded
bronze metal level. There were similarly no modifications to either set
of plan designs at any of the other metal levels. Our finalized plan
designs for PY 2026 are detailed in Tables 1 and 2 of this final rule.
After consideration of comments and for the reasons outlined in the
proposed rule and this final rule, including our responses to comments,
we are also finalizing, with minor modification, our proposal that an
issuer that offers multiple standardized plan options
[[Page 4496]]
within the same product network type, metal level, and service area
must meaningfully differentiate these plans from one another in terms
of included benefits, provider networks, and/or formularies.
In particular, we modified the language at Sec. 156.201(c) to
state that an issuer that offers multiple standardized plan options
within the same product network type, metal level, and service area
must meaningfully differentiate these plans from one another in terms
of included benefits, provider networks, included prescription drugs,
or a combination of some or all these factors. For the purposes of this
standard, a standardized plan option with a different product ID,
provider network ID, drug list ID, or some combination of or all these
factors, will be considered meaningfully different.
We modified the portion of the proposed standard stating that a
difference in formularies (which is defined as a difference in
formulary IDs) would constitute a meaningful difference to instead
state that a difference in included prescription drugs (which is
defined as a difference in drug list IDs) would constitute a meaningful
difference. We made this modification to ensure that minor differences
in prescription drug cost sharing (which would be reflected by
differences in formulary IDs) would not constitute a meaningful
difference under this framework, consistent with our goal of ensuring
that standardized plan options differ in meaningful ways. This is
similar to how differences in included benefits (which is defined as a
difference in product IDs) would constitute a meaningful difference,
but differences in the cost sharing for those medical benefits would
not. Additionally, we made this modification to further clarify the
flexibility that issuers are permitted.
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. Some of these
commenters described standardized plan options as helping to reduce
consumer confusion by simplifying the plan selection process and by
allowing consumers to draw meaningful comparisons between plan options
more easily. Many commenters noted that consumers continue to risk
experiencing plan choice overload as they navigate the plan selection
process and that standardized plan options continue to play an
important role in reducing the number of variables that consumers need
to compare as part of the selection process. Other comments encouraged
CMS to make further improvements to the HealthCare.gov shopping
experience by refining tools that help consumers navigate and manage
plan choices more easily, including by enhancing the differential
display of standardized plan options. Some commenters also requested
that CMS create a pathway for issuers to submit both English and
Spanish marketing plan variant names for all plans to enhance
accessibility for Spanish-speaking consumers using CuidadoDeSalud.gov.
Many commenters supported our approach to the design of these
standardized plan options for PY 2026. Specifically, commenters
supported taking a consistent approach to the design of standardized
plan options and only making minor adjustments to ensure the plans
continue to have AVs within the permissible de minimis ranges at each
metal level, particularly because of the consistency this provides
enrollees for anticipating their health care costs. Conversely, a few
commenters opposed continuing to require issuers to offer standardized
plan options. These commenters noted that continuing to subject issuers
to these requirements reduces consumer choice and makes it harder for
consumers to find plan options that best meet their individual health
care needs.
Response: We agree that standardized plan options continue to serve
as one important facet of our multifaceted strategy of reducing the
rate of plan proliferation, the risk of plan choice overload, and the
frequency of suboptimal plan selection. We are also engaged in ongoing
work to improve consumers' decision-making through enhancing choice
architecture and the user experience on HealthCare.gov, and we will
consider additional ways to do so in the future.
For the comments requesting that we create a pathway for issuers to
submit both English and Spanish marketing plan variant names for all
plans to enhance accessibility for Spanish-speaking consumers using
CuidadoDeSalud.gov, we note that we are currently working on
modifications to HealthCare.gov to improve the user experience,
including with respect to language accessibility. We also note that we
will consider revising the submission website to allow issuers to
submit plan variant marketing names in Spanish or other languages in
future plan years. For the purposes of the meaningful difference
standard that we are finalizing in this rule for PY 2026 and subsequent
plan years, we reiterate our explanation in the proposed rule (89 FR
82380) that we would not consider differences in plan variant marketing
names, the availability of different language access features, or the
administration of the plan by different vendors in determining whether
two or more standardized plan options are meaningfully different.
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 consumers enrolled in these plans 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 potentially 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 consumers, we may consider making major
modifications to the design of these standardized plan options in
future rulemakings if this assessment changes.
We disagree that continuing to require issuers in the FFEs and SBE-
FPs to offer standardized plan options makes it harder for consumers to
access plans that meet their unique health needs, even with the
additional requirement we are finalizing in this rule for meaningfully
differentiating standardized plan options when an issuer chooses to
offer multiple standardized plan options within the same product
network type, metal level, and service area. We note that, as clarified
in section III.E.7 of this rule, issuers are permitted to offer two
non-standardized plan options per product network type, metal level
(excluding catastrophic plans), inclusion of adult dental benefit
coverage, pediatric dental benefit coverage, and adult vision benefit
coverage, and service area, as well as additional non-standardized plan
options per product network type, metal level, inclusion of adult
dental benefit coverage, pediatric dental benefit coverage, and adult
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 under
Sec. 156.202(d) and (e).
[[Page 4497]]
As we explained in the 2025 Payment Notice (89 FR 26367), 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, as well as reducing the non-
standardized plan option limit and implementing the exceptions process
for this limit (as discussed in section III.E.7. of this rule), 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.
Comment: Many commenters expressed support for various features of
the proposed plan designs. In particular, commenters supported
standardized plan options for improving affordability by providing
greater access to pre-deductible coverage and requiring copayments
instead of coinsurance rates for certain benefit categories. Commenters
also noted that the use of copayments and pre-deductible coverage in
standardized plan options promotes predictable and affordable cost
sharing for essential care, thereby reducing barriers and enhancing
access for these services.
However, some commenters recommended further reducing enrollees'
out-of-pocket costs, such as by exempting additional drug tiers from
the deductible, or by capping monthly out-of-pocket costs for
particular prescription drugs. Several commenters recommended lowering
the coinsurance rate for both sets of plan designs at the expanded
bronze metal level from 60 percent to 50 percent in order to allow
issuers to design plans compliant with State laws that prohibit
coinsurance rates over 50 percent. Another commenter recommended
including health savings account (HSA)-compliant high-deductible health
plan (HDHP) designs in both sets of standardized plan options.
Response: We appreciate commenters' support for various features of
the proposed plan designs. We acknowledge that a high annual 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,
as well as subjecting particular benefit categories and prescription
drug tiers to the deductible, can potentially increase consumer
uncertainty regarding how much particular items and 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 annual
limitation on cost sharing or deductible values, expand pre-deductible
coverage to include additional benefit categories, or include
copayments as the form of cost sharing for a broader range of benefit
categories without a corresponding increase in the 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
would result 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.
We further 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 in the standardized plan options finalized in this
rule 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. The
disadvantages include the risk 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.
However, we agree with commenters who recommended reducing the
expanded bronze plan coinsurance rate from 60 percent in both sets of
plan designs, as proposed, to 50 percent in order to allow issuers to
design plans in a manner that conforms with State laws and to maintain
continuity with plan designs from previous years. Requiring issuers to
offer standardized plan options that fail to conform with State laws
may inadvertently lead issuers to become subject to State enforcement
and other legal actions, which could endanger their licensure and
ability to continue offering QHPs, and cause coverage disruptions for
consumers enrolled in noncompliant standardized plan options that are
terminated during the plan year. Accordingly, we have finalized
coinsurance rates of 50 percent for all benefit categories subject to a
coinsurance rate in the expanded bronze plan design in both sets of
plan designs.
In addition to modifying the default coinsurance rates for both
sets of plan designs at the expanded bronze metal level, we also
reduced the copayments exempt from the deductible for the primary care
visit benefit category from $60 to $50; for the urgent care benefit
category from $90 to $75; for the specialist visit benefit category
from $120 to $100; for the mental health and substance use disorder
outpatient office visit benefit category from $60 to $50; for the
speech therapy benefit category from $60 to $50; and for the
occupational and physical therapy benefit category from $60 to $50. To
counterbalance this subsequent increase in AV and help ensure both sets
of plan designs at the expanded bronze metal level have AVs within the
permissible de minimis range for that level, we increased the annual
limitation on cost sharing value from $9,200 to $10,000. Altogether,
these modifications resulted in a reduction in AV from 64.42 percent in
the proposed plan designs to 64.12 percent in the plan designs
finalized in this rule.
We made these changes primarily to maintain consistent year-to-year
plan designs, which allows enrollees to become better acquainted with
these plans, increasing both consumer understanding and financial
certainty, similar to our approach in previous years and consistent
with the goals outlined in the proposed rule (89 FR 82379), to minimize
the risk of coverage disruption for consumers already enrolled in these
plans, and to allow issuers to design standardized plans in a manner
that conforms to State laws.
[[Page 4498]]
Finally, we 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, as we explained when we reintroduced standardized plan
options in the 2023 Payment Notice (87 FR 27319), our approach is to
design standardized plan options that reflect the most popular QHPs
offered through the Exchanges. 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, PY 2024, or PY 2025, and we want to maintain a high degree
of continuity with the standardized plan option policies and designs
finalized in the 2023, 2024 and 2025 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 the proposal to allow QHP
issuers to offer more than one standardized plan option within the same
product network type, metal level, and service area if the plans
conform to the proposed meaningful difference standard. These
commenters appreciated the effort to reduce duplicative plan offerings
and to help consumers better understand included benefits, provider
networks, and included prescription drugs when making plan selections
and comparisons. They described the adoption of the meaningful
difference standard as a critical step toward simplifying plan
selection, preventing confusion, and promoting better consumer
decision-making. Commenters noted that the adoption of the meaningful
difference standard aligns with the broader aims of standardized plan
options--reducing the number and complexity of the variables that
consumers must consider when comparing plans.
Some commenters noted their approval of relying on product,
provider network, and formulary IDs to determine whether standardized
plan options are meaningfully different, while other commenters noted
concern that the proposed standard would not be strict enough to reduce
the risk of issuers offering duplicative standardized plan options. One
such commenter recommended that CMS consider requiring a particular
quantitative difference between the standardized plan options' provider
networks and formularies to ensure plans are meaningfully different
from one another. Many commenters similarly recommended making the
meaningful difference requirement more stringent by reducing the number
of factors that would qualify a plan as meaningfully different. Several
commenters recommended applying the meaningful difference standard to
the non-standardized plan options instead of standardized plan options.
Some commenters encouraged CMS to monitor whether allowing issuers to
offer multiple standardized plan options in the same service area would
result in unnecessary complexity for consumers shopping for health
plans.
Response: We agree that requiring issuers to meaningfully
differentiate between multiple standardized plans within the same
product network type, metal level, and service area will improve the
consumer experience by increasing consumer understanding, simplifying
the plan selection process, and limiting unnecessary plan
proliferation. We share commenters' concerns about consumer confusion
when comparing identical-appearing standardized plan options, and, as
we explained in the proposed rule (89 FR 82380), we will monitor
whether issuers are seeking certification of standardized plans that
technically meet the meaningful difference standard but are nearly
identical.
We note that, in this final rule, we are finalizing a modification
to our proposed meaningful difference standard. Instead of providing
that a difference in formularies (which is defined as a difference in
formulary IDs) would constitute a meaningful difference, we are
finalizing that a difference in included prescription drugs (which is
defined as a difference in drug list IDs) will constitute a meaningful
difference. We made this modification to ensure that minor differences
in prescription drug cost sharing (which would be reflected by
differences in formulary IDs) would not constitute a meaningful
difference. This is similar to how differences in included benefits
(which is defined as a difference in product IDs) would constitute a
meaningful difference, but differences in the cost sharing for those
medical benefits would not.
If we determine that issuers are attempting to circumvent this
standard, or that it is otherwise not strict enough, we will consider
proposing in future rulemaking a version of this meaningful difference
standard that would require greater variation among plans beyond
product ID, provider network ID, drug list ID, or a combination of some
or all these factors. We did not propose such a standard for PY 2026
and subsequent plan years in the proposed rule because, assuming
issuers do not attempt to circumvent this standard as noted above, we
believe that this proposed policy would likely be sufficient to ensure
that issuers' standardized plan offerings support our goals of
enhancing the consumer experience, increasing consumer understanding,
and simplifying the plan selection process. We will monitor whether the
standard we are finalizing in this rule effectively enhances the
consumer experience, reduces plan proliferation, and encourages plan
diversity in the individual market.
We appreciated comments that shared specific recommendations about
how to craft this standard in a manner that would ensure that the
standardized plan options offered under this standard yield
meaningfully different plan design features for consumers--such as by
requiring particular quantitative differences in provider networks or
formularies. Again, if we determine that the standardized plan options
that issuers are offering within the same product network type, metal
level, and service area that have different product IDs, provider
network IDs, drug list IDs, or a combination of some or all these
factors, fail to yield meaningful and distinguishable differences in
plans for consumers, we may consider proposing a quantitative version
of the standard in a future plan year.
Comment: Several commenters requested clarification on how issuers
could vary benefit coverage in standardized plan options within the
same product network type, metal level, and service area under this
proposed standard. Several commenters recommended relaxing this
standard, such as by allowing plans to be considered meaningfully
different based on differences in cost sharing for non-standardized
benefit categories or differences in tiered provider networks (in
addition to differences in product, provider network, and drug list
IDs)--similar to the previous meaningful difference standard finalized
in the 2018 Payment Notice. Another commenter recommended providing
issuers with the opportunity to make their case for how two proposed,
seemingly indistinguishable standardized plan options meaningfully
differ from one another before CMS decides whether to not certify one
of these plans (assuming the issuer meets all other certification
requirements).
[[Page 4499]]
A few commenters opposed allowing issuers to offer multiple
standardized plan options within the same product network type, metal
level, and service area--regardless of whether they are deemed to be
meaningfully different--primarily due to concerns regarding plan
proliferation. These commenters explained that permitting issuers to
offer multiple standardized plan options within the same product
network type, metal level, and service area but with different included
benefit coverage, provider networks, or included prescription drugs
could cause confusion for consumers--since these standardized plan
options would not be standardized in every regard.
Response: In response to the commenters who requested clarification
regarding how standardized plan options can vary benefit coverage
outside of the benefit categories with standardized cost sharing in
order to satisfy the requirements of this standard, we note that
issuers may differentiate their standardized plan options from one
another by varying the included benefit coverage, such as non-EHBs, or
in how the plan covers EHB, consistent with the EHB requirements in the
applicable State. For example, when reviewing if two standardized plan
options within the same product network type, metal level, and service
area are meaningfully different, we will consider the plans to be
meaningfully different from one another if they do not share the same
product ID.
However, we note that varying non-standardized benefit category
cost sharing parameters (such as for those benefit categories that do
not have standardized cost sharing parameters specified in Tables 1 and
2 of this rule) would not constitute a meaningful difference for the
purpose of this standard. This is because we do not believe that minute
differences in cost sharing (such as a $5 difference in the copayment
amount for a relatively infrequently utilized benefit) would provide a
meaningful or discernible difference for consumers. The same is true
for minor differences in cost sharing for prescription drugs (which
would be reflected in differences in formulary IDs)--which is why we
modified the standard we are finalizing to instead state that
differences in included prescription drugs (which is defined as
differences in drug list IDs) would constitute a meaningful difference.
Furthermore, permitting issuers to vary standardized plan options
in this regard could increase the risk of circumvention of the standard
(such as by permitting issuers to offer one standardized plan option
with a $20 copayment for an infrequently utilized benefit, another with
a $15 copayment for the same benefit, and another with a $10 copayment
for the same benefit)--within the same product network type, metal
level, and service area and with the same product, provider network,
and drug list ID. Such an approach would exacerbate the risk of plan
proliferation and choice overload.
In response to commenters who recommended that we allow
standardized plan options to be considered meaningfully different based
on tiered provider networks, similar to our stance when we reintroduced
the requirement for issuers to offer standardized plan options in the
2023 Payment Notice (87 FR 27311), we reiterate that we continue to
design these standardized plan options to be similar to the most
popular QHPs in FFEs and SBE-FPs in terms of cost sharing parameters,
annual limitation on cost sharing values, and deductibles in order to
ensure these plans are similar to plans that most consumers are already
currently enrolled in, thereby reducing the risk of disruption for both
consumers and issuers.
Given that most consumers continue to not be enrolled in plans with
tiered provider networks, we believe that permitting issuers to offer
standardized plan options with tiered provider networks under this
standard would unnecessarily increase the risk of plan proliferation
for consumers. Permitting issuers to offer standardized plan options
with tiered provider networks would also mark a departure from our aim
of maintaining continuity in plan designs from year to year, since we
have not designed such plans as standardized plans to date. Adopting
such an approach would also increase the number of factors that
consumers must consider when selecting a plan--which runs counter to
our goal of simplifying the plan selection process to reduce the risks
of consumer confusion and plan choice overload. We also note that
issuers are permitted to offer non-standardized plan options with
tiered provider networks, if they so desire.
In response to the commenter who recommended that we provide
issuers with an opportunity to make their case that their two proposed,
seemingly indistinguishable standardized plan options are meaningfully
different from one another before deciding not to certify one, we refer
the commenter to discussion on this point in the proposed rule (89 FR
82380). In particular, in the proposed rule, we explained that, if an
issuer submitted two standardized plan options within the same product
network type, metal level, and service area, both with the same
product, provider network, and formulary IDs, we would not certify both
of these plans. We explained that before deciding which plan to
certify, assuming the issuer meets all other certification
requirements, we would seek feedback from the issuer regarding which
plan to certify. Under the standard finalized in this rule, we will
consider the issuer's explanation of how the plans differ based on
their benefit coverage, provider networks, included prescription drugs,
or a combination of some or all these factors, as part of this process.
We appreciate the concern of commenters who opposed allowing
multiple standardized plan options within the same product network
type, metal level, and service area due to this approach increasing the
risk of plan proliferation. We acknowledge that this standard could
permit issuers to offer multiple standardized plan options where
consumers struggle to discern how the plans differ. However, as we
explained in the proposed rule (89 FR 82380), we believe this is
unlikely, and we will monitor whether issuers seek certification of
standardized plan options that technically meet the meaningful
difference standard but are nearly identical.
Further, if we determine that issuers are attempting to circumvent
this standard in this manner, we will consider proposing in future
rulemaking a version of this meaningful difference standard that would
require greater variation between plans beyond requiring differences in
product, provider network, and drug list IDs. As we explained in the
proposed rule (89 FR 82380), we did not propose such a standard for PY
2026 and subsequent plan years because, assuming issuers do not attempt
to circumvent this standard as noted above, we believe that the
proposed policy would likely be sufficient to ensure that issuers'
standardized plan options support our goals of enhancing the consumer
experience, increasing consumer understanding, and simplifying the plan
selection process.
Finally, we acknowledge the concern that allowing standardized plan
options to have varied benefit coverage, provider networks, and
included prescription drugs could potentially increase the risk of
consumer confusion--since these standardized plan options would not be
standardized in every regard. However, we note that that we wish to
permit issuers a sufficient degree of flexibility to design plans that
accommodate a broad and
[[Page 4500]]
diverse range of unique health care needs, which we do by permitting
issuers to offer a range of standardized plan options, subject to the
meaningful difference standard, as well as non-standardized plan
options.
The benefit categories that we standardize within these plans are
the most frequently utilized--and they are all required to be offered
by QHP issuers as EHB. We do not wish to standardize the cost sharing
for every possible benefit category within these plans since there are
benefit categories that are less frequently utilized--as well as
benefit categories that may not be required to be offered as EHB in
particular States--and we do not wish to give the impression that such
benefit coverage must be included in these plans even if they are not
EHB in particular States. We further believe the standard we are
finalizing in this rule will ensure that issuers that offer multiple
standardized plan options within a product network type, metal level,
and service area will yield meaningful differences in coverage for
consumers while still providing a sufficient degree of standardization
and minimizing the risk of consumer confusion. At the same time, we
want to take steps to simplify and streamline the plan selection
process for consumers, which, for the reasons explained in this final
rule and in the proposed rule, we believe this policy does.
Altogether, we believe that requiring issuers to offer these
standardized plan options, reintroducing this meaningful difference
standard, limiting the number of non-standardized plan options that
issuers can offer, and permitting exceptions to the non-standardized
plan option limit for plans that have specific design features that
would substantially benefit consumers with chronic and high-cost
conditions strikes an appropriate balance between allowing issuers to
innovate in plan designs, maintaining a sufficient degree of choice for
consumers, and simplifying and streamlining the plan selection process
to reduce the risk of choice overload.
7. Non-Standardized Plan Option Limits (Sec. 156.202)
In the HHS Notice of Benefit and Payment Parameters for 2026
proposed rule (89 FR 82308, 82382), we proposed to exercise our
authority under sections 1311(c)(1) and 1321(a)(1)(B) of the ACA to
amend Sec. 156.202(b) and (d) to properly reflect the flexibility that
issuers have operationally been permitted since the introduction of
non-standardized plan option limits to vary the inclusion of distinct
adult dental benefit coverage, pediatric dental benefit coverage, and/
or adult vision benefit coverage categories under the non-standardized
plan option limit in accordance with Sec. 156.202(c)(1) through (3).
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,
which includes section 1311, for, among other things, the offering of
QHPs through such Exchanges.
In the 2024 Payment Notice (88 FR 25855 through 25865), we
finalized requirements under Sec. 156.202(a) and (b) 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 non-standardized plan
options for PY 2025 and subsequent years.
In the 2025 Payment Notice (89 FR 26362 through 26375), we
finalized an exceptions process under Sec. 156.202(d) and (e)
permitting 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 offered 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
certain other requirements.
In the 2025 Payment Notice (88 FR 26365 through 26366), we also
clarified that the example included in the 2024 Payment Notice that
illustrated issuers' 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) and (b) failed
to properly distinguish between the adult and pediatric dental benefit
coverage categories.
In particular, in the 2024 Payment Notice (88 FR 25858), we stated
that for PY 2025, for example, an issuer would 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 the 2025 Payment Notice, we clarified that 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 3, instead of in the
more limited manner reflected in the incomplete example in the 2024
Payment Notice.
In the 2025 Payment Notice, we affirmed that issuers continued to
retain this flexibility for PY 2025 and subsequent years. We thus noted
that under the non-standardized plan option limit of two for PY 2025
and subsequent years, if an issuer desired to offer the theoretical
maximum number of non-standardized plans, and if that issuer varied the
inclusion of adult dental benefit coverage, pediatric dental benefit
coverage, and/or adult 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 3. Furthermore, we noted that if an issuer
offered 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 3.
BILLING CODE 4120-01-P
[[Page 4501]]
[GRAPHIC] [TIFF OMITTED] TR15JA25.055
BILLING CODE 4120-01-C
In the proposed rule, we proposed to amend the regulation text at
Sec. 156.202(b) and (d) to properly reflect the flexibility that
issuers have been operationally permitted since we introduced non-
standardized plan option limits to vary the inclusion of the distinct
adult dental benefit coverage, pediatric dental benefit coverage, and/
or adult vision benefit coverage under the non-standardized plan option
limit at Sec. 156.202(b) in accordance with Sec. 156.202(c)(1)
through (3) for PY 2025 and subsequent plan years.
In particular, we proposed to amend Sec. 156.202(b) to properly
distinguish between adult dental benefit coverage at Sec.
156.202(c)(1) and pediatric dental benefit coverage at Sec.
156.202(c)(2), such that an issuer offering QHPs in an FFE or SBE-FP,
for PY 2025 and subsequent plan years, is limited to offering two non-
standardized plan options per product network type, as the term is
described in the definition of ``product'' at Sec. 144.103 of this
subchapter, metal level (excluding catastrophic plans), and inclusion
of adult dental benefit coverage, pediatric dental benefit coverage,
and/or adult vision benefit coverage (as defined in paragraphs (c)(1)
through (3) of Sec. 156.202), in any service area.
Consistent with our proposed amendment of Sec. 156.202(b), we
further proposed a conforming amendment to Sec. 156.202(d) to provide
that, for PY 2025 and subsequent plan years, an issuer may offer
additional non-standardized plan options for each product network type,
metal level, inclusion of adult dental benefit coverage, pediatric
dental benefit coverage, and/or adult vision benefit coverage (as
defined in paragraphs (c)(1) through (3) of Sec. 156.202), 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 the
issuer's other non-standardized plan option offerings in the same
product network type, metal level, inclusion of adult dental benefit
coverage, pediatric dental benefit coverage, and/or adult vision
benefit coverage, and service area.
[[Page 4502]]
In the proposed rule, we stated that we proposed these
modifications to align the regulation text of Sec. 156.202(b) and (d)
with the existing flexibility that issuers have been operationally
permitted since the non-standardized plan option limit was introduced
in the 2024 Payment Notice.\230\
---------------------------------------------------------------------------
\230\ CMS. (2024, April 10). 2025 Final Letter to Issuers in the
Federally-facilitated Exchanges. https://www.cms.gov/files/document/2025-letter-issuers.pdf.
---------------------------------------------------------------------------
We sought comment on these proposed modifications. After
consideration of comments, and for the reasons outlined in the proposed
rule and in this final rule, including our responses to comments, we
are finalizing these provisions as proposed, with one minor
modification. In particular, we are modifying the language at both
Sec. 156.202(b) and (d) to state that issuers may vary the inclusion
of adult dental benefit coverage, pediatric dental benefit coverage,
and adult vision benefit coverage, instead of adult dental benefit
coverage, pediatric dental benefit coverage, and/or adult vision
benefit coverage--to enhance clarity and minimize risk of
confusion.\231\ We summarize and respond below to public comments
received on the proposed modifications to Sec. 156.202(b) and (d).
---------------------------------------------------------------------------
\231\ Antonin Scalia & Bryan A. Garner, Reading Law: The
Interpretation of Legal Texts 125 (2012) (collecting ``experts''
that ``warn against'' use of the ``hybrid'' and/or); Kenneth A.
Adams, Know Your Enemy: Sources of Uncertain Meaning in Contracts,
Mich. B.J. 40, 42 (Oct. 2016) (discussing the ``ambiguity of the
part versus the whole'' presented by the words ``and'' and ``or'').
---------------------------------------------------------------------------
Comment: Several commenters supported the modifications to clarify
the permissibility of varying the inclusion of the distinct adult
dental benefit coverage, pediatric dental benefit coverage, and adult
vision benefit coverage categories under the non-standardized plan
option limit and the associated exceptions process. These commenters
stated that clarifying that flexibility would ensure that issuers have
a clearer understanding of the operational parameters of the existing
non-standardized plan option limit and exceptions process and establish
more uniform market rules for all issuers in FFE and SBE-FP States that
are subject to the policy.
Many commenters expressed general support for continuing to limit
the number of non-standardized plan options that issuers can offer.
These commenters noted that in recent years, consumers have been
confronted with too many health plan choices and thus may be more
likely to make suboptimal plan selections. In some instances,
commenters noted that consumers run the risk of forgoing enrollment
altogether in instances where they cannot easily identify a plan that
meets their needs due to choice overload. Several of these commenters
also noted the chilling effect that choice overload can have on
consumers with chronic and high-cost conditions or other significant
health care demands.
Similarly, several commenters expressed general support for
continuing to allow issuers to offer additional non-standardized plan
options under the exceptions process so that they can provide targeted
coverage specifically for populations with chronic and high-cost
conditions. Commenters noted that permitting issuers to offer these
additional non-standardized plan options continues to support health
equity and allows for more targeted innovation by issuers, while still
simultaneously 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 these
individuals often encounter significantly higher out-of-pocket costs
associated with the higher rates of utilization of the benefits
required to treat these conditions.
Response: We agree that clarifying how the non-standardized plan
option limit and exceptions process are operationalized enhances issuer
understanding of the policy. We reiterate that we are not permitting
issuers a novel flexibility to vary the inclusion of the distinct adult
dental benefit coverage, pediatric dental benefit coverage, and adult
vision benefit coverage categories--nor are we permitting a novel
flexibility in the exceptions process with the conforming modification
to the regulation text language. Instead, we are amending Sec.
156.202(b) and (d) to clarify the flexibility that issuers have been
operationally permitted since we implemented the non-standardized plan
option limit in PY 2024, as we explained in greater detail in the 2025
Payment Notice (89 FR 26365 through 26366). Thus, in PY 2026 and
subsequent plan years, issuers will continue to retain that same
flexibility.
We also agree that providing additional clarity in our regulations
helps to educate issuers about their existing options for designing
their product and plan offerings within and--when justified--above the
non-standardized plan option limit. Ensuring issuers understand their
non-standardized plan design flexibility may encourage more coverage of
vision and dental benefits by non-standardized plans and more uniform
plan offerings by issuers across States.
We also agree that the number of plan choices available to
consumers continues to complicate the plan selection process, and that
plan proliferation and the risk of plan choice overload persist. We
further agree that this increased risk of plan choice overload also
increases the risk of suboptimal plan selection and unexpected
financial harm for those least able to afford it. Thus, we agree that
continuing to limit the number of non-standardized plan options that
issuers can offer in conjunction with permitting issuers to offer
additional non-standardized plan options that facilitate the treatment
of chronic and high-cost conditions under the exceptions process
continues to reduce plan proliferation and the risk of choice overload
while simultaneously permitting issuers a sufficient degree of
flexibility to innovate.
We continue to recognize the advantages that innovation imparts
upon consumers by supporting the ability of QHP issuers to offer them a
diverse range of plan offerings from which to select. We also continue
to believe that excepted non-standardized plans that reduce cost
sharing for benefits pertaining to the treatment of chronic and high-
cost conditions can significantly reduce the out-of-pocket costs for
consumers with these conditions experience and ultimately increase
treatment adherence and improve health outcomes.
Comment: Some commenters opposed continuing to limit the number of
non-standardized plan options that issuers can offer. Some commenters
suggested that the market conditions that may necessitate a restriction
on the number of non-standardized plan options may not apply uniformly
across all States. These commenters explained that States differ in
their rates of issuer participation and the unique needs of each
State's population, among other factors.
Several of these commenters further suggested that that individual
FFE and SBE-FP States themselves should be given the ability to
exercise discretion on how best to address issues of plan proliferation
and choice overload. Some of these commenters suggested that States
could then choose how best to structure a non-standardized plan option
limit or pursue an alternative approach altogether. One commenter
suggested that all SBE-FP States should be exempted from the non-
standardized plan option limit. Another commenter suggested allowing
SBE-FP States to seek blanket exceptions for individual
[[Page 4503]]
issuers in their State to be exempted from the non-standardized plan
option limit.
