[Federal Register Volume 90, Number 52 (Wednesday, March 19, 2025)]
[Proposed Rules]
[Pages 12942-13032]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-04083]
[[Page 12941]]
Vol. 90
Wednesday,
No. 52
March 19, 2025
Part II
Department of Health and Human Services
-----------------------------------------------------------------------
45 CFR Parts 147, 155 and 156
Patient Protection and Affordable Care Act; Marketplace Integrity and
Affordability; Proposed Rule
Federal Register / Vol. 90, No. 52 / Wednesday, March 19, 2025 /
Proposed Rules
[[Page 12942]]
-----------------------------------------------------------------------
DEPARTMENT OF HEALTH AND HUMAN SERVICES
45 CFR Parts 147, 155, and 156
[CMS-9884-P]
RIN 0938-AV61
Patient Protection and Affordable Care Act; Marketplace Integrity
and Affordability
AGENCY: Centers for Medicare & Medicaid Services (CMS), Department of
Health and Human Services (HHS).
ACTION: Proposed rule.
-----------------------------------------------------------------------
SUMMARY: This proposed rule would revise standards relating to past-due
premium payments; exclude Deferred Action for Childhood Arrivals
recipients from the definition of ``lawfully present''; the evidentiary
standard HHS uses to assess an agent's, broker's, or web-broker's
potential noncompliance; failure to file and reconcile; income
eligibility verifications for premium tax credits and cost-sharing
reductions; annual eligibility redetermination; the automatic
reenrollment hierarchy; the annual open enrollment period; special
enrollment periods; de minimis thresholds for the actuarial value for
plans subject to essential health benefits (EHB) requirements and for
income-based cost-sharing reduction plan variations; and the premium
adjustment percentage methodology; and prohibit issuers of coverage
subject to EHB requirements from providing coverage for sex-trait
modification as an EHB.
DATES: To be assured consideration, comments must be received by April
11, 2025.
ADDRESSES: In commenting, please refer to file code CMS-9884-P.
Comments, including mass comment submissions, must be submitted in
one of the following three ways (please choose only one of the ways
listed):
1. Electronically. You may submit electronic comments on this
regulation to http://www.regulations.gov. Follow the ``Submit a
comment'' instructions.
2. By regular mail. You may mail written comments to the following
address ONLY: Centers for Medicare & Medicaid Services, Department of
Health and Human Services, Attention: CMS-9884-P, P.O. Box 8016,
Baltimore, MD 21244-8016.
Please allow sufficient time for mailed comments to be received
before the close of the comment period.
3. By express or overnight mail. You may send written comments to
the following address ONLY: Centers for Medicare & Medicaid Services,
Department of Health and Human Services, Attention: CMS-9884-P, Mail
Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
For information on viewing public comments, see the beginning of
the SUPPLEMENTARY INFORMATION section.
FOR FURTHER INFORMATION CONTACT: Jeff Wu, (301) 492-4305, Rogelyn
McLean, (410) 786-1524, Grace Bristol, (410) 786-8437, for general
information.
SUPPLEMENTARY INFORMATION:
Inspection of Public Comments: Comments received before the close
of the comment period are available for viewing by the public,
including any personally identifiable or confidential business
information that is included in a comment. We post comments received
before the close of the comment period on the following website as soon
as possible after they have been received: http://www.regulations.gov.
Follow the search instructions on that website to view public comments.
We will not post on Regulations.gov public comments that make threats
to individuals or institutions or suggest that the commenter will take
actions to harm an individual. We continue to encourage individuals not
to submit duplicative comments. We will post acceptable comments from
multiple unique commenters even if the content is identical or nearly
identical to other comments.
Plain Language Summary: In accordance with 5 U.S.C. 553(b)(4), a
summary of not more than 100 words in length of this proposed rule, in
plain language, may be found at https://www.regulations.gov/.
I. Executive Summary
On January 20, 2025, President Trump issued a memorandum entitled
``Delivering Emergency Price Relief for American Families and Defeating
the Cost-of-Living Crisis.'' \1\ This memorandum instructed all
executive departments and agencies to deliver emergency price relief
for the American people and to increase the prosperity of the American
worker. Health care represents a substantial portion of a family's
budget and a tremendous cost to Federal taxpayers. To provide relief
from rising health care costs, we propose several regulatory actions
aimed at strengthening the integrity of the Patient Protection and
Affordable Care Act (ACA) eligibility and enrollment systems to reduce
waste, fraud, and abuse. We expect these actions would provide premium
relief to families who do not qualify for Federal premium subsidies and
reduce the burden of the ACA premium subsidy expenditures to the
Federal taxpayer.
---------------------------------------------------------------------------
\1\ Executive Office of the President. (January 20, 2025).
Delivering Emergency Price Relief for American Families and
Defeating the Cost-of-Living Crisis. https://www.federalregister.gov/documents/2025/01/28/2025-01904/delivering-emergency-price-relief-for-american-families-and-defeating-the-cost-of-living-crisis.
---------------------------------------------------------------------------
Based on our review of enrollment data and our experience fielding
consumer complaints, we believe several regulatory policies recently
put in place to make it easier to enroll in subsidized coverage
severely weakened program integrity and put consumers at risk from
improper enrollment. In particular, these policies put consumers at
risk for accumulating surprise tax liabilities and substantial
inconveniences from resolving these liabilities, as well as other
issues related to coverage changes and access to care, due to the
improper enrollment. The substantial increase in consumer complaints
from people who were unaware that they had been enrolled by an agent,
broker, or web-broker in Exchange coverage suggests many of these
improper enrollments are due to fraud.\2\ We note, fraudulent
enrollments involve enrollments obtained through willful
misrepresentations whereas improper enrollments involve any enrollment
determination that was made incorrectly for any reason which can
include fraud.\3\
---------------------------------------------------------------------------
\2\ For example, from January 2024 through August 2024, CMS
received 90,863 complaints that consumers had their FFE plan changed
without their consent (also known as an ``unauthorized plan
switch''). CMS (2024, October). CMS Update on Action 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. See also, U.S.
Department of Justice. (2025, February 19). President of insurance
brokerage firm and CEO of marketing company charged in $161M
Affordable Care Act enrollment fraud scheme [Press release]. https://www.justice.gov/opa/pr/president-insurance-brokerage-firm-and-ceo-marketing-company-charged-161m-affordable-care.
\3\ See U.S. Government Accountability Office, Improper Payments
and Fraud: How They Are Related but Different, December 7, 2023,
https://www.gao.gov/products/gao-24-106608.
---------------------------------------------------------------------------
Because Federal law limits the amount that enrollees with lower
household incomes must repay when they reconcile advance payments of
the premium tax credit (APTC) received, these improper enrollments
ended up costing Federal taxpayers billions of dollars. One analysis of
improper enrollments estimated the Federal Government may have spent up
to $26 billion on improper enrollments in 2024, before reconciling
enrollment data.\4\ The proposed provisions here aim
[[Page 12943]]
to address these serious program integrity problems while at the same
time delivering a streamlined enrollment and eligibility determination
process for individual market consumers.
---------------------------------------------------------------------------
\4\ Blase, B.; Gonshorowski, D. (2024, June). The Great
Obamacare Enrollment Fraud. Paragon Health Institute. https://paragoninstitute.org/private-health/the-great-obamacare-enrollment-fraud.
---------------------------------------------------------------------------
Before summarizing these proposed rules, we believe it is important
to review the interlocking policies the ACA put in place to expand
access to coverage on the individual market.\5\ A full understanding of
how ACA individual market policies interact helps frame why we believe
the program integrity and premium relief policies contained within
these proposed rules are necessary to improve the individual health
insurance market. As a starting point, the ACA establishes American
Health Benefit Exchanges, or ``Exchanges'' to facilitate the purchase
of qualified health plans (QHPs). Many individuals who enroll in QHPs
through individual market Exchanges are eligible to receive a premium
tax credit (PTC) to reduce their costs for health insurance premiums
and have their out-of-pocket expenses for health care services reduced
through cost-sharing reductions (CSR). Most individuals who claim PTCs
receive APTC, which subsidizes lower monthly premiums, before they must
file taxes. Taxpayers must then reconcile APTC paid to issuers on their
behalf when they file taxes. The ACA includes limits on how much excess
APTC a taxpayer must repay based on household income.
---------------------------------------------------------------------------
\5\ 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''.
---------------------------------------------------------------------------
The ACA's individual market rules require issuers to guarantee
coverage to all applicants regardless of pre-existing conditions and
restrict issuers from setting premiums based on health status. These
requirements create an inherent bias towards adverse selection--a
situation where individuals with higher risk are more likely to select
coverage than healthy individuals--by allowing people to wait to enroll
in coverage until they need health services. In such situations, health
insurance issuers offering coverage to a larger proportion of higher
risk enrollees raise premiums, which causes healthier people to drop
coverage. Enough cycles of rising premiums and healthier people
dropping coverage would create a ``death spiral'' and undermine the
viability of the individual market for everyone.
To discourage people from waiting until they need health care
services to sign up for coverage, the ACA permits issuers to limit
enrollment periods to certain times. The ACA also provides PTC for
plans sold through Exchanges to subsidize coverage for certain
households.
Several policies included in the ACA attempt to address its adverse
selection bias. For example, adverse selection between plans can occur
when one plan enrolls a disproportionate number of people with high
risks. The ACA's risk adjustment program transfers funds from issuers
with relatively low-risk enrollees to issuers with relatively high-risk
enrollees, though implementation of the risk adjustment program has
been criticized by some commenters for creating further distortions
that limit incentives for issuers to attract lower-risk enrollees.\6\
In addition, to avoid adverse selection between plans sold on and off
the Exchanges, the ACA requires issuers to keep issuers to keep all
individual market plans subject to the law's main coverage mandates in
the same risk pool.
---------------------------------------------------------------------------
\6\ Cruz, D; Fann, G. (2024, Sept.). It's Not Just the Prices:
ACA Plans Have Declined in Quality Over the Past Decade. Paragon
Health Institute. https://paragoninstitute.org/private-health/its-not-just-the-prices-aca-plans-have-declined-in-quality-over-the-past-decade/.
---------------------------------------------------------------------------
By tying an issuer's on-Exchange and off-Exchange individual market
risk pools together, the ACA's unsubsidized off-Exchange market was
intended to help anchor the subsidized Exchange enrollees to a more
competitive and efficient market. A well-functioning market depends on
consumers actively shopping for the best deal based on price and
quality.\7\ In practice, however, the high premiums of off-Exchange
plans have made these options largely unattractive to unsubsidized
consumers, with only an estimated 2.5 million people enrolling in
unsubsidized off-Exchange coverage (including some in plans not subject
to all of the ACA's market rules, like grandfathered and short-term
plans) nationwide in 2023.\8\ Further, subsidies, especially price-
linked subsidies like PTCs, generally distort markets and weaken
competition because the subsidized enrollee is no longer price
sensitive to the full cost.\9\ In a market where everyone is
subsidized, prices would generally be much higher due to the subsidized
consumers' lower level of price sensitivity.\10\ When Congress enacted
the ACA, the Congressional Budget Office (CBO) projected the law would
enroll 15 million unsubsidized consumers--about the same as without the
law--and another 19 million subsidized consumers.\11\ Those 15 million
unsubsidized consumers actively shopping for the best deal were
expected to support a competitive and efficient market. In turn, the
benefits from this competition would spill over to the subsidized
consumers who benefit from the availability of higher quality health
plans and the Federal taxpayers funding the subsidies who benefit from
lower premium subsidies.
---------------------------------------------------------------------------
\7\ Garrod, L.; Waddams, C.; Hvvid, M.; and Loomes, G. (2009).
Competition Remedies in Consumer Markets. Loyola Consumer Law
Review. 21. 439-495. https://www.researchgate.net/publication/271701344_Competition_Remedies_in_Consumer_Markets (last accessed
Feb. 23, 2025).
\8\ Ortaliza, J.; Amin, K.; and Cox, C. (2023). As ACA
Marketplace Enrollment Reaches Record High, Fewer Are Buying
Individual Market Coverage Elsewhere. https://www.kff.org/private-insurance/issue-brief/as-aca-marketplace-enrollment-reaches-record-high-fewer-are-buying-individual-market-coverage-elsewhere/#.