Some commenters opposed allowing issuers to offer excepted plans
beyond the non-standardized plan option limit, citing concerns that
additional exceptions could exacerbate the risk of plan choice overload
and suboptimal plan selection. These commenters noted 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 permit each issuer the opportunity to receive exceptions to the
numerical limit counteracts this intent.
Response: We reiterate that we did not propose and are not
finalizing any changes to the applicability of the non-standardized
plan option limit or exceptions process under Sec. 156.202(b) and (d).
Instead, we are only making modifications to those regulations to more
clearly align their text with the flexibility that issuers have been
operationally permitted since we implemented the non-standardized plan
option limit. As we previously noted in the 2024 Payment Notice (88 FR
25856 and 25864), we continue to believe it is appropriate to apply the
non-standardized plan option limit equally to issuers in FFE and SBE-FP
States given their shared platform. We also reiterate that States with
SBE-FPs that do not wish to be subject to these requirements may
investigate the feasibility of transitioning to a State Exchange. We
continue to believe the financial and operational burden to HHS
outweighs the benefit of changing the platform to permit distinction on
this policy between FFEs and SBE-FPs.
We also acknowledge that different States and counties have
differing rates of issuer participation, and thus, differing numbers of
available plans. We still believe the limit of two non-standardized
plan options and the permissible exceptions strike an appropriate
balance in reducing the risk of plan choice overload and preserving a
sufficient degree of consumer choice, even for consumers in counties
with lower rates of issuer participation. For a more detailed example
of the number of plan choices that we described as a likely scenario
for consumers who have access to one QHP issuer where they live, we
refer readers to the 2024 Payment Notice (88 FR 25862 through 258623).
Except for the modifications we are making in this final rule, we are
maintaining the non-standardized plan option limit and accompanying
exceptions process and the applicability of these requirements as
previously finalized.
We also recognize the potential concerns associated with an
uncontrolled exceptions process. However, as we explained in the 2025
Payment Notice (89 FR 26363 through 26364), we did not set a numerical
limit on the permitted exceptions per issuer, product network type,
metal level, inclusion of dental and vision benefit coverage, and
service area (for example, allowing exceptions for only two such plans)
to ensure that issuers are not restricted in the number of innovative
plans they can offer. We noted that this approach would 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 services critical to the treatment of their conditions.
We continue to believe the exceptions process finalized in the 2025
Payment Notice (alongside the modification we are finalizing in this
rule to clarify the flexibility associated with varying the inclusion
of adult dental benefit coverage, pediatric dental benefit coverage,
and adult vision benefit coverage) that limits issuers to one exception
per chronic and high-cost condition in each product network type, metal
level, inclusion of adult dental benefit coverage, pediatric dental
benefit coverage, and adult vision benefit coverage, and service area
sufficiently mitigates the risk of contributing to choice overload.
Furthermore, similar to what we explained in the 2025 Payment
Notice (89 FR 26364), although issuers are not limited in the total
number of exceptions they may be granted from the non-standardized plan
option limit (provided all such exceptions meet the criteria at Sec.
156.202), 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 of doing so. In PY 2025, we
certified only 120 plans as excepted plans, and we do not expect that
those plans' availability on HealthCare.gov will create a colorable
risk of plan proliferation or choice overload.
Additionally, we continue to believe that limiting the total number
of excepted non-standardized plan options issuers can offer 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, which would hinder efforts to advance health equity.
Comment: Several commenters noted general support for the existing
flexibility, clarified in the proposed rule, that issuers are permitted
to offer additional plans within the non-standardized plan option limit
by varying the inclusion of adult dental benefit coverage, pediatric
dental benefit coverage, and adult vision benefit coverage. These
commenters noted that the flexibility allows issuers the opportunity to
design a sufficient number of plan offerings that cater to the
individualized needs of consumers on the Exchange while maintaining
guardrails on the rate of plan proliferation.
Some commenters also noted specific support for the benefit
coverage categories that are subject to the existing flexibility
afforded to issuers under the non-standardized plan option limit,
namely adult dental benefit coverage, pediatric dental benefit
coverage, and adult vision benefit coverage. These commenters further
noted that ensuring that issuers' plan offerings include a variety of
these dental and vision benefits encourages consumer access to these
services and ensures that these services are integrated into the
marketplace in a way that benefits both consumers and issuers.
Conversely, several commenters opposed the existing flexibility
allowing issuers to offer non-standardized plans beyond the plan limit
by varying the inclusion of adult dental benefit coverage, pediatric
dental benefit coverage, and adult vision benefit coverage. Some
commenters cited concerns that the flexibility to offer non-
standardized plans beyond the plan limit by varying the inclusion of
adult dental benefit coverage, pediatric dental benefit coverage, and
adult vision benefit coverage could result in additional plan
proliferation and ultimately exacerbate existing concerns with plan
choice overload. One commenter noted that the existence of plans with
variations solely based on dental or vision benefit coverage could
complicate plan selection and the consumer shopping experience.
Response: We reiterate that the flexibility afforded to issuers to
offer non-standardized plans within the plan limit by varying the
inclusion of adult dental benefit coverage, pediatric dental benefit
coverage, and adult vision benefit coverage has been operationally
permitted since the non-standardized plan option limit was introduced
in the 2024 Payment Notice. In this final rule, we are maintaining
continuity across all operational requirements associated with the non-
standardized plan option limit for PY 2026, including that we are only
finalizing modifications to align
[[Page 4504]]
the regulation text of Sec. 156.202(b) and (d) with that existing
flexibility.
We agree that the flexibility given to issuers to offer non-
standardized plan options within the plan limit by varying the
inclusion of adult dental benefit coverage, pediatric dental benefit
coverage, and adult vision benefit coverage affords them the
opportunity to design their non-standardized plan options enough to
cater to the individualized needs of consumers while keeping the
overall number of plans low.
In the 2024 Payment Notice (88 FR 25862), we expressed our belief
that this combination of limiting issuers' non-standardized plan
options and allowing flexibility to vary adult dental benefit coverage,
pediatric dental benefit coverage, and adult vision benefit coverage
within non-standardized plans within the limit strikes a sufficient
balance between minimizing the extent of plan proliferation and
maximizing choice of plans among distinguishable plan options.
We also agree that the vision and dental benefits are appropriate
for distinguishing among non-standardized plan options within the
existing flexibility offered under the non-standardized plan option
limit opposed to other additional benefits. As previously noted in the
2024 Payment Notice (88 FR 25959), issuers have frequently offered
dental and vision as additional benefits in otherwise identical plan
options. Furthermore, when two plans are offered by the same issuer in
the product network type, metal level, and service area with different
product IDs, the plans are most often distinguished by their coverage
of vision or dental benefits.
We share commenters' concerns about the negative consumer impact of
plan proliferation. However, we note that nothing compels issuers to
offer nearly identical plans that vary solely by the plans' coverage of
vision and dental benefits. In our experience, we have found that
issuers often choose to offer non-standardized plan options that vary
in terms of more parameters (such as the plans' formularies or provider
networks, among other factors)--in addition to the inclusion of dental
and vision benefit coverage--within the limit of two non-standardized
plan options per product network type, metal level, inclusion of adult
dental benefit coverage, pediatric dental benefit coverage, and adult
vision benefit coverage, and service area.
We disagree with commenters who suggested that the flexibility
permitting issuers to vary the inclusion of adult dental benefit
coverage, pediatric dental benefit coverage, and adult vision benefit
coverage would result in issuers offering virtually indistinguishable
plans that may confuse consumers and render them unable to make
meaningful comparisons when attempting to select a plan that best meets
their needs. This is because the inclusion of dental and vision benefit
coverage represents meaningful coverage variations for consumers.
Comment: Several commenters suggested other modifications to the
non-standardized plan option limit. Some commenters recommended
expanding the criteria considered under the limit beyond those already
included under Sec. 156.202(b) to further relax the standard and allow
issuers to vary plans along a greater number of parameters. Some
commenters suggested adopting a meaningful difference standard for non-
standardized plan options in conjunction with the non-standardized plan
option limit to ensure that any two plans are not duplicative across
all plan parameters, taking into account differences such as
differences in product packages, differences in cost sharing (including
whether particular services are available pre-deductible), differences
in provider network (such as if there is a reasonable difference in the
size of each plan's network), differences in provider network ID,
differences in product network type, and differences in whether a plan
is an HSA-eligible HDHP.
Response: Similar to our stance in the 2024 Payment Notice (88 FR
25863), we continue to believe that the current structure of the non-
standardized plan option limit (as well as the criteria currently
considered under the limit) strikes an appropriate balance that allows
for issuers to innovate across a sufficiently broad number of plan
attributes (including but not limited to provider network, benefit
coverage, and benefit cost sharing) while further preventing the
likelihood of unabated plan proliferation and plan choice overload.
Furthermore, similar to our stance in the 2024 Payment Notice (88 FR
25864), we continue to believe that directly limiting the number of
non-standardized plan options issuers can offer under the non-
standardized plan option limit is a more effective mechanism than
applying a meaningful difference standard at this particular time to
reduce plan proliferation and the risk of plan choice overload.
We note that the current structure of the non-standardized plan
option limit does not restrict issuers' ability to innovate by
differentiating plans on the basis of parameters that are not
explicitly identified in the limit--which allows issuers to vary non-
standardized plan options' included benefit coverage, cost sharing
parameters, and provider networks, among other factors, while still
complying with the limit. Additionally, we note that the harm of
identical or near-identical plans to the consumer experience is
particularly salient for standardized plan options since there is no
limit on the maximum allowable number of standardized plan options that
an issuer can offer. However, we believe this harm is sufficiently
mitigated for non-standardized plan options due to the existence of the
non-standardized plan option limit. This is because under the limit,
issuers are incentivized to offer plans with meaningful differences to
consumers to attract a broader portion of the market. Offering
duplicative plans under the non-standardized plan option limit would
result in an issuer targeting the same market segments with two
different plans.
As we explained in the preceding section addressing standardized
plan options, we will monitor whether issuers seek certification of
nearly identical plans, including by assessing whether there are plans
that would appear identical to consumers shopping on HealthCare.gov. If
we observe this kind of plan proliferation, we may consider proposing
stricter standards in future rulemaking.
Comment: Several commenters also suggested modifications to the
current exceptions process. They suggested considering additional
metrics beyond cost sharing on which issuers might choose to innovate
as grounds for granting an exception, such as deductibles, additional
benefit coverage, provider networks, formularies, telehealth
availability, or HSA-eligibility.
Response: While we agree that different benefit packages,
deductibles, provider networks, formularies, the inclusion of
telehealth services, and HSA-eligibility are all important factors that
pertain to the treatment of chronic and high-cost conditions, we
maintain that 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 continue to believe that the inclusion of any additional
factors, including the aforementioned factors and HSA-eligibility, may
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. As we explained in the
2025 Payment Notice (89 FR 26371), one of
[[Page 4505]]
our goals with the exceptions process is to ensure that excepted plans
substantially benefit consumers with chronic and high-cost conditions.
Specifically, considering these additional criteria in determining
eligibility for an exception may allow issuers to offer excepted plans
that only slightly vary included provider networks, formularies,
deductible amounts, the inclusion of telehealth services, HSA-
eligibility, or additional benefits unrelated to the unique health care
needs of consumers with high-cost and chronic conditions. This could
result in excepted plans differing slightly but failing to provide
meaningfully different coverage between excepted plans or failing to
provide coverage that is tailored to meet the health care needs of
consumers with high-cost and chronic conditions. We maintain that
including one different provider in a plan's network, for example,
should not result in that plan being permitted an exception on that
basis alone.
We reiterate that such an approach would weigh against our goals of
reducing plan proliferation, choice overload, and consumer confusion.
We refer readers to the 2025 Payment Notice (89 FR 26368) for
additional discussion about why we believe that 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 remains the most appropriate approach.
8. Essential Community Provider Reviews for States Performing Plan
Management (Sec. 156.235)
In the HHS Notice of Benefit and Payment Parameters for 2026
proposed rule (89 FR 82308, 82385), we proposed, under Sec. 156.235,
to conduct Essential Community Provider (ECP) certification reviews of
plans for which issuers submit QHP certification applications in FFEs
in States performing plan management functions effective beginning in
PY 2026.\232\
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\232\ Twelve FFEs operate in States performing plan management
functions: Delaware, Hawaii, Iowa, Kansas, Michigan, Montana,
Nebraska, New Hampshire, Ohio, South Dakota, Utah, and West
Virginia.
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Section 1311(c)(1)(C) of the ACA directs HHS to establish by
regulation certification criteria for QHPs, including criteria that
require QHPs to include within health insurance plan networks those
ECPs, where available, that serve predominately low-income, medically-
underserved individuals. Federal ECP standards were first detailed in
the Exchange Establishment Rule (77 FR 18310) and codified at Sec.
156.235. ECP certification reviews under Sec. 156.235 ensure medical
QHP and stand-alone dental plan (SADP) issuers include in their
provider networks a sufficient number and geographic distribution of
ECPs, where available.
HHS has relied on State ECP certification reviews for the
certification of QHPs in FFEs in States that perform plan management
functions since PY 2015 due to system limitations in the Systems for
Electronic Rates & Forms Filing (SERFF),\233\ which does not have
unique network and service area IDs reliably associated with issuers'
ECP data. From PY 2015 to PY 2024, prior to HHS' implementation of the
user interface logic for ECPs in the Health Insurance Oversight System
(HIOS) Marketplace Plan Management System (MPMS),\234\ HHS received ECP
data via the ECP/Network Adequacy (NA) Template \235\ and SERFF. The
ECP/NA Template was an Excel template created by HHS to provide to FFE
issuers for collection and submission of both ECP and NA data. While
issuers in FFE States would submit the ECP/NA Template with ECP data to
HHS directly, issuers in FFEs in States performing plan management
functions would not use the ECP/NA Template, but rather submit the ECP
data to SERFF.\236\ Since there was no reliable mechanism for HHS to
convert ECP data received from SERFF back into the ECP/NA Template for
review and analysis of the data, HHS could not conduct ECP reviews for
issuers in FFEs in States performing plan management functions and
therefore relied on States to perform those ECP certification reviews.
In the SERFF data, each plan has its own ECP template with its own set
of ECPs and networks. The SERFF data does not allow HHS to conduct
accurate ECP evaluations of each issuer's networks because multiple
networks can share the same sequence of numbers (sometimes referred to
as ``sequence numbers'') within the SERFF data, making them
indistinguishable from each other in the issuer's SERFF binder. For
example, since network IDs are not required to be unique across
binders, an issuer may have a multiple network ID 001; then when SERFF
data is transferred to HHS, it is not possible to distinguish if
``Network 001'' is applied to the issuer's individual market QHPs or
small business health option program (SHOP) SADPs. Initially, HHS
designed a workaround to merge the SERFF issuer templates across each
plan and remove duplicate entries to allow HHS to conduct the review at
the plan level; but this workaround still did not allow for independent
evaluation of each issuer's provider networks that share the same
sequence number or network IDs.
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\233\ Systems for Electronic Rates & Forms Filing (SERFF) is a
portal utilized by States for form submittal, document management,
and review.
\234\ HIOS MPMS is a web application where users can validate
plan data as well as submit their QHPs and SADPs to CMS for annual
review and certification.
\235\ OMB Control Number 0938-1415: Essential Community
Provider-Network Adequacy (ECP/NA) Data Collection to Support QHP
Certification (CMS-10803).
\236\ For PY 2025 there were 13 FFEs that operate in States
performing plan management functions: Delaware, Hawaii, Illinois,
Iowa, Kansas, Michigan, Montana, Nebraska, New Hampshire, Ohio,
South Dakota, Utah, and West Virginia.
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As we stated in the proposed rule (89 FR 82385), as a result of
HHS' system design enhancements via MPMS, HHS is now able to collect
ECP data directly from issuers in States performing plan management
functions, enabling HHS to conduct ECP evaluations of each issuer's
network. Starting with certification reviews for PY 2025, all issuers
seeking certification of plans as medical QHPs and SADPs in FFEs,
including in States performing plan management functions, can now enter
their ECP data in the HIOS MPMS using the ECP user interface. We noted
that because ECP data can now be collected directly in MPMS from all
issuers applying for certification of plans as QHPs in FFEs, including
in States performing plan management functions, HHS will now be able to
independently review the ECP data for such issuers.
In addition, we noted that now, the MPMS ECP user interface also
allows issuers in FFEs, including in States performing plan management
functions, to validate data before submission to their States,
improving data submission to the State as well as providing HHS with
each issuer's provider network. We stated that, therefore, HHS will now
be able to assess validated ECP data, improving the accuracy and
efficiency of the QHP certification process.
We further noted that it was always HHS' intent to implement
operational capabilities that would allow for more efficient and
accurate ECP reviews. As a result, we proposed to harness the
flexibilities afforded by MPMS to conduct Federal ECP certification
reviews of medical and dental plans for which issuers submit QHP
certification applications in FFEs in States that perform plan
management functions beginning with certification reviews for PY 2026.
We stated that this proposal would allow HHS to review, evaluate,
analyze, and compare provider networks across various FFE States. We
added that HHS would also consider challenges FFE issuers face across
[[Page 4506]]
various provider networks and ECP categories, such as provider
shortages or facility closures. As proposed, issuers applying for
certification of plans as QHPs in FFEs, including in States performing
plan management functions, would be evaluated against the same
requirements and standards. We stated that FFE issuers in States with
limited plan management staff or resources would be given the same ECP
support, guidance, and monitoring of ECP deficiencies as other FFE
issuers.
We noted that this proposal would provide more consistent oversight
of ECP data across all FFEs. We further noted that Federal ECP reviews
would help ensure all medical QHP and SADP issuers applying for
certification of plans as QHPs in FFEs, including in States performing
plan management functions, include sufficient provider networks. We
stated that this proposal would allow HHS to strengthen ECP data
integrity in the FFEs by validating all ECP data before they are
submitted and displayed on the FFEs, thereby supporting consumer access
to vitally important medical and dental services and health equity for
low-income and medically underserved consumers.
We sought comment on this proposal. After consideration of comments
and for the reasons outlined in the proposed rule and this final rule,
including our responses to comments, we are finalizing this policy as
proposed. We summarize and respond below to public comments received on
the proposed policy to conduct ECP certification reviews of plans for
which issuers submit QHP certification applications in FFEs in States
performing plan management functions beginning in PY 2026.
Comment: Many commenters supported this proposal to conduct ECP
certification reviews of plans submitted by QHP issuers in FFEs in
States performing plan management functions, expressing that this
proposal would allow greater consistency, improve data integrity,
streamline data transfers that result in an overall operational
improvement, and improve consumer access to ECPs. One commenter that
supported this proposal asked that we extend this review to SADPs as
these plans are also subject to the ECP requirement under the ACA.
Response: We agree that conducting ECP certification reviews for
QHPs, both medical QHPs and SADPs, in all FFEs, including in States
performing plan management functions, would allow greater consistency,
improve data integrity, and support consumer access to qualified ECPs.
We clarify that QHPs include medical QHPs and SADPs, and ECP
certification reviews include medical QHPs and SADPs for which issuers
submit QHP certification applications in FFEs, including in States
performing plan management functions.
Comment: A few commenters opposed the proposal to expand Federal
ECP review to certification applications submitted by issuers in FFE
States performing plan management functions. These commenters stated
that CMS does not have the authority to conduct these reviews as
written in the Payment Notice.
Response: Although we have relied on the State for ECP
certification review of QHPs in FFEs in States that perform plan
management functions since PY 2015 due to system limitations in SERFF,
these issuers are still applying for QHP certification in FFEs. We
remind commenters that Section 1311(c)(1)(C) of the ACA, part of Title
I of the statute, directs HHS to establish by regulation certification
criteria for QHPs, including criteria that require QHPs to include
within health insurance plan networks those ECPs, where available, that
serve predominately low-income, medically-underserved individuals. In
addition, Section 1321(a)(1)(B) of the ACA directs the Secretary to
issue regulations setting standards for meeting the requirements of
Title I with respect to the offering of QHPs through the Exchanges.
Comment: A few commenters submitted comments related to the use of
MPMS for the purpose of providing ECP data to HHS via the ECP user
interface. One of the commenters was confused by HHS' explanation of
the associated network ID and service area ID data within SERFF prior
to MPMS and asked, ``What is a `sequence' number? Is it by a different
name in the templates?'' Another commenter expressed concern over the
level of personal information required to be disclosed for the
multifactor identification for MPMS registration for users and the
administrative burden on issuers. Another commenter suggested HHS
provide year-round access to the ECP user interface and encouraged HHS
to continue to provide transparent communications regarding timeframes
for ECP reviews in MPMS and the frequency of updates made to the ECP
list in MPMS.
Response: In response to the questions about sequence numbers, we
clarify that the term ``sequence numbers'' was used to reference
multiple provider networks that may share the same number sequence
within SERFF data. Furthermore, we add that issuers in FFEs, including
in States performing plan management functions, are not required to
provide a unique sequence of numbers for their network IDs across SERFF
binders. A SERFF binder submitted by an issuer contains a collection of
various templates and plan data,\237\ and an issuer may have multiple
binders in SERFF. However, since an issuer could submit multiple SERFF
binders for different types of plans (e.g., SHOP SADPs, individual
market medical QHPs, etc.) with potentially identical network IDs, this
made it difficult for HHS to distinguish and evaluate how a network was
applied to the issuer's plan. We used a workaround to merge the SERFF
data at a plan level, but this workaround still did not allow for
independent evaluation of each issuer's provider networks; therefore,
we relied on States to certify ECP review results. Due to variations in
ECP data transfers across SERFF submitting States, this network ID
barrier to evaluating ECP data may not have applied to all SERFF
submitting States.
---------------------------------------------------------------------------
\237\ https://login.serff.com/Appendix%20II.pdf.
---------------------------------------------------------------------------
In response to concerns about MPMS' registration requirements, we
note that the implementation of the MPMS ECP user interface was the
start of our efforts to drive innovation and tackle challenges during
QHP certification. We continue to provide technical enhancements to
help reduce burden on issuers while providing a secure environment to
protect the sensitive data provided by MPMS users to HHS. By using HIOS
to access a CMS system, MPMS, users are accessing a Federal Government
information system which has system requirements that ensure only
authorized/registered users can access protected information and
systems through the CMS Enterprise Portal. New users are required to
complete the Remote Identity Proofing process, which requires users to
answer questions related to their personal information; as well as
Multi-Factor Authentication (MFA), which requires users to provide more
than one form of verification in order to access the CMS Enterprise
Portal. Once an MFA device is registered for their account, users must
use this device to log into the CMS Enterprise Portal. All users must
complete this registration process, but we will continue to enhance our
operational processes to minimize duplicative administrative steps for
issuers.
We appreciate the suggestion that we provide year-round access to
the ECP user interface. At this time, the ECP user interface is
available for QHP certification; but issuers can access the Final PY
2025 ECP List or the HHS
[[Page 4507]]
Rolling Draft ECP List year-round to view the current list of available
ECPs. We will continue to provide issuers with technical support and
communication around QHP certification timeframes and provide the
frequency of updates to the ECP list through our published guidance and
other communications.
9. Quality Improvement Strategy (Sec. 156.1130)
In the HHS Notice of Benefit and Payment Parameters for 2026
proposed rule (89 FR 82308, 82385), we proposed to share aggregated,
summary-level Quality Improvement Strategy (QIS) information publicly
on an annual basis beginning on January 1, 2026, with information QHP
issuers submit during the PY 2025 QHP Application Period. We did not
propose any revisions to the regulation text to codify this proposal.
Section 1311(c)(1)(E) of the ACA specifies that to be certified as
a QHP for participation on an Exchange, each health plan must implement
a QIS described in section 1311(g)(1) of the ACA. Section 1311(g)(1) of
the ACA describes this strategy as a payment structure that provides
increased reimbursement or other incentives for improving health
outcomes of plan enrollees, and the implementation of activities to
prevent hospital readmissions, improve patient safety and reduce
medical errors, promote wellness and health, and reduce health and
health care disparities. Section 1311(g)(2) of the ACA requires the
Secretary to develop guidelines associated with the QIS in consultation
with health care quality experts and interested parties, including
periodic reporting to the applicable Exchange of the activities that
the plan has conducted to implement the QIS, as described in section
1311(g)(3) of the ACA. In the 2016 Payment Notice (80 FR 10844 through
10845), we issued regulations at Sec. 156.1130(a) and (c) to direct
eligible QHP issuers to implement and report on their QIS for each QHP
offered in an Exchange, and to submit data annually to evaluate
compliance with the standards for a QIS in a manner and timeline
specified by the Exchange, respectively.\238\ In addition, in the
Exchange Establishment Rule (77 FR 18324 and 18415), we finalized
regulations at Sec. 155.200(d) that direct Exchanges to evaluate each
QIS, and Sec. 156.200(b)(5) that direct QHP issuers to implement and
report on a QIS consistent with ACA section 1311(g) standards as QHP
certification criteria for participation in an Exchange.
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\238\ Refer to OMB control number 0938-1286.
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The CMS National Quality Strategy,\239\ launched in 2022, builds on
previous efforts to improve quality across the health care system. As
we noted in the proposed rule (89 FR 82386), we continue to use a
variety of levers across the agency, including but not limited to
quality measurement, public reporting, and quality improvement
programs, to improve health care quality for all. One of the four
priority areas of the CMS National Quality Strategy is to promote
alignment and coordination across programs and care settings and to
improve quality and health outcomes across the care journey.\240\ We
stated that by developing aligned approaches across quality programs,
we can improve coordination and comparisons across programs and across
the continuum of care and build the evidence base for quality
interventions to support identifying disparities in care. We noted that
across Medicare, Medicaid, and Exchange quality programs and
initiatives, we promote sharing health care quality information with
consumers, providers, researchers and others using different methods,
such as program experience reports. Specifically, for the Quality
Rating System (QRS) program, we share a summary of quality ratings for
each plan year in an annual Results at a Glance report.\241\
Additionally, we share information pertaining to both the QRS and QHP
Enrollee Experience Survey programs with the public annually through
the same report.\242\ We noted that our proposal to share aggregated,
summary-level QIS information publicly is consistent with the goal of
these Marketplace Quality Initiatives (MQIs) to share information
publicly and is in alignment with agency efforts to drive innovation
and advance quality improvement across the Exchanges.
---------------------------------------------------------------------------
\239\ The CMS National Quality Strategy for Quality Improvement
in Health Care available at http://www.cms.gov/medicare/quality/meaningful-measures-initiative/cms-quality-strategy.
\240\ Id.
\241\ See, for example, Health Insurance Exchanges Quality
Rating System (QRS) for Plan Year (PY) 2024: Results at a Glance,
available at https://www.cms.gov/files/document/health-insurance-exchanges-qrs-program-plan-year-2024-results-glance.pdf.
\242\ Id.
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Since 2017, we have been collecting QIS information from QHP
issuers on the FFEs. We stated in the proposed rule (89 FR 82386) that
over the years, we have received feedback from issuers, States, and
Technical Expert Panel (TEP) representatives about the benefits of
sharing QIS data more broadly to promote transparency, improve
engagement of best practices across QHP issuers, and provide consumers
with useful information about quality improvement efforts by QHP
issuers on the FFEs. Therefore, recognizing the general interest in
this information, and consistent with the general authority set forth
in section 1701(a)(8) of the PHS Act,\243\ we proposed to release
annually, in a report format, the following aggregated, summary-level
QHP issuer data: (1) value-based payment models used in QHPs offered by
the issuer; (2) QIS topic area; (3) QIS market-based incentive types;
(4) clinical areas addressed by QIS; (5) QIS activities; and (6) QRS
measures used in QIS. We stated that we do not receive QIS data from
State Exchanges or SBE-FPs and would not collect QIS data from State
Exchanges or SBE-FPs or their respective issuers under this proposal.
As such, we stated that the report would provide information on QIS
programs adopted by issuers offering QHPs in the FFEs.
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\243\ Section 1701(a)(8) of the PHS Act, codified at 42 U.S.C.
300u(a)(8), provides general authority to the Secretary of HHS to
foster exchange of health-related information to consumers and
others.
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We noted that we believe this proposal would promote transparency
of data and drive innovation and quality improvement across Exchanges.
We stated that sharing QIS data publicly would also strengthen
alignment across CMS quality reporting and value-based incentive
programs, including the MQI programs, and would encourage learning to
inform best practices for quality improvement across Exchanges, QHP
issuers, researchers, and health care quality communities.
Additionally, we stated that we believe this proposal would increase
accountability for QHP issuers through transparency of quality
improvement goals, encourage State Exchanges to share QIS information
from their State Exchange issuers publicly, and support HHS' mission to
achieve optimal health and well-being for all individuals.
We acknowledged there may be concerns related to the potential
sharing of proprietary and/or confidential information. However, we
stated that we do not intend to share confidential or proprietary
information from a QHP issuer and would only share QIS data that is de-
identified and in summary and aggregate form. We further stated that we
would maintain compliance with CMS privacy policies, and to address
potential confidentiality concerns, we would carefully redact and omit
confidential data when data are released aggregately and in a summary
format.
[[Page 4508]]
We sought comment on this proposal. In particular, we sought
comment on the types of QHP issuer QIS data to release in an annual
report, on the proposed approach and timeline for release of a QIS
summary report with aggregated QIS data, and other potential mechanisms
to present QIS information publicly in a manner that is informative to
issuers and consumers.
After consideration of comments and for the reasons outlined in the
proposed rule and this final rule, including our responses to comments,
we are finalizing this policy as proposed. We summarize and respond
below to public comments received on our proposal to share aggregated,
summary-level QIS information publicly on an annual basis beginning on
January 1, 2026.
Comment: Many commenters supported the proposal to release
aggregated, summary-level QIS information publicly in a report format
beginning in 2026. Specifically, these commenters noted support for
releasing aggregated, summary-level QIS data and our goals of promoting
transparency and encouraging learning to inform best practices for
quality improvement across Exchanges, health plan issuers, researchers,
and health care quality communities, which they stated will provide
consumers with useful information about quality improvement efforts by
QHP issuers on the FFEs.