\9\ See Sonia Jaffe and Mark Shepard, ``Price-Linked Subsidies
and Imperfect Competition in Health Insurance,'' American Economic
Journal: Economic Policy, Vol 12, No. 3, August 2020.
\10\ While subsidized consumers are willing to tolerate higher
prices than unsubsidized consumers, there are certain limits on how
much prices can rise overall. The ACA's rate review provision
(section 2794 of the Public Health Service Act (PHS Act)) restrains
prices prospectively by placing scrutiny on proposed premium rate
increases before they go into effect, which can discourage or
prevent issuers from implementing unreasonable rate increases. The
ACA's medical loss ratio provision (section 2718 of the PHS Act)
limits prices retrospectively by requiring issuers to pay rebates to
consumers if premium rates end up being excessive relative to actual
medical costs.
\11\ Congressional Budget Office. (2010, March 20) Letter to
Nancy Pelosi. Congress of the U.S. Table 4, https://www.cbo.gov/sites/default/files/111th-congress-2009-2010/costestimate/amendreconprop.pdf.
---------------------------------------------------------------------------
The ACA did not roll out as intended when the ACA's main coverage
mandates went into effect in 2014. Premiums increased much more and
enrollment levels among both the subsidized and the unsubsidized were
much lower than projected. Higher premiums then led to a substantial
decline in unsubsidized enrollment, which undermined the
competitiveness of the market. By 2019, our data showed that subsidized
enrollment on the Exchanges had reached only 8.3 million while
unsubsidized enrollment across the entire individual market subject to
the ACA's market rules had dropped to 3.4 million.\12\ To improve the
[[Page 12944]]
attractiveness of the market, several States implemented reinsurance
programs that lowered premiums for the unsubsidized by funding high-
cost claims across the individual market. These policies helped retain
unsubsidized enrollees who anchor the market in a more competitive and
efficient position.
---------------------------------------------------------------------------
\12\ CMS. (2020, Oct. 9). Trends in Subsidized and Unsubsidized
Enrollment. p. 11. https://www.cms.gov/CCIIO/Resources/Forms-Reports-and-Other-Resources/Downloads/Trends-Subsidized-Unsubsidized-Enrollment-BY18-19.pdf. Note that, in 2019, an
additional 1.4 million unsubsidized people remained enrolled in
grandfathered and grandmothered individual market plans that were
not subject to all of the ACA's market rules. Grandmothered coverage
refers to certain non-grandfathered health insurance coverage in the
individual and small group market with respect to which CMS has
announced it will not take enforcement action even though the
coverage is out of compliance with certain specified market rules.
See CMS. (2022, March 23). Extended Non-Enforcement of Affordable
Care Act-Compliance with Respect to Certain Policies. https://www.cms.gov/files/document/extension-limited-non-enforcement-policy-through-calendar-year-2023-and-later-benefit-years.pdf.
---------------------------------------------------------------------------
After reviewing individual market data and responding to a
substantial increase in consumer complaints, we believe several rules
we have implemented removed necessary program integrity protections and
facilitated the substantial increase in improper enrollments on the
Exchanges. Some of those rules removed or reduced eligibility
verifications related to qualifying for APTC and CSR subsidies. Other
rules amended enrollment period policies by removing verifications and
expanding when and under what conditions a consumer can enroll. We
believe the data and analysis presented in this preamble show how these
rules have led to higher premiums and costs for consumers and taxpayers
alike. Therefore, we propose the following regulatory changes to
improve program integrity and protect against adverse selection, while
at the same time keeping the enrollment process streamlined and
accessible, especially for low-income consumers who utilize Exchanges
for subsidized individual market coverage.
We propose to remove Sec. 147.104(i), which would reverse the
policy restricting an issuer from attributing payment of premium for
new coverage to past-due premiums from prior coverage. This current
policy, in effect, restricts issuers from establishing premium payment
policies that require enrollees to pay past-due premiums to effectuate
new coverage. While we previously concluded that this restriction would
remove an unnecessary barrier and make it easier for consumers to
enroll in coverage, recent enrollment data suggest people are
manipulating guaranteed availability and grace periods to time coverage
to when they need health care services. Alongside the removal of this
restriction, we propose to allow issuers, subject to applicable State
law, to add past-due premium amounts owed to the issuer to the initial
premium the enrollee must pay to effectuate new coverage and to not
effectuate new coverage if the past-due and initial premium amounts are
not paid in full. We believe this change would strengthen the risk pool
and lower gross premiums.
We propose to modify the definition of ``lawfully present''
currently articulated at Sec. 155.20 and used for the purpose of
determining whether a consumer is eligible to enroll in a QHP through
an Exchange or a Basic Health Program (BHP) in States that elect to
operate a BHP.\13\ The BHP regulations at 42 CFR 600.5 cross-reference
the definition of lawfully present at 45 CFR 155.20. This change would
reflect the explicit statutory requirements of the ACA by once again
excluding ``Deferred Action for Childhood Arrivals'' (DACA) recipients
from the definition of ``lawfully present'' that is used to determine
eligibility to enroll in a QHP through an Exchange, for APTC and CSRs,
and for a BHP in States that elect to operate a BHP.
---------------------------------------------------------------------------
\13\ Currently, Minnesota and Oregon operate a BHP. See their
approved BHP Blueprints, available at: https://www.medicaid.gov/basic-health-program/index.html.
---------------------------------------------------------------------------
We propose to revise Sec. 155.220(g)(2) to require HHS to apply a
``preponderance of the evidence'' standard of proof for terminations
for cause by HHS of an agent's, broker's, or web-broker's Exchange
agreements under Sec. 155.220(g)(1). We also propose to add a
definition for ``preponderance of the evidence'' to Sec. 155.20. We
believe this change would improve transparency in the process for
holding agents, brokers, and web-brokers accountable for compliance
with applicable law, regulatory requirements, and the terms and
conditions of their Exchange agreements.
We propose to revise the failure to file and reconcile (FTR)
process at Sec. 155.305(f)(4) to reinstate the policy that Exchanges
must determine a tax filer ineligible for APTC if: (1) HHS notifies the
Exchange that the tax filer (or their spouse if the tax filer is a
married couple) received APTC for a prior year for which tax data would
be utilized for verification of income, and (2) the tax filer or tax
filer's spouse did not comply with the requirement to file a Federal
income tax return and reconcile APTC for that year. This proposed
process would replace the existing requirement that Exchanges may not
determine a tax filer eligible for APTC if HHS notifies the Exchanges
that the tax filer (or either spouse if the tax filer is a married
couple) received APTC for two consecutive years for which tax data
would be utilized for verification of income, and (2) the tax filer or
tax filer's spouse did not comply with the requirement to file a
Federal income tax return and reconcile APTC for that year and the
previous year. We believe this change would reduce the number of
ineligible enrollees who continue to receive APTC, which would, in
turn, lower APTC expenditures and protect ineligible enrollees from
accumulating surprise tax liabilities. We also propose to amend the
notice requirement at Sec. 155.305(f)(4)(i) and remove the notice
requirement at Sec. 155.305(f)(4)(ii) to conform with the notice
policy under the previous FTR policy.
To further protect against consumers receiving APTC and CSR
subsidies when they do not meet eligibility requirements, we propose
policies to strengthen the verification process when there is an income
inconsistency with trusted data sources. We propose to remove Sec.
155.315(f)(7) which requires that applicants receive an automatic 60-
day extension to the 90-day period set forth in section 1411(e)(4)(A)
of the ACA to provide documentation to verify household income when
there is an income inconsistency. Removing Sec. 155.315(f)(7) would
end APTC payments to individuals who have failed to provide
documentation verifying their eligibility for APTC within 90 days and
further protect them from surprise tax liabilities if they are
ineligible. We also propose to revise Sec. 155.320(c)(3)(iii) to
specify that all Exchanges must generate annual household income
inconsistencies when a tax filer's attested projected annual household
income is greater than or equal to 100 percent and not more than 400
percent of the Federal poverty level (FPL) and trusted data sources
indicate that projected household income is under 100 percent of the
FPL. Finally, we propose to remove Sec. 155.320(c)(5) which would
remove the exception to the standard household income inconsistency
process that requires the Exchange to accept an applicant's attestation
of household income and family size without verification when the
Internal Revenue Service (IRS) does not have tax return data to verify
household income and family size. Removing this exception would in most
circumstances require Exchanges to verify household income with other
trusted data sources when a tax return is unavailable and follow the
alternative verification process to verify the income, which would
strengthen
[[Page 12945]]
program integrity by improving the accuracy of eligibility
determinations across all Exchanges.
To prevent fully subsidized enrollees from being automatically re-
enrolled without taking an action to confirm their eligibility
information, we propose an amendment to the annual eligibility
redetermination regulation and are seeking comment on a range of
potential measures to ensure program integrity with respect to re-
enrollments. We propose that, when an enrollee does not contact an
Exchange to obtain an updated eligibility determination and select a
plan on or before the last day to do so for January 1 coverage, in
accordance with the effective dates specified in Sec. Sec. 155.410(f)
and 155.420(b), as applicable, and the enrollee's portion of the
premium for the entire policy would be zero dollars after application
of APTC through the Exchange's annual redetermination process, all
Exchanges must decrease the amount of the APTC applied to the policy
such that the remaining monthly premium owed by the enrollee for the
entire policy equals $5 for the first month and for every following
month that the enrollee does not confirm their eligibility for APTC.
Consistent with Sec. 155.310(c) and (f), enrollees automatically
reenrolled with a $5 monthly premium after APTC under this policy would
be able to update their Exchange application at any point to confirm
eligibility for APTC that covers the entire premium, and re-confirm
their plan to thereby reinstate the full amount of APTC for which the
enrollee is eligible on a prospective basis. We propose that the
Federally-facilitated Exchanges (FFEs) and the State-based Exchanges on
the Federal platform (SBE-FPs) must implement this change starting with
annual redeterminations for benefit year 2026. We propose that the
State Exchanges must implement it starting with annual redeterminations
for benefit year 2027. We believe these proposals would strengthen the
program integrity of the Exchanges and protect consumers.
We are also seeking comment on a range of other options to ensure
program integrity with respect to automatic re-enrollment that would
provide a more meaningful incentive to confirm eligibility for APTC, as
the millions estimated to currently receive improper APTC could simply
pay the $5 premium while continuing to improperly receive generous
subsidies on their behalf, potentially incurring significant future
surprise tax liabilities in the process. As such, we are seeking
comment on whether $5 is the appropriate premium amount for affected
individuals to pay under the proposed policy. Another such option could
include requiring individuals who qualify for fully subsidized plans to
re-confirm their plan and re-verify their income before they are
eligible to receive APTC. Finally, we are seeking comment on removing
the option for Exchanges to auto-reenroll individuals who qualify for
fully or partially subsidized plans, ensuring individuals affirmatively
choose their plan and verify their income during the open enrollment
period, dramatically reducing the likelihood of improper payments of
the APTC.
We propose to amend the automatic reenrollment hierarchy by
removing Sec. 155.335(j)(4) which currently allows Exchanges to move a
CSR-eligible enrollee from a bronze QHP and re-enroll them into a
silver QHP for an upcoming plan year, if a silver QHP is available in
the same product, with the same provider network, and with a lower or
equivalent net premium after the application of APTC as the bronze plan
into which the enrollee would otherwise have been re-enrolled. We
believe the consumer awareness problem the current policy aimed to
address is substantially less today and, therefore, no longer outweighs
the negative consequences from not automatically re-enrolling consumers
whose current plan remains available for an upcoming plan year without
the active consent of the consumer, including that the policy could
confuse consumers, undermine consumer choice, and create unexpected tax
liability.
We propose to modify Sec. 155.400(g) to remove paragraphs (2) and
(3), which establish an option for issuers to implement a fixed dollar
and/or gross percentage-based premium payment threshold. To preserve
the integrity of the Exchanges, we believe it is important to ensure
that enrollees do not remain enrolled in coverage without paying at
least some of the premium owed, as there are situations where the fixed
dollar and/or gross percentage-based thresholds would allow an enrollee
to remain enrolled in coverage for extended periods of time after
payment of the binder. Therefore, we propose to limit issuers to the
net percentage-based premium payment threshold at Sec. 155.400(g)(1).