Response: We appreciate commenters' support of the proposal to
publicly share aggregated, summary-level QIS information annually in a
report format. As noted in the proposed rule (89 FR 82386), this policy
is in alignment with the goal of the MQIs to share information publicly
and is in alignment with agency efforts to drive innovation and advance
quality improvement across Federal programs including Medicare,
Medicaid as well as the Exchanges.
Comment: Several commenters recommended we develop specific formats
for data collection and reporting to ensure consistency, reliability of
the data, and to reduce issuers' reporting burden. Other commenters
encouraged CMS to develop a uniform standardized reporting format
sample for use by QHP issuers in both the FFEs and the State Exchanges,
to allow QHP issuers operating in State Exchanges to submit their data
for inclusion in the summary-level QIS data CMS plans to share
publicly. One commenter recommended we add demographic data to the
aggregated, summary-level QHP issuer data we proposed to release
annually, while another commenter suggested we add consensus-based
entity endorsed measure information, if applicable. One commenter
requested additional clarification with respect to what ``summary level
data'' includes.
Response: We appreciate the feedback and suggestions regarding the
format for QIS data collection and reporting. We intend to leverage
data collected from QHP issuers in FFEs through the current QIS forms
for the annual aggregated, summary-level QIS data and will consider
opportunities to improve the consistency and reliability of data that
is included in the aggregated, summary-level QIS data that we will
release publicly. This will not increase issuer burden since issuers
are already submitting this information on their current QIS forms.
Prior to release of the first annual public report of QIS data, we plan
to seek feedback from our TEP and will provide definitions, a summary,
and clarifications to existing data elements in the associated
technical guidance documents. As we stated in the proposed rule (89 FR
82386), we do not currently receive QIS data from State Exchanges or
SBE-FPs and do not intend to collect QIS data from State Exchanges or
SBE-FPs or their respective issuers under this proposal. We stated in
the proposed rule (89 FR 82386) that over the years, we have received
feedback from issuers, States, and TEP representatives about the
benefits of sharing QIS data more broadly to promote transparency, and
the types of data to release in an annual report to provide consumers
with useful information about quality improvement efforts by QHP
issuers on the FFEs. We will also consider and gain input from our TEP
regarding adding demographic data and endorsement data, which refers to
measure data that has been reviewed using a standard set of evaluation
criteria by the Consensus-Based Entity. We clarify that we anticipate
the summary-level QIS data we share publicly will be similar to the
summary-level data contained in the QRS Results at a Glance report.
Summary-level QRS data includes high-level overviews of health plan
quality information such as percent and number of reporting units that
scored three stars or more in their overall rating. Summary-level QIS
data may include the percent and number of reporting units that used a
specific market-based incentive type, addressed a specific clinical
topic area, or used a QRS measure(s). We believe sharing such data
allows consumers, researchers and policymakers to assess key trends,
performance, and comparisons across QHP issuers.
Comment: A few commenters provided recommendations on specific
approaches for release of an annual report with aggregated, summary-
level QIS data. These commenters suggested we share a sample of an
annual report for issuer review and feedback prior to the release of an
official report, so that plans have an opportunity to review and
comment to ensure QIS data is consistent across all plans, on which
data points are made available to the public, and how the data will be
presented and displayed. One commenter suggested that the publicly
reported information be available in digital formats and physical
formats to ensure access to information.
Response: We appreciate commenters' feedback, and consistent with
section 1311(g)(2) of the ACA, which requires consultation with experts
in health care quality and interested parties, we intend to seek
feedback on approaches for the public display of the aggregated,
summary-level QIS data, including meeting with TEP representatives and
engagement with interested parties. We will take the comments
summarized above into consideration in doing so. Although we do not
routinely publish MQI sample reports solely for issuer review and
feedback, we intend to gain thorough input from interested parties
including representatives from issuer organizations, State Exchanges,
the health care quality community, and consumer advocates. We will
adhere to our processes of utilizing the TEP and above-mentioned
parties to seek feedback on the timing of the report being released,
types of data for inclusion, and approaches to sharing the data. We
will also request input from our TEP as to the feasibility of reporting
the QIS data in physical and digital formats.
Comment: A few commenters suggested that CMS allow for one full
year of data collection prior to release of an annual report with
aggregated, summary-level QIS data or limit the included data to a
specific timeframe, to allow issuers to use information from the
Healthcare Effectiveness Data and Information Set (HEDIS[supreg]) and
any related QRS metrics in issuers' reporting. A few commenters
recommended that CMS limit its public reporting to the information
included in the QIS implementation plans submitted in the first year
because different health plans may be operating on different timelines,
and this may lead to ambiguity if data on plan performance is combined
for reporting purposes. One commenter recommended CMS delay the public
release of aggregated, summary-level QIS data until 2027 and use the
interim period to clarify reporting requirements and release more
detail on what data will be released. These commenters
[[Page 4509]]
stated that these steps will allow issuers to align their data
submission processes with a standardized format fostering uniformity in
the reporting of the data across issuers while avoiding duplication,
and ensuring clear, consistent public information on QHP quality
improvements.
Response: We appreciate the feedback and note the timeline being
finalized will allow for one full year of data collection prior to
release of the first annual report. One full year of data collection
will ensure that issuers can capture comprehensive and reliable
information from relevant sources such as HEDIS[supreg] and QRS
metrics. One full year of data collection also ensures that the data
used for reporting reflects a complete cycle of care and improvements.
With a year of data, issuers can compare their performance against
industry standards, which can identify areas for improvement. With
respect to the comment related to the use of data from the QIS
Implementation Plan form, CMS will extract and aggregate a majority of
data fields from the Implementation Plan form, and may supplement
information from an issuer's Modification Summary Supplement form, as
needed. CMS may extract the performance measures from an issuer's
Modification Summary Supplement form if that issuer has modified their
measures. We currently do not aggregate nor publicly report data
collected via Progress Report forms due to the timing of QIS data
collection, which may result in unvalidated data. We are finalizing in
this rule that aggregated, summary-level QIS information will be shared
publicly on an annual basis beginning on January 1, 2026, with
information QHP issuers submit during the PY 2025 QHP Application
Period. We believe that January 1, 2026, is the appropriate time to
begin sharing this QIS data publicly because, for the reasons stated
above, we need one full year of data collection prior to the release of
the annual report. QHP issuers have been submitting QIS data to HHS
since 2017 and since that time, we have received feedback from issuers,
States, and TEP representatives about the benefits of sharing QIS data
more broadly. We intend to leverage data collected from issuers through
current QIS reporting tools and believe that sharing the QIS data
publicly beginning in 2026, instead of 2027, allows opportunities for
interested parties to understand trends and potential issues by viewing
interim data. Sharing interim data promotes transparency and helps
foster trust even if the data is not yet complete. The collaborative
approach from interested parties on review of the data can improve the
quality of the final report. Additionally, regular data sharing can
address quality improvement efforts where enhancements need to be made
to processes throughout the year. Specifically, best practices in
quality improvement activities across QHP issuers can be made apparent,
improving engagement of QHP issuers to potentially refine approaches to
their QIS, and provide consumers with useful information about quality
improvement efforts by QHP issuers on the FFEs. We will continue to
assess and enhance the public-facing report to help ensure that clear,
consistent QIS information is being provided. Since we intend to use
QIS information already submitted by QHP issuers on the FFEs through
current, annual reporting tools, there would be no duplication of
information.
Comment: One commenter suggested we ensure plain language experts
review the QIS information that is publicly displayed to make this data
accessible to a wider audience, which will empower interested parties
to make informed decisions. One commenter recommended that the data be
published in a manner that is simplified for consumers to easily
understand and in multiple languages. Another commenter suggested we
comply with ADA accessibility standards when presenting data. One
commenter suggested the report be housed on the QIS website instead of
HealthCare.gov because it will be most meaningful to policymakers and
researchers with expertise in quality work and value-based care, and
likely will be too much information and detail for a consumer. Another
commenter recommended HHS disseminate publicly diverse sets of
educational resources including webinars, fliers, and FAQs relevant to
the aggregated, summary-level QIS data that will be publicly shared.
Response: We will make efforts to incorporate plain language and
ensure that the QIS information that will be publicly shared complies
with ADA standards. We will also consider making MQI reports, including
the annual QIS report, available in multiple languages and align them
as consistently as possible with other quality initiatives. We
acknowledge the recommendation to post the QIS report on the QIS
website as well as the recommendation regarding dissemination of
information relevant to the aggregated, summary-level QIS information
that will be publicly shared through various educational resources. As
noted above, we intend to conduct activities to receive feedback for
the public display of the information, including meeting with
interested parties pursuant to section 1311(g) of the ACA.
Comment: Several commenters noted concern regarding the
confidentiality of the aggregated, summary-level QIS information that
will be displayed publicly on an annual basis because of accidental
data breaches. One commenter suggested that we include de-identified
data to address information security and privacy concerns.
Response: We acknowledged in the proposed rule (89 FR 82386) that
there may be concerns related to the potential sharing of proprietary
and/or confidential information. However, as we stated in the proposed
rule, we do not intend to share confidential or proprietary information
from a QHP issuer and will only share QIS data that is de-identified
and in summary and aggregate form. We will maintain compliance with CMS
privacy policies, and to address potential confidentiality concerns, we
will carefully redact and omit confidential data when data are released
aggregately and in a summary format.
10. HHS-RADV Materiality Threshold for Rerunning HHS-RADV Results
(Sec. 156.1220(a)(2))
In the HHS Notice of Benefit and Payment Parameters for 2026
proposed rule (89 FR 82308, 82386), we proposed to amend Sec.
156.1220(a) to codify a new materiality threshold for HHS-RADV
appeals,\244\ hereafter referred to as the materiality threshold for
rerunning HHS-RADV results.\245\ We stated that this proposal would
codify a standard for when HHS would take action to rerun HHS-RADV
results and adjust HHS-RADV adjustments to State transfers in response
to a successful appeal. We proposed to make amendments to Sec.
156.1220 to add a new paragraph (a)(2)(i) to provide that HHS would
rerun HHS-RADV results in response to an appeal when the impact to the
filing issuer's (that is, the issuer who submitted the appeal) HHS-RADV
adjustments to State transfers is greater than or equal to $10,000, and
we
[[Page 4510]]
proposed to apply this new materiality threshold for rerunning HHS-RADV
results beginning with the 2023 benefit year HHS-RADV.\246\
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\244\ For the purposes of this proposal, ``appeals'' refers to
all three steps of the administrative appeals process as listed in
Sec. 156.1220, which includes the request for reconsideration,
informal hearing, and review by the Administrator of CMS.
\245\ For purposes of this proposal, rerunning HHS-RADV results
involves recalculating all national program benchmarks and issuers'
error rate results, reissuing issuers' error rate results,
conducting discrepancy reporting and appeal windows for the reissued
results, applying the reissued error rates to the applicable benefit
year's State transfers, and invoicing, collecting, and distributing
any additional changes to the HHS-RADV adjustments to State
transfers.
\246\ The appeal window for 2023 benefit year HHS-RADV is
expected to open in July 2025, after the publication of the Summary
Report of 2023 Benefit Year HHS-RADV Adjustments to 2023 Benefit
Year Risk Adjustment Transfers, which is tentatively scheduled for
release in July 2025. See the 2023 Benefit Year HHS-RADV Activities
Timeline. https://regtap.cms.gov/uploads/library/2023_RADV_Timeline_5CR_072424.pdf. Therefore, we proposed to adopt
and apply the materiality threshold for rerunning HHS-RADV results
in response to a successful appeal beginning with the 2023 benefit
year HHS-RADV.
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We noted that this materiality threshold would promote the
stability of HHS-RADV and avoid considerable expenditures to rerun HHS-
RADV results in situations where the filing issuer only accrues a very
minor financial benefit (in this case defined as less than $10,000), if
any, and where there is a non-material impact on State transfers in a
State market risk pool. As we stated in the proposed rule (89 FR
82387), we believe the adoption of this additional materiality
threshold to codify a standard for when HHS would rerun HHS-RADV
results is necessary and appropriate because HHS-RADV is unique in
comparison to other ACA financial programs, such as APTC, where the
outcome of a successful appeal only impacts the filing issuer because
an issuer's amount of APTC does not impact other issuers.\247\ We noted
that instead, an HHS-RADV appeal has the potential to impact all
issuers nationwide who participated in the applicable benefit year's
HHS-RADV.\248\
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\247\ The EDGE data discrepancies that can arise in States where
the HHS-operated risk adjustment program applies have a more limited
reach and only impact the State market risk pool with the
discrepancy.
\248\ The impact of successful HHS-RADV requests for
reconsideration or appeals on HHS-RADV results and HHS-RADV
adjustments to risk adjustment State transfers on all participating
issuers also differs from that of high-cost risk pool audits,
discrepancies, and appeals. Any high-cost risk pool funds HHS
recoups as a result of audits of risk adjustment covered plans,
actionable discrepancies, or successful appeals are used to reduce
high-cost risk pool charges for that national high-cost risk pool in
the next applicable benefit year for which high-cost risk pool
payments have not already been calculated. See the 2023 Payment
Notice (87 FR 27253).
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We refer readers to the proposed rule (89 FR 82386 through 82388)
for further discussion of the background and rationale for this
proposal.
We solicited comments on the proposed materiality threshold for
rerunning HHS-RADV results, including the proposed dollar amount for
the materiality threshold and whether that dollar amount should be
higher or lower or subject to an annual inflation adjustment amount, as
well as the proposed applicability of this threshold beginning with
2023 benefit year HHS-RADV.
After consideration of comments and for the reasons outlined in the
proposed rule and this final rule, including our responses to comments,
we are finalizing, as proposed, the amendments to add Sec.
156.1220(a)(2)(i) to codify a new materiality threshold for rerunning
HHS-RADV results such that we will not rerun HHS-RADV results if the
appeal's financial impact on the filing issuer was less than $10,000,
beginning with the 2023 benefit year of HHS-RADV. For purposes of this
new materiality threshold, ``appeals'' refers to all three steps of the
process in Sec. 156.1220, which includes the request for
reconsideration, informal hearing, and review by the Administrator of
CMS. We summarize and respond below to public comments received on the
proposed materiality threshold for rerunning HHS-RADV results.
Comment: A few commenters supported the proposal to codify a dollar
threshold to specify when HHS would rerun HHS-RADV results based on a
successful appeal. A few commenters noted that the proposal would
improve predictability and ensure that adjustments to State transfers
as the result of a successful HHS-RADV appeal are limited to situations
with significant impacts on HHS-RADV adjustments to risk adjustment
transfers. One commenter noted that the policy would limit the burden
that rerunning HHS-RADV results has historically disproportionately
placed on smaller issuers.
Response: We agree with commenters that this new materiality
threshold to rerun HHS-RADV results, which we are finalizing as
proposed in this final rule, will ensure appeals are limited to
situations with significant State transfer impacts. We also agree that
this materiality threshold will improve predictability and limit the
administrative burden associated with HHS-RADV, including for smaller
issuers.
Comment: A few commenters suggested that the proposed threshold of
$10,000 was too low, with one suggesting an alternative threshold of
$100,000. These commenters noted concern that a low threshold would
result in HHS rerunning HHS-RADV results too frequently. Another
commenter suggested that the threshold be set at a certain percentage
of statewide average premium.
Response: We are finalizing the proposed materiality threshold for
rerunning HHS-RADV results in response to a successful appeal such that
we will not rerun HHS-RADV results if the appeal's financial impact on
the filing issuer was less than $10,000. We are finalizing this $10,000
threshold because the current materiality threshold applicable to risk
adjustment discrepancies set forth in Sec. 153.710(e) is $100,000, and
we have found based on our years of experience with HHS-RADV that the
magnitude of HHS-RADV adjustments is generally at least one order of
magnitude smaller than that of risk adjustment transfers calculated by
HHS under the State payment transfer formula, as HHS-RADV adjustments
are adjustments to the original risk adjustment State transfer amounts
for a benefit year. For these reasons, we believe the proposed lower
materiality threshold of $10,000 is roughly proportional to the risk
adjustment discrepancy materiality threshold of $100,000.\249\
Therefore, we maintain that this is an appropriate materiality
threshold for rerunning HHS-RADV results in response to a successful
appeal.
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\249\ Please note that the risk adjustment discrepancy
materiality threshold is the lesser of either $100,000 or 1% of
State risk pool transfers.
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As for setting a materiality threshold based on a percentage of
statewide average premium, we are concerned that this approach would be
overly complex for the purposes of rerunning HHS-RADV results in
response to a successful appeal as all issuers would be held to
different dollar thresholds under the percentage of statewide average
premium standard. While this would ensure a consistent proportional
threshold by State market risk pool to account for the correlation of
State transfers and statewide average premium, we note that it would
likely advantage issuers whose risk adjustment State payments or
charges were a larger percent of statewide average premium in meeting
the materiality threshold and disadvantage issuers whose State
transfers were a lower proportion of the statewide average premium. In
this situation, two issuers with the same dollar impact could have
their appeals treated differently based on different statewide average
premiums. Use of a percentage of statewide average premium could also
lead to more frequent re-running of national HHS-RADV results in
response to a successful appeal, with associated burden but minimal
impact on national results, based on appeals in smaller States with
lower statewide average premium. Therefore, in the interest of ensuring
that HHS-RADV appeals
[[Page 4511]]
measure the impact to HHS-RADV adjustments at a certain dollar
threshold, we did not propose and decline to finalize a materiality
threshold based on a percentage of statewide average premium at this
time.
Comment: One commenter noted that the proposed threshold may impact
the accuracy of the HHS-RADV results if HHS identifies a methodological
error and limits recalculation and reissuance of the HHS-RADV results
only to situations where the filing issuer meets the proposed
materiality threshold. This commenter requested HHS clarify that the
Department would recalculate and reissue HHS-RADV results in response
to a successful appeal when an HHS error impacting many or all issuers
is identified, regardless of how the error was identified.
Response: While we will not rerun HHS-RADV results in response to a
successful appeal resulting in an impact of less than $10,000 to a
filing issuer's HHS-RADV adjustments to State transfers, the
materiality threshold finalized in this rule does not prevent HHS from
taking appropriate action, outside of an individual appeal, which could
include recalculation and reissuance of HHS-RADV results for a given
benefit year, as a result of an identified HHS methodological error.
With the adoption of Sec. 156.1220(a)(2)(i), we aim to balance the
importance of having accurate HHS-RADV results with the administrative
burden of rerunning HHS-RADV when the impact on the filing issuer's
HHS-RADV adjustments to transfers is not material.
Comment: One commenter suggested that as an alternative to a
materiality threshold, HHS could reduce the broad impact of HHS-RADV
successful appeals by limiting the application of the result of a
successful appeal to the State market risk pool in which the appeal is
filed, or adopt a policy to not make changes to group failure rate
classifications or bounds if appeals are submitted after HHS-RADV
adjustments to State transfers for a given benefit year are posted.
Response: We did not propose and are not finalizing the
alternatives suggested by this commenter. We believe that the
materiality threshold for determining when we will rerun HHS-RADV
results in response to a successful appeal that we are finalizing in
this final rule will best mitigate the administrative burden associated
with re-running HHS-RADV results when there is a small financial impact
both inside and outside of the State market risk pool in which the
appeal was filed, and that the finalized materiality threshold to rerun
HHS-RADV results ensures appeals are limited to situations with
significant program impacts relative to the burdens incurred by issuers
and HHS in rerunning HHS-RADV results.
We disagree that we could limit the scope of an HHS-RADV appeal to
the applicable State market risk pool. HHS-RADV appeals have national
impacts in that successful appeals can affect and change the national
confidence intervals and group failure rates used to calculate issuers'
error rates. This process cannot be disaggregated from the calculation
of HHS-RADV adjustments, which applies issuers' error rates to all plan
level risk scores and recalculates risk adjustment transfers at the
State market risk pool level. We also do not believe this approach
would be methodologically justifiable as disaggregating the processes
of recalculating error rates from the application of error rates for
HHS-RADV adjustments to State market risk pool level risk adjustment
transfers would imply using two different sets of HHS-RADV results for
a single benefit year.
We also do not agree with the comment that we should not make any
changes to the group failure rates or confidence interval bounds in
response to appeals submitted after the publication of the Summary
Report of HHS-RADV Adjustments to Risk Adjustment State Transfers.
First, all appeals occur after the publication of the Summary Report of
HHS-RADV Adjustments to Risk Adjustment State Transfers. Second, this
approach would not take into consideration the true impact of any
successful appeal as appeals can result in necessary and
methodologically justifiable updates to the group failure rates or
confidence interval bounds. Lastly, due to the budget neutrality of
risk adjustment transfers, a change to one issuer's risk score error
rate or HHS-RADV adjustment due to a successful appeal impacts all
other issuers' HHS-RADV adjustments in the filing issuer's State market
risk pool; therefore, we do not believe the suggested approach to
develop a policy that ignores the impact of a successful appeal on
group failure rates and confidence interval bounds is a reasonable
option.
E. Part 158--Issuer Use of Premium Revenue: Reporting and Rebate
Requirements
1. Definitions (Sec. 158.103)
In the HHS Notice of Benefit and Payment Parameters for 2026
proposed rule (89 FR 82308, 82388), we proposed to amend Sec. 158.103
by adding a definition of ``qualifying issuer.'' See subsection E.2
below for the discussion of this proposal.
2. Reimbursement for Clinical Services Provided to Enrollees
(Sec. Sec. 158.140, 158.240)
In the HHS Notice of Benefit and Payment Parameters for 2026
proposed rule (89 FR 82308, 82388), we proposed to amend Sec.
158.140(b)(4)(ii) to allow qualifying issuers to not adjust incurred
claims by the net payments or receipts related to the risk adjustment
program for MLR reporting and rebate calculation purposes beginning
with the 2026 MLR reporting year (MLR reports due in 2027). We also
proposed to amend Sec. 158.240(c) to add an illustrative example of
how qualifying issuers would calculate the amount of rebate owed to
each enrollee to accurately reflect how such issuers would incorporate
the net risk adjustment transfer amounts into the MLR and rebate
calculations differently from other issuers, as well as to make a
conforming amendment to clarify that the current illustrative example
in paragraph (c)(2) would apply to issuers that are not qualifying
issuers.
Section 2718 of the PHS Act and the implementing regulations at 45
CFR part 158 require health insurance issuers offering group or
individual health insurance coverage to submit an annual report to the
Secretary of HHS concerning their MLR and issue an annual rebate to
enrollees if the issuer's MLR is less than the applicable MLR standard
established in sections 2718(b)(1)(A)(i) and (ii) of the PHS Act. Under
section 2718 of the PHS Act, an issuer's MLR is defined as the ratio of
(a) incurred claims and quality improvement activity expenses, to (b)
premium revenue after subtracting taxes and licensing and regulatory
fees and accounting for payments or receipts for risk adjustment, risk
corridors, and reinsurance under sections 1341, 1342, and 1343 of the
ACA. The statute also defines the total amount of an issuer's annual
rebate as an amount equal to the product of the amount by which the
applicable MLR standard exceeds the issuer's MLR, multiplied by the
issuer's premium revenue after subtracting taxes and licensing and
regulatory fees and accounting for payments or receipts for risk
adjustment, risk corridors, and reinsurance under sections 1341, 1342,
and 1343 of the ACA.
In contrast, section 1342(c) of the ACA provides that allowable
costs shall be reduced by any risk adjustment payments in the numerator
of the risk
[[Page 4512]]
corridors calculation.\250\ To preserve consistency between these two
programs, we finalized an approach in the 2014 Payment Notice (78 FR
15504) that accounted for all premium stabilization program \251\
amounts, other than reinsurance contribution fees, in a way that would
not have a net impact on the adjusted earned premium revenue used in
the calculation of the MLR denominator as defined in Sec. 158.130.
Specifically, in the 2014 Payment Notice, we noted that to account for
premium stabilization program amounts as an adjustment to earned
premium under Sec. 158.130(b)(5), net risk adjustment program
receipts, net risk corridors program receipts, and reinsurance program
payments would be added to total premium and then subtracted from
adjusted earned premium. Section 158.140(b)(4) also provided that
premium stabilization amounts, other than reinsurance contribution
fees, must adjust incurred claims in the numerator of the MLR
calculation defined in Sec. 158.221, in a manner similar to the
adjustment of allowable costs in the risk corridors formula set forth
in Sec. 153.500. As stated in the 2014 Payment Notice, we found that
this approach adhered to the statutory construct of the MLR formula in
section 2718 of the PHS Act, which we believe provides flexibility as
to whether to account for the effects of collections or receipts for
the premium stabilization programs in determining revenue (the
denominator) or costs (the numerator) of the MLR formula, while also
aligning with the treatment of risk adjustment transfer amounts and
reinsurance payments in the calculation of risk corridors payments and
charges under section 1342 of the ACA.
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\250\ Section 1342 of the ACA and the implementing regulations
at 45 CFR part 153 established a temporary risk corridors program
applicable to QHP issuers in the individual and small group (or
merged) markets for the 2014, 2015, and 2016 benefit years.
\251\ The premium stabilization programs refer to the
reinsurance, risk corridors, and risk adjustment programs
established by the ACA. See section 1341 of the ACA (transitional
reinsurance program), section 1342 of the ACA (risk corridors
program), and section 1343 of the ACA (risk adjustment program).
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In the proposed rule (89 FR 82389), we noted that while many
complex factors influence an issuer's underwriting position, our
internal analysis suggests that issuers with unusual business models
characterized by ratios of risk adjustment payments to earned premium
that are approximately 50 percent or higher may owe disproportionately
large MLR rebates that could impact solvency. We stated that in these
circumstances, we believe that the way the current MLR methodology
functions is misaligned with one of the primary statutory goals of the
program, which is to ensure that consumers receive value for their
premium dollars, as issuers with especially high-risk populations spend
a significant proportion of their revenue paying medical claims and may
nonetheless also owe rebates that make continued operation in their
current markets untenable. Consistent with section 2718(c) of the PHS
Act, the standardized methodologies for calculating an issuer's MLR
``shall be designed to take into account the special circumstances of
smaller plans, different types of plans, and newer plans.'' We stated
that we believe modifying the treatment of risk adjustment transfer
amounts in the MLR and rebate calculations for these issuers such that
these amounts have a net impact on the MLR denominator rather than on
MLR numerator would mitigate the solvency and stability concerns for
this small subset of issuers that offer different types of plans with
unique business models, namely the issuers that focus on underserved
communities with significant rates of serious health conditions and
that may disproportionately rely on risk adjustment payments, as
opposed to premiums, for revenue.
Therefore, we proposed to exercise our authority to account for the
special circumstances of this small subset of issuers. Specifically, we
proposed to amend Sec. 158.103 to add a definition of ``qualifying
issuer'' to mean an issuer whose ratio of net payments related to the
risk adjustment program under section 1343 of the ACA to earned
premiums, prior to accounting for the net payments or receipts related
to the risk adjustment, risk corridors, and reinsurance programs (as
described in Sec. 158.130(b)(5)) in a relevant State and market, is
greater than or equal to 50 percent. We also proposed to modify Sec.
158.140(b)(4)(ii) to no longer apply net risk adjustment receipts as an
adjustment to the incurred claims amount that is used to calculate the
MLR numerator defined in Sec. 158.221(b) for such qualifying issuers.
We did not propose to make any changes to the definition of premium
revenue in Sec. 158.130.
We stated in the proposed rule (89 FR 82390) that under this
proposal, we would modify the calculation of the MLR denominator and
rebates as described in the 2014 Payment Notice such that for
qualifying issuers, earned premium would account for net risk
adjustment receipts by simply adding these net receipts to total
premium, without subsequently subtracting them from adjusted earned
premium. We noted that the effect of the proposed changes would be to
remove these offsetting adjustments (the addition and the subtraction
that offset each other) to earned premium in the MLR denominator and
rebate calculations, such that these qualifying issuers' risk
adjustment transfer amounts would have a net impact on the MLR
denominator and rebate calculations in Sec. 158.221(c) and Sec.
158.240(c), respectively. We also proposed to make a conforming
amendment to Sec. 158.240(c) to clarify that the existing illustrative
example in paragraph (c)(2) would apply to issuers that are not
qualifying issuers, and to add an illustrative example in a new
paragraph (c)(3) of how qualifying issuers would determine the amount
of rebate owed to each enrollee, to accurately reflect how qualifying
issuers would incorporate the net risk adjustment transfer amounts into
the MLR and rebate calculations differently from other issuers.
In summary, we proposed that for qualifying issuers, risk
adjustment transfer amounts would be a net adjustment to the
denominator, rather than the numerator, of the MLR calculation as
follows:
If (ra/p) > or = 50%;
Adjusted MLR = [(i + q-s + nc-rc)/{(p + s-nc + rc)-t-f-(s-nc + rc)-na +
ra{time} ] + c
Where,
i = incurred claims
q = expenditures on quality improving activities
p = earned premiums
t = Federal and State taxes
f = licensing and regulatory fees including transitional reinsurance
contributions
s = issuer's transitional reinsurance receipts
na = issuer's risk adjustment related payments
nc = issuer's risk corridors related payments
ra = issuer's risk adjustment related receipts
rc = issuer's risk corridors related receipts
c = credibility adjustment, if any
For a qualifying issuer whose MLR falls below the minimum MLR
standard in a State and market, we proposed to calculate the MLR rebate
in Sec. 158.240(c) as follows:
If (ra/p) > or = 50%;
Rebates = (m-a) * [(p + s-nc + rc)-t-f-(s-nc + rc)-na + ra]
Where,
m = the applicable minimum MLR standard for a particular State and
market
a = issuer's MLR for a particular State and market.
We proposed that these amendments would be applicable beginning
with the 2026 MLR reporting year (MLR reports
[[Page 4513]]
due in 2027), to enable issuers that are, or may be able to meet the
definition of, a qualifying issuer to reflect the amendments in their
premium rates. We requested comment on all aspects of the proposal,
including the definition of ``qualifying issuer'' and whether issuers
should satisfy additional criteria to qualify for this flexibility,
whether the proposed MLR and rebate methodologies would create any
inappropriate incentives for issuers that are unable to accurately
price their products or reduce administrative costs, as well as impacts
to other issuers that are not ``qualifying issuers'' and potential
market distortions that may arise if the proposed flexibility for MLR
and rebate calculations is not extended to all issuers in applicable
markets.