For benefit years starting January 1, 2026, and beyond, we propose
to change the annual Open Enrollment Period (OEP) for coverage through
all individual market Exchanges from November 1 through January 15 to
November 1 through December 15 of the calendar year preceding the
benefit year of enrollment. This change would also apply to non-
grandfathered individual health insurance coverage offered outside of
an Exchange.
We propose to remove Sec. 155.420(d)(16) and make conforming
changes to repeal the monthly special enrollment period (SEP) for
qualified individuals or enrollees, or the dependents of a qualified
individual or enrollee, who are eligible for APTC and whose projected
household income is at or below 150 percent of the FPL. We believe this
proposal and the proposal to change the length of the OEP would improve
the risk pool by reducing adverse selection from people who may
otherwise wait to enroll until they need health care services and would
encourage enrollees to maintain continuous coverage for the full year.
We also anticipate this would lower premiums.
Based on recent evidence \14\ suggesting an increase in the misuse
and abuse of SEPs to gain coverage outside the OEP, we propose to amend
Sec. 155.420(g) to enable HHS to reinstate pre-enrollment verification
of eligibility of applicants for all categories of individual market
SEPs. We propose to further amend Sec. 155.420(g) to require all
Exchanges to conduct pre-enrollment verification of eligibility for at
least 75 percent of new enrollments through SEPs. We understand that
most Exchanges most likely would be able to meet this requirement by
verifying just two of their most used SEPs.
---------------------------------------------------------------------------
\14\ This conclusion is drawn from current and historic SEP data
available to the Exchanges on the Federal platform through the
Monthly SEP report and is current as of 1/03/2025.
---------------------------------------------------------------------------
We propose to amend Sec. 156.115(d) to provide that an issuer of
coverage subject to EHB requirements may not provide sex-trait
modification as an EHB beginning with Plan Year (PY) 2026.
We propose to update the premium adjustment percentage methodology
to establish a premium growth measure that comprehensively reflects
premium growth in all affected markets. This premium growth measure is
used to ensure that certain parameters change with health insurance
market premiums over time, including parameters related to annual
limits on cost sharing, eligibility for certain exemptions based on
access to affordable premiums, and employer shared responsibility
payment amounts. The premium adjustment percentage is also used as part
of the calculation of the reduced annual limitation on cost sharing
applicable to silver plan variations. This proposed change would re-
adopt the premium growth measure that was in place for PY
[[Page 12946]]
2020 and PY 2021 and apply it to the related parameters starting with
PY 2026. As such, we also propose the PY 2026 maximum annual limitation
on cost sharing, reduced maximum annual limitations on cost sharing,
and required contribution percentage under Sec. 155.605(d)(2) using
the proposed premium adjustment percentage methodology.
Beginning in PY 2026, we propose changing the de minimis thresholds
for the AV for plans subject to EHB requirements to +2/-4 percentage
points for all individual and small group market plans subject to the
AV requirements under the EHB package, other than for expanded bronze
plans,\15\ for which we propose a de minimis range of +5/-4 percentage
points, as well as establishing wider de minimis thresholds for income-
based CSR plan variations.
---------------------------------------------------------------------------
\15\ Expanded bronze plans are bronze plans currently referenced
in Sec. 156.140(c) that cover and pay for at least one major
service, other than preventive services, before the deductible or
meet the requirements to be a high deductible health plan within the
meaning of section 223(c)(2) of the Internal Revenue Code of 1986.
---------------------------------------------------------------------------
II. Background
A. Legislative and Regulatory Overview
Section 2702 of the Public Health Service (PHS) Act, as added by
the ACA, establishes requirements for guaranteed availability of
coverage in the group and individual markets.
Section 2703 of the PHS Act, as added by the ACA, and sections 2712
(former) and 2741 of the PHS Act, as added by the Health Insurance
Portability and Accountability Act of 1996 (HIPAA), require health
insurance issuers in the group and individual markets to guarantee the
renewability of coverage unless an exception applies.
Section 1302 of the ACA provides for the establishment of an EHB
package that includes coverage of EHBs (as defined by the Secretary of
Health and Human Services (the Secretary)), cost-sharing limits, and AV
requirements. Among other things, 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.
To set cost-sharing limits, section 1302(c)(4) of the ACA directs
the Secretary to determine an annual premium adjustment percentage, a
measure of premium growth that is used to set the rate of increase for
three parameters: (1) The maximum annual limitation on cost sharing
(section 1302(c)(1) of the ACA); (2) the required contribution
percentage used to determine whether an individual can afford minimum
essential coverage (MEC) (section 5000A of the Internal Revenue Code of
1986 (the Code), as enacted by section 1501 of the ACA); and (3) the
employer shared responsibility payment amounts (section 4980H of the
Code, as enacted by section 1513 of the ACA).
Section 1302(d) of the ACA describes the various levels of coverage
based on their AV. Consistent with section 1302(d)(2)(A) of the ACA, AV
is calculated based on the provision of EHB to a standard population.
Section 1302(d)(1) of the ACA requires a bronze plan to have an AV of
60 percent, a silver plan to have an AV of 70 percent, a gold plan to
have an AV of 80 percent, and a platinum plan to have an AV of 90
percent. Section 1302(d)(2) of the ACA directs the Secretary of HHS to
issue regulations on the calculation of AV and its application to the
levels of coverage. Section 1302(d)(3) of the ACA directs the Secretary
to develop guidelines to provide for a de minimis variation in the AVs
used in determining the level of coverage of a plan to account for
differences in actuarial estimates.
Section 1311(c)(6)(B) of the ACA directs the Secretary to require
an Exchange to provide for annual OEPs after the initial enrollment
period.
Section 1311(c)(6)(C) of the ACA authorizes the Secretary to
require an Exchange to provide for SEPs specified in section 9801 of
the Code and other SEPs under circumstances similar to such periods
under part D of title XVIII of the Social Security Act (the Act).
Section 1311(c)(6)(D) of the ACA directs the Secretary 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(c) of the ACA provides the Secretary the authority to
issue regulations to establish criteria for the certification of QHPs.
Section 1311(c)(1)(B) of the ACA requires among the criteria for
certification that the Secretary must establish by regulation that QHPs
ensure a sufficient choice of providers. Section 1311(e)(1) of the ACA
grants the Exchange the authority to certify a health plan as a QHP if
the health plan meets the Secretary's requirements for certification
issued under section 1311(c) of the ACA, and the Exchange determines
that making the plan available through the Exchange is in the interests
of qualified individuals and qualified employers in the State.
Section 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 APTC and CSRs for QHPs sold through an Exchange.
Sections 1312(f)(3), 1401, 1402(e), and 1412(d) of the ACA require
that an individual must be either a citizen or national of the United
States or be lawfully present in the United States to enroll in a QHP
through an Exchange, to be eligible for PTC, APTC, and CSRs. 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 directs the Secretary to provide for the efficient and non-
discriminatory administration of Exchange activities and to implement
any measure or procedure the Secretary determines is appropriate to
reduce fraud and abuse. Section 1321 of the ACA provides for State
flexibility in the operation and enforcement of Exchanges and related
requirements.
Section 1321(a) of the ACA provides broad authority for the
Secretary to establish standards and regulations to implement the
statutory requirements related to Exchanges, QHPs and other components
of title I of the ACA, including such other requirements as the HHS
Secretary determines appropriate.
Section 1321(a)(1) of the ACA directs the Secretary to issue
regulations that set standards for meeting the requirements of title I
of the ACA with respect to, among other things, the
[[Page 12947]]
establishment and operation of Exchanges.
Section 1331 of the ACA provides States the option to establish a
BHP, and more specifically, section 1331(e) requires that an individual
must either be a citizen or national of the United States or be
lawfully present in the United States to enroll in a BHP in States that
elect to operate a BHP.
Section 1401(a) of the ACA added section 36B to the Code, which,
among other things, requires that a taxpayer reconcile APTC for a year
of coverage with the amount of the PTC the taxpayer is allowed for the
year.
Section 1402(c) of the ACA provides for, among other things,
reductions in cost sharing for essential health benefits for qualified
low- and moderate-income enrollees in silver level health plans offered
through the individual market Exchanges, including reduction in out-of-
pocket limits.
Section 1411 the ACA directs the Secretary to make advance
determinations for the PTC with respect to income eligibility for
individuals enrolling in a QHP through the individual market. Section
1411 of the ACA further specifies that the Secretary verify income with
the Secretary of the Treasury based on the most recent tax return
information, and then implement alternative procedures to verify income
on the basis of different information to the extent that a change has
occurred or for individuals who were not required to file an income tax
return.
Section 1411(f)(1)(B) of the ACA directs the Secretary to establish
procedures to redetermine the eligibility of individuals on a periodic
basis in appropriate circumstances.
Sections 1402(f)(3), 1411(b)(3) and 1412(b)(1) of the ACA provide
that data from the most recent tax return information available must be
the basis for determining eligibility for APTC and CSRs to the extent
such tax data is available. Section 1412(c)(2)(B) of the ACA
establishes requirements on issuers with regards to an individual
enrolled in a health plan receiving an APTC.
Section 1412(d) of the ACA states that nothing in the law allows
Federal payments, credits, or CSRs for individuals who are not lawfully
present in the United States.
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 and
requires Exchanges to participate in a data matching program for the
determination of eligibility on the basis of reliable, third-party
data.
Section 1414 of the ACA amends section 6103 of the Code to direct
the Secretary of the Treasury to disclose certain tax return
information to verify and determine eligibility for APTC and CSR
subsidies.
1. Guaranteed Availability and Guaranteed Renewability
In the April 8, 1997 Federal Register (62 FR 16894), HHS published
an interim final rule relating to the HIPAA health insurance reforms
that established rules applying guaranteed availability in the small
group market and guaranteed renewability in the large and small group
market. Also, in the April 8, 1997 Federal Register (62 FR 16985), HHS
published an interim final rule relating to the HIPAA health insurance
reforms that, among other things, established rules applying guaranteed
renewability in the individual market. In the February 27, 2013 Federal
Register (78 FR 13406) (2014 Market Rules), we published the health
insurance market rules. In the May 27, 2014 Federal Register (79 FR
30240) (2015 Market Standards Rule), we published the final rule,
``Patient Protection and Affordable Care Act; Exchange and Insurance
Market Standards for 2015 and Beyond.'' In the December 22, 2016
Federal Register (81 FR 94058) (2018 Payment Notice), we provided
additional guidance on guaranteed availability and guaranteed
renewability, and in the April 18, 2017 Federal Register (82 FR 18346)
(Market Stabilization Rule) we provided further guidance related to
guaranteed availability. In the May 6, 2022 Federal Register (87 FR
27208) we amended the regulations regarding guaranteed availability.
2. Deferred Action for Childhood Arrivals
HHS issued an interim final rule in the July 30, 2010 Federal
Register (75 FR 45014) to define ``lawfully present'' for the purposes
of determining eligibility for the Pre-Existing Condition Insurance
Plan (PCIP) program. In the March 27, 2012 Federal Register (77 FR
18310) (Exchange Establishment Rule), HHS defined lawfully present for
purposes of determining eligibility to enroll in a QHP through an
Exchange by cross-referencing the existing PCIP definition. In the
August 30, 2012 Federal Register (77 FR 52614), HHS adjusted the
previous definition of ``lawfully present'' used for PCIP and QHP
eligibility, which had considered all recipients of ``deferred action''
to be lawfully present, to add an exception that excluded DACA
recipients from the definition. In the March 12, 2014 Federal Register
(79 FR 14112), HHS established the framework for governing a BHP, which
also adopted the definition of ``lawfully present'' for the purpose of
determining eligibility to enroll in a BHP through a cross-reference to
Sec. 155.20. In the May 8, 2024 Federal Register (89 FR 39392) (DACA
Rule), HHS reinterpreted ``lawfully present'' to include DACA
recipients and certain other noncitizens for the purposes of
determining eligibility to enroll in a QHP through an Exchange, PTC,
APTC, CSRs, and to enroll in a BHP in States that elect to operate a
BHP.
3. Program Integrity
We have finalized program integrity standards related to the
Exchanges and premium stabilization programs in two rules: the ``first
Program Integrity Rule'' published in the August 30, 2013 Federal
Register (78 FR 54069), and the ``second Program Integrity Rule''
published in the October 30, 2013 Federal Register (78 FR 65045). We
also refer readers to the 2019 Patient Protection and Affordable Care
Act; Exchange Program Integrity final rule (2019 Program Integrity
Rule) published in the December 27, 2019 Federal Register (84 FR
71674).