We also considered an alternative approach that would modify the
treatment of net risk adjustment transfer amounts such that these
amounts would have a net impact on the MLR denominator and rebate
calculations in Sec. 158.221(c) and Sec. 158.240(c), respectively,
instead of the MLR numerator defined in Sec. 158.221(b), for all
issuers subject to MLR requirements, rather than only for qualifying
issuers. We noted that we did not propose this alternative approach as
we believe that the more narrow, tailored proposal to provide this
flexibility only for qualifying issuers is sufficient to maximize
availability of coverage options while remaining consistent with the
statutory objective of section 2718 of the PHS Act, which is to ensure
that consumers receive value for their premium dollars. We stated that
the more narrow, tailored proposal would also produce a smaller
reduction in rebate payments to consumers than the alternative approach
and would cause less disruption to the industry. We requested comment
on all aspects of this alternative approach, including on ways that
this alternative approach could potentially influence issuers' rebate
positions, plan composition, and pricing decisions, and potential
impacts of this alternative approach on consumers.
We refer readers to the proposed rule (89 FR 82388 through 82391)
for further discussion of our proposal as well as the alternative
approach we considered.
After consideration of comments and for the reasons outlined in the
proposed rule and this final rule, including our responses to comments,
we are finalizing our proposal, with modification, effective beginning
with the 2026 MLR reporting year. First, we are finalizing our proposed
amendment to Sec. 158.103 to add a definition of ``qualifying
issuer,'' with a modification to clarify that the new definition of
``qualifying issuer'' is based on an issuer's 3-year aggregate ratio of
net payments related to the risk adjustment program under section 1343
of the ACA to earned premiums as defined in Sec. 158.130, but prior to
and excluding the adjustments in Sec. 158.130(b)(5) that account for
the net payments or receipts related to the risk adjustment, risk
corridors, and reinsurance programs, in a relevant State and market.
Second, we are finalizing our proposed amendment to Sec.
158.140(b)(4)(ii) to allow qualifying issuers to not adjust incurred
claims by the net payments or receipts related to the risk adjustment
program for MLR reporting and rebate calculation purposes, with a
modification to specify that we are allowing qualifying issuers to
modify the treatment of risk adjustment transfer amounts in the manner
described above at their option, rather than making this change
mandatory for qualifying issuers. Finally, we are finalizing our
proposed amendments to Sec. 158.240(c) to (1) add an illustrative
example at Sec. 158.240(c)(3) of how qualifying issuers that choose to
apply risk adjustment transfer amounts as described in Sec.
158.140(b)(4)(ii) would calculate the amount of rebate owed to each
enrollee to accurately reflect how such issuers would incorporate the
net risk adjustment transfer amounts into the MLR and rebate
calculations differently from other issuers, with a modification to
clarify that qualifying issuers ``opt'' to apply risk adjustment
transfer amounts as described in Sec. 158.140(b)(4)(ii), and (2) to
clarify that the current illustrative example in Sec. 158.240(c)(2)
would apply to issuers that are not qualifying issuers or that are
qualifying issuers that do not opt to apply risk adjustment transfer
amounts as described in Sec. 158.140(b)(4)(ii). We summarize and
respond to public comments received on our proposal below.
Comment: We received several comments of general support for the
proposal.
Response: We thank commenters for their support of the proposal.
Comment: Several commenters supported the proposal's applicability
to only the narrow subset of qualifying issuers, on the basis that
doing so would minimize any rebate reduction that would be a result of
the proposal and would avoid harming issuers whose premium rates are
relatively low in proportion to the coverage provided and that incur
risk adjustment program payments.
Response: We agree with these commenters and thank them for their
support of the proposal.
Comment: One commenter requested CMS to clarify whether, when
determining if an issuer is a ``qualifying issuer,'' the issuer should
use a single year, or 3-years' aggregate ratio of net risk adjustment
payments to earned premiums. Another commenter requested CMS to state
more clearly and explicitly that the definition of ``qualifying
issuer'' is based on billed premium, rather than premium that reflects
the impact of risk adjustment transfer amounts.
Response: We confirm that the definition of ``qualifying issuer''
at Sec. 158.103 is based on an issuer's 3-year aggregate ratio of net
payments related to the risk adjustment program under section 1343 of
the ACA to earned premiums as defined in Sec. 158.130, but prior to
and excluding the adjustments in Sec. 158.130(b)(5) that account for
the net payments or receipts related to the risk adjustment, risk
corridors, and reinsurance programs, in a relevant State and market. We
are modifying the proposed definition of ``qualifying issuer'' at Sec.
158.103 accordingly.
Comment: One commenter suggested that we allow all issuers that
receive risk adjustment payments to reflect these amounts in the MLR
denominator, while continuing to allow issuers that make risk
adjustment payments (pay risk adjustment charges) to reflect these
amounts in the MLR numerator. The commenter stated that they believe
this approach eliminates any potential incentive to misprice premiums,
is straightforward to implement, and is fair and equitable for all
issuers, regardless of their share of claims from high- and low-risk
enrollees.
Response: We decline to adopt this commenter's suggestion as the
statute does not provide for a different means of accounting for risk
adjustment payments and receipts in the MLR calculation. This approach
is also inconsistent with generally accepted accounting principles that
provide for a consistent accounting of transfers regardless of their
direction. Additionally, the suggested approach would significantly
reduce total net rebates to consumers without a justifiable benefit,
contrary to the goals of the MLR program.
Comment: One commenter recommended making the proposal optional for
qualifying issuers.
Response: We appreciate the comment and agree that qualifying
issuers should have the option to elect whether to take advantage of
modifying the treatment of risk adjustment program transfer amounts in
their MLR and rebate calculations. Making the modification optional
will allow issuers
[[Page 4514]]
that are part of a holding company system, and that operate in many
States and markets, to maintain the consistent MLR reporting practices
that they have implemented across companies. Such companies might find
having one reporting approach to be simpler than determining which
issuers, and in which States and markets, in the holding company system
are ``qualifying issuers'' and changing their MLR reporting process
only for those issuers. Additionally, issuers that meet the definition
of a ``qualifying issuer'' but do not owe MLR rebates may not want to
change their established reporting processes when the change would not
create any benefit for them.
We are modifying the amendments to Sec. 158.140(b)(4)(ii) and
Sec. 158.240(c)(2) and (3) to give qualifying issuers the option to
elect whether to take advantage of modifying the treatment of risk
adjustment program transfer amounts in their MLR and rebate
calculations.
Comment: One commenter suggested that we add a maximum threshold of
25,000 enrollees in order for an issuer to qualify as a qualifying
issuer, to serve as a guardrail to ensure that the proposal targets the
specific issuers whose risk adjustment payments exceed 50 percent of
their earned premium and does not cause unintended consequences for
other issuers.
Response: While we appreciate the commenter's suggestion, we
decline to adopt a maximum enrollment threshold of 25,000 enrollees, as
we believe that it is possible for an issuer to have a unique business
model and corresponding challenges targeted by this policy even if its
enrollment exceeds 25,000. Based on our estimates that extremely few
issuers would meet the definition of a qualifying issuer and also owe
rebates, we do not believe that proposal, as finalized, is likely to
cause unintended consequences for other issuers.
Comment: A few commenters declined to offer support or opposition
to the proposal, but pointed out the potential benefits of, as well as
noted concerns with, the proposal. A few commenters requested that if
CMS does finalize the proposal, that it carefully monitor the impact on
the affected enrollees in underserved communities. These commenters
noted that the proposal could potentially benefit enrollees with
chronic conditions by stabilizing their issuers, reducing premium
increases, and promoting consistent access to care. On the other hand,
commenters noted that the proposal could result in lower rebates, and
that limiting the proposal to only qualifying issuers could result in
market imbalances and lead to higher costs or fewer coverage options.
These commenters noted concern that the proposal could unintentionally
incentivize issuers to reduce their costs by reducing benefit quality.
Response: We appreciate the commenters' perspectives and agree that
the policy will have a number of beneficial impacts. We agree that the
policy could benefit enrollees in underserved communities, particularly
those with chronic conditions and those with lower incomes that are
served by issuers that receive large risk adjustment payments in
proportion to their revenue. We believe that allowing qualifying
issuers the flexibility to account for risk adjustment transfers in the
denominator of the MLR calculation will enable them to continue to
serve these communities and provide continuity of care to enrollees. We
intend to monitor the impact of the finalized policy to the extent
resources are available. While we acknowledge commenters' concern that
the finalized policy could reduce rebates, we note that any rebate
reduction is expected to come from issuers whose business models put
them at risk of being financially unviable and unable to continue to
provide coverage or pay any rebates, and thus any rebate reduction
would be outweighed by the benefit to enrollees of being able to
continue their current health coverage, or access higher quality health
coverage that might not otherwise be available. We do not agree that
the policy would incentivize issuers to reduce benefit quality, raise
costs, or reduce coverage options as such coverage changes would not
attract higher-risk enrollees for which the issuer would receive risk
adjustment payment. For the reasons described in more detail in the
response to the comment below, we also do not believe that the rule is
likely to cause significant market imbalances or precipitate issuer
insolvencies. However, we intend to monitor and analyze the impact of
this provision after it is implemented for the 2026 and later MLR
reporting years to evaluate whether it operates as intended and
continues to be appropriate.
Comment: One commenter requested that CMS provide the number of
impacted issuers as well as additional data on the impact of the
proposal to enable interested parties to fully evaluate the proposal.
Response: As noted in the Regulatory Impact Analysis section of
this final rule, since the proposal as finalized is not mandatory for
qualifying issuers, CMS cannot, at this time, provide the number of
impacted issuers. However, based on 2023 MLR data, we estimate that
fewer than half a dozen issuers would meet the new definition of
``qualifying issuer'' and, if all of them choose to modify the
treatment of risk adjustment transfer amounts in the manner described
and finalized in this rule, would experience a total combined reduction
in rebates of approximately $35 million, out of approximately 180
issuers that owed approximately $946 million in combined total rebates
for 2023.
Comment: Several commenters opposed the proposal. The majority of
these commenters advocated for the alternative approach described in
the proposed rule that would apply the risk adjustment transfer amounts
in a manner that has a net impact on the MLR denominator instead of
numerator for all issuers, rather than only ``qualifying issuers.'' In
contrast, a few commenters who opposed the proposal stated that if CMS
nevertheless did finalize the proposal, they would prefer the proposed
narrow approach, rather than the alternative approach, as it would be
less harmful. These commenters were particularly concerned with the
potential negative impacts of the alternative approach on the lower-
cost issuers that tend to offer more affordable plans designed to
target low utilization, generally owe risk adjustment payments, and
sometimes face solvency concerns of their own. One commenter opposed
both the proposal and the alternative approach. Several commenters
noted concern that the proposal would exacerbate pricing uncertainty
and market distortion for non-qualifying issuers. One commenter stated
that they were unable to conclusively determine whether risk adjustment
should be reflected in the MLR numerator or denominator, while two
commenters stated they consider payments or receipts related to the
HHS-operated risk adjustment program to be more appropriate as an
adjustment to premium rather than claims, as this would be consistent
with both generally accepted accounting practices and State statutory
accounting.
Response: Given the wide range of views among commenters, including
conflicting views regarding whether payments or receipts related to the
risk adjustment program are generally more appropriate as an adjustment
to premium in the MLR denominator or claims in the MLR numerator, we
are declining to adopt the alternative approach described in the
proposed rule and are finalizing the narrower proposal that applies the
changes only to ``qualifying issuers,'' rather than all issuers, with
the modification discussed
[[Page 4515]]
above to allow qualifying issuers to opt into taking advantage of
modifying the treatment of risk adjustment transfer amounts in their
MLR and rebate calculations. We agree with commenters who favored
limiting this option to qualified issuers as a means of reducing the
possibility of an adverse impact on issuers that owe risk adjustment
charges and that may have lower administrative costs and premiums.
Given the very small number of issuers that we estimate will meet the
definition of a ``qualifying issuer'' and also owe rebates, we believe
that finalizing the narrower proposal will have minimal possibility of
disrupting the market and exacerbating pricing uncertainty, and we
share some commenters' concerns regarding the potential negative impact
of higher MLR rebates under the alternative approach on issuers that
owe risk adjustment payments.
Comment: Some commenters who opposed the proposal stated that the
proposed 50 percent threshold to become a ``qualifying issuer'' is
arbitrary, inequitable, and would create an unlevel playing field.
These commenters stated that the proposal could incentivize issuers to
set inadequate rates to meet the new definition of a qualifying issuer,
and that if actual risk adjustment receipts were to be lower than
expected, an issuer could face both inadequate premium and risk
adjustment revenue, as well as have to pay higher than expected
rebates, which could ultimately increase, rather than prevent, market
instability and issuer insolvencies.
Response: We acknowledge commenters' concerns. However, we believe
that this hypothetical scenario, under which an issuer that is close to
the threshold of ``qualifying issuer'' and close to or under the MLR
rebate threshold would purposely and significantly underprice, would
greatly increase the risk of insolvency, and is therefore unlikely. Our
analysis of 2023 MLR data shows that fewer than half a dozen additional
issuers have aggregate ratios of risk adjustment receipts to premium
between 20 and 50 percent. Further, our analysis of 2023 MLR data also
shows that very few issuers nationwide would currently meet the
threshold to qualify as a ``qualifying issuer'' and also owe rebates,
and thus it is unlikely that providing the option for these issuers to
modify the treatment of risk adjustment transfer amounts in the manner
described and finalized in this rule would cause significant or
widespread market uncertainty, distortion, or instability that would
outweigh the benefits of codifying this narrow flexibility for
qualifying issuers that opt to utilize it. For the same reason, we
disagree that the 50 percent threshold is arbitrary or would create an
uneven playing field, as it was chosen to capture a small number of
issuers that are clear outliers relative to the prevalent positioning
in the industry, and whose risk adjustment transfer amounts and premium
revenue indicate business models that are fundamentally different from
those of most issuers.
Comment: One commenter noted skepticism that the proposal validly
asserts that risk adjustment overcompensates issuers whose premiums are
below statewide average premium and that they should be entitled to
retain that overcompensation. One commenter also noted that the
proposal is unnecessary since any issuer whose risk adjustment program
payments are large enough to result in it owing MLR rebates is being
overcompensated by the risk adjustment program for its enrollees,
depriving those enrollees of an MLR rebate.
Response: The policy being finalized in this final rule is designed
to target issuers that rely on risk adjustment receipts for revenue to
such a disproportionate degree that it distorts the results of the MLR
and rebate calculations, and that are consequently also unable to
reduce enrollees' premiums any further without jeopardizing solvency.
Therefore, we do not agree that the policy would enable such issuers to
be overcompensated or that it would improperly deprive their enrollees
of the benefit of MLR rebates.
Comment: A few commenters urged CMS to explore alternative vehicles
other than MLR to address the stated policy concerns, such as
addressing issues with the HHS-operated risk adjustment program or
focusing on other policies that directly impact issuers' long-term
financial stability and actuarily sound pricing practices.
Response: We appreciate the commenters' suggestions. We have
analyzed the HHS risk adjustment methodology in numerous white papers,
have refined the HHS risk adjustment methodology as new data become
available, and have finalized modifications and improvements to it as
necessary, including in this final rule. However, the modifications we
are finalizing in part 158 do not impact the HHS-operated risk
adjustment program, and the comment regarding changes to the HHS-
operated risk adjustment program to address issuers' financial
stability and pricing practices is out of scope of this proposal. As
stated in the proposed rule, the change to the MLR and rebate
calculations is intended to specifically address concerns that, for
certain issuers with risk adjustment payments that are greater than
half of their premium revenue, these calculations might require large
rebate payments that impact solvency--a scenario that we believe is
contrary to the goals of the MLR program. As such, we believe that
finalizing the proposed change to the MLR and rebate calculations for
qualifying issuers, at their option, is appropriate.
Comment: One commenter supported making the proposal effective
beginning with the 2026 MLR reporting year.
Response: We thank the commenter for their support of the proposed
effective date and are finalizing this proposal, with modification,
effective beginning with the 2026 MLR reporting year.
Comment: One commenter suggested CMS postpone finalizing the
proposal to study its potential impact in greater depth and to receive
additional feedback from interested parties.
Response: While we appreciate the commenter's suggestion, we
decline to postpone finalizing the proposal. We received many detailed
and thorough comments from interested parties that addressed the full
spectrum of the potential benefits and drawbacks of the proposal, and
that are sufficient to inform the decision to finalize the proposal.
However, as noted above, we intend to monitor and analyze the impact of
this policy after it is implemented for the 2026 and later MLR
reporting years to evaluate whether it operates as intended and
continues to be appropriate.
Comment: One commenter urged CMS to investigate how issuers and
PBMs are using vertically integrated systems to circumvent the intent
of the MLR reporting and rebate rules by shifting profits from an
issuer to an affiliated entity that is not subject to the MLR
requirements, or inflating clinical reimbursement payments to
affiliated providers. One commenter recommended that we change the
definition of a ``health plan'' to include stand-alone dental coverage.
Response: While we appreciate the commenters' recommendations,
these comments are out of scope of this proposal.
F. Severability
As demonstrated by the number of distinct programs addressed in
this rulemaking and the structure of this final rule in addressing them
independently, HHS generally intends this rule's provisions to be
severable from each other. For example, the final rule outlines payment
parameters and
[[Page 4516]]
provisions for the HHS-operated risk adjustment and risk adjustment
data validation programs, 2026 user fee rates for issuers in these
programs, and changes to the BHP payment calculations. It includes
modifications to the initial and second validation audit processes that
are part of the HHS-RADV program and addresses HHS' authority to take
enforcement action against lead agents at insurance agencies for
violations of HHS' Exchange standards and requirements. The rule also
addresses certification standards, ECP reviews, public sharing of
aggregated, summary-level QIS information on an annual basis, and
revisions to the MLR reporting and rebate requirements for qualifying
issuers that meet certain standards. It is HHS' intent that if any
provision of this final rule is held to be invalid or unenforceable by
its terms, or as applied to any person or circumstance, the rule shall
be construed so as to continue to give maximum effect as permitted by
law. In the event a provision is found to be utterly invalid or
unenforceable, HHS intends that that provision to be severable.
IV. Waiver of Delay in Effective Date
We ordinarily provide a minimum 60-day delay in the effective date
of the provisions of a rule in accordance with the Administrative
Procedure Act (APA) (5 U.S.C. 553(d)), which usually requires a 30-day
delayed effective date, and the Congressional Review Act (CRA) (5
U.S.C. 801(a)(3)), which usually requires a 60-day delayed effective
date for major rules. However, we can waive the APA and CRA delay in
effective date requirements for good cause (5 U.S.C. 553(d)(3) waiver
available when ``provided by the agency for good cause found and
published with the rule''; 5 U.S.C. 808(2) (waiver available when ``an
agency for good cause finds (and incorporates the finding and a brief
statement of reasons therefore in the rule issued that notice and
public procedure thereon are impactable, unnecessary, or contrary to
the public interest''). The Secretary has determined that it is
appropriate to issue this final rule effective immediately from the
date this rule appears in the Federal Register. The provisions are
necessary to address imminent threats to the health and safety of
Exchange enrollees presented by unauthorized changes to a consumer's
health coverage.
Prompt action is necessary to provide for certain critical changes
to our monitoring of agents and brokers for 2025 to protect consumers,
insurers, and agents and brokers from non-compliant actors. Over the
past year, HHS has observed inappropriate behavior by a small
population of agents and brokers in the Exchanges that significantly
impacts and endangers consumers. The non-compliant actions of these
agents and brokers have placed the health and safety of consumers at
risk, led to consumer financial harm, and undermined trust in the
Exchanges and the healthcare system.
HHS has observed enrollment practices where agents and brokers
switch individuals' plans without their consent or enroll them in a
plan without their consent. This has led to dangerous gaps in coverage
that kept consumers from obtaining medications for chronic conditions
and placed at risk their ability to receive medically necessary
procedures and services because of the disruption to their coverage.
Making this final rule effectively immediately will help to mitigate
the significant health and safety risk that consumers will go without
necessary medical care and services due to gaps in coverage that are no
fault of their own.
As reported, from January to August of 2024 there were 90,863
unauthorized plan switches and 183,553 unauthorized enrollments
attributed to agent and broker misconduct.\252\ Such actions not only
harm consumers, but also place sensitive consumer information at risk,
disrupting the integrity of the Exchanges. The oversight policies in
this final rule are integral to combatting agent and broker misuse of
sensitive consumer information. Privacy violations pose a significant
risk, as unauthorized use or sharing of personal consumer information
can lead to identity theft and other privacy breaches. In response to
the proposed rule, interested parties requested speedy changes in
oversight to protect consumers from noncompliant and fraudulent
behavior to protect consumers and maintain the integrity of the
Exchanges.
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\252\ CMS, CMS Update on Actions to Prevent Unauthorized Agent
and Broker Marketplace Activity, https://www.cms.gov/newsroom/press-
releases/cms-update-actions-prevent-unauthorized-agent-and-broker-
marketplace-
activity#:~:text=consumers%20who%20believe%20they%20may,resolve%20any
%20coverage%20issues%20promptly. Oct. 17, 2024.
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Consumers also have faced financial harm after being
inappropriately lured into a plan by misleading agent/broker
advertisements that promise non-existent cash benefits, as well as
concerning behavior involving the use of high-pressure sales tactics.
Such tactics have caused consumers to enroll in QHPs with no premium
responsibility when they are already enrolled in Medicaid or employer
sponsored coverage that qualifies as minimum essential coverage that
disqualifies them from receiving APTCs to support QHP premium payments.
This has exposed affected consumers to liability to repay APTCs once
they discover they were enrolled in a plan without their knowledge or
consent.
Prompt action is also necessary to provide for certain critical
changes to our programs for 2025--including a policy to allow issuers
to voluntarily adopt multiple premium payment thresholds to support
continuous coverage of consumers; an amendment to the medical loss
ratio (MLR) calculation to account for risk adjustment; updates to user
fees for issuers offering qualified health plans (QHPs) through an FFE
or SBE-FP and those participating in the HHS-RADV program; amendments
to adjust the premium adjustment factor (PAF) in the Basic Health
Program (BHP); a clarification to the BHP payment methodology to
address ambiguities when multiple second lowest cost silver plans exist
in one county; risk adjustment data validation policies that remove
enrollees without HCCs from the IVA sampling methodology and remove the
finite population correction (FPC) factor; and timeliness standards for
State Exchanges to review and resolve enrollment data inaccuracies. We
seek an immediate effective date to allow issuers ample time to prepare
for the 2025 plan year and help stabilize the Exchanges for issuers and
consumers. We believe consumers' confidence in the Exchanges is
especially important this time of year when they are making enrollment
decisions, with Open Enrollment in the individual market ongoing and
the Medicare General Enrollment period about to begin on January 1.
States, issuers, and other interested parties have also requested that
this rule become effective earlier to establish rates for 2026 in a
timely fashion.
HHS has determined that implementation of these changes beginning
early in 2025 is necessary to protect against imminent threats to the
health and safety of Exchange applicants and enrollees, maintain robust
participation on the Exchanges, and to encourage affordability of
coverage for enrollees and the continuity of care that is supported by
the continued availability of plans on the Exchanges. HHS has therefore
found good cause to waive the APA's and CRA's delayed effective date
requirements and determined that the rule will become effective
immediately
[[Page 4517]]
on the date this rule appears in the Federal Register January 15, 2025.
V. Collection of Information Requirements
Under the Paperwork Reduction Act of 1995 (PRA), we are required to
provide a 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 comments 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.
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.\253\ Table 4 presents the median
hourly wage, the cost of fringe benefits and overhead, and the adjusted
hourly wage.
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\253\ See Department of Labor. (2024, April 3). Bureau of Labor
Statistics, Occupational Employment and Wage Statistics, May 2023
Occupation Profiles. https://www.bls.gov/oes/current/oes_stru.htm.
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As indicated, employee hourly wage estimates have been adjusted by
a factor of 100 percent. This is necessarily a rough adjustment, both
because fringe benefits and overhead costs vary significantly across
employers, and because methods of estimating these costs vary widely
across studies. Nonetheless, there is no practical alternative, and we
believe that doubling the hourly wage to estimate total cost is a
reasonably accurate estimation method.
[GRAPHIC] [TIFF OMITTED] TR15JA25.056
B. ICRs Regarding the Initial Validation Audit (IVA) Sample--Enrollees
Without HCCs, Removal of the FPC, and Neyman Allocation (Sec.
153.630(b))
Beginning with the 2025 benefit year of HHS-RADV, we are finalizing
under Sec. 153.630(b) excluding enrollees without HCCs from the IVA
sampling methodology, removing the FPC from IVA sampling,\254\ and
replacing the source of the Neyman allocation data with the most recent
3 years of consecutive HHS-RADV data with results that have been
released before HHS-RADV activities for the benefit year begin.
Specifically, these amendments will exclude enrollees without HCCs
(stratum 10 enrollees that do not have HCCs nor RXCs and RXC-only
enrollees in strata 1 through 3) from IVA sampling, remove the FPC such
that issuers with 200 or more enrollees in strata 1 through 9 will have
IVA sample sizes of 200 enrollees and issuers with less than 200
enrollees in strata 1 through 9 will have IVA sample sizes equal to
their population of enrollees with HCCs, and change the source of the
Neyman allocation data used to calculate the standard deviation of risk
score error from MA-RADV data to HHS-RADV data. By removing enrollees
without HCCs from IVA sampling, the Neyman allocation will only apply
to enrollees with HCCs in strata 1 through 9 in the IVA sample.
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\254\ In the current IVA sampling methodology, a Finite
Population Correction factor is used to calculate a target IVA
sample size less than 200 enrollees for issuers with less than 4,000
enrollees.
---------------------------------------------------------------------------
These amendments are intended to improve the validity of our IVA
sampling assumptions and sampling precision and will decrease aggregate
burden across all issuers when implemented in combination. As noted in
section III.B.6.a of this final rule, the finalized changes to the IVA
sampling methodology will result in increased sample sizes for some
smaller issuers that are subject to the FPC and currently assigned
modified IVA sample sizes less than 200 enrollees under the current
methodology. However, sample size is not necessarily indicative of
issuer burden in HHS-RADV, as the driving factor of burden is the
number of enrollee medical records that must be retrieved and reviewed
for the IVA sample. Overall, the amended IVA sampling methodology in
this final rule alters the allocation of strata sample sizes within the
IVA sample, ultimately resulting in relatively smaller proportions of
enrollees from high-risk strata, who generally have more medical
records to review, being selected for the IVA sample, on average.
Consequently, with these amendments, the average number of medical
records reviewed per enrollee in the IVA sample and the average number
of medical records reviewed per issuer will decrease.
The currently approved information collection (OMB Control Number
0938-1155) for conducting the IVA takes into account that the issuer
must review the IVA sample and determine which enrollees will require
medical records to validate their HCCs and details the processes the
issuer must undertake to obtain medical records for their enrollees
selected for the IVA sample. In the currently approved information
[[Page 4518]]
collection, we estimate an upper limit of 650 issuers submitting
samples of 200 enrollees for HHS-RADV for any given benefit year, five
medical record requests per enrollee in the IVA sample size and three
HCCs to be reviewed by a certified medical coder per enrollee with
HCCs, which leads to an aggregate burden of conducting IVAs of
approximately 1,663,729 hours and $116,963,821.\255\ Given the changes
to the IVA sample under the policies in this final rule and recent HHS-
RADV data, we estimate an upper limit of 600 issuers submitting samples
of 200 enrollees for HHS-RADV for any given benefit year.\256\ We
estimate an approximate average of two medical records reviewed and two
HCCs reviewed per enrollee in the IVA sample under the revised IVA
sampling methodology.
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\255\ OMB Control No: 0938-1155 (exp. April 30, 2025). https://www.reginfo.gov/public/do/PRAViewICR?ref_nbr=202308-0938-015.
\256\ A total of 605 issuers participated in the HHS-operated
risk adjustment program for the 2023 benefit year. However, some of
these issuers are subject to exemptions from HHS-RADV under 45 CFR
153.630(g) and would not submit IVA samples for HHS-RADV. For
example, any issuers at or below the materiality threshold for
random and targeted sampling only participate in HHS-RADV
approximately once every 3 years. Therefore, we use 600 issuers as a
conservative upper limit of the number of issuers that could
participate in a given benefit year of HHS-RADV. See the Summary
Report on Individual and Small Group Market Risk Adjustment
Transfers for the 2023 Benefit Year (July 22, 2024) available at
https://www.cms.gov/cciio/programs-and-initiatives/premium-stabilization-programs/downloads/ra-report-by2023pdf.
---------------------------------------------------------------------------
For our monetary and hourly burden estimates, we are incorporating
labor and wage costs from the most recent premium stabilization
programs information collection, ``Standards Related to Reinsurance,
Risk Corridors, Risk Adjustment, and Payment Appeals'' (OMB Control
Number 0938-1155). Based on an analysis that applies the amendments to
remove enrollees without HCCs from IVA sampling, remove the FPC, and
use HHS-RADV data as the source for the Neyman allocation beginning
with 2025 benefit year HHS-RADV, approximately 200 enrollees in an
issuer sample will require medical records to validate HCCs, with
approximately two medical record requests per enrollee (approximately
400 medical record requests per issuer).\257\ We estimate it will take
a business operations specialist (occupation title ``Business
Operations Specialists, All Other'' at an hourly wage rate of $76.52)
approximately 1 hour to complete, review, and conduct follow-up on each
medical record request (20 minutes each to complete each medical record
request, review the response to each medical record request, and to
conduct further follow-up on each medical record request). For each
issuer, we anticipate the burden will be approximately 400 hours at a
cost of $30,608. For an estimated 600 issuers required to submit
samples for HHS-RADV for any given benefit year, we anticipate that the
aggregate burden of completing medical record reviews will be
approximately 240,000 hours and $18,364,800.
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\257\ This estimate is a decrease from the estimate of medical
record requests per enrollee in the currently approved information
collection because the finalized changes to the IVA sampling
methodology in this rule will generally result in relatively fewer
enrollees sampled from higher-risk strata, which are generally
composed of enrollees with more medical records, thereby reducing
our estimated number of medical records for review.
---------------------------------------------------------------------------
Based on a review of enrollee-level EDGE data for the 2017-2022
benefit years and the finalized changes to the IVA sampling methodology
in this final rule, we have determined that for enrollees with HCCs,
the average number of HCCs to be reviewed by a certified medical coder
per enrollee will be approximately two HCCs. Additionally, based on
HHS-RADV audit experience, we estimate that it may cost approximately
$272.52 ($60.56 per hour for 4.5 hours on average) for a certified
medical coder to review the medical record documentation for one
enrollee with roughly two HCCs. For 200 enrollees with HCCs in an
issuer's IVA sample, the total cost to each issuer will be $54,504 (for
900 hours). In some cases, a secondary review by a senior certified
medical coder (occupation title ``Health Information Technologists and
Medical Registrars'' at an hourly wage rate of $60.56 per hour) will be
needed to re-review approximately one-third of the medical record
documentation required during the first review. Thus, a senior
certified medical coder will need to review medical documentation for
the equivalent of approximately 66 enrollees with HCCs in an issuer
sample. We estimate that the total cost to each issuer will be
approximately $17,986.32 ($60.56 per hour for 4.5 hours per enrollee).
For this review and secondary review, the total cost to each issuer
will be approximately $72,490.32 (1,197 total hours).
These changes will not affect the review of demographic and
enrollment information, as we will continue to validate demographic and
enrollment information for a subsample of up to 50 enrollees from the
audit sample, or the RXC review, as the audit entity must review RXCs
for all adult enrollees in the audit sample with at least one RXC, and
we continue to assume that a review will be performed on approximately
50 RXCs per issuer. As such, we are only changing our burden estimates
of demographic and enrollment or RXC review to use the most recent
median hourly wage estimates. We estimate that it may cost
approximately $20.19 per enrollee ($60.56 per hour for 20 minutes) to
validate demographic information for 50 enrollees in each audit sample
totaling $1,009.33 per issuer. Similarly, we estimate that RXC
validation for 50 enrollees will cost approximately $20.19 per RXC
($60.56 per hour for 20 minutes), totaling $1,009.33 per issuer. In
addition, for each issuer, we expect it will require a compliance
officer working 40 hours at $72.76 per hour, and two operations
managers working a total of 80 hours at $97.38 per hour to make
available to external medical coders associated with the IVA entity
claims documents for review of demographic information and RXC review
(120 hours at a combined cost of $10,701).
For each issuer submitting audit findings for HHS-RADV in a given
benefit year, the total burden for reporting, coding, and
administration will be approximately 1,750.33 hours at a cost of
$115,817.79 per issuer. For an estimated 600 issuers required to submit
audit findings for HHS-RADV for any given benefit year, we anticipate
that the aggregate burden of conducting IVAs will be approximately
1,050,200 hours and $69,490,672 beginning in 2025. This reflects an
aggregate burden decrease of 613,529 hours and $47,473,149 from the
existing aggregate burden estimate of approximately 1,663,729 hours and
$116,963,821.
We sought comment on these assumptions.
We did not receive any comments in response to the proposed burden
estimates for this policy. We received comments on the general impacts
of this policy on issuer and IVA Entity burden and respond to those
comments in section III.B.6.a. and the Regulatory Impact Analysis
section of this rule. For the reasons outlined in the proposed rule and
this final rule, we are finalizing these estimates as proposed.
C. ICRs Regarding Engaging in Compliance Reviews and Taking Enforcement
Actions Against Lead Agents for Insurance Agencies (Sec. 155.220)
This finalized policy addresses HHS' authority to engage in
compliance reviews of and take enforcement action against lead agents
of insurance agencies in both FFE and SBE-FP States for misconduct or
noncompliant activity
[[Page 4519]]
at the agency level. We did not propose any amendments to our existing
regulations as the current regulatory framework and definitions
supports this approach. Furthermore, this finalized policy only
envisions collecting agency-level documentation, including, but not
limited to, training manuals, onboarding material, and marketing
materials, from lead agents, in addition to the existing documentation
collection \258\ for agents, brokers, or web-brokers, to investigate
potential misconduct or noncompliant behavior or activities. Therefore,
this collection will fall under 5 CFR 1320.4(a)(2), stating collections
of information ``. . . during the conduct of an [. . .] investigation''
are exceptions to the ICR requirements.\259\ The documentation that
will be collected will solely relate to investigations of potential
misconduct or noncompliant behavior or activities such that this
exception will apply.
---------------------------------------------------------------------------
\258\ This includes documentation of consumer review and
confirmation of the accuracy of eligibility application information
in compliance with 45 CFR 155.220(j)(2)(ii)(A)(2) and consumer
consent documentation in compliance with 45 CFR
155.220(j)(2)(iii)(c).
\259\ 5 CFR 1320.4(a)(2).
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We sought comment on these assumptions.
We did not receive any public comments regarding this ICR, and the
assumptions made. For the reasons outlined in the proposed rule and
this final rule, we are finalizing these assumptions for this policy as
proposed.
D. ICRs Regarding Agent and Broker System Suspension Authority (Sec.
155.220(k))
We are finalizing an amendment to expand HHS' authority to suspend
system access for agents and brokers under Sec. 155.220(k)(3) in
instances in which we discover circumstances that pose unacceptable
risk to the accuracy of the Exchange's eligibility determinations,
Exchange operations, applicants or enrollees, or Exchange information
technology systems, including but not limited to risk related to
noncompliance with the standards of conduct under Sec.
155.220(j)(2)(i), (ii), or (iii) or the privacy and security standards
at Sec. 155.260, until the circumstances of the incident, breach, or
noncompliance are remedied or sufficiently mitigated to HHS'
satisfaction. Since this amendment will entail providing an opportunity
for agents and brokers to submit evidence and information to
demonstrate that the circumstances of the incident, breach, or
noncompliance have been remedied or sufficiently mitigated to HHS'
satisfaction, it will involve collecting documents from agents and
brokers participating in the FFEs and SBE-FPs whose system access has
been suspended. Depending on the circumstances leading to the system
suspension, we anticipate receiving documentation of consumer consent
and/or review and confirmation of the accuracy of the Exchange
eligibility application information and assessing whether the
documentation complies with Sec. 155.220(j)(2)(ii) and (iii) for
consumers cited in the suspension notice from agents and brokers we
system suspend under Sec. 155.220(k)(3). The system suspension
authority in Sec. 155.220(k)(3) is part of HHS' oversight and
enforcement framework applicable to agents and brokers who participate
in the FFEs and SBE-FPs. Therefore, this collection will fall under 5
CFR 1320.4(a)(2), stating collections of information ``. . . during the
conduct of an [. . .] investigation'' are exceptions to the ICR
requirements.\260\ The documentation that will be collected will solely
relate to investigations and responses to system suspensions, meaning
this exception would apply.
---------------------------------------------------------------------------
\260\ Id.
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We sought comment on these assumptions.
We did not receive any public comments regarding this ICR, and the
assumptions made. For the reasons outlined in the proposed rule and
this final rule, we are finalizing these assumptions for this policy as
proposed.
E. ICRs Regarding Updating the Model Consent Form (Sec. 155.220)
We are finalizing amendments to the model consent form created as
part of the 2024 Payment Notice (88 FR 25809 through 25811). The
existing model consent form only provides a template for meeting the
consent documentation and retention requirements of Sec.
155.220(j)(2)(iii)(A)-(C). We are finalizing an update such that the
model consent form will also include a template to meet the
requirements under Sec. 155.220(j)(2)(ii), which requires agents,
brokers, and web-brokers to document that eligibility application
information has been reviewed by and confirmed to be accurate by the
consumer or their authorized representative prior to submission of the
application to the FFE or SBE-FP. This amendment will only update the
optional model consent form that was created as part of the 2024
Payment Notice and adopted on June 30, 2023. The 2024 Payment Notice
(88 FR 25890 through 25891) considered the additional time it would
take the assisting agent, broker, or web-broker to process and submit
each consumer's eligibility application, and those assumptions remain
valid and are unchanged. We believe these assumptions remain valid as
none of the regulatory requirements established by the 2024 Payment
Notice are being changed and no new requirements are being added with
this amendment. Therefore, this finalized policy will not impart extra
time or costs to the assisting agent, broker, or web-broker. Agents,
brokers, and web-brokers are already required to meet the requirements
of Sec. 155.220(j)(2)(ii) and (iii), meaning the time required to
gather the documentation required by the 2024 Payment Notice is already
a part of every agent's, broker's, and web-broker's enrollment process.
We do not believe the updated model consent form will impose any
additional burden on agents, brokers, web-brokers, or consumers,
because usage of this model consent form remains optional and this
updated model consent form is simply intended to provide a useable
example of how agents, brokers, web-brokers, and agencies may
compliantly meet the documentation requirements already required by the
2024 Payment Notice. If agents, brokers, agencies, or web-brokers elect
to use this form, we do not anticipate that the updated model consent
form will take any longer to fill out than agent, broker, web-broker,
or agency-created forms or other methods being already being utilized
currently, as the requirements for documentation are not changing from
the documentation requirements that agents, brokers, agencies, and web-
brokers are already required to meet in their current agent, broker,
web-broker, or agency-created forms or methods.
The amended model consent form will also include scripts agents,
brokers, and web-brokers can utilize to meet the consumer consent and
eligibility application review requirements finalized in the 2024
Payment Notice when assisting consumers via an audio recording. The
scripts will ensure agents, brokers, and web-brokers having verbal,
recorded conversations with consumers discuss all the regulatory
requirements with consumers. We do not anticipate these scripts will
increase burden on any assisting agent, broker, web-broker, or consumer
as no regulatory requirements have been changed. As agents, brokers,
and web-brokers should already be complying with these requirements, no
additional costs will be borne by the agent, broker, or web-broker if
using the updated model consent form scripts. The scripts are merely
meant to provide agents,
[[Page 4520]]
brokers, and web-brokers with guidance and clarification on how the
consent documentation and eligibility application review documentation
requirements can be met when having a verbal, recorded conversation
with a consumer. The scripts in the updated model consent form are not
mandatory and are not intended to limit or otherwise impact the agent,
broker, or web-broker's ability to answer consumer questions about plan
selection or other matters.
Finally, there is no anticipated increase in documentation
collection burden on HHS based on the updated model consent form. We
currently request documentation of consumer consent and eligibility
application review for compliance reviews and, assuming agents,
brokers, and web-brokers use the updated model consent form, that will
not meaningfully impact the documentation collection or review by HHS.
The updated model consent form discussed in this section will be
submitted for OMB review and approval in the amended PRA package (OMB
Control No. 0938-1438/Expiration date: June 30, 2026).
We sought comment on these assumptions.
After consideration of comments and for the reasons outlined in the
proposed rule and this final rule, including our responses to comments,
we are finalizing these assumptions for this policy as proposed. We
summarize and respond to public comments received on the proposed
assumptions below.
Comment: Some commenters stated we should not mandate audio
recording of enrollments and should not require agents, brokers, or
web-brokers to use our scripts as this would be especially burdensome
to smaller agents, brokers, web-brokers, or agencies.
Response: While agents, brokers, and web-brokers can meet the
requirements of Sec. 155.220(j)(2)(ii)(A) and (j)(2)(iii) via an audio
recording, this is just one type of documentation that is considered to
be acceptable under these sections, and there is no mandate that an
audio recording be used to meet these requirements. Agents, brokers,
and web-brokers may use any method they wish to meet the consent
documentation requirement and review and confirmation of the accuracy
of eligibility application information requirement, provided the
minimum information required by the regulations is captured in this
documentation and the documentation can be maintained for a minimum of
10 years and produced to CMS upon request. In addition, as noted in the
proposed rule (89 FR 82364), it would not be mandatory for agents,
brokers, or web-brokers to use the amended model consent form or new
scripts to comply with the requirements set forth in Sec.
155.220(j)(2)(ii)(A) and (j)(2)(iii)(A)-(C).
Comment: Numerous commenters noted concern that this proposal would
impose more burdens on agents, brokers, and web-brokers, especially
smaller entities. Commenters stated that agents, brokers, and web-
brokers would have less time to spend with each consumer, people would
be deterred from enrolling, and agents and brokers would be deterred
from participating in the Exchange.
Response: We respectfully disagree with commenters that this
proposal will require an agents, broker, or web-broker to spend more
time with each consumer, that smaller agents or agencies will be
impacted more severely, or that agents, brokers, web-brokers, or
consumers will stop participating in the Exchange.
The proposal to update the model consent form does not involve a
regulatory change or add requirements to the current enrollment
process. The proposal expands the model consent form to include means
to meet requirements that were established in the 2024 Payment Notice,
namely, the requirement to document the consumer reviewed and confirmed
their eligibility application information. The proposal also provides
scripts an agent, broker, or web-broker may utilize to meet these
requirements, along with the consent documentation requirements, if
working with a consumer via a spoken method.
The requirements established in the 2024 Payment Notice remain in
effect and are unchanged. Therefore, we do not anticipate any new
burden or impact to consumers', agents', brokers', or web-brokers'
participation in the Exchange that will be associated with the updated
model consent Form and use of this form will remain optional.
F. ICRs Regarding Notification of 2-Year Failure To File and Reconcile
Population (Sec. 155.305)
We are finalizing an amendment to current regulation at Sec.
155.305(f)(4) under which an Exchange needs to provide notification to
either an enrollee or their tax filer (or both) who have been
identified as having failed to file their Federal income taxes and
reconcile their APTC after 2 consecutive tax years. This notification
provides an additional opportunity to educate the enrollee or their tax
filer of their responsibility to file their Federal income taxes and
reconcile their APTC and that they are at risk for losing their
eligibility for APTC. This finalized rule will ensure that State
Exchanges will provide notifications, similar to how Exchanges on the
Federal platform currently do, and that tax filers with a 2 year FTR
status on State Exchanges receive adequate education on the requirement
to file and reconcile. It will also impact State Exchanges' FTR
processing notices for PY 2026 and subsequent years, although HHS-
published guidance has already recommended States implement noticing
procedures for PY 2025 similar to what is being required in this final
rule. We anticipate that the finalized amendment will not impact the
information collection (OMB Control Number 0938-1207) burden for
Exchanges because, in practice, the majority of Exchanges are already
sending notifications to consumers who have been identified as at risk
for losing APTC due to failing to file their Federal income taxes and
reconcile their APTC for 2 consecutive years, as discussed in further
detail in section VI.C.9 of this final rule and section V.C.9 the
proposed rule.
We sought comment on these assumptions.
We did not receive any public comments regarding this ICR and the
assumptions made. For the reasons outlined in the proposed rule and
this final rule, we are finalizing these assumptions as proposed.
G. ICRs Regarding General Program Integrity and Oversight Requirements
(Sec. 155.1200)
As discussed in the preamble of this final rule, we proposed to
increase transparency into Exchange operations by publishing annual
State Exchange and SBE-FP SMARTs, programmatic and financial audits,
Blueprint applications, and additional data points in the Open
Enrollment data reports. We are finalizing this proposal with a
modification to not publish the SMARTs. We estimate that there will be
no additional costs or burdens on Exchanges associated with this
finalized policy since this data is already collected through the
Blueprint application (OMB Control No.: 0938-1172), SMART (OMB Control
No.: 0938-1244), and Enrollment Metrics PRA packages (OMB Control No.:
0938-1119).
We sought comment on these assumptions.
We did not receive any public comments regarding this ICR and the
assumptions made. For the reasons outlined in the proposed rule and
this final rule, we are finalizing these assumptions as proposed.
[[Page 4521]]
H. ICRs Regarding Essential Community Provider Certification Reviews
(Sec. 156.235)
The finalized policy to conduct ECP certification reviews of plans
for which issuers submit QHP certification applications in FFEs in
States performing plan management functions effective beginning in PY
2026 continues our ECP data collection as permitted under the currently
approved information collection (OMB Control No.: 0938-1187/Expiration
date: June 30, 2025).
To satisfy the ECP requirement under Sec. 156.235, medical QHP and
SADP issuers must complete and submit ECP data as part of their QHP
application, in which they must list the names and geographic locations
of ECPs with whom they have contracted to provide health care services
to low-income, medically underserved individuals in their service
areas. These issuers must contract with a certain percentage, as
determined by HHS, of the available ECPs in the plan's service area.
This finalized policy will not significantly change the burden
currently approved under OMB Control No. 0938-1415,\261\ because the
ECP data collected remains the same. Only the format in which the ECP
information is submitted will be different. As described in the
preamble of this final rule, issuers in FFEs, including in States
performing plan management functions, can now submit ECP data to HHS
via MPMS. As a result of HHS system design enhancements via MPMS, HHS
is now able to collect ECP data directly from issuers in FFEs in States
performing plan management functions, enabling HHS to conduct
independent ECP evaluations of each issuers' network.
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\261\ OMB Control No. 0938-1415: Essential Community Provider-
Network Adequacy (ECP/NA) Data Collection to Support QHP
Certification (CMS-10803).
---------------------------------------------------------------------------
We sought comment on these assumptions.
We did not receive any public comments regarding this ICR and the
assumptions made. For the reasons outlined in the proposed rule and
this final rule, we are finalizing these assumptions as proposed.
I. ICRs Regarding Quality Improvement Strategy Information (Sec.
156.1130)
There is no information collection associated with this finalized
policy and no changes were proposed to the QIS data collection
requirements applicable to QHP issuers. QIS data collection from QHP
issuers to the Exchange has been approved under OMB Control Number
0938-1286.
J. ICRs Regarding Medical Loss Ratio (Sec. Sec. 158.103, 158.140,
158.240)
We are finalizing adding a definition of ``qualifying issuer'' to
Sec. 158.103, with certain clarifications, amending Sec.
158.140(b)(4)(ii) to no longer adjust incurred claims by the net
payments or receipts related to the risk adjustment program for MLR
reporting and rebate calculation purposes for, and at the option of,
qualifying issuers, making conforming amendments to the rebate
calculation example in Sec. 158.240(c)(2), and adding Sec.
158.240(c)(3) to provide a rebate calculation example for qualifying
issuers that choose to apply risk adjustment transfer amounts as
described in Sec. 158.140(b)(4)(ii). To the extent issuers currently
report their risk adjustment transfer amounts on their Annual MLR
Reporting Form(s), we do not expect there to be any impact on the
reporting burden, as the affected issuers will continue to report the
same risk adjustment transfer amounts but will include them on
different lines of the MLR Annual Reporting Form. The burden related to
this information collection is currently approved under OMB Control
No.: 0938-1164.
We sought comment on these assumptions.
We did not receive any public comments regarding this ICR and the
assumptions made. For the reasons outlined in the proposed rule and
this final rule, we are finalizing these assumptions as proposed.
K. Summary of Annual Burden Estimates for Finalized Requirements
[GRAPHIC] [TIFF OMITTED] TR15JA25.057
L. Submission of PRA-Related Comments
We have submitted a copy of the final rule to OMB for its review of
the rule's information collection and recordkeeping requirements. These
requirements are not effective until they have been approved by the
OMB.
To obtain copies of the supporting statement and any related forms
for the finalized proposed collections discussed above, please visit
CMS' website at www.cms.hhs.gov/PaperworkReductionActof1995, or call
the Reports Clearance Office at 410-786-1326.
VI. Regulatory Impact Analysis
A. Statement of Need
This final rule includes payment parameters and provisions related
to the HHS-operated risk adjustment and risk adjustment data validation
programs, as well as 2026 user fee rates for issuers offering QHPs
through FFEs and SBE-FPs. This final rule also includes finalized
requirements related to modifications to the calculation of the BHP
payment, changes to the IVA sampling approach and SVA pairwise means
test for HHS-RADV, as well as finalized compliance reviews of and
enforcement action against lead agents, updates to the model consent
form, and the authority for HHS to suspend agent and broker access to
Exchange systems. Additionally, this rule includes finalized policies
related to consumer notification requirements, standards for an issuer
to request the reconsideration of denial of certification as a QHP
specific to the FFEs, changes to the approach for conducting ECP
certification reviews of plans for which issuers submit QHP
certification
[[Page 4522]]
applications in FFEs in States performing plan management functions,
and revisions to the MLR reporting and rebate requirements for
qualifying issuers. Lastly, this final rule includes finalized
amendments to specify that the actuarially justified plan-specific
factors by which an issuer may vary premium rates for a particular plan
from its market-wide adjusted index rate include the actuarial value
and cost-sharing design of the plan, including, if permitted by the
applicable State authority, accounting for CSR amounts provided to
eligible enrollees under Sec. 156.410, provided the issuer does not
otherwise receive reimbursement for such amounts.
B. Overall Impact
We have examined the impacts of this final 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, 94 Stat. 1164), section
1102(b) of the Act, section 202 of the Unfunded Mandates Reform Act of
1995 (March 22, 1995; Pub. L. 104-4, 109 Stat. 48), Executive Order
13132 on Federalism (August 4, 1999), and the Congressional Review Act
(5 U.S.C. 804(2)).
Executive Orders 12866 and 13563 direct agencies to assess all
costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects, distributive impacts, and equity). Executive
Order 14094 \262\ amends section 3(f) of Executive Order 12866 and
defines 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.
---------------------------------------------------------------------------
\262\ Office of the White House. (2023, April 6). Executive
Order on Modernizing Regulatory Review. https://www.whitehouse.gov/briefing-room/presidential-actions/2023/04/06/executive-order-on-modernizing-regulatory-review/.
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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 regulations, and the Department has provided the following
assessment of their impact.
C. Impact Estimates of the Payment Notice Provisions and Accounting
Table
Consistent with OMB Circular A-4 (available at https://www.whitehouse.gov/wp-content/uploads/2023/11/CircularA-4.pdf), we have
prepared an accounting statement in Table 6 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
health insurance markets and in Exchanges. We are unable to quantify
all the benefits and costs of this final rule. The effects in Table 6
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 7 include changes to costs associated with
the risk adjustment user fee paid to HHS by issuers.
BILLING CODE 4120-01-P
[[Page 4523]]
[GRAPHIC] [TIFF OMITTED] TR15JA25.058
[[Page 4524]]
[GRAPHIC] [TIFF OMITTED] TR15JA25.059
[[Page 4525]]
[GRAPHIC] [TIFF OMITTED] TR15JA25.060
BILLING CODE 4120-01-C
1. BHP Methodology Regarding the Value of the Premium Adjustment Factor
(PAF) (42 CFR Part 600)
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\263\ Reinsurance collections ended in FY 2018 and outlays in
subsequent years reflect remaining payments, refunds, and allowable
activities.
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The aggregate economic impact of the finalized changes to the BHP
payment methodology is estimated to be $0 in transfers for calendar
year 2026 and all subsequent years. For the purposes of this analysis,
we have assumed that two States will operate BHPs in 2026 since
currently only two States operate BHPs, and we do not assume any more
States will do so.
For the States currently operating BHPs, we do not anticipate these
finalized changes to the payment methodology will affect future
payments. We expect that these States will have fully implemented
programs by 2026, and thus these changes will not change the value of
the PAF used in the payment methodologies for these States in 2026 and
beyond. If other States implement a BHP and do so on a partial basis,
the finalized changes would be expected to reduce Federal BHP payments
compared to what they would be under current law. The changes in
payments would depend on the number of people enrolled in BHP in the
State, the QHP premiums in the State, and the level of adjustments
added to the premiums to account for the CSRs.
We sought comment on these impacts and assumptions.
We did not receive any comments in response to the proposed impact
estimates for this policy. For the reasons outlined in the proposed
rule and this final rule, we are finalizing these estimates as
proposed.
2. Incorporation of PrEP Affiliated Cost Factor (ACF) in the HHS Risk
Adjustment Adult and Child Models (Sec. 153.320)
We are finalizing the incorporation of PrEP into the HHS risk
adjustment adult and child models as part of a new class of factors
that reflect the costs associated with care that is not related to
active medical conditions. This finalized class of factors, called the
Affiliated Cost Factors (ACFs), which are detailed in the preamble
discussion under 45 CFR part 153, will not result in any additional
reporting burden for issuers. Because it will have some impact on risk
adjustment State transfers, some issuers' State transfers will be
impacted, either in a positive or in a negative manner, consistent with
the budget-neutral nature of the HHS-operated risk adjustment program.
As HHS is responsible for operating the risk adjustment program in all
50 States and the District of Columbia, we do not expect these policies
to place any additional burden on State governments. The finalized
model specifications in this final rule result in limited changes to
the number and type of risk adjustment model factors; therefore, we do
not expect these changes to impact issuer burden beyond the current
burden for the HHS-operated risk adjustment program. This change will
help mitigate risk of adverse selection and issuers' associated
perverse incentives for coverage of PrEP users, resulting in increased
health equity among this population.
We sought comment on these impacts and assumptions.
We did not receive any comments in response to the proposed impact
estimates for this policy. For the reasons outlined in the proposed
rule and this final rule, we are finalizing these assumptions as
proposed.
3. Initial Validation Audit (IVA) Sampling Methodology Changes (Sec.
153.630(b))
We are finalizing several changes to the IVA sampling methodology.
Beginning with the 2025 benefit year of HHS-RADV, we are finalizing
under Sec. 153.630(b) excluding enrollees without HCCs (enrollees in
stratum 10 without HCCs nor RXCs and RXC-only enrollees in strata 1
through 3) from IVA sampling, removing the FPC such that issuers with
200 or more enrollees in strata 1 through 9 would have IVA sample sizes
of 200 enrollees and issuers with less than 200 enrollees in strata 1
through 9 would have IVA sample sizes equal to their EDGE population of
enrollees with HCCs, and changing the source of the Neyman allocation
data used to calculate the standard deviation of risk score error from
MA-RADV data to the 3 most recent consecutive years of HHS-RADV data
with results that have been released before that benefit year's HHS-
RADV activities begin, beginning with benefit year 2025 HHS-RADV.
Although issuers are already required to provide the IVA Entities
with all documentation necessary to complete HHS-RADV, these finalized
changes to the IVA sample will ensure all enrollees in the IVA sample
have at least one HCC on EDGE and therefore will have associated
medical records that will need to be submitted. In the Collection of
Information section of this final rule, we estimate the aggregate
decrease in administrative burden that will result from the finalized
policies to modify the IVA sample as the average number of medical
records reviewed per enrollee in the IVA sample and the average number
of medical records reviewed per issuer will decrease. We estimate that
the aggregate burden of conducting IVAs will be approximately 1,050,200
hours and $69,490,672 beginning with 2025 benefit year HHS-RADV, which
is an aggregate burden decrease of 613,529
[[Page 4526]]
hours and $47,473,149 from the existing aggregate burden estimate of
approximately 1,663,729 hours and $116,963,821. We believe that these
finalized changes to the IVA sampling methodology will result in more
precise HHS-RADV results which are used to adjust risk scores and
associated risk adjustment State transfers.
We sought comment on these impacts and assumptions.
After consideration of comments and for the reasons outlined in the
proposed rule and this final rule, including our responses to comments,
we are finalizing these impact estimates for this policy as proposed.
We summarize and respond to public comments received on the proposed
estimates below.
Comment: A few commenters agreed that the proposed changes to the
IVA sampling methodology would contribute to reduced administrative
burden among issuers and IVA entities. One commenter specifically
suggested that administrative burden could decrease for issuers with a
greater volume of HCCs to validate in their IVA samples if the proposed
changes to the IVA sampling methodology were finalized. However, a few
commenters questioned HHS' assessment of burden associated with the
proposed changes to the IVA sampling methodology. Some commenters
suggested that the proposals would increase administrative burden for
issuers, specifically for smaller issuers or lower-risk issuers with
more enrollees without HCCs in their population. One commenter
suggested that issuers' operational resources and capacity will be
significantly impacted because issuers will have to perform more HCC
and RXC validations under the proposed IVA sampling methodology.
Another commenter noted that smaller issuers that currently have
modified IVA sample sizes of fewer than 200 enrollees under the FPC
factor would be burdened by increasing the number of sampled enrollees
and medical records. Another commenter suggested that there would be a
significant burden increase associated with collecting more records
from enrollees in lower-risk strata as these enrollees are more likely
to see providers who do not provide issuers with direct access to
medical records, which could make it more burdensome for issuers to
retrieve medical records for these enrollees, especially for smaller
issuers. Another commenter suggested concern that compliance with the
added HHS-RADV audit requirements could place a greater burden on
smaller issuers without clarity on how these proposed changes would
help patients. One commenter requested HHS to monitor the impact of
these changes on burden and consider future changes if there is an
untenable increase in burden or an undesired impact on HHS-RADV
adjustments to risk adjustment transfers.
Response: As explained in section III.B.6.a of this rule, we are
finalizing the proposed changes to the IVA sampling methodology to
exclude enrollees without HCCs, remove the FPC, and use the 3 most
recent consecutive years of HHS-RADV data with results that have been
released before that benefit year's HHS-RADV activities begin to
calculate the standard deviation of risk score error (Si,h) in the
Neyman allocation as proposed to align sampling with the error
estimation methodology and improve sampling precision. We anticipate
that these changes will also improve the precision of group failure
rates, the national benchmarks used to determine outlier status in each
failure rate group, the net risk score error calculations, and will
therefore improve the precision of HHS-RADV results used to adjust risk
adjustment State transfers. Improving the precision of the IVA sampling
methodology with the adoption of the changes finalized in this rule
will also further promote the overall integrity of HHS-RADV and
confidence in the HHS-operated risk adjustment program.
As explained in the section III.B.6.a of this final rule, we
anticipate a decrease in the aggregate average burden associated with
conducting IVAs as the average number of medical records reviewed per
enrollee in the IVA sample and the average total number of medical
records reviewed per issuer will generally decrease. We disagree that
all issuers will have to perform more HCC and RXC validations under the
IVA sampling methodology finalized in this rule that incorporates all
three of the proposed changes and, as described in the proposed rule
and in section III.B.6.a of this final rule, we estimate an approximate
average of two medical records reviewed and two HCCs reviewed per
enrollee in the IVA sample under the revised IVA sampling methodology,
which is a decrease from the previous burden estimates under the
existing IVA sampling methodology of an approximate average of five
medical record requests per enrollee in the IVA sample size and three
HCCs to be reviewed by a certified medical coder per enrollees with
HCCs. In addition, as explained in section III.B.6.a. and the
Collection of Information section of this rule, we do not anticipate
that these changes will affect RXC review, as HHS-RADV requires review
of RXCs for all adult enrollees in the IVA sample with at least one
RXC, and we continue to assume that a review will be performed on
approximately 50 RXCs per issuer.\264\
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\264\ For more details on RXC validation, see Section 10.4
Validation of the BY23 HHS-RADV Protocols available at: https://regtap.cms.gov/uploads/library/HHS-RADV_2023_Benefit_Year_Protocols_v1_5CR_060424.pdf.