In the May 6, 2022 Federal Register (87 FR 27208), we finalized
policies to address certain agent, broker, and web-broker practices and
conduct. In the April 27, 2023 Federal Register (88 FR 25740) (2024
Payment Notice), we finalized allowing additional time for HHS to
review evidence submitted by agents and brokers to rebut allegations
pertaining to Exchange agreement suspensions or terminations. We also
introduced consent and eligibility documentation requirements for
agents and brokers. In the 2025 Payment Notice, issued in the April 15,
2024 Federal Register (89 FR 26218), we finalized that the CMS
Administrator, who is a principal officer, is the entity responsible
for handling requests by agents, brokers, and web-brokers for
reconsideration of HHS' decision to terminate their Exchange
agreement(s) for cause. We also finalized changes to Sec. Sec. 155.220
and 155.221 to apply certain standards to web-brokers and Direct
Enrollment (DE) entities assisting consumers and applicants across all
Exchanges. In the January 15, 2025 Federal Register (90 FR 4424) (2026
Payment Notice), we addressed 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
[[Page 12948]]
the insurance agency level to hold lead agents of insurance agencies
accountable. We also finalized changes to 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 until the
circumstances of the incident, breach, or noncompliance are remedied or
sufficiently mitigated to HHS' satisfaction.
4. Premium Adjustment Percentage
In the March 11, 2014 Federal Register (79 FR 13744) HHS
established a methodology for estimating the average per capita premium
for purposes of calculating the premium adjustment percentage.
Beginning with PY 2015, we calculated the premium adjustment percentage
based on the estimates and projections of average per enrollee
employer-sponsored insurance premiums from the National Health
Expenditure Accounts (NHEA), which are calculated by the CMS Office of
the Actuary. In the April 25, 2019 Federal Register (84 FR 17454) HHS
amended the methodology for calculating the premium adjustment
percentage by estimating per capita insurance premiums as private
health insurance premiums, minus premiums paid for Medigap insurance
and property and casualty insurance, divided by the unrounded number of
unique private health insurance enrollees, excluding all Medigap
enrollees. Additionally, in response to public comments to the 2021
Payment Notice proposed rule (85 FR 7088), in the May 14, 2020 Federal
Register (85 FR 29164) HHS stated that we will finalize payment
parameters that depend on NHEA data, including the premium adjustment
percentage, based on the data that are available as of the publication
of the proposed rule for that plan year, even if NHEA data are updated
between the proposed and final rules. In the December 15, 2020 Federal
Register (85 FR 81097), HHS published the Grandfathered Group Health
Plans and Grandfathered Group Health Insurance Coverage final rule,
along with the Departments of Labor and the Treasury, that finalized
using the premium adjustment percentage as one alternative in setting
the parameters for permissible increases in fixed-amount cost-sharing
requirements for grandfathered group health plans. In the May 5, 2021
Federal Register (86 FR 24140), Part 2 of the 2022 Payment Notice
amended the methodology for calculating the premium adjustment
percentage by reverting to using the NHEA employer-sponsored insurance
(ESI) premium measure previously used for PY 2015 to PY 2019 and
established that the premium adjustment percentage could be established
in guidance for plan years in which the premium adjustment percentage
is not methodologically changing.
5. Failure To File Taxes and Reconcile APTC
In the March 27, 2012 Exchange Establishment Rule (77 FR 18310), we
required the Exchange to determine a primary taxpayer ineligible to
receive APTC if HHS notifies the Exchange that the taxpayer received
APTC from a prior year for which tax data would be utilized for income
verification and did not file a tax return and reconcile APTC as
required by implementing regulations proposed by the Department of the
Treasury. In the May 23, 2012 Federal Register (77 FR 30377), the
Department of the Treasury finalized implementing regulations to
require every taxpayer receiving APTC to file an income tax return.
In the December 22, 2016 Federal Register (81 FR 94058) (2018
Payment Notice), we provided that Exchanges cannot determine a taxpayer
ineligible for APTC due to failure to file a tax return unless the
Exchanges send a direct notification to that tax filer stating that
their eligibility will be discontinued for failure to comply with the
requirement to file taxes. We then revisited this notice requirement in
the April 17, 2018 Federal Register (83 FR 16930) (2019 Payment Notice)
and removed the notice requirement.
In the April 27, 2023 Federal Register (88 FR 25740) (2024 Payment
Notice) we required Exchanges to wait to discontinue APTC until the tax
filer has failed to file a tax return and reconcile their past APTC for
2-consecutive years rather than ending APTC after a single year. In the
April 15, 2024 Federal Register (89 FR 26218) (2025 Payment Notice), we
required Exchanges to send notices to tax filers for the first year in
which they have been identified by the IRS as failing to reconcile
APTC. In the January 15, 2025 Federal Register (90 FR 4424) (2026
Payment Notice), we required Exchanges to send notices to tax filers
for the second year in which they have been identified by the IRS as
failing to reconcile APTC.
6. Income Inconsistencies
In the April 17, 2018, Federal Register (83 FR 16930) (2019 Payment
Notice), we revised income verification provisions in Sec.
155.320(c)(3)(iii) to require the Exchange to generate annual household
income inconsistencies in certain circumstances when a tax filer's
attested projected annual household income is greater than the income
amount represented by income data returned by IRS and the Social
Security Administration (SSA) and current income data sources. On March
4, 2021, the United States District Court for the District of Maryland
decided City of Columbus, et al. v. Cochran, No. 523 F. Supp. 3d 731
(D. Md. 2021) and vacated these revisions to income verification. We
then implemented the court's decision in the May 5, 2021 Federal
Register (86 FR 24140) (Part 2 of the 2022 Payment Notice) and
rescinded the income verification provisions in Sec.
155.320(c)(3)(iii) that the court invalidated.
In the March 27, 2012 Federal Register (77 FR 18310) (Exchange
Establishment Rule), we established the alternative verification
process in Sec. 155.320(c) for situations when a household income
inconsistency occurs with IRS data or when tax return data is
unavailable. This process required the Exchange to provide the
applicant notice of the income inconsistency and requires applicants to
provide documentary evidence to verify their income or otherwise
resolve the inconsistency within a period of 90 days from which notice
is sent. In the April 27, 2023 Federal Register (88 FR 25740) (2024
Payment Notice), we revised this process to require Exchanges to accept
an applicant's or enrollee's self-attestation of annual household
income when a call to IRS is completed but tax return data is
unavailable and add that household income inconsistencies must receive
an automatic 60-day extension in addition to the 90 days provided to
applicants to resolve their income inconsistency.
7. Annual Eligibility Redetermination
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. This included
standards for annual eligibility redeterminations and renewals of
coverage. In the January 22, 2013 Federal Register (78 FR 4594), we
sought comment on whether the redetermination notice should describe
how the enrollee's deductibles, co-pays, coinsurance, and other forms
of cost sharing would change. In the July 15, 2013 Federal Register (78
FR 42160) (2013 Eligibility Final Rule), we amended the notice to
remove the requirement to provide the data used for
[[Page 12949]]
the eligibility redetermination and the data used for the most recent
eligibility determination, even though we did not previously propose to
change the annual redetermination notice. In the September 5, 2014
Federal Register (79 FR 52994), we amended the annual redetermination
standards to allow for an Exchange to choose from one of three methods
for conducting annual redeterminations. In the January 24, 2019 Federal
Register (84 FR 227) (2020 Payment Notice proposed rule), we sought
comment on the automatic re-enrollment processes to address program
integrity concerns. In the February 6, 2020 Federal Register (85 FR
7088) (2021 Payment Notice proposed rule), we solicited comment on
modifying the automatic re-enrollment process such that any enrollee
who would be automatically re-enrolled with APTC that would cover the
enrollee's entire premium would instead be automatically re-enrolled
without APTC, and we solicited comments on a variation where APTC for
this population would be reduced to a level that would result in an
enrollee premium that is greater than zero dollars, but not eliminated
entirely. We did not finalize any changes in the final rules.
8. Automatic Re-Enrollment Hierarchy
In the March 27, 2012 Federal Register (77 FR 18309) (Exchange
Establishment Rule), we implemented the Exchanges, consistent with
Title I of the ACA. This included implementation of components of the
Exchanges and standards for annual eligibility redetermination and
renewal of coverage. In the September 5, 2014 Federal Register (79 FR
52994) (Annual Eligibility Redeterminations Rule), we modified the
standards for re-enrollment in coverage by adding a re-enrollment
hierarchy to address situations when the enrollee's plan or product is
not available through the Exchange for renewal. In the March 8, 2016
Federal Register (81 FR 12204) (2017 Payment Notice), we amended the
hierarchy to give Exchanges flexibility to prioritize re-enrollment
into silver plans for all enrollees in a silver-level QHP that is no
longer available for re-enrollment, and re-enroll consumers into plans
of other Exchange issuers if the consumer is enrolled in a plan from an
issuer that does not have another plan available for re-enrollment
through the Exchange.
In the January 5, 2022 Federal Register (87 FR 584) (2023 Payment
Notice proposed rule), we solicited comments on revising the re-
enrollment hierarchy at Sec. 155.335(j) at a later date. After
considering comments, we proposed and finalized amendments and
additions to the re-enrollment hierarchy in the April 27, 2023 Federal
Register (88 FR 25740) (2024 Payment Notice), including changes to
allow Exchanges to direct re-enrollment for enrollees who are eligible
for CSRs from a bronze QHP to a silver QHP, if certain conditions are
met.
9. Premium Payment Threshold
In the December 2, 2015 Federal Register (80 FR 75532), we
published a proposed rule to allow issuers to adopt an optional premium
payment threshold policy under which issuers could collect a minimal
amount of premium, less than that which is owed, without triggering the
consequences for non-payment of premiums. We established the option for
issuers to implement a net premium percentage-based premium payment
threshold in the 2017 Payment Notice (81 FR 12271 through 12272). In
the October 10, 2024 Federal Register (89 FR 82366 through 82369), we
proposed to add additional optional premium payment threshold
flexibilities, proposing an option for issuers to adopt a fixed dollar
premium threshold amount of $5 or less and/or a percentage-based
threshold based on the gross premium of 99 percent or more or the
existing net premium of 95 percent or more of the premium after
application of APTC. We modified and finalized this proposal in the
2026 Payment Notice (90 FR 4475 through 4480), allowing issuers to
adopt a fixed dollar premium threshold amount of $10 or less and/or a
percentage-based threshold based on the gross premium of 98 percent or
more or net premium of 95 percent or more of the premium after
application of APTC.
10. Special Enrollment Periods
In the July 15, 2011 Federal Register (76 FR 41865), we published a
proposed rule establishing SEPs for the Exchange. We implemented these
SEPs in the Exchange Establishment Rule (77 FR 18309). In the January
22, 2013 Federal Register (78 FR 4594), we published a proposed rule
amending certain SEPs, including the SEPs described in Sec.
155.420(d)(3) and (7). We finalized these rules in the July 15, 2013
Federal Register (78 FR 42321).
In the June 19, 2013 Federal Register (78 FR 37032), we proposed to
add an SEP when the Federally Facilitated Exchange (FFE) determines
that a consumer has been incorrectly or inappropriately enrolled in
coverage due to misconduct on the part of a non-Exchange entity. We
finalized this proposal in the October 30, 2013 Federal Register (78 FR
65095). In the March 21, 2014 Federal Register (79 FR 15808), we
proposed to amend various SEPs. In particular, we proposed to clarify
that later coverage effective dates for birth, adoption, placement for
adoption, or placement for foster care would be effective the first of
the month. The rule also proposed to clarify that earlier effective
dates would be allowed if all issuers in an Exchange agree to
effectuate coverage only on the first day of the specified month.
Finally, that rule proposed adding that consumers may report a move in
advance of the date of the move and established an SEP for individuals
losing medically needy coverage under the Medicaid program even if the
medically needy coverage is not recognized as minimum essential
coverage (individuals losing medically needy coverage that is
recognized as minimum essential coverage already were eligible for an
SEP under the regulation). We finalized these provisions in the May 27,
2014 Federal Register (79 FR 30348). In the October 1, 2014 Federal
Register (79 FR 59137), we published a correcting amendment related to
codifying the coverage effective dates for plan selections made during
an SEP and clarifying a consumer's ability to select a plan 60 days
before and after a loss of coverage.