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We recognize that the IVA sampling methodology finalized in this
rule will result in increased sample sizes for some smaller issuers
that are currently subject to the FPC and assigned modified IVA sample
sizes of fewer than 200 enrollees under the current IVA sampling
methodology. However, we note that sample size will not increase for
all issuers currently subject to the FPC as some of these issuers have
a smaller population of enrollees with HCCs than their previously
assigned modified IVA sample sizes that included enrollees without
HCCs. For example, an issuer with a total enrollee population of 1,000
would be assigned a sample size of 160 enrollees under the current
methodology and using the FPC formula. If this issuer only has a
population of 100 enrollees with HCCs, then, under the revised IVA
sampling methodology being finalized in this rule, the issuer's IVA
sample size would decrease to 100 enrollees. In addition, based on an
analysis of historical HHS-RADV data, we estimate that the vast
majority of issuers who would see increased IVA sample sizes after the
removal of the FPC are at or below the materiality threshold for random
and targeted sampling and would therefore only be selected to
participate in HHS-RADV approximately once every 3 benefit years
(barring any risk-based triggers based on experience that will warrant
more frequent audits).265 266
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\265\ 45 CFR 153.630(g)(2).
\266\ Beginning with the 2022 benefit year of HHS-RADV, the
materiality threshold under Sec. 153.630(g)(2) is defined as 30,000
total billable member months Statewide, calculated by combining an
issuer's enrollment in the individual non-catastrophic,
catastrophic, small group, and merged markets (as applicable), in
the benefit year being audited. See the 2024 Payment Notice, 88 FR
25740, 25788 through 25790.
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We also recognize the commenter's concern that some providers of
enrollees from lower-risk strata may provide issuers with less direct
access to medical records for enrollees from lower-risk strata, but we
note that that enrollees in lower-risk strata are enrollees with fewer
HCCs or relatively lower-risk HCCs, for whom issuers should be able to
provide supporting medical records for risk adjustment eligible
diagnoses submitted to EDGE as required by the EDGE Server Business
[[Page 4527]]
Rules.\267\ The principles for including an HCC in the risk adjustment
models require that each HCC represents a well-specified, clinically
significant, chronic or systematic medical condition, and therefore,
any enrollees with HCCs, regardless of if they are in a lower-risk
stratum or higher-risk stratum, have conditions that should have
supporting medical records.\268\ Furthermore, if it is more burdensome
to retrieve medical records for enrollees from lower-risk strata, any
increase in burden from retrieving these medical records would be
offset, at least in part, by the decrease in burden from retrieving
fewer medical records for enrollees from higher-risk strata. We also
note that enrollees from low, medium, and high-risk strata will
continue to be sampled for the IVA and the actual number of enrollees
sampled from each stratum will depend on that stratum's contribution to
the total standard deviation of net risk score error in the issuer's
population.
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\267\ See, for example, the EDGE Server Business Rules (ESBR)
Version 25.0 (December 2024) available at: https://regtap.cms.gov/uploads/library/DDC-ESBR-v25-5CR-120624.pdf.
\268\ See CMS. (2021). HHS-Operated Risk Adjustment Technical
Paper on Possible Model Changes. Section 1.2.1 (Principles of Risk
Adjustment). https://www.cms.gov/files/document/2021-ra-technical-paper.pdf.
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Moreover, as explained in section III.B.6.a of this rule, we
estimate that any smaller issuers receiving the FPC under the current
methodology and whose IVA sample sizes would increase under the
finalized IVA sampling methodology would see a 35 percent increase in
Super HCC count in their IVA samples and a 26 percent increase in group
failure rate precision on average across all three failure rate groups.
Therefore, we believe that the benefits a smaller issuer gains from
increased group failure rate precision and the estimated overall
average decrease in the number of HCCs and medical records reviewed per
enrollee outweigh any potential increases in IVA sample size.
We also clarify that while HHS-RADV does not directly impact
patients, HHS-RADV is an issuer audit that helps ensure the integrity
of data used in the HHS-operated risk adjustment program to calculate
risk adjustment State transfers. The risk adjustment program helps
stabilize premiums across the individual, merged, and small group
markets, and thereby helps provide consumers with affordable health
insurance coverage options.
HHS will continue to monitor the impact of the finalized changes to
the IVA sampling methodology once implemented. While these changes to
the IVA sampling methodology could affect the adjustments to risk
adjustment State transfers for an individual issuer, we anticipate that
any changes to HHS-RADV adjustments will reflect more accurate
actuarial risk differences between issuers.
4. Second Validation Audit (SVA) Pairwise Means Test (Sec. 153.630(c))
We are finalizing modifications to the pairwise means test to use a
90 percent confidence interval bootstrapping methodology and to
increase the initial SVA subsample size from 12 enrollees to 24
enrollees beginning with 2024 benefit year HHS-RADV. Because issuers
are already required to provide the IVA and SVA Entities with all
documentation necessary to complete the audits, the finalized changes
to the pairwise means test that will increase the initial SVA subsample
size to 24 enrollees and transition to a bootstrapping methodology
using a 90 percent confidence interval will not directly increase
burden on issuers. We believe that these changes will increase the
burden and costs to the Federal Government of conducting the SVA. We
estimate that increasing the initial SVA sample size from 12 to 24
enrollees will increase the annual costs of SVA medical review by
approximately $1.5 million and that transitioning from the current t-
test pairwise means testing procedure to a bootstrapped procedure will
increase the annual cost of SVA medical review by approximately
$500,000 as more issuers will be expanded to larger SVA sample sizes
under a more sensitive pairwise means testing procedure. In addition,
there will be a one-time cost of approximately $250,000 to code these
modifications to the existing SVA pairwise means test in the Audit
Tool. Any increase in SVA costs will increase the costs to the Federal
Government associated with HHS-RADV program activities, which are
covered through the risk adjustment user fees that are charged to
issuers. While issuers will indirectly cover these costs through the
risk adjustment user fee, we do not anticipate that this policy alone
will increase the risk adjustment user fee as the costs are relatively
small compared to the entirety of the budget to operate the HHS-
operated risk adjustment program. We believe that the benefits from
improving the SVA process for validating the IVA results and
determining the appropriate audit results to use in error estimation
will outweigh the increased costs to the Federal Government and better
ensure the integrity of the risk adjustment program.
We sought comment on these impacts and assumptions.
After consideration of comments and for the reasons outlined in the
proposed rule and this final rule, including our responses to comments,
we are finalizing these impact estimates for this policy as proposed.
We summarize and respond to public comments received on the proposed
estimates below.
Comment: One commenter requested how the estimate costs and
estimated improvement in the false negative rate are attributed to
modifying the SVA subsample size as opposed to modifying the
statistical methodology. Another commenter stated that they could not
appropriately evaluate the impact of the proposed changes because
issuers and IVA entities have little transparency into SVA outcomes as
issuers who pass pairwise do not receive SVA results.
Response: As previously noted in section III.B.6.b of this rule, we
estimate that approximately 20 percent of the estimated improvement in
the false negative rate will be attributable to modifying the initial
SVA subsample size to 24 enrollees and approximately 80 percent will be
attributable to modifying the pairwise means test to a bootstrapped 90
percent confidence interval.\269\ We also estimate that approximately
33 percent of the costs associated with making these changes in 2024
benefit year HHS-RADV will be attributed to transitioning from the
current t-test pairwise means testing procedure to the bootstrapped
procedure and coding the changes to test and execute the bootstrapping
methodology, and the remaining costs will be attributed to increasing
the initial SVA subsample size to 24 enrollees.
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\269\ The rate of improvement in the false negative rate and how
this is attributed to the initial SVA subsample size or the
statistical methodology differs depending on the effect size, or the
magnitude of the true difference between IVA and SVA results. For
these estimates, we use the Cohen's D effect size measure and assume
a small effect size. See Cohen, Jacob (1988). Statistical Power
Analysis for the Behavioral Sciences. Routledge. ISBN 978-1-134-
74270-7. pp 25-27.
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We disagree that issuers and IVA entities have insufficient
transparency into SVA outcomes to evaluate the impact of the proposed
changes to the SVA pairwise testing procedure. In the proposed rule (89
FR 82308, 82355), we explained the impact of the proposed modifications
to increase the initial SVA subsample size to 24 enrollees and use a
bootstrapped 90 percent confidence interval on the false negative rate,
false positive rate and the overall sensitivity of the pairwise means
test, and we sought comment on these proposals. As explained in section
[[Page 4528]]
III.B.6.b of this final rule, we are finalizing the proposed
modifications to the SVA pairwise means testing procedure beginning
with 2024 benefit year HHS-RADV to improve the sensitivity of the SVA
pairwise means test, reduce the false negative rate and promote the
integrity of HHS-RADV. In addition, we disagree that issuers have
insufficient transparency into SVA outcomes. HHS does not provide SVA
results to issuers or IVA entities that pass pairwise testing because
passing signifies that the SVA findings do not significantly differ
from IVA findings and that the IVA findings, which issuers review and
sign off on, can be used during error estimation as issuers' final
accepted audit results for that benefit year of HHS-RADV. Issuers and
IVA Entities that pass pairwise testing and do not receive an SVA
findings report are still able to review key SVA findings, such as the
most commonly miscoded HCCs for SVA reviewed sampled enrollees, from
each benefit year of HHS-RADV in the results memo.\270\ Issuers that do
not pass pairwise testing receive SVA findings reports that include
details on the enrollee-level HCCs that differed between IVA and SVA
review.
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\270\ See, for example, Table 1 of the 2022 Benefit Year HHS-
RADV Results Memo (May 14, 2024) available at https://www.cms.gov/files/document/by22-hhs-radv-results-memo-appendix-pdf.
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5. HHS Risk Adjustment User Fee for the 2026 Benefit Year (Sec.
153.610(f))
For the 2026 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 2026 benefit year, we are
finalizing using the same methodology to estimate our administrative
expenses to operate the HHS risk adjustment program as was used in the
2025 Payment Notice (89 FR 26218).
We expect that the finalized risk adjustment user fee for the 2026
benefit year of $0.20 PMPM would increase the amount transferred from
issuers of risk adjustment covered plans to the Federal Government by
approximately $6.6 million compared to maintaining the 2025 benefit
year risk adjustment user fee of $0.18 PMPM. We continue to estimate
that the total costs for HHS to operate the risk adjustment program on
behalf of all States and the District of Columbia within the 2026
calendar year will be approximately $65 million, roughly the same as
the amount estimated for the 2025 calendar year, and are finalizing the
risk adjustment user fee for the 2026 benefit year at $0.20 PMPM to
sufficiently fund these costs.
6. Engaging in Compliance Reviews and Taking Enforcement Actions
Against Lead Agents for Insurance Agencies (Sec. 155.220)
As discussed in the preamble to this final rule, we address our
authority to investigate, engage in compliance reviews of, and take
enforcement actions against lead agents of insurance agencies who are
engaging in potential misconduct or noncompliant behavior or activities
in FFE and SBE-FP States. This will better align our oversight and
enforcement approach with how States regulate agencies. This will also
ensure enhanced consumer protections from agency-level misconduct or
noncompliance facilitated at the agency level, which similarly impacts
consumers negatively as misconduct or noncompliance by individual
agents, brokers, and web-brokers. This finalized policy is also
designed to reduce consumer harm associated with unauthorized
enrollments or bad-acting agents, brokers, or web-brokers entering
incorrect income information on eligibility applications which may
cause harm by providing the enrollee or applicant with an incorrect
APTC amount. For example, an incorrect APTC amount can result in a
consumer having a zero-dollar monthly premium. Because the consumer
does not receive monthly billing notifications due to the zero-dollar
premiums, they may not know they were enrolled or that their
eligibility application information was incorrect. However, once the
consumer files their taxes, a reconciliation may reveal that the
consumer must repay the incorrect APTC amount they were receiving. By
their nature, these unauthorized enrollments and plan changes, as well
as inaccurate eligibility application information submissions, also
involve the misuse of enrollee or applicant PII, and they threaten the
efficient administration of the Exchange and the accuracy of Exchange
eligibility determinations.
This finalized policy is also designed to reduce consumer harm
associated with unauthorized enrollments or unauthorized plan switches
which can lead to the consumer receiving a DMI. Upon application
submission, certain consumer data is checked against trusted data
sources to ensure a match between what is in the application submission
and the information HHS receives from the trusted data source(s). If
the trusted data source does not have the consumer data or the data is
inconsistent with the information provided on the application, a DMI is
generated. A non-exhaustive list of DMIs include the Annual Income DMI,
Citizenship/Immigration DMI, and American Indian/Alaskan Native Status
DMI. Certain DMIs may lead to loss of Exchange coverage, including a
Citizenship/Immigration DMI, which occurs when the consumer is unable
to verify an eligible citizenship or lawful presence status.
We sought comment on these impacts and assumptions.
After consideration of comments and for the reasons outlined in the
proposed rule and this final rule, including our responses to comments,
we are finalizing these impact estimates for this policy as proposed.
We summarize and respond to public comments received on the proposed
estimates below.
Comment: We received comments that we should remove or limit the
150 percent SEP and implement pre-enrollment SEP verification that are
vulnerable to fraud, such as income.
Response: While this comment touches on issues that potentially
relate to noncompliant agents and brokers or fraudulent behavior, these
comments are outside the scope of this proposal.
Comment: We received comments stating this change would protect
consumers from noncompliant and fraudulent behavior and maintain the
integrity of the Exchange.
Response: We agree with commenters that this change would better
protect consumers. This change would allow HHS to take targeted action
against lead agents found to be involved in noncompliant or fraudulent
behavior. Removing noncompliant individuals and entities from the
Exchanges that use the Federal platform reduces fraud and improves
public trust of these Exchanges as a whole. We continue to encourage
State Exchanges that do not use the Federal platform to adopt a similar
enforcement approach to enable it to also take immediate action when
circumstances that pose unacceptable risk to their Exchange operations.
7. Agent and Broker System Suspension Authority (Sec. 155.220(k))
We believe the impact related to the finalized changes to Sec.
155.220(k)(3) will be positive. These changes will allow HHS to take
swift action for misconduct and noncompliance with existing standards
and requirements by expanding the bases on which Sec. 155.220(k)(3)
system suspensions may be implemented. This finalized policy will
enhance consumer protection and
[[Page 4529]]
promote program integrity by allowing HHS to immediately suspend an
agent's or broker's access to Exchange systems when HHS discovers
circumstances that pose unacceptable risk to the accuracy of the
Exchange's eligibility determinations, Exchange operations, applicants,
or enrollees, or Exchange information technology systems, including but
not limited to risk related to noncompliance with the standards of
conduct under Sec. 155.220(j)(2)(i), (ii), or (iii) or the privacy and
security standards at Sec. 155.260, until the circumstances of the
incident, breach, or noncompliance are remedied or sufficiently
mitigated to HHS' satisfaction. This will help reduce future consumer
harm by allowing HHS to quickly suspend system access for agents or
brokers who are engaged in misconduct or noncompliant behavior that
impacts Exchange consumers, operations, and systems. This finalized
policy will also increase transparency by informing agents and brokers
of the full suite of HHS enforcement actions that may be leveraged in
response to noncompliance or misconduct, which may help curb such
activities and behaviors. We do not anticipate negative feedback from
the entities impacted by this, such as agents and brokers, as these
changes are meant to more quickly system suspend bad-acting agents and
brokers. This will help build consumer trust in compliant agents and
brokers who work with consumers on the FFEs and SBE-FPs.
We sought comment on these impacts and assumptions.
After consideration of comments and for the reasons outlined in the
proposed rule and this final rule, including our responses to comments,
we are finalizing these impact estimates for this policy as proposed.
We summarize and respond to public comments received on the proposed
estimates below.
Comment: Commenters suggested we allow agents and brokers to
provide evidence to us prior to initiating system suspensions.
Response: We do not agree with commenters that we should change our
system suspension process to allow for agent or broker response prior
to engaging in a system suspension.
The purpose of Sec. 155.220(k)(3) is to maintain the integrity of
the Exchange and individual consumers. Adding language to allow system
suspensions to be implemented when we discover circumstances that pose
unacceptable risk to the accuracy of the Exchange's eligibility
determinations, Exchange operations, applicants or enrollees, or
Exchange information technology systems, including but not limited to
risk related to noncompliance with the standards of conduct under Sec.
155.220(j)(2)(i), (ii) or (iii) or the privacy and security standards
at Sec. 155.260,\271\ helps achieve these goals.
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\271\ Section 155.220(d)(3) requires agents and brokers to enter
into a Privacy and Security Agreement pursuant to which they agree
to comply with Exchange privacy and security standards adopted
consistent with Sec. 155.260. There are two Privacy and Security
Agreements between CMS and the agent, broker, and web-broker for
FFEs and SBE-FPs: (1) one is for the individual market FFEs and SBE-
FPs, and (2) one is for the FF-SHOPs and SBE-FP-SHOPs.
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Providing an opportunity to provide evidence prior to a system
suspension being implemented would leave consumers vulnerable to
potential harm as the agent or broker would have full use of all
avenues to enroll consumers. System suspensions allow HHS to
``immediately'' prevent an agent or broker from utilizing the DE/EDE
pathways, protecting consumers. The use of the word ``immediate'' in
Sec. 155.220(k)(3) means this enforcement tool is intended to reduce
risk of noncompliance as soon as it is discovered. Allowing an agent or
broker to respond prior to implementing the system suspension would
defeat the intention of the regulation. While the option to enroll
using the call center or HealthCare.gov exists, these are safer options
for the consumer as the call center requires the consumer to be on the
call and the agent or broker would need to be sitting with the consumer
if using HealthCare.gov.
We believe our process allowing an agent or broker to respond to a
system suspension is efficient and provides sufficient due process to
the system-suspended agent or broker. Agents or brokers may respond
with exculpatory evidence immediately after receiving a system
suspension, which would reduce the amount of time the system suspension
is in place, provided the submitted evidence mitigates the situation to
HHS' satisfaction.
Furthermore, we do not engage in compliance actions, such as system
suspensions, without reviewing all the evidence at our disposal and
determining there is a high likelihood the agent or broker has been
engaging in noncompliant behavior.
Comment: We received comments in support of expanding Sec.
155.220(k)(3) as it would reduce noncompliant behavior and protect
consumers.
Response: We agree with commenters who supported this proposal and
agree it would reduce noncompliant behavior and protect consumers.
The original intent of Sec. 155.220(k)(3) included protecting
against unacceptable risk to consumer Exchange data. Clarifying this in
regulatory text will allow us to implement system suspensions in
situations involving consumer PII while making agents and brokers aware
of this authority. We believe violations of the standards of conduct
under 155.220(j)(2)(i), (ii), or (iii), risk to the accuracy of
Exchange eligibility determinations, operations, applications,
enrollees, or information technology systems all warrant system
suspensions as each may cause consumer harm or reduce public trust in
the Exchange itself.
8. Updating the Model Consent Form (Sec. 155.220)
We are finalizing an update to the model consent form to include a
section for documentation of consumer review and confirmation of the
accuracy of their Exchange eligibility application information under
Sec. 155.220(j)(2)(ii)(A)(1)-(2), as well as scripts agents, brokers,
and web-brokers could use when meeting the requirements codified at
Sec. 155.220(j)(2)(ii)(A) and (j)(2)(iii)(A)-(C) via an audio
recording.
These finalized policies will update the optional model consent
form that was created as part of the 2024 Payment Notice and adopted on
June 18, 2023. The 2024 Payment Notice (88 FR 25890 through 25892)
considered the additional time it would take to process and submit each
consumer's eligibility application and those assumptions remain valid
and are unchanged. We believe these assumptions remain valid because we
are not changing the regulatory requirements established by the 2024
Payment Notice, we are not adding requirements with this finalized
policy, and we are not making the use of the model consent form
mandatory. The time required to gather the documentation required by
the 2024 Payment Notice requirements is already a part of every
agent's, broker's, and web-broker's enrollment process. We do not
believe the updated model consent form will impose any additional
burden on agents, brokers, web-brokers, or consumers. We do not
anticipate that the updated model consent form will take any longer to
fill out than agent, broker, web-broker, or agency-created forms
already being utilized. The use of the updated model consent form will
not be mandatory. Therefore, this finalized policy will not impart
extra time or costs to the assisting agent or broker.
This updated model consent form will provide agents, brokers, and
web-brokers with clarity on how to meet the regulatory requirements
under Sec. 155.220(j)(2)(ii) and help them comply
[[Page 4530]]
with this regulation by providing a standardized form they may use to
do so. Furthermore, we believe providing a clearly written model
consent form will provide more consumer clarity and assurance that the
agent, broker, or web-broker they are working with is complying with
Sec. 155.220(j)(2)(ii). The finalized scripts, to the extent they are
utilized by agents, brokers, and web-brokers, will help ensure they are
following the regulatory requirements when enrolling consumers. We
believe this will reduce consumer harm by reducing unauthorized
enrollments, which can result in financial harm if a consumer receives
an improper APTC amount upon enrollment, and DMIs, which may lead to
cancellation of coverage if the DMIs are not resolved in a timely
manner. We also believe this finalized policy will clarify and simplify
how regulated entities can meet regulatory requirements.
We sought comment on these impacts and assumptions.
After consideration of comments and for the reasons outlined in the
proposed rule and this final rule, including our responses to comments,
we are finalizing these impact estimates for this policy as proposed.
We summarize and respond to public comments received on the proposed
estimates below.
Comment: Some commenters stated we should not mandate audio
recording of enrollments and should not require agents or brokers to
use our scripts as this would be especially burdensome to smaller
agents, brokers, web-brokers, or agencies.
Response: While agents, brokers, and web-brokers can meet the
requirements of Sec. 155.220(j)(2)(ii)(A) and (j)(2)(iii) via an audio
recording, this is just one type of documentation that is considered to
be acceptable under these sections, and there is no mandate that an
audio recording be used to meet these requirements. Agents, brokers,
and web-brokers may use any method they wish to meet the consent
documentation requirement and review and confirmation of the accuracy
of eligibility application information requirement, provided the
minimum information required by the regulations is captured in this
documentation and the documentation can be maintained for a minimum of
10 years and produced to CMS upon request.
Comment: Some commenters supported updating the model consent form,
stating this would provide clarity to agents, brokers, and web-brokers,
and help ensure consumers' enrollment applications have correct
information.
Response: We agree with commenters that these updates will provide
more clarity and assurance to agents, brokers, web-brokers, and
agencies on how to meet the applicable regulatory requirements and more
consumer clarity and assurance that the agent, broker, or web-broker
they are working with is complying with the applicable regulatory
requirements.
9. Requirement for Notification of Tax Filers and Consumers Who Have
Failed To File and Reconcile APTC for 2 Consecutive Tax Years (Sec.
155.305)
We anticipate a small financial impact related to our finalized
updates to Sec. 155.305(f)(4)(i)(A)(1)-(2). Prior to pausing the FTR
process during the COVID-19 PHE, Exchanges provided notice to enrollees
or their tax filers (or both) who were identified as at risk of losing
their APTC due to their failure to file their Federal income taxes and
reconcile their APTC using Form 8962 prior to the FTR Recheck process.
The 2025 Payment Notice (89 FR 26299) codified the requirement to send
notices in the first tax year a tax filer was identified as having FTR
status. The policy finalized in this rule will require sending either
direct or indirect notices to tax filers or their enrollees when the
tax filer is identified as having an FTR status for a second
consecutive tax year, which we estimated in the 2024 Payment Notice (88
FR 25902) to represent 20 percent of the total FTR population. We
sought comments on these impacts and assumptions, including regarding
additional costs, burdens, and benefits to issuers, consumers, and
Exchanges.
We did not receive any comments in response to the proposed impact
estimates for this policy. For the reasons outlined in the proposed
rule and this final rule, we are finalizing these estimates with the
following modifications to our initial cost estimates for these new FTR
notice requirements.
Since the publication of the proposed rule, HHS has sent out FTR
notices regarding APTC eligibility for the 2025 coverage year to
enrollees or their tax filers, and we wish to update our initial cost
projections for this policy change. Due to increases in enrollment in
Exchanges on the Federal platform, the volume of FTR notices sent to
enrollees or their tax filers was higher than we originally estimated,
which increased the cost of providing FTR direct notices to tax filers.
The revised cost for Exchanges on the Federal platform to provide FTR
direct notices that protect FTI to tax filers will be approximately
$292,000 annually for fiscal years 2025 through 2029, revised from
$134,000 as proposed. These cost estimates may fluctuate in future
years due to unknown factors, such as increases in the cost of postage
and inflation in future years. We expect that the cost of providing
notices would decrease in 2026 and the subsequent years if the enhanced
PTC subsidies provided by the Inflation Reduction Act are not extended
past 2025 because consumers may terminate their Exchange coverage if
they become ineligible for financial assistance. However, because it is
currently unknown whether the enhanced PTC subsidies will expire or be
extended, we have not factored this into our cost estimate. While HHS
did not receive any comments related to our estimates regarding the
cost of print notices for FTR, we would like to provide more context on
why we are not providing more details regarding the contract pricing.
We did not publish the cost per print notice because this is
proprietary information. Furthermore, HHS will not publish specific
future contract estimates in this final rule because the data
underlying those estimates could undermine future contract
procurements. For example, if HHS were to publish the projected future
cost of the contracts used to provide print notifications, the Federal
Government would be meaningfully disadvantaged in future contract
negotiations related to Federal notice printing activities, as bidders
would know how much HHS anticipates such a future contract is worth.
Although current contract awards are published and publicly
available,\272\ these award amounts do not necessarily reflect the
future value of the contract, as there may be future changes in policy
and operations and the scope of the work.
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\272\ Available at https://sam.gov.
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Our finalized regulations give flexibility to Exchanges to choose
to send the required notices to enrollees or tax filers, or both. While
most State Exchanges have noted a preference to provide indirect
notices to their consumers, there is uncertainty about how State
Exchanges would choose to provide notices to their enrollees (for
example, mail or electronic) as well as the proportion of enrollees on
State Exchanges who fail to file their Federal income taxes and
reconcile their APTC for 2 consecutive tax years, and therefore we are
unable to provide exact estimates of the cost of providing these
notices. We believe that if State Exchanges chose to provide direct
mailing notices, the approximate cost could be $0.84 per notice for FY
2025 based on the cost for the Exchanges on the Federal platform to
send an average notice and would likely grow with
[[Page 4531]]
postage and inflation costs in future years. We anticipate
approximately 110,000 total notices across State Exchanges based on
updated FTR data from the Exchanges on the Federal platform, and so in
total, the updated estimated cost to State Exchanges to send these
notices will be approximately $92,400 yearly for fiscal years 2025
through 2029. However, we still believe this is likely an overestimate
based on conversations with interested parties because many State
Exchanges may prefer to provide indirect notices that can be emailed,
which would substantially reduce costs to the State Exchanges. There
could be some cost related to creation of the notice, but State
Exchanges could also choose to use either the language that Exchanges
on the Federal platform already use or the language previously used in
FTR notices.
10. Timeliness Standard for State Exchanges To Review and Resolve
Enrollment Data Inaccuracies (Sec. 155.400(d)(1))
We are finalizing the addition of Sec. 155.400(d)(1) to codify
HHS' guidance document titled, Reporting and Reviewing Data Inaccuracy
Reports in State-based Exchanges (SBE) Frequently Asked Questions
(FAQs),\273\ which provides that, within 60 calendar days after a State
Exchange receives a data inaccuracy from an issuer operating in an
State Exchange (hereinafter referred to as ``State Exchange issuer'')
that includes a description of an inaccuracy that meets the
requirements at Sec. 156.1210(a)-(c) and all the information that the
State Exchange requires or requests to properly assess the inaccuracy,
the State Exchange must review and resolve the State Exchange issuers'
enrollment data inaccuracies and submit to HHS a description of the
resolution of any inaccuracies described by the State Exchange issuer
that the State Exchange confirms to be inaccuracies in a format and
manner specified by HHS.\274\ This finalized policy aligns with
existing guidance \275\ and builds on the existing requirement at Sec.
155.400(d) that a State Exchange must reconcile enrollment information
with issuers and HHS no less than on a monthly basis. It also provides
certainty for State Exchange issuers by providing a timeline for State
Exchanges to act upon an enrollment data inaccuracy submitted to the
State Exchange by a State Exchange issuer that meets the requirements
at Sec. 156.1210(a)-(c).
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\273\ CMS. (2024, Aug. 14). Reporting and Reviewing Data
Inaccuracy Reports in State-based Exchanges (SBE) Frequently Asked
Questions (FAQs). https://www.cms.gov/cciio/programs-and-initiatives/health-insurance-marketplaces/downloads/faqs-SBE-reporting-enrollment-data-inaccuracies.pdf.
\274\ OMB Control No.: 0938-1312 and 0938-1341.
\275\ CMS. (2024, Aug. 14). Reporting and Reviewing Data
Inaccuracy Reports in State-based Exchanges (SBE) Frequently Asked
Questions (FAQs). https://www.cms.gov/cciio/programs-and-initiatives/health-insurance-marketplaces/downloads/faqs-SBE-reporting-enrollment-data-inaccuracies.pdf.
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We do not believe that the finalized amendment will impose
substantial additional costs to HHS, State Exchanges, or State
Exchanges issuers beyond the costs that are already accounted for as
part of the existing issuers' enrollment data inaccuracies description
process and existing State Exchange enrollment data reconciliation
requirements. The existing process already requires State Exchange
issuers to submit enrollment inaccuracies and the State Exchanges to
resolve those inaccuracies and reconcile enrollment information with
both State Exchange issuers and HHS on no less than a monthly basis. We
have no reason to believe that codifying a timeliness standard will
materially increase burden.
Furthermore, this finalized policy to codify a timeliness standard
for resolution of enrollment data inaccuracies will clarify to issuers
in State Exchanges the process for timely reviewing and resolving
enrollment data inaccuracies and will ensure the accurate and timely
payment of APTCs as this enrollment data is the basis of APTC payments
to State Exchange issuers in the automated PBP system.
Therefore, we anticipate that this finalized policy will streamline
the existing issuers' enrollment data inaccuracies process and benefit
consumers by ensuring accurate payment of APTCs.
We sought comment on these impacts and assumptions.
We did not receive any comments in response to the proposed impact
estimates for this policy. For the reasons outlined in the proposed
rule and this final rule, we are finalizing these estimates as
proposed.
11. Establishment of Optional Fixed-Dollar Premium Payment Threshold
and Total Premium Threshold (Sec. 155.400(g))
We anticipate that the finalized policy to allow issuers to
implement a fixed-dollar premium payment threshold, adjusted for
inflation by annual agency guidance, will benefit enrollees who may
otherwise have been unable to maintain enrollment due to owing de
minimis amounts of premium. The finalized modification will likely be
especially beneficial to enrollees who have low incomes, who might be
disproportionately impacted by disruptions in coverage. In addition, we
believe that issuers that choose to implement a fixed-dollar premium
payment threshold will benefit by being able to continue enrollment for
enrollees who owe small amounts of premium. We anticipate that there
will be some costs associated with implementing a fixed-dollar
threshold for those issuers that choose to do so, as well as State
Exchanges that choose to allow issuers to do so.
Since the finalized policy will be optional for issuers to adopt,
and some may choose not to adopt a payment threshold at all, it is
challenging to quantify the impact on APTC payments. In the proposed
rule, assuming a fixed-dollar threshold of $5 or less, based on PY 2023
counts of 79,612 QHP policies terminated for non-payment where the
enrollee had a member responsibility amount of $0.01-$5.00, with an
average monthly APTC of $604.78 per enrollee (for PY 2023), we
estimated that this at most would result in $481,477,453.60 in APTC
payments for 10 months that excludes the binder payment and first month
of the grace period (for which the issuer already received APTC and
would not have to return) that issuers would retain, rather than being
returned to the Federal Government.\276\
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\276\ See CMS (2024) Effectuated Enrollment: Early 2024 Snapshot
and Full Year 2023 Average. https://www.cms.gov/files/document/early-2024-and-full-year-2023-effectuated-enrollment-report.pdf.
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We sought comment on these impacts and assumptions, including
quantifying a lower limit, and whether there are additional costs for
other interested parties that have not been considered here.
We did not receive any comments in response to the proposed impact
estimates for this policy. For the reasons outlined in the proposed
rule and this final rule, we are finalizing these estimates with the
following modifications: since we are finalizing a fixed-dollar
threshold of $10 or less, based on PY2023 counts of 135,185 QHP
policies terminated for non-payment where the enrollee had a member
responsibility amount of $0.01-$10.00, with an average monthly APTC of
$604.78 per enrollee (for PY 2023), we estimate that this at most will
result in $817,571,843.00 in APTC payments for 10 months that excludes
the binder payment and first month of the grace period (for which the
issuer already received APTC and would not have to return) that issuers
would retain, rather than being returned to the Federal
[[Page 4532]]
Government. This would allow such consumers to remain in coverage,
rather than having their policy terminated and health care coverage
terminated for owing de minimis amounts of premium.
12. General Eligibility Appeals Requirements (Sec. 155.505)
This finalized modification will allow application filers to file
appeals through the HHS appeals entity or a State Exchange appeals
entity on behalf of applicants and enrollees on their Exchange
application, streamlining the appeals process and ensuring operational
consistency between the Exchanges on the Federal platform and appeals
entities. We do not anticipate any material financial impact related to
our proposed change at Sec. 155.505(b).
We sought comment on these impacts and assumptions.
We did not receive any comments in response to the proposed impact
estimates for this policy. For the reasons outlined in the proposed
rule and this final rule, we are finalizing these estimates as
proposed.
13. Amendments to Certification Standards for QHPs, Request for the
Reconsideration of Denial of Certification, and Non-Certification and
Decertification of QHPs (Sec. Sec. 155.1000 and 155.1090)
We are finalizing an amendment to Sec. 155.1000 by codifying that
an Exchange may deny certification to any plan that does not meet the
general certification criteria at Sec. 155.1000 and amending Sec.
155.1090 with refinements to the standards for the request for the
reconsideration of a denial of certification specific to the FFEs. We
anticipate no appreciable changes in impact because of these
modifications. We expect that the FFEs will deny certification to one
or fewer certification applications on average each year, so we expect
the number of affected entities to be small. In addition, the finalized
revisions to Sec. Sec. 155.1000 and 155.1090 do not substantively
alter the responsibilities of affected issuers or the content of
reconsideration requests. As a result, there is no material impact on
regulated entities because of these finalized policies.
We sought comment on these impacts and assumptions.
We did not receive any comments in response to the proposed impact
estimates for this policy. For the reasons outlined in the proposed
rule and this final rule, we are finalizing these estimates as
proposed.
14. General Program Integrity and Oversight Requirements (Sec.
155.1200)
As part of Sec. 155.1200, we proposed to increase transparency in
Exchanges by publishing annual State Exchange and SBE-FP SMARTs,
programmatic and financial audits, Blueprint applications, and
additional data points in the Open Enrollment data reports. We are
finalizing this proposal with a modification to not publish the SMARTs.
We anticipate no appreciable change in impact with this finalized
policy since this data is already collected through the Blueprint
application (OMB Control Number: 0938-1172), SMART (OMB Control Number:
0938-1244), and Enrollment Metrics PRA packages (OMB Control Number:
0938-1119). We expect that this policy will increase the public's
understanding of State Exchanges, promote program improvements, and
better evaluate Exchange quality.
We sought comment on these impacts and assumptions.
We did not receive any comments in response to the proposed impact
estimates for this policy. For the reasons outlined in the proposed
rule and this final rule, we are finalizing these assumptions as
proposed.
15. FFE and SBE-FP User Fee Rates for the 2026 Benefit Year (Sec.
156.50)
We are finalizing an updated FFE user fee rate of 2.5 percent of
monthly premiums for the 2026 benefit year, which is greater than the
FFE user fee rate finalized in the 2025 Payment Notice (89 FR 26336
through 26338) of 1.5 percent of total monthly premiums. We are also
finalizing an SBE-FP user fee rate of 2.0 percent for the 2026 benefit
year, which is greater than the SBE-FP user fee rate finalized in the
2025 Payment Notice of 1.2 percent of total monthly premiums. We are
also finalizing an alternative FFE user fee rate of 2.2 percent of
total monthly premiums and an alternative SBE-FP user fee rate of 1.8
percent of total monthly premiums, which would take effect if enhanced
PTC subsidies were extended at their current level, or higher, by July
31, 2025. We recognize that the expiration of the enhanced PTC
subsidies at the end of the 2025 benefit year creates a significant
amount of uncertainty in the ACA markets and despite this uncertainty,
we maintain that the amount collected under these user fee rates will
adequately fund all user fee-eligible Exchange and Federal platform
functions based on the latest budget estimates.
We provided estimates of FFE and SBE-FP user fee transfers from
issuers to the Federal Government in the proposed rule based on the
proposed FFE and SBE-FP user fee rates of 2.5 and 2.0 percent of total
monthly premiums, respectively, and alternative FFE and SBE-FP user fee
rate range between 1.8 and 2.2 percent and between 1.4 and 1.8 percent
of total monthly premiums, respectively, and our projections of
enrollment and premium growth at the time. We are finalizing the FFE
and SBE-FP user fee rates of 2.5 and 2.0 percent of total monthly
premiums, respectively, as proposed and finalizing modified alternative
FFE and SBE-FP user fee rates of 2.2 percent and 1.8 percent of total
monthly premiums, respectively. Therefore, we are updating our
estimates of transfers from issuers to the Federal Government in this
final rule as follows.
We estimate an increase in FFE and SBE-FP user fee transfers from
issuers to the Federal Government of $732 million for benefit year 2026
compared to if the user fee rates from the prior benefit year were
maintained in 2026. We estimate additional increases in FFE and SBE-FP
user fee transfers from issuers to the Federal Government of $937
million in 2027, $958 million in 2028, and $997 million in 2029 if the
finalized 2026 benefit year user fee rates were maintained in
subsequent years. Under the alternate FFE and SBE-FP user fee rates,
which reflect different enrollment assumptions, we estimate increases
in FFE and SBE-FP user fee transfers compared to if the 2025 benefit
year user fee rates were maintained for 2026 and beyond from issuers to
the Federal Government of $620 million in 2026, $854 million in 2027,
$885 million in 2028, and $918 million in 2029 if the alternate user
fee rates were maintained in subsequent years.
We anticipate that these finalized user fee rates, along with the
impact of the expiration of the enhanced PTCs on enrollment in ACA
markets, will exert upward pressure on premiums compared to the 2025
benefit year. However, we believe these user fee rate increases from
the 2025 user fee rates are necessary to provide financial stability to
the Exchanges on the Federal platform, ensure continuity of special
benefits to issuers, and maintain access to QHPs for enrollees. We
sought comment on the impacts and assumptions included in the proposed
rule, and we responded to all comments received on the FFE and SBE-FP
user fees in the preamble section titled FFE and SBE-FP User Fee Rates
for the 2026 Benefit Year (Sec. 156.50). After consideration of
comments and for the reasons outlined in the proposed rule and this
final rule, including our
[[Page 4533]]
responses to comments, we are finalizing the impact estimates for this
policy as discussed in the preceding paragraphs.
16. CSR Loading (Sec. 156.80)
While we anticipate that codifying the permissibility of CSR
loading will provide greater clarity and generally promote market
stability, we do not expect that it will have a substantive economic
impact, as it will continue to allow States' existing actuarially
justified practices of determining whether and how CSR loading occurs.
17. Amendments to AV Calculator Update Methodology (Sec. 156.135)
This approach to revise the method for updating the AV Calculator,
starting with the 2026 AV Calculator, resulting in an earlier release
of the final AV Calculator for a given plan year, will benefit both
issuers and States. Issuers have previously provided feedback that HHS
should strive to release the final version of the AV Calculator sooner,
and this approach addresses such requests. An earlier release of the
final AV Calculator benefits issuers by providing additional time to
develop plan designs ahead of State filing deadlines. In addition,
States could benefit from an earlier release of the final version of
the AV Calculator to ensure their EHB-benchmark plans comply with EHB
requirements, and States that design their own standardized plan
options could benefit from an earlier release to ensure they satisfy
the AV de minimis ranges. This approach will have no impact on
consumers.
We did not receive any comments in response to the proposed impact
estimates for this policy. For the reasons outlined in the proposed
rule and this final rule, we are finalizing these estimates as
proposed.
18. Standardized Plan Options (Sec. 156.201)
We are finalizing updates to the standardized plan options for PY
2026 to ensure these plans continue to have AVs within the permissible
de minimis range for each metal level, and we are revising both sets of
plan designs at the expanded bronze metal level to conform more closely
to the corresponding plan designs for PY 2025. These modifications are
discussed in detail in the Sec. 156.201 of the preamble to this rule.
We believe 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 continue to believe that making major departures from the
approach to standardized plan options set forth in the 2023, 2024, and
2025 Payment Notices could result in changes that may cause undue
burden for interested parties. For example, if the standardized plan
options 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, similar to the approach taken in the 2023, 2024, and 2025
Payment Notices, we are finalizing standardized plan options that
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 cost sharing and
enrollment data to ensure that these plans continue to reflect the most
popular offerings in the Exchanges. By finalizing an approach to
standardized plan options similar to that taken in the 2023, 2024, and
2025 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 2025. Further, issuers
will continue to not be required to extend plan offerings beyond their
existing service areas.
We do not anticipate that the modification we are finalizing at
Sec. 156.201(c) that will require an issuer that offers multiple
standardized plan options within the same product network type, metal
level, and service area to meaningfully differentiate these plans from
one another in terms of included benefits, networks, included
prescription drugs, or a combination of some or all these factors, will
have a significant impact on issuers. This is because most issuers have
not offered multiple standardized plan options within the same product
network type, metal level, and service area since these requirements
were introduced in PY 2023. In fact, current QHP certification
submission data indicates that only three issuers offered multiple
standardized plan options within the same product network type, metal
level, and service area in PY 2025.
However, we acknowledge that those issuers that do offer multiple
standardized plan options in the same product network type, metal
level, and service area will either have to modify certain offerings
(such as by modifying included benefits, provider networks, included
prescription drugs, or a combination of some or all these factors) or
choose to discontinue certain plans to the extent they are not
meaningfully different. That said, given that issuers will retain the
discretion to choose between modifying or discontinuing plans, and
given that making these modifications to plans are a routine part of
the annual plan design process, we do not anticipate significant burden
for affected issuers related to this proposed requirement.
We sought comment on these impacts and assumptions.
We did not receive any comments in response to the proposed impact
estimates for this policy. For the reasons outlined in the proposed
rule and this final rule, we are finalizing these estimates as
proposed.
19. Non-Standardized Plan Option Limits (Sec. 156.202)
We are finalizing an amendment to Sec. 156.202(b) and (d) to
properly reflect the flexibility that issuers have been operationally
permitted since the introduction of these requirements to vary the
inclusion of the distinct adult dental benefit coverage, pediatric
dental benefit coverage, and adult vision benefit coverage categories
under the non-standardized plan option limit at Sec. 156.202(b) in
accordance with Sec. 156.202(c)(1) through (3).
In particular, we are finalizing an amendment to Sec. 156.202(b)
to properly distinguish between adult dental benefit coverage at Sec.
156.202(c)(1) and pediatric dental benefit coverage at Sec.
156.202(c)(2), such that an issuer offering QHPs in an FFE or SBE-FP,
for PY 2025 and subsequent plan years, is limited to offering two non-
standardized plan options per product network type, as the term is
described in the definition of ``product'' at Sec. 144.103 of this
subchapter, metal level (excluding catastrophic plans), and inclusion
of adult dental benefit coverage, pediatric dental benefit coverage,
and adult vision benefit coverage (as defined in paragraphs (c)(1)
through (3) of Sec. 156.202), in any service area.
We are finalizing a similar conforming amendment to Sec.
156.202(d), such that for PY 2025 and subsequent plan years, an issuer
may offer additional non-standardized plan options for each product
network type, metal level, inclusion of adult dental benefit coverage,
pediatric dental benefit coverage, and adult vision benefit coverage
(as defined in paragraphs (c)(1) through (3) of Sec. 156.202), and
service area if it demonstrates that these additional plans' cost
sharing for
[[Page 4534]]
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, inclusion of adult dental benefit
coverage, pediatric dental benefit coverage, and adult vision benefit
coverage, and service area.
We are finalizing these modifications to align the regulation text
with the existing flexibility that issuers have been operationally
permitted since the non-standardized plan option limit was introduced
in the 2024 Payment Notice.\277\ Given that issuers have had this
flexibility since the non-standardized plan option limit was first
introduced PY 2024, we do not anticipate any impact on relevant
interested parties.
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\277\ CMS. (2024, April 10). 2025 Final Letter to Issuers in the
Federally-facilitated Exchanges. https://www.cms.gov/files/document/2025-letter-issuers.pdf.
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We sought comment on these impacts and assumptions.
We did not receive any comments in response to the proposed impact
estimates for this policy. For the reasons outlined in the proposed
rule and this final rule, we are finalizing these estimates as
proposed.
20. Essential Community Provider Certification Review for States
Performing Plan Management Functions (Sec. 156.235)
This finalized policy to conduct ECP certification reviews of plans
for which issuers submit QHP certification applications in FFEs in
States performing plan management functions beginning in PY 2026 will
not have a significant financial impact on the Federal Government. HHS
continues to perform ECP certification reviews for plans in the FFEs,
so the financial burden to conduct the certification reviews of plans
for which issuers submit QHP certification applications in FFEs in
States performing plan management functions using the existing data
infrastructure is a marginal increase within the annual programming for
QHP certifications. For PY 2025, HHS will use MPMS for ECP reviews for
plans seeking QHP certification in FFEs, and HHS has all the necessary
data infrastructure and operational processes to conduct reviews for
States performing plan management functions for PY 2026 as finalized.
While the Federal Government will undertake additional administrative
work to review the ECP data from QHP certification applications
submitted by issuers seeking certification of their plans as QHPs in
FFEs in States performing plan management functions, the transfer of
administrative impact from the State that had been performing these
reviews to the Federal Government is marginal, as the Federal
Government already has in place processes and procedures to conduct the
ECP certification reviews. HHS will continue ECP QHP certification
reviews in all other FFE States.
This finalized policy will reduce the administrative burden for
these States as they will no longer be responsible for ECP data review.
We estimate a cost savings of $148,212.12 per State annually for each
of the 12 FFE States performing plan management functions in PY
2026.\278\ This is calculated by taking the median hourly wage for a
compliance officer of $36.38, according to the Occupational Employment
and Wage Statistics,\279\ and adding 100 percent fringe benefits to
total $72.76. We estimate the operations and maintenance costs for the
ECP QHP data collection and the QHP data collection support to equal
485 hours for 4.2 full-time equivalents,\280\ totaling $148,212.12. The
total cost across the 12 FFE States performing plan management
functions will be $1,778,545.44. This cost associated with ECP
enforcement/compliance reviews will be transferred from the States
performing plan management functions to the Federal Government. We
further estimate an annual cost of $8,155 associated with ECP
compliance reviews that will be transferred from the States performing
plan management functions to the Federal Government based on current
contract costs.
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\278\ Twelve FFEs operate in States performing plan management
functions for PY 2026: Delaware, Hawaii, Iowa, Kansas, Michigan,
Montana, Nebraska, New Hampshire, Ohio, South Dakota, Utah, and West
Virginia.
\279\ Occupational Employment and Wage Statistics from the US
Bureau of Labor Statistics for job code 13-1041 Compliance Officer
from https://www.bls.gov/oes/current/oes131041.htm.
\280\ We estimated 485 hours for 4.2 full time equivalents
similar to the administrative burden cost for the Federal Government
as indicated in cost estimate of the Supporting Statement for
Continuation of Data Collection to Support QHP Certification and
other Financial Management and Exchange Operations OMB control
number: 0938-1187.
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Further, this finalized policy should not lead to increased burden
for issuers in the FFE in States performing plan management functions
as they will still have to submit ECP data to HHS regardless of whether
it is the State or HHS conducting the QHP certification review. In
previous years, these issuers were required to submit ECP data to HHS
via the SERFF binders, whereas these issuers are now required to submit
their ECP data to HHS in MPMS beginning with the PY 2025 QHP
application submission season, making it now possible for HHS to begin
reviewing these ECP data going forward.
In addition, this finalized policy will not financially impact
providers on the HHS ECP list.\281\ There is no fee to be included in
the HHS ECP list, and the administrative burden to complete the
petition continues to be the same. The finalized policy will support
consumer access to vitally important medical and dental services,
enhancing health equity for low-income and medically underserved
consumers.
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\281\ A non-exhaustive list of available ECPs that primarily
serve low-income and medically underserved populations which can be
counted toward an issuer's satisfaction of the ECP standard as part
of the issuer's QHP application.
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We sought comment on these impacts and assumptions.
We did not receive any comments in response to the proposed impact
estimates for this policy. For the reasons outlined in the proposed
rule and this final rule, we are finalizing these estimates as
proposed.
21. HHS-RADV Materiality Threshold for Rerunning HHS-RADV Results
(Sec. 156.1220(a)(2))
We are finalizing an amendment to Sec. 156.1220(a)(2) to codify a
materiality threshold for when HHS will rerun HHS-RADV results in
response to a successful HHS-RADV appeal. We believe that this
amendment supports providing stability for issuers that participate in
risk adjustment because it limits the potential for issuers to reopen
their books for small changes to their State transfers because of a
successful HHS-RADV appeal. This finalized policy will avoid situations
where HHS is required to rerun HHS-RADV results and all issuers are
required to reopen their books, when the impact for the filer of a
successful HHS-RADV appeal is less than $10,000. Because this approach
is limited to small dollar amounts, we do not believe that the
finalized policy will materially impact issuers or their premiums and
it will provide stability to issuers by limiting the situations where
their books will need to be reopened. We believe that this finalized
amendment, when applicable, will reduce Federal costs by an estimated
$75,000 due to the estimated 575 hours of contractor work.
[[Page 4535]]
We also believe that this amendment, when applicable, will reduce
Federal costs through a decrease in HHS staff work hours. These HHS
staff are funded by the risk adjustment user fee, therefore there is no
cost impact. Rerunning HHS-RADV results requires HHS to recalculate all
national metrics, reissue all issuers' error rate results, and then
apply all of those revised error rates to State transfers for the
applicable benefit year before going through the process to net,
invoice, collect, and redistribute the changes to the HHS-RADV
adjustments to State transfers.
We sought comment on these impacts and assumptions.
After consideration of comments and for the reasons outlined in the
proposed rule and this final rule, including our responses to comments,
we are finalizing the impact estimates for this policy as proposed. We
summarize and respond to public comments received on the proposed
estimates below.
Comment: One commenter noted that this policy would reduce the
burden on smaller issuers, who are disproportionately impacted when
HHS-RADV is rerun.
Response: We agree with this commenter. This policy should provide
stability to the HHS-operated risk adjustment markets by limiting the
potential for HHS-RADV results to be rerun for a particular benefit
year when the financial impact on the filer falls below the materiality
threshold and thereby reduce burden on all issuers of risk adjustment
covered plans, including smaller issuers, by reducing the situations
where there are additional adjustments to the HHS-RADV adjustments to
State transfers for any given benefit year.
22. Medical Loss Ratio (Sec. Sec. 158.103, 158.140, 158.240)
We are finalizing (1) the addition of a definition of ``qualifying
issuer'' to Sec. 158.103 with a modification to clarify that the new
definition of ``qualifying issuer'' is based on an issuer's 3-year
aggregate ratio of net payments related to the risk adjustment program
under section 1343 of the ACA to earned premiums as defined in Sec.
158.130, but prior to and excluding the adjustments in Sec.
158.130(b)(5) that account for the net payments or receipts related to
the risk adjustment, risk corridors, and reinsurance programs, in a
relevant State and market, and (2) amending Sec. 158.140(b)(4)(ii) to
allow qualifying issuers, at their option, to not adjust incurred
claims by the net payments or receipts related to the risk adjustment
program for MLR reporting and rebate calculation purposes beginning
with the 2026 MLR reporting year. This rule also amends Sec.
158.240(c) to add an illustrative example of how qualifying issuers
that opt to apply risk adjustment transfer amounts as described in
Sec. 158.140(b)(4)(ii) would determine the amount of rebate owed to
each enrollee, and makes a conforming amendment to Sec. 158.240(c) to
clarify that the current illustrative example in paragraph (c)(2) would
apply to issuers that are not qualifying issuers and to qualifying
issuers that do not choose to apply risk adjustment transfer amounts as
described in Sec. 158.140(b)(4)(ii). These finalized policies, which
will extend only to qualifying issuers (that is, issuers whose
aggregate ratio of net payments related to the risk adjustment program
under section 1343 of the ACA to earned premiums as defined in Sec.
158.130, but prior to and excluding the adjustments in Sec.
158.130(b)(5) that account for the net payments or receipts related to
the risk adjustment, risk corridors, and reinsurance programs, based on
3 consecutive years of data in a relevant State and market, is greater
than or equal to 50 percent), will result in transfers to such issuers
from their enrollees in the form of lower rebates or higher premiums.
Based on MLR data for 2023, these finalized policies will reduce
rebates paid by issuers to consumers or increase premiums collected by
issuers from consumers by a total of approximately $35 million per
year.
We sought comment on these impacts and assumptions.
After consideration of comments and updated estimates based on the
more recent 2023 MLR data, and for the reasons outlined in the proposed
rule and this final rule, including our response to comments, we are
finalizing these impact estimates. We summarize and respond to public
comments received on the proposed estimates below.
Comment: One commenter requested that we provide information
regarding the number of issuers that will be impacted by the proposal
to enable interested parties to evaluate whether it would in fact be a
``small subset,'' and the magnitude of the impact on MLR calculations.
Response: Since the proposal as finalized is not mandatory for
qualifying issuers, CMS cannot, at this time, provide the exact number
of impacted issuers. However, based on 2023 MLR data, we estimate that
fewer than half a dozen issuers would meet the new definition of
``qualifying issuer'' and, if all of them choose to apply risk
adjustment transfer amounts as described and finalized in this rule,
would experience a reduction in rebates in a combined total amount of
approximately $35 million, out of approximately 180 issuers that owed
approximately $946 million in combined total rebates.
23. 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 a range of between the total
number of unique commenters on the 2026 Payment Notice proposed rule
(266) and the total number of page views on the 2026 Payment Notice
proposed rule (about 13,000) will include the actual number of
reviewers of this final rule. We therefore use an average number of
approximately 6,600 reviewers of this final rule. We acknowledge that
this assumption may understate or overstate the costs of reviewing this
final rule. It is possible that not all commenters reviewed the
proposed rule in detail, and it is also possible that some page viewers
will not actually read the final rule. For these reasons, we believe
that the approximate average of the number of commenters and number of
page viewers on the proposed rule will be a fair estimate of the number
of reviewers of this final rule. We sought comments on the approach in
estimating the number of entities which will review the proposed rule
and did not receive any such comments.
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 55 percent of the rule (an average of the
range from 10 percent to 100 percent of the rule). We sought comments
on this assumption and did not receive any such comments.
Using the wage information from the BLS for medical and health
service managers (Code 11-9111), we estimate that the cost of reviewing
this final rule is $106.42 per hour, including overhead and fringe
benefits.\282\ Assuming an average reading speed of 250 words per
minute, we estimate that it will take approximately 4.75 hours for the
staff to review 55 percent of this final rule. For each entity that
reviews the rule, the
[[Page 4536]]
estimated cost is $505.50 (4.75 hours x $106.42 per hour). Therefore,
we estimate that the total cost of reviewing this regulation is
approximately $3,336,300 ($505.50 per reviewer x 6,600 reviewers).
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\282\ U.S. Bureau of Labor Statistics. (2024, April 9).
Occupational Employment and Wage Statistics. https://www.bls.gov/oes/current/oes_nat.htm.
---------------------------------------------------------------------------
D. Regulatory Alternatives Considered
We are finalizing under Sec. 153.630(b) excluding enrollees
without HCCs, removing the FPC, and changing the source of the Neyman
allocation data used to calculate the standard deviation of risk score
error from MA-RADV data to HHS-RADV data beginning with the 2025
benefit year of HHS-RADV.
The finalized IVA sampling methodology will use the most recent 3
consecutive years of HHS-RADV data with results that have been released
before that benefit year's HHS-RADV activities begin to calculate a
national variance of net risk score error to calculate each issuer's
standard deviation of risk score error used in the Neyman allocation
formula, whereas the current IVA sampling methodology relies on MA-RADV
data to calculate this national variance of net risk score error.\283\
When investigating the impact of switching the Neyman allocation data
source to the most recent 3 consecutive years of HHS-RADV data with
results that have been released before that benefit year's HHS-RADV
activities begin, we considered creating an issuer-specific variance of
net risk score error to calculate each issuer's standard deviation of
risk score error used in the Neyman allocation formula. However, it
would not be possible to calculate an issuer-specific variance of net
risk score error for all issuers participating in a given benefit year
of HHS-RADV as some issuers would not have 3 consecutive years of HHS-
RADV data. As explained in the proposed rule (89 FR 82308, 82353),
these issuers would have to rely on fewer years of HHS-RADV data under
an issuer-specific calculation, meaning significantly fewer data points
compared to other issuers that participated in all years, which could
result in large variations in IVA sample stratum size and increased
uncertainty in HHS-RADV. Therefore, for this reason and the reasons
noted in section III.B.6.a.3 of this final rule, we are finalizing
continuing to calculate each issuer's standard deviation of risk score
error using a national variance of net risk score error, but to use a
three-year rolling window of HHS-RADV data rather than the MA-RADV data
as the source data for the Neyman allocation.
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\283\ As noted in the preamble of this final rule, a new benefit
year of HHS-RADV activities generally begins in the spring when
issuers can start selecting their IVA entity and IVA entities can
start electing to participate in HHS-RADV for that benefit year. We
would use data from the 3 most recent consecutive years of HHS-RADV
where results have been released. For the most recently published
annual HHS-RADV timeline, see the 2023 Benefit Year HHS-RADV
Activities Timeline. https://regtap.cms.gov/uploads/library/2023_RADV_Timeline_5CR_072424.pdf. Note that there were delays in
the 2023 Benefit Year HHS-RADV Activities Timeline in recognition of
the challenges some issuers were facing related to EDGE server
operations after the Change Healthcare Cybersecurity Incident.
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We considered proposing to replace the source of the Neyman
allocation data while continuing to include enrollees without HCCs in
IVA sampling and retaining the FPC.\284\ However, this would result in
sampling a greater proportion of enrollees without HCCs, who do not
have risk scores to adjust when calculating issuers' error rates during
HHS-RADV. In addition, keeping the FPC while excluding enrollees
without HCCs from IVA sampling and replacing the source data for the
Neyman allocation with available HHS-RADV data would lead to a dramatic
increase in the number of issuers subject to the FPC and therefore
decrease the total count of Super HCCs in issuers' IVA samples. For
example, we estimate that the average Super HCC count for issuers
currently subject to the FPC would decrease by 26 percent by retaining
the FPC, which would increase the proportion of issuers that fail to
meet the 30 Super HCC constraint in HHS-RADV.\285\ In contrast,
removing the FPC would increase the average Super HCC count for these
same issuers by 30 percent, which would improve issuers' probability of
meeting the 30 Super HCC constraint. Overall, our analyses found that
making these modifications in combination will lead to the greater
improvements in sampling precision and will allow more than 95 percent
of issuers to pass the 10 percent sampling precision target at a two-
sided 95 percent confidence level.
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\284\ As noted in the preamble of this final rule, enrollees
without HCCs include stratum 10 enrollees that do not have HCCs nor
RXCs and RXC-only enrollees in strata 1 through 3.
\285\ As noted earlier in this preamble, this estimate is based
on the combined impact of all finalized changes to the IVA sampling
methodology.
---------------------------------------------------------------------------
We also considered only excluding stratum 10 enrollees from the IVA
sampling methodology and retaining RXC-only enrollees in strata 1
through 3. However, we believe removing all enrollees without HCCs
(both stratum 10 enrollees and RXC-only enrollees) is the preferred
approach so issuers and IVA Entities are not spending resources on
enrollees who do not have risk scores to adjust when calculating
issuers' error rates during HHS-RADV. In addition, our analysis
revealed the greatest improvements in precision and greatest decreases
in the average medical records reviewed per enrollee, and therefore the
greatest decreases in issuer and IVA Entity burden, when excluding RXC-
only enrollees and stratum 10 enrollees from the IVA sampling
methodology.