In the November 26, 2014 Federal Register (79 FR 70673), we
proposed to amend effective dates for SEPs, the availability and length
of SEPs, the specific types of SEPs, and the option for consumers to
choose a coverage effective date of the first of the month following
the birth, adoption, placement for adoption, or placement in foster
care. We finalized these provisions in the February 27, 2015 Federal
Register (80 FR 10866). In the July 7, 2015 Federal Register (80 FR
38653), we issued a correcting amendment to include those who become
newly eligible for a QHP due to a release from incarceration. In the
December 2, 2015 Federal Register (80 FR 75487) (2017 Payment Notice
proposed rule), we sought comment and data related to existing SEPs,
including data relating to the potential abuse of SEPs. In the 2017
Payment Notice, we stated that in order to review the integrity of
SEPs, the FFE will conduct an assessment by collecting and reviewing
documents from consumers to confirm their eligibility for the SEPs
under which they enrolled.
In an interim final rule with comment published in the May 11, 2016
Federal Register (81 FR 29146), we made amendments to the parameters of
certain SEPs (2016 Interim Final Rule).
[[Page 12950]]
We finalized these in the 2018 Payment Notice, published in the
December 22, 2016 Federal Register (81 FR 94058). In the April 18, 2017
Market Stabilization Rule (82 FR 18346), we amended standards relating
to SEPs and announced HHS would begin pre-enrollment verifications for
all categories of SEPs in June 2017. In the 2019 Payment Notice,
published in the April 17, 2018 Federal Register (83 FR 16930), we
clarified that certain exceptions to the SEPs only apply to coverage
offered outside of the Exchange in the individual market. In the April
25, 2019 Federal Register (84 FR 17454), the final 2020 Payment Notice
established a new SEP. In part 2 of the 2022 Payment Notice, in the May
5, 2021 Federal Register (86 FR 24140), we made additional amendments
and clarifications to the parameters of certain SEPs and established
new SEPs related to untimely notice of triggering events, cessation of
employer contributions or government subsidies to COBRA continuation
coverage, and loss of APTC eligibility. In part 3 of the 2022 Payment
Notice, in the September 27, 2021 Federal Register (86 FR 53412), which
was published by HHS and the Department of the Treasury, we established
a temporary new monthly SEP for those eligible for APTC with projected
household incomes at or below 150 percent of the FPL. In the May 6,
2022 Federal Register (87 FR 27208), we finalized updates to the
requirement that all Exchanges conduct SEP verifications and limited
pre-enrollment verification for Exchanges on the Federal platform to
only consumers who attest to losing minimum essential coverage. In the
April 27, 2023 Federal Register (88 FR 25740) (2024 Payment Notice), we
lengthened the SEP from 60 to 90 days to those who lose Medicaid
coverage. In the April 15, 2024 Federal Register (89 FR 26218) (2025
Payment Notice), we aligned effective dates for coverage after
selecting certain SEPs across all Exchanges and removed limitations on
the monthly SEP for those eligible for APTC with incomes up to 150
percent of the FPL.
11. Essential Health Benefits
We established requirements relating to EHBs in the Standards
Related to Essential Health Benefits, Actuarial Value (AV), and
Accreditation Final Rule, which was published in the February 25, 2013
Federal Register (78 FR 12834) (EHB Rule). In the EHB Rule, we included
at Sec. 156.115 a prohibition on issuers from providing routine non-
pediatric dental services, routine non-pediatric eye exam services,
long-term/custodial nursing home care benefits, or non-medically
necessary orthodontia as EHB. In the 2019 Payment Notice, published in
the April 17, 2018 Federal Register (83 FR 16930), we added Sec.
156.111 to provide States with additional options from which to select
an EHB-benchmark plan for PY 2020 and subsequent plan years. In the
2023 Payment Notice, published in the May 6, 2022 Federal Register (87
FR 27208), we revised Sec. 156.111 to require States to notify HHS of
the selection of a new EHB-benchmark plan by the first Wednesday in May
of the year that is 2 years before the effective date of the new EHB-
benchmark plan, otherwise the State's EHB-benchmark plan for the
applicable plan year will be that State's EHB-benchmark plan applicable
for the prior year. We displayed the Request for Information; Essential
Health Benefits (EHB RFI), published in the December 2, 2022 Federal
Register (87 FR 74097), to solicit public comment on a variety of
topics related to the coverage of benefits in health plans subject to
the EHB requirements of the ACA. In the 2025 Payment Notice (89 FR
26218), we removed the regulatory prohibition at Sec. 156.115(d) on
issuers from providing routine non-pediatric dental services as an EHB
beginning with PY 2027.
In the 2026 Payment Notice, published in the January 15, 2025
Federal Register (90 FR 4424), we revised Sec. 156.80(d)(2)(i) to
require 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 AV 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.
III. Provisions of the Individual Health Insurance Market and Exchange
Program Integrity Proposed Rule
A. Part 147--Health Insurance Reform Requirements for the Group and
Individual Health Insurance Markets
1. Limited Open Enrollment Periods (Sec. 147.104(b)(2))
As further discussed in section III.B.8. of this preamble regarding
the proposal to remove the monthly SEP for APTC-eligible qualified
individuals with a projected household income at or below 150 percent
of the FPL (Sec. 155.420(d)(16)), we propose a conforming amendment to
remove Sec. 147.104(b)(2)(i)(G), which currently excludes Sec.
155.420(d)(16) as a triggering event for a limited open enrollment
period (OEP) for coverage offered outside of an Exchange. In proposing
the removal of Sec. 147.104(b)(2)(i)(G), we do not intend to include
Sec. 155.420(d)(16) as a triggering event for a limited OEP for
coverage offered outside of an Exchange; rather, we are proposing to
remove Sec. 147.104(b)(2)(i)(G) to reflect the removal of the SEP at
Sec. 155.420(d)(16). We request comment on this proposal.
2. Coverage Denials for Failure To Pay Premiums for Prior Coverage
(Sec. 147.104(i))
We propose to remove Sec. 147.104(i) that restricts an issuer from
attributing payment of premium for new coverage to past-due premiums
from prior coverage. Similar to the policy we articulated in the Market
Stabilization Rule (82 FR 18349 through 18353), we also propose to
allow issuers to attribute to past-due premium amounts they are owed
the initial premium the enrollee pays to effectuate new coverage.
Unlike the policy articulated in the Market Stabilization Rule (82 FR
18349 through 18353), the proposal would not limit the policy to past-
due premium amounts accruing over the prior 12 months. States would
remain free to impose such a limitation and apply additional parameters
governing issuers' premium payment policies, to the extent permitted
under Federal law.
As background, when we initially proposed the guaranteed
availability regulations in the proposed 2014 Market Rules (77 FR
70584, 70599), we noted concerns about the ability of individuals to
manipulate guaranteed availability each year. We also noted how
guaranteed renewability requirements under section 2703 of the PHS Act
allow issuers to non-renew or discontinue coverage for non-payment of
premiums while the guaranteed availability requirements under section
2702 of the PHS Act do not include an exception allowing issuers to
refuse to cover individuals with histories of non-payment under other
policies with the same issuer or other issuers. We then solicited
comments on ways to discourage people from gaming guaranteed
availability rights while, at the same time, ensuring consumers
retained the right afforded by law. In response, commenters, including
the National Association of Insurance Commissioners (NAIC), suggested
that there are several tools States use to limit adverse selection.\16\
In the 2014 Market
[[Page 12951]]
Rules (78 FR 13406, 13416 through 13417), we did not provide any
further guidance on what the statute's guaranteed availability
provision requires and took no further actions to address these
concerns over gaming the guaranteed availability requirement.
---------------------------------------------------------------------------
\16\ Tools identified by commenters included, for example, (1)
allowing issuers to require pre-payment of premiums each month; (2)
allowing issuers to require payment of all outstanding premiums
before enrollees can re-enroll in coverage after termination due to
non-payment of premiums; (3) allowing late enrollment penalties or
surcharges (similar to those in Medicare Parts B and D); (4)
allowing issuers to establish waiting periods or delayed effective
dates of coverage; (5) allowing issuers to offset claims payments by
the amount of any owed premiums; (6) allowing issuers to prohibit
individuals who have canceled coverage or failed to renew from
enrolling until the second open enrollment period after their
coverage ceased (unless they replace coverage with other creditable
coverage); (7) restricting product availability (for example, to a
catastrophic, bronze, or silver level plan) outside of enrollment
periods to prevent high-risk individuals from enrolling in more
generous coverage when medical needs arise; and (8) allowing
individuals to move up one metal level each year through the
Exchange shopping portal (78 FR 13406, 13416).
---------------------------------------------------------------------------
After finalizing the 2014 Market Rules (78 FR 13406), we published
instructions in annual Exchange enrollment manuals that interpreted the
guaranteed availability requirement to mean that an issuer may not
apply any premium payment made for coverage under a new enrollment to
any outstanding debt owed from any previous coverage that has been
terminated for non-payment of premiums and then refuse to effectuate
the new enrollment based on failure to pay premiums.\17\ Under that
interpretation, enrollment under an SEP or annual OEP subsequent to a
termination for non-payment of premium would be considered a new
enrollment that would fall under the guaranteed availability
requirements and the consumer must be allowed to purchase coverage
without having to pay past-due premiums. However, we also provided
guidance that in situations where an enrollee's grace period for non-
payment of premiums spans 2 plan years,\18\ and the individual seeks to
renew prior coverage with the same issuer in the same product, the
issuer could attribute the enrollee's premium payments to the oldest
outstanding debt in the existing grace period (that is, the prior non-
payments).\19\
---------------------------------------------------------------------------
\17\ CMS. (version as of 2016, July 19). Federally-facilitated
Marketplace and Federally-facilitated Small Business Health Options
Program Enrollment Manual. Section 6.3 Terminations for Non-Payment
of Premiums. https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/ENR_FFMSHOP_Manual_080916.pdf (stating that if a
consumer selects a QHP from which they had been previously
terminated for non-payment of premium by qualifying for another SEP
or during the next OEP, then the QHP cannot attribute any payment
from the individual toward the outstanding debt from the prior,
terminated enrollment and then refuse to enroll the applicant based
on failure to pay premiums); and CMS. (version as of 2015, Oct. 1).
Federally-facilitated Marketplace and Federally-facilitated Small
Business Health Options Program Enrollment Manual. Section 6.3
Terminations for Non-Payment of Premiums. https://www.cms.gov/cciio/resources/regulations-and-guidance/downloads/updated_enr_manual.pdf.
See also, CMS. (2013, Oct. 3). Federally Facilitated Marketplace,
Enrollment Operational Policy & Guidance. https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/ENR_OperationsPolicyandGuidance_5CR_100313.pdf (stating that ``If
the [qualified individual] selects the same QHP from which he or she
was previously terminated [for non-payment of premiums], the QHP
cannot terminate enrollment in the QHP in which the [qualified
individual] newly enrolled based on failure to pay for any
previously owed and unpaid premium.'').
\18\ This could occur if enrollees who are receiving APTC fail
to timely pay their premium in full or in an amount necessary to
satisfy a payment threshold, if applicable, for November or December
coverage.
\19\ CMS. (version as of 2016, July 19). Federally-facilitated
Marketplace (FFM) and Federally-facilitated Small Business Health
Options Program Enrollment Manual. Section 6.5.2 Grace Period
Spanning Two Plan Years, https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/ENR_FFMSHOP_Manual_080916.pdf.
---------------------------------------------------------------------------
Due to substantial market instability and data confirming prior
concerns over consumers gaming the guaranteed availability requirement,
we revisited these Exchange enrollment instructions through formal
rulemaking in the Market Stabilization Rule (82 FR 18346). In that
rule, we modified our interpretation of the guaranteed availability
requirement with respect to non-payment of premiums. Under that
modification, we allowed issuers, subject to applicable State law, to
apply a premium payment to an individual's past debt owed for coverage
from the same issuer or a different issuer in the same controlled group
within the prior 12 months before applying the payment toward a new
enrollment. The Market Stabilization Rule (82 FR 18346) cited third-
party research and our own internal analysis showing a substantial
portion of enrollees' coverage had been terminated due to non-payment
of premium and, among these terminations, a large portion repurchased
plans the following plan year from the same issuer.
In the Market Stabilization Rule (82 FR 18350 through 18351), we
noted it is clear from reading the guaranteed availability provision in
section 2702 of the PHS Act, together with the guaranteed renewability
provision in section 2703 of the PHS Act, that an issuer's sale and
continuation in force of an insurance policy is contingent upon payment
of premiums. Notably, this recognizes how the guaranteed renewability
requirement is not just about renewals but also includes a requirement
on issuers to continue the coverage in force throughout the year. Read
together, we concluded that the guaranteed availability provision is
not intended to require issuers to provide coverage to applicants who
have not paid for such coverage. To the extent an individual or
employer makes payment in the amount required to effectuate new
coverage, but the issuer lawfully credits all or part of that amount
toward past-due premiums, we conclude that the consumer has not made
sufficient initial payment for the new coverage.
On January 28, 2021, President Biden issued Executive Order (E.O.)
14009,\20\ directing the Department of Health and Human Services (HHS),
and the heads of all other executive departments and agencies with
authorities and responsibilities related to the ACA, to review all
existing regulations, orders, guidance documents, policies, and any
other similar agency actions to determine whether such agency actions
were inconsistent with that Administration's policy with respect to the
ACA. After reviewing the interpretation of guaranteed availability that
we codified in the Market Stabilization Rule (82 FR 18349 through
18353), we concluded that interpretation had the unintended consequence
of creating barriers to health coverage that disproportionately affect
low-income individuals. In the 2023 Payment Notice (87 FR 27208),
consistent with section 3(iv) of E.O. 14009 and section 2(a) of E.O.
14070, we then re-interpreted the guaranteed availability requirement
and added a new Sec. 147.104(i) to specify that a health insurance
issuer that denies coverage to an individual or employer due to the
individual's or employer's failure to pay premium owed under a prior
policy, certificate, or contract of insurance, including by attributing
payment of premium for a new policy, certificate, or contract of
insurance to the prior policy, certificate, or contract of insurance,
violates Sec. 147.104(a).
---------------------------------------------------------------------------
\20\ 86 FR 7793. E.O. 14009 was subsequently revoked by E.O.
14148, ``Initial Rescissions of Harmful Executive Orders and
Actions.'' See 90 FR 8237.
---------------------------------------------------------------------------
In finalizing that current interpretation, we attempted to assess
the policy impact of our prior interpretation. In the 2023 Payment
Notice (87 FR 27369), we conducted an internal analysis and estimated
the percent of enrollees in Exchanges using the Federal platform that
had their coverage terminated for non-payment of premiums was 17.3
percent in 2017, 12.4 percent in 2018, 10.7 percent in
[[Page 12952]]
2019, and 7.8 percent in 2020.\21\ This steady decline is consistent
with what would be expected to happen if the Market Stabilization Rule
(82 FR 18346) successfully encouraged enrollees to continue paying
premiums. However, due to data limitations we concluded that we were
unable to directly attribute any changes in enrollment behavior in the
Exchanges using the Federal platform to the interpretation of the
guaranteed availability requirement stated in the Market Stabilization
Rule (82 FR 18346).
---------------------------------------------------------------------------
\21\ The regulatory impact analysis stated that these annual
figures should not necessarily be interpreted as trends, as some
States moved from Exchanges using the Federal platform to State
Exchanges and the overall composition of the dataset may have
changed (87 FR 27369, fn 381).
---------------------------------------------------------------------------
It is possible, however, that this decline in the rate of enrollees
who had their coverage terminated from 2017 to 2020 happened in part
because the interpretation of the guaranteed availability requirement
adopted in the Market Stabilization Rule (82 FR 18349 through 18353)
successfully encouraged enrollees to continue paying premiums. Actions
by issuers to require enrollees to pay initial and past-due premiums to
obtain coverage may have contributed to an improved risk pool by
keeping healthier people enrolled who may have otherwise stopped
payment if they anticipated they would not need covered health services
for the rest of the plan year.
We previously determined that reversing the Market Stabilization
Rule's policy would increase access to health insurance coverage for
individuals who stop paying premiums due to reasons such as financial
hardship or affordability and who are currently unable to enroll in
coverage because they cannot afford to pay both past-due premiums and
the first month premium for new coverage. Given the availability of
premium support for many who experience financial hardship, we
anticipate that enrollment loss from requiring payment of past-due
premiums would be minimal. Enrollment losses should be minimal because
the amount most individuals owe in past-due premiums is relatively
small and thus having to pay those amounts generally would not impose a
substantial financial burden to enroll in coverage. Because of rules
regarding grace periods and termination of coverage, individuals with
past-due premiums who receive APTC would generally owe no more than 1
to 3 months of past-due premium amounts.\22\ Furthermore, for
individuals on whose behalf the issuer received APTC, their past-due
premiums would be net of any APTC that was paid on the individual's
behalf to the issuer, with respect to any months for which the
individual is paying past-due premiums, and thus, the typical past-due
premium is quite small. We continue to believe that allowing issuers to
require payment of past-due premiums to effectuate coverage is aligned
with the statutory text in section 2702 of the PHS Act and is
consistent with section 2703 of the PHS Act regarding guaranteed
renewability.
---------------------------------------------------------------------------
\22\ Section 156.270(d) requires issuers to observe a 3-
consecutive month grace period before terminating coverage for those
enrollees who when failing to timely pay their premiums are
receiving APTC. Section 155.430(d)(4) requires that when coverage is
terminated following this grace period, the last day of enrollment
in a QHP through the Exchange is the last day of the first month of
the grace period. Therefore, individuals whose coverage is
terminated at the conclusion of a grace period would owe at most 1
month of premiums, net of any APTC paid on their behalf to the
issuer. Individuals who attempt to enroll in new coverage while in a
grace period (and whose coverage has not yet been terminated) could
owe up to 3 months of premium, net of any APTC paid on their behalf
to the issuer.
---------------------------------------------------------------------------
Under section 2702(a) of the PHS Act, issuers are generally
required to accept every individual and employer in the State that
applies for coverage, subject to certain exceptions. These exceptions
allow issuers to uniformly limit enrollment: (1) to certain open
enrollment periods and SEPs; (2) to an employer with eligible employees
who live, work, or reside in the service area of a network plan; (3) if
the capacity of a network plan cannot provide adequate services to new
enrollees; and (4) if the issuer does not have the financial reserves
necessary to underwrite additional coverage. Under this framework, the
PHS Act's guaranteed availability requirements focus on regulating
matters under the control of the issuer to accept every individual and
employer that applies for coverage except under a limited set of
exceptions where a uniform enrollment limit protects the viability of
the market and individual issuers.
Section 2703 of the PHS Act requires an issuer that offers health
insurance coverage in the group or individual market to renew or
continue in force such coverage at the option of the plan sponsor or
individual, unless certain exceptions apply. These exceptions allow
issuers to non-renew or discontinue coverage for non-payment of
premium, committing fraud, violating employer participation or
contribution rules, moving outside the network service area, or ceasing
the membership of an employer in an association. In addition, an issuer
may also uniformly terminate coverage by following a specific set of
requirements. These guaranteed renewability exceptions focus on
allowing issuers to respond to individual and employer behavior after
their coverage is in force. Under this framework, the guaranteed
renewability requirements cover both renewals and the continuing of
coverage in force throughout the year.
Whether or not an exception applies would depend on the issuer's
terms of coverage, and applicable State and Federal law. Section 2703
of the PHS Act gives issuers broad flexibility to establish terms of
coverage related to most of the exceptions. In traditional insurance
contracts, there are typically provisions related to premium payments,
fraud, employer participation and contribution rates, and living,
residing, or working in the network service area. By enrolling in
coverage, the applicant accepts the terms of coverage. After coverage
is in force (including in instances where an enrollee is renewing prior
coverage), the issuer may discontinue coverage if the individual fails
to follow the terms of coverage for one of the exceptions provided
under the law.
Consistent with section 2702 of the PHS Act, we propose to allow
issuers to establish terms of coverage that attribute the initial
premium an enrollee pays to effectuate new coverage to past-due premium
amounts owed to an issuer and then to refuse to effectuate coverage if
the payment does not equal the outstanding debt and the new monthly
premium amount. Assuming State law does not prohibit such action, this
would permit an issuer to establish terms of coverage that require a
policyholder whose coverage is terminated for non-payment of premium in
the individual or group market to pay all past-due premium owed to that
issuer in order to purchase new coverage from that issuer. Under this
proposal, similar to the policy in the Market Stabilization Rule, an
issuer would be required to apply its premium payment policy uniformly
to all employers or individuals in similar circumstances in the
applicable market regardless of health status, and consistent with
applicable nondiscrimination requirements.\23\ The proposal would not
permit an issuer to condition the effectuation of new coverage on
payment of past-due premiums by any individual other than
[[Page 12953]]
the person contractually responsible for the payment of premium.
---------------------------------------------------------------------------
\23\ Issuers may also have obligations under other applicable
Federal laws prohibiting discrimination, and issuers are responsible
for ensuring compliance with all applicable laws and regulations.
There may also be separate, independent non-discrimination
obligations under State law.
---------------------------------------------------------------------------
This interpretation also avoids the perverse incentives introduced
under the current interpretation. Under the current interpretation, an
enrollee who is receiving APTC and who renews and owes past-due
payments at the start of the plan year (because the individual failed
to pay the full amount due starting in November or December) will be in
a 3-month grace period in January and must pay the full amount owed by
the end of the grace period to prevent termination.\24\ In contrast,
someone who is not renewing coverage under the same product but instead
selects coverage under a different product and owes past-due premiums
would be able to pay the binder payment to effectuate new coverage
without being in a grace period or paying past-due premiums. Therefore,
by choosing new coverage versus continuing in the same coverage, the
enrollee can avoid paying the outstanding debt before starting coverage
for the next plan year. While the enrollee still owes a debt to the
issuer related to the prior coverage, this strategy makes the debt far
harder for the issuer to collect and buys the enrollee more flexibility
to game their coverage period. Under our proposal, the obligation to
pay the past debt does not change based on whether the annual contract
is new or a renewal.
---------------------------------------------------------------------------
\24\ See, Federally-facilitated Exchange (FFE) Enrollment
Manual, Section 6.3 Terminations for Non-Payment of Premiums
(version effective as of Aug. 19, 2024), available at https://www.cms.gov/files/document/ffe-enrollment-manual-2024-5cr-082024.pdf
(stating that for individuals whose grace period for non-payment of
premiums extends past the end of the annual OEP and who either auto-
renews or makes an active plan selection that is a continuation of
the same coverage, the issuer may attribute enrollee payments to the
oldest outstanding debt in the existing grace period for the current
coverage).
---------------------------------------------------------------------------
In the 2016 Payment Notice (80 FR 10750, 10794), we revised Sec.
155.400(e) to establish a standard policy for premium payment deadlines
in the FFEs, while leaving other Exchanges the option of establishing
such policies. In particular, we set a uniform deadline for the payment
of the first month's premium to effectuate an enrollment. When setting
this policy, we received several comments recommending that HHS give
issuers flexibility surrounding payment deadlines and, in response, we
recognized that decisions regarding payment of the first month's
premium (the binder payment) have traditionally been business decisions
made by issuers, subject to State rules. While we have established
certain uniform standards for premium payment deadlines, premium
payment policies are generally business decisions made by issuers,
subject to State rules. We therefore propose to allow issuers, to the
extent permitted by applicable State law, to establish terms of health
insurance coverage that attribute to past-due premium amounts owed to
an issuer the initial premium the enrollee pays to effectuate new
coverage. We propose that this policy would apply starting on the
effective date of the final rule. We seek comment on this proposal.