As an alternative respect to the SVA pairwise means test proposal,
we considered only changing the pairwise means testing procedure from
the 95 percent confidence interval paired t-test to the 90 percent
confidence interval bootstrapped test without increasing the initial
SVA subsample size to 24. However, our analysis found that maintaining
an initial SVA subsample size of 12 under the bootstrapping methodology
did not achieve an optimal target false negative rate of approximately
20 percent at various effect sizes. Therefore, we are finalizing a
modification to the pairwise means test to use a 90 percent confidence
interval bootstrapping methodology and to increase the initial SVA
subsample size from 12 enrollees to 24 enrollees beginning with 2024
benefit year HHS-RADV.\286\
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\286\ A standard IVA sample size is 200 enrollees, and it
applies to the majority of issuers of risk adjustment covered plans.
CMS calculates a smaller IVA sample sizes for issuers for smaller
populations by using a Finite Population Correction (FPC) factor.
All issuers are subject to the same SVA subsample sizes, but the
maximum SVA subsample for pairwise testing is one half of the
issuer's IVA sample size. As discussed in section II.B.5.a., we are
finalizing changes to the IVA sampling methodology that will exclude
enrollees without HCCs from IVA sampling and remove the FPC factor
such that all IVA samples will consist of 200 enrollees with HCCs or
the issuer's total EDGE population of enrollees with HCCs if they
have less than 200 enrollees with HCCs beginning with the 2025
benefit year of HHS-RADV. Under this policy, the SVA subsample size
expansion for issuers with less than 200 enrollees with HCCs will
continue to follow the standard SVA subsample sizes with a maximum
SVA subsample for pairwise testing equal to one half of the issuer's
IVA sample size. If the issuer fails at the maximum SVA subsample
size for pairwise testing, a precision analysis if performed to
determine whether the SVA audit results from that maximum SVA
subsample size can be used in error estimation or if the SVA sample
needs to expand to the full IVA sample.
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We considered taking no action regarding the changes at Sec.
155.305(f)(4)(ii) and instead relying on the guidance released by CMS
to inform Exchanges of noticing best practices as was previously done,
but instead decided to codify this as a requirement to ensure that tax
filers or their enrollees receive multiple educational notices
regarding the requirement to file their Federal income taxes and
reconcile their APTC.
We considered taking no action regarding modifications to Sec.
155.400(g) to allow issuers to adopt a fixed-dollar premium payment
threshold or a gross
[[Page 4537]]
premium-based percentage payment threshold. However, the finalized
policy will provide important flexibility to issuers that wish to allow
enrollees who owe de minimis amounts of premium to maintain their
enrollment. This flexibility is limited under current regulation, and
as a result enrollees who owe small amounts of premium are sometimes
unable to remain enrolled. We solicited feedback from interested
parties on whether a fixed-dollar threshold, or a percentage threshold
based on gross premium, would better meet our goal of providing
flexibility to issuers to allow enrollees to avoid triggering a grace
period and termination of enrollment through the Exchange for owing
small amounts of premium. For the fixed-dollar premium payment
threshold, we also considered whether to implement a $5 or $10 cap on
the fixed-dollar threshold because while we believe the $5 cap is
sufficient to help many enrollees avoid termination, CMS data on non-
payment terminations also indicate that there are a considerable number
of policies that were terminated in PY2023 with a member responsibility
amount of $10 or less. We solicited feedback from interested parties to
determine what the appropriate cap should be on the fixed-dollar
threshold and received comments supporting a $10 threshold, which we
are finalizing in this rule. We also considered keeping the existing
net premium-based threshold at a ``reasonable'' limit, which we
recommended to be 95 percent or higher, but we are finalizing
specifically defining the threshold at 95 percent or higher, to provide
clarity for issuers and Exchanges. We also considered whether it would
be administratively feasible to allow issuers to adopt both a fixed-
dollar and percentage-based threshold but restricted issuers to
choosing one threshold method. We solicited feedback from interested
parties on whether we should allow this flexibility and received
comments supporting this flexibility, which we are finalizing in this
rule.
For the 2026 benefit year FFE and SBE-FP user fees, we considered
only proposing one FFE user fee rate and one SBE-FP user fee rate as we
have done in previous years. However, we recognize that the expiration
of the enhanced PTC subsidies at the end of the 2025 benefit year
creates a significant amount of uncertainty in the ACA markets and
despite this uncertainty, we maintain our interest in ensuring that we
collect user fees at a rate that will allow us to sustain the
operations of the FFEs. Therefore, we are finalizing two sets of user
fee rates to account for both the expiration and extension of enhanced
PTC subsidies.
We are finalizing an updated FFE user fee rate of 2.5 percent of
total monthly premiums and an SBE-FP user fee rate of 2.0 percent of
total monthly premiums for the 2026 benefit year, which account for the
expiration of enhanced PTC subsidies at the end of the 2025 benefit
year. The 2026 benefit year FFE and SBE-FP user fee rates are greater
than the FFE and SBE-FP user fee rates of 1.5 and 1.2 percent of total
monthly premiums, respectively, that were finalized in the 2025 Payment
Notice (89 FR 26336 through 26338). We are also finalizing an
alternative FFE user fee rate of 2.2 percent of total monthly premiums
and an alternative SBE-FP user fee rate of 1.8 percent of total monthly
premiums for the 2026 benefit year, which would take effect if enhanced
PTC subsidies are extended at their current level, or at a higher
level, by July 31, 2025.
We considered taking no action on conducting ECP certification
reviews of plans for which issuers submit QHP certification
applications in FFEs in States performing plan management functions
under Sec. 156.235. Not conducting reviews as finalized would maintain
current certification operations for issuers in FFE States that perform
plan management functions and continue to provide States with the
ability to use a similar approach to Federal ECP certification reviews
of plans for which issuers submit QHP certification applications in
FFEs. However, due to the implementation of the MPMS and enhancement of
the ECP user interface, issuers seeking QHP certification in FFEs,
including States performing plan management functions, can now submit
ECP data to HHS for data integrity of the Federal platform regardless
of whether it is the State or HHS conducting the review.
We are finalizing an amendment Sec. 156.1220(a)(2) to codify when
HHS will take action in response to a successful HHS-RADV appeal. We
considered several ways to design the new materiality threshold to
rerun HHS-RADV results. For example, we considered setting the second
materiality threshold to rerun HHS-RADV results to include a percentage
of HHS-RADV adjustments and applying a 1 percent test to align with the
EDGE materiality threshold in Sec. 153.710(e). However, considering
that the HHS-RADV adjustments to State risk adjustment transfer charges
and State risk adjustment transfer payments are orders of magnitude
smaller than those of the initial State risk adjustment transfer
amounts, we were concerned that we would see situations where 1 percent
of the applicable payment or charge could be as little as $10 based on
our experience running HHS-RADV for the past few years. Specifically,
we believe that structuring the threshold, as finalized, to the
financial impact of the filer and applying a threshold of equal to or
greater than $10,000 amount will balance the need for ensuring that
HHS-RADV results are accurate with the desire for ensuring that changes
in HHS-RADV results actually have a meaningful financial impact. This
finalized new materiality threshold to rerun HHS-RADV results takes
into consideration the existing materiality threshold for filing a
request for reconsideration, which applies to a number of different
program appeals. To remain consistent with this existing threshold and
recognizing that HHS-RADV adjustments are significantly smaller in
magnitude than risk adjustment transfers, we believe that $10,000 is a
reasonable threshold, but we solicited comment on this dollar amount
and whether it should be higher or lower or whether we should consider
including an inflation adjustment rate to this amount. This new
finalized materiality threshold to rerun HHS-RADV results also
considers the fact that it costs HHS approximately $75,000 to rerun
HHS-RADV and re-release results. Reducing the number of times HHS-RADV
needs to be rerun and HHS-RADV adjustments need to be re-released also
helps maintain the stability of the market, as there are fewer
instances of adjustments after the initial release of HHS-RADV
adjustments.
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 Small Business Administration (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 Exchanges and QHP issuers.
[[Page 4538]]
For purposes of the RFA, we believe that health insurance issuers
will be classified under the NAICS code 524114 (Direct Health and
Medical Insurance Carriers). According to SBA size standards, entities
with average annual receipts of $47 million or less would be considered
small entities for these NAICS codes. Issuers could possibly be
classified in 621491 (HMO Medical Centers) and, if this is the case,
the SBA size standard will be $44.5 million or less.\287\ 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 2023 MLR
reporting year, approximately 82 out of 475 issuers of health insurance
coverage nationwide had total premium revenue of $47 million or
less.\288\ This estimate may overstate the actual number of small
health insurance issuers that may be affected, since over 80 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 82 issuers are
considered small entities, for the purposes of this analysis, we assume
82 small issuers will be impacted by this final rule.
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\287\ SBA. (n.d.). Table of size standards. https://www.sba.gov/document/support--table-size-standards.
\288\ CMS. (n.d.). Medical Loss Ratio Data and System Resources.
https://www.cms.gov/CCIIO/Resources/Data-Resources/mlr.html.
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The finalized policies that will result in an increased burden to
small entities are described below.
We are finalizing an update to the IVA sampling methodology,
including the removal of enrollees without HCCs (including RXC-only
enrollees), removing the FPC, and replacing the source of the Neyman
allocation data with the most recent 3 years of consecutive HHS-RADV
data with results that have been released before that benefit year's
HHS-RADV activities begin, beginning with benefit year 2025 HHS-RADV.
The total cost savings associated with this finalized policy will be
approximately $79,121.92 per issuer audited per year. For more details,
please refer to the Regulatory Impact Analysis section associated with
this policy in this final rule.
We are finalizing in this final rule amendments to add a definition
of ``qualifying issuer'' and to give such issuers an option to modify
the treatment of payments or receipts related to the risk adjustment
program for MLR reporting and rebate calculation purposes beginning
with the 2026 MLR reporting year. If every qualifying issuer chooses to
take advantage of the option to modify the treatment of the payments or
receipts related to the risk adjustment program for MLR reporting and
rebate calculation purposes, then this finalized policy will reduce
rebates paid by these issuers to consumers or increase premiums
collected by these issuers from consumers by approximately $35 million
annually. The cost savings per issuer will therefore be approximately
$73,684.21.\289\ For more details, please refer to the Regulatory
Impact Analysis section associated with this policy in this final rule.
---------------------------------------------------------------------------
\289\ $35 million/475 issuers subject to the MLR requirements =
approximately $73,684.21.
---------------------------------------------------------------------------
Thus, the per-entity estimated annual cost savings for small
issuers is $152,806.13, and the total estimated annual cost savings for
small issuers is $13,294,133.31. See Tables 8 and 9.
[GRAPHIC] [TIFF OMITTED] TR15JA25.061
[GRAPHIC] [TIFF OMITTED] TR15JA25.062
We sought comment on this analysis and sought information on the
number of small issuers that may be affected by the provisions in these
final rules. We did not receive any comments on this analysis and are
therefore finalizing the estimates as proposed.
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 savings of $152,806.13 per small issuer represents approximately
0.07 percent of the average annual receipts for a small issuer.\290\
Therefore, the Secretary has certified that this final rule will not
have a significant economic impact on a substantial number of small
entities.
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\290\ United States Census Bureau (2020, March). 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.
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In addition, section 1102(b) of the Act requires us to prepare a
regulatory 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 final rule is
not subject to section 1102 of the Act, we have determined that this
final rule will not affect small rural hospitals. Therefore, the
Secretary has certified that this final
[[Page 4539]]
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 an 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 Executive Order 13132 that
agencies examine closely any policies that may have Federalism
implications or limit the policy making discretion of the States, we
have engaged in efforts to consult with and work cooperatively with
affected States, including participating in conference calls with and
attending conferences of the NAIC, and consulting with State insurance
officials on an individual basis.
While developing this final rule, we attempted to balance the
States' interests in regulating health insurance issuers with the need
to ensure market stability. By doing so, we complied with the
requirements of Executive Order 13132.
Because States have flexibility in designing their Exchange and
Exchange-related programs, State decisions will ultimately influence
both administrative expenses and overall premiums. States are not
required to establish an Exchange or risk adjustment program. For
States that elected previously to operate an Exchange, those States had
the opportunity to use funds under Exchange Planning and Establishment
Grants to fund the development of data. Accordingly, some of the
initial cost of creating programs was funded by Exchange Planning and
Establishment Grants. After establishment, Exchanges must be
financially self-sustaining, with revenue sources at the discretion of
the State. Current State Exchanges charge user fees to issuers.
In our view, while this final rule will not impose substantial
direct requirement costs on State and local governments, this
regulation has Federalism implications due to potential direct effects
on the distribution of power and responsibilities among the State and
Federal governments relating to determining standards relating to
health insurance that is offered in the individual and small group
markets. For example, the finalized policy to conduct ECP certification
reviews of plans for issuers in FFEs in States performing plan
management functions effective beginning in PY 2026 may have Federalism
implications, given that HHS has not conducted Federal ECP
certification reviews of plans in FFEs in States performing plan
management functions since PY 2015. However, these Federalism
implications may be balanced by enabling HHS to align standards in
these States with Federal review standards, and thereby increasing
consumer access in these States and improving efficiency of the QHP
certification process. Additionally, we do not believe that the
finalized amendment to codify the timeliness guidance for State
Exchanges to review and resolve the State Exchange issuers enrollment
data inaccuracies within 60 calendar days will have significant
Federalism implications because this finalized policy is merely
codifying a timeline for an existing data submission requirement.
Likewise, we do not believe that codifying the permissibility of CSR
loading has significant Federalism implications because it continues to
allow States to determine whether to allow and how to implement
actuarially justified CSR loading in their State, as discussed in
section III.D.3 of this preamble.
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 meets the
criteria set forth in 5 U.S.C. 804(2). Therefore, this rule shall be
submitted to each House of the Congress and to the Comptroller General
as part of a report containing a copy of the rule along with other
information specified in 5 U.S.C. 801(a)(1). Chiquita Brooks-LaSure,
Administrator of the Centers for Medicare & Medicaid Services, approved
this document on December 20, 2024.
List of Subjects
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.
45 CFR Part 158
Administrative practice and procedure, Claims, Health care, Health
insurance, Penalties, Reporting and recordkeeping requirements.
For the reasons set forth in the preamble, under the authority at 5
U.S.C. 301, the Department of Health and Human Services amends 45 CFR
subtitle A, subchapter B, as set forth below.
PART 155--EXCHANGE ESTABLISHMENT STANDARDS AND OTHER RELATED
STANDARDS UNDER THE AFFORDABLE CARE ACT
0
1. 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
2. Section 155.220 is amended by revising paragraph (k)(3) to read as
follows:
[[Page 4540]]
Sec. 155.220 Ability of States to permit agents, brokers, web-
brokers, and agencies to assist qualified individuals, qualified
employers, or qualified employees enrolling in QHPs.
* * * * *
(k) * * *
(3) HHS may immediately suspend the agent's or broker's ability to
transact information with the Exchange if HHS discovers circumstances
that pose unacceptable risk to the accuracy of the Exchange's
eligibility determinations, Exchange operations, applicants, or
enrollees, or Exchange information technology systems, including but
not limited to risk related to noncompliance with the standards of
conduct under paragraph (j)(2)(i), (ii), or (iii) of this section and
the privacy and security standards under Sec. 155.260, until the
circumstances of the incident, breach, or noncompliance are remedied or
sufficiently mitigated to HHS' satisfaction.
* * * * *
0
3. Section 155.305 is amended by adding paragraph (f)(4)(ii) to read as
follows:
Sec. 155.305 Eligibility Standards.
* * * * *
(f) * * *
(4) * * *
(ii) 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 their spouse, if the tax filer is a married couple,
for 2 consecutive tax years 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 both
years 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 direct notification to the tax filer, consistent with
the standards applicable to the protection of Federal Tax Information,
that explicitly 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 their Federal income taxes and reconcile
APTC, and educate the tax filer of the need to file and reconcile or
risk being determined ineligible for APTC after 2 consecutive years of
failing to file and reconcile; or
(B) Send an indirect 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 after 2 years of failing
to file and reconcile. These notices must educate tax filers or their
enrollees on the requirement to file and reconcile, while not directly
stating that the Internal Revenue Service indicates the tax filer or
the tax filer's spouse, if the tax filer is married, has failed to file
and reconcile.
* * * * *
0
4. Section 155.400 is amended by adding paragraphs (d)(1) and (2) and
revising paragraph (g) to read as follows:
Sec. 155.400 Enrollment of qualified individuals into QHPs.
* * * * *
(d) * * *
(1) Timeliness standard for State Exchanges to review, resolve, and
report data inaccuracies submitted by a State Exchange issuer. Within
60 calendar days after a State Exchange receives a data inaccuracy from
an issuer operating in the State Exchange that includes a description
of a data inaccuracy in accordance with Sec. 156.1210 and all the
information that the State Exchange requires or requests to properly
assess the inaccuracy, the State Exchange must review and resolve the
State Exchange issuer's data inaccuracies and submit to HHS a
description of the resolution of the inaccuracies in a format and
manner specified by HHS.
(2) [Reserved]
* * * * *
(g) Premium payment threshold. Exchanges may, and the Federally-
facilitated Exchanges and State-Based Exchanges on the Federal platform
will, allow issuers to implement a percentage-based premium payment
threshold policy (which can be based on either the net premium after
application of advance payments of the premium tax credit or gross
premium) and/or a fixed-dollar premium payment threshold policy,
provided that the threshold and policy is applied in a uniform manner
to all applicants and enrollees.
(1) Under a net premium percentage-based premium payment threshold
policy, issuers can consider applicants or enrollees to have paid all
amounts due for the following purposes, if the applicants or enrollees
pay an amount sufficient to maintain a percentage of total premium paid
out of the total premium owed equal to or greater than 95 percent of
the net monthly premium amount owed by the enrollees. If an applicant
or enrollee satisfies the percentage-based premium payment threshold
policy, the issuer may:
(i) Effectuate an enrollment based on payment of the binder payment
under paragraph (e) of this section.
(ii) Avoid triggering a grace period for non-payment of premium, as
described by Sec. 156.270(d) of this subchapter or a grace period
governed by State rules.
(iii) Avoid terminating the enrollment for non-payment of premium
as, described by Sec. Sec. 156.270(g) of this subchapter and
155.430(b)(2)(ii)(A) and (B).
(2) Under a gross premium percentage-based premium payment
threshold policy, issuers can consider enrollees to have paid all
amounts due for the following purposes, if the enrollees pay an amount
sufficient to maintain a percentage of the gross premium of the policy
before the application of advance payments of the premium tax credit
that is equal to or greater than 98 percent of the gross monthly
premium owed by the enrollees. If an enrollee satisfies the gross
premium percentage-based premium payment threshold policy, the issuer
may:
(i) Avoid triggering a grace period for non-payment of premium, as
described by Sec. 156.270(d) of this subchapter or a grace period
governed by State rules.
(ii) Avoid terminating the enrollment for non-payment of premium
as, described by Sec. Sec. 156.270(g) of this subchapter and
155.430(b)(2)(ii)(A) and (B).
(3) Under a fixed-dollar premium payment threshold policy, issuers
can consider enrollees to have paid all amounts due for the following
purposes, if the enrollees pay an amount that is less than the total
premium owed, the unpaid remainder of which is equal to or less than a
fixed-dollar amount of $10 or less, adjusted for inflation, as
prescribed by the issuer. If an enrollee satisfies the fixed-dollar
premium payment threshold policy, the issuer may:
(i) Avoid triggering a grace period for non-payment of premium, as
described by Sec. 156.270(d) of this subchapter or a grace period
governed by State rules.
(ii) Avoid terminating the enrollment for non-payment of premium
as, described by Sec. Sec. 156.270(g) of this subchapter and
155.430(b)(2)(ii)(A) and (B).
* * * * *
0
5. Section 155.505 is amended by revising paragraph (b) introductory
text to read as follows:
Sec. 155.505 General Eligibility Appeals Requirements.
* * * * *
(b) Right to appeal. An applicant, enrollee, or application filer
must have the right to appeal:
* * * * *
[[Page 4541]]
0
6. Section 155.1000 is amended by adding paragraph (e) to read as
follows:
Sec. 155.1000 Certification standards for QHPs.
* * * * *
(e) Denial of certification. The Exchange may deny certification to
any plan that does not meet the general certification criteria under
Sec. 155.1000(c).
0
7. Section 155.1090 is amended by revising the section heading, the
paragraph (a) heading, and paragraphs (a)(2) and (3) to read as
follows:
Sec. 155.1090 Request for the reconsideration of a denial of
certification.
(a) Request for the reconsideration of a denial of certification
specific to a Federally-facilitated Exchange--
* * * * *
(2) Form and manner of request. An issuer submitting a request for
reconsideration under paragraph (a)(1) of this section must submit a
written request for reconsideration to HHS, in the form and manner
specified by HHS, within 7 calendar days of the date of the written
notice of denial of certification. The issuer must include any and all
documentation the issuer wishes to provide in support of its request
with its request for reconsideration. The request for reconsideration
must provide clear and convincing evidence that HHS' determination that
the plan does not meet the general certification criteria at Sec.
155.1000(c) was in error.
(3) HHS reconsideration decision. HHS will review the
reconsideration request to determine whether the issuer's
reconsideration request provided clear and convincing evidence that
HHS' determination that the plan does not meet the general
certification criteria at Sec. 155.1000(c) was in error. HHS will
provide the issuer with a written notice of the reconsideration
decision. The decision will constitute HHS' final determination.
* * * * *
PART 156--HEALTH INSURANCE ISSUER STANDARDS UNDER THE AFFORDABLE
CARE ACT, INCLUDING STANDARDS RELATED TO EXCHANGES
0
8. 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
9. Section 156.80 is amended by revising paragraph (d)(2)(i) to read as
follows:
Sec. 156.80 Single risk pool.
* * * * *
(d) * * *
(2) * * *
(i) The actuarial value and cost-sharing design of the plan,
including, if permitted by the applicable State authority (as defined
in Sec. 144.103 of this subchapter), accounting for cost-sharing
reduction amounts provided to eligible enrollees under Sec. 156.410,
provided the issuer does not otherwise receive reimbursement for such
amounts.
* * * * *
0
10. Section 156.201 is amended by adding paragraph (c) to read as
follows:
Sec. 156.201 Standardized plan options.
* * * * *
(c) For plan year 2026 and subsequent plan years, an issuer that
offers multiple standardized plan options within the same product
network type, metal level, and service area must meaningfully
differentiate these plans from one another in terms of included
benefits, provider networks, included prescription drugs, or a
combination of some or all these factors. For the purposes of this
standard, a standardized plan option with a different product ID,
provider network ID, drug list ID, or a combination of some or all
these factors, would be considered meaningfully different.
0
11. Section 156.202 is amended by revising paragraph (b) and paragraph
(d) introductory text to read as follows:
Sec. 156.202 Non-standardized plan option limits.
* * * * *
(b) For plan year 2025 and subsequent plan years, is limited to
offering two non-standardized plan options per product network type, as
the term is described in the definition of ``product'' at Sec. 144.103
of this subchapter, metal level (excluding catastrophic plans), and
inclusion of adult dental benefit coverage, pediatric dental benefit
coverage, and adult vision benefit coverage (as defined in paragraphs
(c)(1) through (3) of this section), in any service area.
* * * * *
(d) For plan year 2025 and subsequent plan years, an issuer may
offer additional non-standardized plan options for each product network
type, metal level, inclusion of adult dental benefit coverage,
pediatric dental benefit coverage, and adult vision benefit coverage
(as defined in paragraphs (c)(1) through (3) of this section), 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
the issuer's other non-standardized plan option offerings in the same
product network type, metal level, inclusion of adult dental benefit
coverage, pediatric dental benefit coverage, and adult vision benefit
coverage, and service area.
* * * * *
0
12. Section 156.1220 is amended by adding paragraphs (a)(2)(i) and (ii)
to read as follows:
Sec. 156.1220 Administrative appeals.
(a) * * *
(2) * * *
(i) Notwithstanding paragraphs (a)(1) and (2) of this section, for
appeals related to HHS-RADV under paragraphs (a)(1)(vii) and (viii) of
this section, HHS will only take action to adjust risk adjustment State
payments and charges for an issuer in response to an appeal decision
when the impact of the decision to the filer's HHS-RADV adjustments to
risk adjustment State transfers is greater than or equal to $10,000.
(ii) [Reserved]
* * * * *
PART 158--ISSUER USE OF PREMIUM REVENUE: REPORTING AND REBATE
REQUIREMENTS
0
13. The authority citation for part 158 continues to read as follows:
Authority: 42 U.S.C. 300gg-18.
0
14. Section 158.103 is amended by adding a definition for ``Qualifying
issuer'' in alphabetical order to read as follows:
Sec. 158.103 Definitions.
* * * * *
Qualifying issuer means an issuer whose aggregate ratio of net
payments related to the risk adjustment program under section 1343 of
the Patient Protection and Affordable Care Act, 42 U.S.C. 18063, to
earned premiums as defined in Sec. 158.130, but prior to and excluding
the adjustments in Sec. 158.130(b)(5) that account for the net
payments or receipts related to the risk adjustment, risk corridors,
and reinsurance programs, based on three consecutive years of data in a
relevant State and market, is greater than or equal to 50 percent.
* * * * *
[[Page 4542]]
0
15. Section 158.140 is amended by revising paragraph (b)(4)(ii) to read
as follows:
Sec. 158.140 Reimbursement for clinical services provided to
enrollees.
* * * * *
(b) * * *
(4) * * *
(ii) Beginning with the 2026 MLR reporting year, for qualifying
issuers (as defined in Sec. 158.103), at such issuers' option,
receipts related to the transitional reinsurance program and net
payments or receipts related to the risk corridors program (calculated
using an adjustment percentage, as described in Sec. 153.500 of this
subchapter, equal to zero percent) under sections 1341 and 1342 of the
Patient Protection and Affordable Care Act, 42 U.S.C. 18061, 18062. For
all other issuers, receipts related to the transitional reinsurance
program and net payments or receipts related to the risk adjustment and
risk corridors programs (calculated using an adjustment percentage, as
described in Sec. 153.500 of this subchapter, equal to zero percent)
under sections 1341, 1342, and 1343 of the Patient Protection and
Affordable Care Act, 42 U.S.C. 18061, 18062, 18063.
* * * * *
0
16. Section 158.240 is amended by revising paragraph (c)(2) and adding
paragraph (c)(3) to read as follows:
Sec. 158.240 Rebating premium if the applicable medical loss ratio
standard is not met.
* * * * *
(c) * * *
(2) For example, an issuer must rebate a pro rata portion of
premium revenue if it does not meet an 80 percent MLR for the
individual market in a State that has not set a higher MLR. If an
issuer has a 75 percent MLR for the coverage it offers in the
individual market in a State that has not set a higher MLR, the issuer
must rebate 5 percent of the premium paid by or on behalf of the
enrollee for the MLR reporting year after subtracting a pro rata
portion of taxes and fees and accounting for payments or receipts
related to the reinsurance, risk adjustment and risk corridors programs
(calculated using an adjustment percentage, as described in Sec.
153.500 of this subchapter, equal to zero percent). If the issuer is
not a qualifying issuer (defined in Sec. 158.103), or is a qualifying
issuer that does not opt to apply risk adjustment transfer amounts as
described in Sec. 158.140(b)(4)(ii), the issuer's total earned premium
for the MLR reporting year in the individual market in the State is
$200,000, incurred claims are $121,250, the issuer received
transitional reinsurance payments of $2,500, and made net payments
related to risk adjustment and risk corridors of $20,000 (calculated
using an adjustment percentage, as described in Sec. 153.500 of this
subchapter, equal to zero percent), then the issuer's gross earned
premium in the individual market in the State would be $200,000 plus
$2,500 minus $20,000, for a total of $182,500. If the issuer's Federal
and State taxes and licensing and regulatory fees, including
reinsurance contributions, that may be excluded from premium revenue as
described in Sec. Sec. 158.161(a), 158.162(a)(1), and 158.162(b)(1),
allocated to the individual market in the State are $15,000, and the
net payments related to risk adjustment and risk corridors, reduced by
reinsurance receipts, that must be accounted for in premium revenue as
described in Sec. Sec. 158.130(b)(5), 158.221, and 158.240, are
$17,500 ($20,000 reduced by $2,500), then the issuer would subtract
$15,000 and add $17,500 to gross premium revenue of $182,500, for a
base of $185,000 in adjusted premium. The issuer would owe rebates of 5
percent of $185,000, or $9,250 in the individual market in the State.
In this example, if an enrollee of the issuer in the individual market
in the State paid $2,000 in premiums for the MLR reporting year, or 1/
100 of the issuer's total premium in that State market, then the
enrollee would be entitled to 1/100 of the total rebates owed by the
issuer, or $92.50.
(3) As another example, if an issuer is a qualifying issuer
(defined in Sec. 158.103) that opts to apply risk adjustment transfer
amounts as described in Sec. 158.140(b)(4)(ii), the issuer's total
earned premium for the MLR reporting year in the individual market in
the State is $90,000, incurred claims are $151,250, and the issuer
received transitional reinsurance payments of $12,500 and net receipts
related to risk adjustment of $110,000, then the issuer's gross earned
premium in the individual market in the State would be $90,000 plus
$12,500, for a total of $102,500. If the qualifying issuer's Federal
and State taxes and licensing and regulatory fees, including
reinsurance contributions, that may be excluded from premium revenue as
described in Sec. Sec. 158.161(a), 158.162(a)(1), and 158.162(b)(1),
allocated to the individual market in the State are $15,000, and the
reinsurance payments that must be accounted for in premium revenue as
described in Sec. Sec. 158.130(b)(5), 158.221, and 158.240 are
$12,500, then the qualifying issuer would subtract $15,000 and $12,500
from gross premium revenue of $102,500, for a subtotal of $75,000. The
qualifying issuer would then add $110,000 in net receipts related to
risk adjustment, for a base of $185,000 in adjusted premium. The
qualifying issuer would owe rebates of 5 percent of $185,000, or $9,250
in the individual market in the State. In this example, if an enrollee
of the issuer in the individual market in the State paid $900 in
premiums for the MLR reporting year, or 1/100 of the issuer's total
premium in that State market, then the enrollee would be entitled to 1/
100 of the total rebates owed by the issuer, or $92.50.
* * * * *
Xavier Becerra,
Secretary, Department of Health and Human Services.
[FR Doc. 2025-00640 Filed 1-13-25; 4:15 pm]
BILLING CODE 4120-01-P