In the Market Stabilization Rule (82 FR 18349 through 18353), we
also set additional parameters around this flexibility. These
parameters allowed an issuer to attribute payments to effectuate new
coverage to past-due premiums amounts owed to any other issuer that is
a member of the same controlled group. For this purpose, a controlled
group was a group of two or more persons that is treated as a single
employer under sections 52(a), 52(b), 414(m), or 414(o) of the Code,
which is the same definition used for other purposes related to the
guaranteed renewability provision. HHS limited the issuer to
attributing premium payments to past-due premiums for coverage within
the prior 12 months. In addition, we also required issuers that adopted
this premium payment policy (as well as any issuers that do not adopt
the policy but are within an adopting issuer's controlled group) to
provide notice of the consequences of non-payment on future enrollment
in enrollment application materials and in any notice that is provided
regarding non-payment of premiums. While these are reasonable
parameters, we believe States are better situated to set and oversee
parameters of this nature and therefore do not believe a uniform
national policy on these elements is warranted. We clarify that our
proposal to permit issuers to establish terms of coverage that
attribute the initial premium an enrollee pays to effectuate new
coverage to past-due premium amounts owed to an issuer, and then to
refuse to effectuate coverage if the payment does not equal the
outstanding debt plus the new monthly premium amount, would permit them
to include past-due premium amounts owed to another issuer in the same
controlled group, if permitted by applicable State law. We seek
comments on whether we should leave such parameters to States or codify
these and any other parameters to establish a more uniform Federal
regulatory approach. We also seek comment on whether issuers should be
required to establish terms of coverage that attribute to past-due
premium amounts owed to an issuer the premium the enrollee initially
pays for subsequent coverage, and the associated costs for issuers to
implement such a requirement.
Here and throughout this proposed rule we encourage commenters to
include supporting facts, research, and evidence in their comments.
When doing so, commenters are encouraged to provide citations to the
materials referenced, including active hyperlinks. Likewise, commenters
who reference materials which have not been published are encouraged to
upload relevant data collection instruments, data sets, and detailed
findings as a part of their comment. Providing such citations and
documentation will assist HHS in analyzing the comments.
B. Part 155--Exchange Establishment Standards and Other Related
Standards Under the Affordable Care Act
1. Definitions; Deferred Action for Childhood Arrivals (Sec. 155.20)
Section 1312 of the ACA specifically excludes individuals who are
not ``lawfully present'' from eligibility for enrollment in a QHP or
for insurance affordability programs.\25\ Section 36B of the Code, and
sections 1412, 1402, and 1331 of the ACA, exclude individuals who are
not ``lawfully present'' from eligibility for PTC,\26\ APTC,\27\
CSRs,\28\ and enrollment in a BHP in States that elect to operate a
BHP,\29\ respectively. From 2012 through 2024, HHS long took the
position that a noncitizen in the United States under the Deferred
Action for Childhood Arrivals (DACA) policy was not ``lawfully
present'' for purposes of determining eligibility to enroll in a QHP or
for these insurance affordability programs.\30\ However, in the DACA
Rule (89 FR 39392), HHS updated the definition of ``lawfully present''
to include DACA recipients for purposes of determining eligibility to
enroll in a QHP through an Exchange, to be eligible for PTC, APTC, and
CSRs, and to enroll in a BHP in States that elect to operate a BHP. The
agency now proposes to realign our policy with the text of the ACA by
updating the definition of ``lawfully present'' such that DACA
recipients are no longer considered ``lawfully present'' for purposes
of enrollment in a QHP, eligibility for PTC, APTC, and CSRs, and for
BHP coverage.
---------------------------------------------------------------------------
\25\ 42 U.S.C. 18032(f)(3).
\26\ 42 U.S.C. 18082(d); 26 U.S.C. 36B(e)(2).
\27\ 42 U.S.C. 18082(d).
\28\ 42 U.S.C. 18071(e).
\29\ 42 U.S.C. 18051(e).
\30\ See the definition of ``insurance affordability program''
at 45 CFR 155.300(a) and 42 CFR 435.4.
---------------------------------------------------------------------------
[[Page 12954]]
On June 15, 2012, the United States Department of Homeland Security
(DHS) issued a memorandum entitled ``Exercising Prosecutorial
Discretion with Respect to Individuals who Came to the United States as
Children'' (``DHS Memo'').\31\ The DHS Memo established, for the first
time, the DACA policy, and it set forth three principles. First,
certain individuals who were brought to the United States as children
from another country and who were in the United States in violation of
immigration laws were not considered to be an immigration enforcement
priority. Second, with respect to these individuals, DHS officials were
instructed to exercise enforcement discretion and generally defer from
placing them into removal proceedings. Finally, United States
Citizenship and Immigration Services (USCIS) was instructed to accept
applications to determine whether these individuals were eligible for
work authorization during a period of deferred action.
---------------------------------------------------------------------------
\31\ Napolitano, J. (2012, June 15). Exercising Prosecutorial
Discretion with Respect to Individuals Who Came to the United States
as Children. U.S. Department of Homeland Security. https://www.dhs.gov/xlibrary/assets/s1-exercising-prosecutorial-discretion-individuals-who-came-to-us-as-children.pdf.
---------------------------------------------------------------------------
On August 30, 2012, HHS issued an Interim Final Rule (77 FR 52615
through 52616) that amended the definition of ``lawfully present'' at
Sec. 155.20 to conform with the law as enacted by the ACA by making
clear that an individual whose case had been deferred under the DACA
policy ``will not be able to enroll in coverage through the Affordable
Insurance Exchanges and, therefore, will not receive coverage that
could make them eligible for premium tax credits.'' The Interim Final
Rule noted at that time (77 FR 52615) that ``the reasons that DHS
offered for adopting the DACA process do not pertain to . . .
extend[ing] health insurance subsidies under the Affordable Care Act to
these individuals.'' For that reason, the HHS explained (77 FR 52615),
it did not intend to ``inadvertently expand the scope of the DACA
process.''
On May 8, 2024, after notice and comment, HHS issued the DACA Rule
(89 FR 39392) reversing this longstanding interpretation. In the final
rule, HHS announced that it had chosen to ``reconsider'' the prior
interpretation from 2012. The DACA Rule, which became effective on
November 1, 2024, advanced several arguments for reversing the agency's
prior interpretation.\32\
---------------------------------------------------------------------------
\32\ On December 9, 2024, the United States District Court for
the District of North Dakota issued a preliminary injunction in
Kansas v. United States of America (Case No. 1:24-cv-00150)
partially blocking implementation of the 2024 final rule at 89 FR
39392.
---------------------------------------------------------------------------
In light of recent Executive Orders, ``Protecting the American
People Against Invasion'' \33\ and ``Ending Taxpayer Subsidization of
Open Borders,'' \34\ and consistent with our statutory authority to
define ``lawfully present'' for use in determining eligibility for our
programs, we are now reconsidering these arguments.
---------------------------------------------------------------------------
\33\ ``Protecting the American People Against Invasion,'' Exec.
Order No. 14,159, 90 FR 8443 (Jan. 20, 2025). https://www.federalregister.gov/documents/2025/01/29/2025-02006/protecting-the-american-people-against-invasion. https://www.federalregister.gov/documents/2025/01/29/2025-02006/protecting-the-american-people-against-invasion.
\34\ ``Ending Taxpayer Subsidization of Open Borders.'' (Feb.
19, 2025). https://www.whitehouse.gov/presidential-actions/2025/02/ending-taxpayer-subsidization-of-open-borders/. https://www.whitehouse.gov/presidential-actions/2025/02/ending-taxpayer-subsidization-of-open-borders/.
---------------------------------------------------------------------------
In the DACA Rule (89 FR 39392 through 39395), HHS concluded that
because DHS had determined that a DACA recipient is ``lawfully
present'' for purposes of eligibility for certain Social Security
benefits under 8 U.S.C. 1611(b)(2), that the agency should ``align''
its position to that of DHS, even while acknowledging that we were
operating under separate statutory and policy considerations. However,
as demonstrated by HHS' prior policy with regard to DACA recipients (89
FR 39392 through 39395), the ``separate statutory authority and policy
considerations'' did not compel HHS to ``align'' its position on DACA
recipients with the position that DHS took with regard to DACA
recipients' eligibility for certain Social Security benefits.
In the DACA Final Rule (89 FR 39395), HHS also posited that it saw
``no statutory mandate to distinguish between recipients of deferred
action under the DACA policy and other deferred action recipients.''
The final rule noted that Federal agencies have long considered
deferred action recipients to be ``lawfully present'' for purposes of
certain Social Security benefits since 1996.\35\ However, DACA
recipients, unlike other deferred action-recipients, received deferred
action under a large-scale presidential initiative whose purposes did
not include extending ACA access to health insurance Exchanges. As HHS
originally explained, it is not consistent with the reasons offered for
adopting the DACA process to extend health insurance subsidies under
the ACA to these individuals (77 FR 52615). This original policy
reflected the better view of the appropriate intersection of DACA and
the ACA.
---------------------------------------------------------------------------
\35\ See Definition of the Term Lawfully Present in the United
States for Purposes of Applying for Title II Benefits Under Section
401(b)(2) of Public Law 104-193, interim final rule, 61 FR 47039).
---------------------------------------------------------------------------
The Fifth Circuit concluded in 2022 that ``Congress created an
intricate statutory scheme for determining which classes of aliens may
receive lawful presence, discretionary relief from removal, deferred
action, and work authorization'' and that ``Congress's rigorous
classification scheme forecloses the contrary scheme in the DACA
Memorandum.'' 36 37 In the DACA Rule, HHS acknowledged the
Fifth Circuit's opinion but proceeded to consider DACA recipients
``lawfully present'' for purposes of eligibility to enroll in a QHP
through an Exchange, to be eligible for PTC, APTC, CSRs, and to be
eligible to enroll in a BHP in States that elect to operate a BHP
because the ``rule reflects our independent statutory authority under
the ACA to define `lawfully present.' '' Upon further reconsideration,
we now believe it was improper for HHS to define ``lawfully present''
under the ACA in a way that departed from the longstanding
understanding of that term with respect to DACA recipients.
---------------------------------------------------------------------------
\36\ Texas v. United States, 50 F.4th 498, 526 (5th Cir. 2022).
\37\ On January 17, 2025, the U.S. Court of Appeals for the
Fifth Circuit issued a decision (State of Texas, et al. v. U.S.A, et
al., 23-40653) regarding DHS's final rule ``Deferred Action for
Childhood Arrivals'' (87 FR 53152), which found the benefits
granting provisions of the rule to be substantively unlawful,
limited injunctive relief to the State of Texas, and remanded the
case to the district court for further proceedings.
---------------------------------------------------------------------------
To support the DACA Rule, HHS stated that the policy would increase
insurance coverage, reduce delays in care, improve the ACA's risk pool,
and make DACA recipients more productive members of society. However,
these benefits the agency previously noted do not mean that DACA
recipients should be considered to have met the ``lawfully present''
standard that Congress set in order to enroll in a QHP through an
Exchange, to be eligible for PTC, APTC, CSRs, and to enroll in a BHP in
States that elect to operate a BHP. We believe the use of the term
``lawfully present'' in the ACA is best implemented by excluding DACA
recipients for purposes of eligibility to enroll in a QHP through an
Exchange, to be eligible for PTC, APTC, CSRs, and to be eligible to
enroll in a BHP in States that elect to operate a BHP. DHS's decision
that DACA recipients are not priorities for removal does not, as DHS
has acknowledged, mean that they have ``lawful status'' within the
United States, nor does that DHS decision control anything regarding
``eligibility rules'' for health-related benefits administered by
``[o]ther
[[Page 12955]]
departments and agencies, such as HHS'' (87 FR 53211 through 53212).
Therefore, we believe it was improper for HHS to advance a policy goal
that was contrary to the ACA's statutory limitations as they have been
understood since the inception of DACA. Furthermore, DHS's decision
that enforcement resources should be focused on other unlawful
immigrants does not compel the conclusion that taxpayer dollars should
be expended to subsidize the healthcare of those unlawful immigrants,
as HHS recognized in its 2012 rule. Indeed, Congress has expressed a
clear immigration policy that ``aliens within the Nation's borders not
depend on public resources to meet their needs'' and public benefits
should ``not constitute an incentive for immigration to the United
States'' (8 U.S.C. 1601(2)). While HHS acknowledged this goal in
previous rulemaking (89 FR 39399), it did not explain why the
understanding that it had adopted prior to the DACA Rule did not better
comport with this statutory goal.
After reconsidering these arguments, we believe that, with respect
to DACA recipients, defining the term ``lawfully present'' as set forth
in the August 30, 2012 Interim Final Rule (77 FR 52614 through 52616)
better adhered to the policy considerations underlying the statutory
scheme. As previously noted, HHS' statutory authority and policy
considerations for defining ``lawfully present'' with regard to its
programs are separate from DHS's, and there is no requirement that HHS
aligns its definition of ``lawfully present'' with DHS's. There is also
no requirement that HHS align its treatment of DACA recipients with
other recipients of deferred action, particularly given the fundamental
differences between DHS's DACA policy and other policies under which
DHS may grant deferred action. In the 2012 Interim Final Rule (77 FR
52614 at 52615), HHS noted that the reasons DHS offered in the DHS Memo
for adopting the DACA process did not include providing access to
insurance affordability programs, and that any such expansion would
``inadvertently expand the scope of the DACA process.'' Section 42
U.S.C. 18032(f)(3), section 36B(e)(2) of the Code, 42 U.S.C. 18082(d),
and 42 U.SC. 18071(e)(1)(A), 42 U.S.C. 18051(e) limit enrollment in a
QHP offered on an Exchange and eligibility for PTC, APTC, CSRs, and
enrollment in a BHP in States that elect to operate a BHP,
respectively, to an individual who is ``lawfully present'' in the
United States, and the better view is that a DACA recipient does not
meet that requirement and would therefore, under this rule, be
ineligible for these benefits.
We seek comments on this proposal.
2. Standards for Termination of an Agent's, Broker's, or Web-Broker's
Exchange Agreements for Cause (Sec. 155.220(g)(2))
Later in this preamble, there is significant discussion regarding
dramatic levels of improper enrollments involving agents, brokers, and
web-brokers. Examining agent, broker, and web-broker practices and
taking enforcement action against noncompliant agents, brokers, and
web-brokers is critical to program integrity, and HHS is committed to
holding noncompliant agents, brokers, and web-brokers accountable to
protect Exchanges and consumers. We propose to amend Sec.
155.220(g)(2) to improve transparency in the process for holding
agents, brokers, and web-brokers accountable for compliance with
applicable law, regulatory requirements, and the terms and conditions
of their Exchange agreements.\38\
---------------------------------------------------------------------------
\38\ Consistent with Sec. 155.220(d), there are currently three
Exchange agreements with CMS that extend to agents, brokers, and
web-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.
---------------------------------------------------------------------------
Section 1312(e) of the ACA provides that the Secretary shall
establish procedures under which a State may allow agents or brokers to
enroll individuals and employers in any QHPs in the individual or small
group market as soon as the plan is offered through an Exchange in the
State; and to assist individuals in applying for PTC and CSRs for plans
sold through an Exchange. Regulations at Sec. 155.220 implement this
statutory requirement.\39\ Among other things, Sec. 155.220 includes
termination for cause standards in paragraphs (g)(1) through (3), which
generally provide that if, in HHS' determination, a specific finding of
noncompliance or pattern of noncompliance is sufficiently severe, HHS
may terminate an agent's, broker's, or web-broker's agreements with the
FFE for cause. Consistent with Sec. 155.220(l), the termination for
cause standards apply to agents, brokers, and web-brokers participating
in SBE-FPs. Paragraph (h) sets forth procedures for subsequent review
(that is, ``reconsideration'') of the termination action.
---------------------------------------------------------------------------
\39\ Also see Sec. Sec. 155.221 and 155.222.
---------------------------------------------------------------------------
We propose to improve transparency in the process for holding
agents, brokers, and web-brokers accountable for noncompliance with
applicable law, regulatory requirements, and the terms and condition of
their Exchange agreements. Specifically, we propose to add text to
Sec. 155.220(g)(2) that clearly states that HHS would apply a
``preponderance of the evidence'' standard of proof with respect to
issues of fact to assess potential noncompliance under Sec.
155.220(g)(1) and make a determination there was a specific finding or
pattern of noncompliance that is sufficiently severe. Similar to
definitions adopted by other HHS agencies and offices,\40\ we propose
at Sec. 155.20 to capture this new definition, which would state that
``preponderance of the evidence'' means proof by evidence that,
compared with evidence opposing it, leads to the conclusion that the
fact at issue is more likely true than not.\41\
---------------------------------------------------------------------------
\40\ See 42 CFR 93.228 (preponderance of the evidence means
``proof by evidence that, compared with evidence opposing it, leads
to the conclusion that the fact at issue is more likely true than
not''); 45 CFR 412.001 (``Preponderance of the evidence means proof,
after assessing the totality of available information, that leads to
the conclusion that the fact at issue is more probably true than
not.''); and 45 CFR 1641.2 (``Preponderance of the evidence means
proof by information that, compared with that opposing it, leads to
the conclusion that the fact at issue is more probably true than
not.'').
\41\ See also INS v. Cardoza-Fonseca, 480 U.S. 421 (1987)
(defining ``more likely than not'' as a greater than 50 percent
probability of something occurring).
---------------------------------------------------------------------------
In proposing the preponderance of the evidence standard, we
considered the severity of the potential consequences involved in our
termination for cause standards in Sec. 155.220(g)(1) through (3),\42\
and how evidentiary standards have traditionally been used in court
cases. Federal administrative and civil cases generally use a
preponderance of the evidence standard, while criminal cases, in order
to sustain a conviction, demand the highest standard, guilt ``beyond a
reasonable doubt,'' under which evidence must be so strong that there
is no reasonable doubt about a defendant's guilt.\43\ Between those two
[[Page 12956]]
evidentiary standards are the ``clear and convincing evidence''
standard, under which a trier of fact must have an abiding conviction
that the truth of the factual contention is ``highly probable,'' \44\
and the ``substantial evidence'' standard, which means such relevant
evidence as a reasonable mind might accept as adequate to support a
conclusion.\45\
---------------------------------------------------------------------------
\42\ HHS acknowledges that there are additional enforcement
actions under 45 CFR 155.220(g) that are not addressed by this
proposal. We are considering future rulemaking to implement
additional regulation changes to the frameworks for those actions
that may strengthen our oversight and the integrity of the program.
\43\ See Maurice, R.; updated by Barrett, S. (2024, Oct. 31).
Legal Standards of Proof. Nolo. https://www.nolo.com/legal-encyclopedia/legal-standards-proof.html (from lowest to highest
standard: preponderance of the evidence, substantial evidence, clear
and convincing evidence, and beyond a reasonable doubt). See
Maurice, R., & Barrett, S. (2024, October 31). Legal standards of
proof: You've probably heard that prosecutors have to prove criminal
charges ``beyond a reasonable doubt.'' But do you know about the
other legal standards of proof? NOLO. https://www.nolo.com/legal-encyclopedia/legal-standards-proof.html.
\44\ Ibid. (citing Colorado v. New Mexico, 467 U.S. 310 at 316
(1984)).
\45\ See Reed v. Sec. of Health and Human Serv., 804 F. Supp.
914 at 918 (E.D. Mich. 1992).
---------------------------------------------------------------------------
HHS is of the view that the preponderance of the evidence standard
is appropriate in our termination for cause standards framework under
Sec. 155.220(g)(1) through (3) because it is the standard used in most
Federal civil cases and administrative proceedings. However, we also
appreciate that the termination of an agent's, broker's, or web-
broker's Exchange agreements may affect their State licensure, given
that we inform State insurance oversight agencies of these enforcement
actions.\46\ In addition, after the applicable period in Sec.
155.220(g)(3) elapses and the Exchange agreement(s) under Sec.
155.220(d) are terminated, the agent, broker, or web-broker will no
longer be permitted to assist with or facilitate enrollment of a
qualified individual in coverage in a manner that constitutes coverage
through an FFE or SBE-FP, or be permitted to assist individuals in
applying for APTC and CSRs for QHPs offered through an FFE or SBE-
FP.\47\ Once an agent's, broker's, or web-broker's Exchange agreements
are terminated, they are unable to assist with applying for or
enrolling in QHPs offered through the Exchange in any of the more than
30 States served by Exchanges on the Federal platform. Given these
potential consequences, we seek comment not only on this proposal to
use a ``preponderance of evidence'' standard of proof in assessing
potential noncompliance under Sec. 155.220(g)(1), but also whether a
different standard would be more appropriate to make a determination
there was a specific finding or pattern of noncompliance by agents,
brokers, and web-brokers that is sufficiently severe. We also solicit
comments on our proposed definition for this new ``preponderance of
evidence'' standard.
---------------------------------------------------------------------------
\46\ See 45 CFR 155.220(g)(6).
\47\ See 45 CFR 155.220(g)(4) and (l).
---------------------------------------------------------------------------
In addition, we intend to provide greater specificity and precision
in the Exchange agreements for PY 2026 and beyond regarding
impermissible conduct by agents, brokers, and web-brokers, and to
address the requirements for ensuring agents, brokers, and web-brokers
have obtained and documented receipt of consumer consent to collect
their personally identifiable information and help them apply for and/
or enroll in QHP coverage offered through the applicable FFE or SBE-FP.
These changes will provide additional, clear guidance to agents,
brokers, and web-brokers, as well as additional information on how HHS
will address compliance failures. We seek input on actions or subject
matters that interested parties believe should be specifically
outlined, emphasized, or otherwise addressed in the Exchange agreements
for PY 2026 and beyond.
We are also inviting comments on the following questions:
1. What are States' oversight practices with respect to
impermissible conduct by agents, brokers, and web-brokers for the State
Exchanges? How are such standards working?
2. Would it be helpful for HHS to provide more guidance on the
form, manner, and content requirements for obtaining and documenting
consumer consent? If so, what guidance would be helpful?
3. Are there other measures HHS should take to assist consumers who
have been enrolled in QHP coverage through the FFEs or SBE-FPs, or
switched to different coverage, without their consent to ensure they
are held harmless for improper enrollments that are the result of
noncompliant behavior by agents, brokers, and web-brokers?
4. Are there other measures that HHS should pursue to enhance
oversight of agents, brokers, and web-brokers who assist consumer apply
for and enroll in QHP coverage through the FFEs and SBE-FPs?
Comments are invited on these specific questions, and generally. We
will consider public comments to help inform potential new or
additional policies and changes to existing standards in future
rulemaking.
3. Verification Process Related to Income Eligibility for Insurance
Affordability Programs (Sec. Sec. 155.305, 155.315, and 155.320)
The ACA provides Federal subsidies to reduce premium and cost
sharing payments for lower-income households who purchase QHPs through
the Exchanges. To guard against fraud and abuse, the ACA establishes a
set of standards and processes to verify that consumers meet the
eligibility requirements for APTC and CSR subsidies. We are proposing
several changes to the processes specifically related to verifying
income eligibility for APTC and CSR subsidies.
Understanding the ACA's full statutory framework for making income
eligibility determinations for APTC provides important context for
analyzing the current regulations and the changes we are proposing.
Each provision of the framework works in coordination with every other
provision to strengthen the program integrity of the ACA's premium and
cost sharing reduction program. Viewed in isolation, the importance of
the role each provision plays can be undervalued or lost. With this in
mind, after reviewing our recent rulemaking on the verification process
related to income eligibility for APTC, we believe certain regulations
do not align with this statutory framework. Therefore, before detailing
the changes we propose, we believe it is important to first outline the
full statutory framework and how each provision connects to increase
the accuracy of eligibility determinations for APTC and CSR subsidies.
Accordingly, the following discussion provides a detailed discussion of
ACA's statutory framework for verifying and determining income
eligibility for APTC.
The ACA provides a PTC to lower net premiums for QHPs purchased
through the Exchanges for eligible individuals. While taxpayers may
choose to claim this credit on their tax return after they pay their
premium, the ACA provides advanced payments of the premium tax credit
(that is, APTC on behalf of eligible consumers, which the Federal
Government pays directly to the issuer when the premium payments are
due). The ACA contains an obligation on issuers to reduce cost-sharing
for people with household incomes between 100 percent and 250 percent
of the FPL who select a silver plan on an Exchange. The ACA imposes an
obligation on the Federal Government to make periodic and timely
payments to issuers equal to the value of the reductions. However,
since a 2017 legal opinion determined the statute does not appropriate
funding for CSR payments,\48\ State Departments
[[Page 12957]]
of Insurance have 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. By
loading premiums to compensate for lack of CSRs, issuers increase the
amount of APTC the Federal Government pays them which, in turn,
indirectly covers the cost of the CSR subsidies. Therefore,
appropriations for APTC now effectively fund both APTC and CSR
subsidies.
---------------------------------------------------------------------------
\48\ U.S. House of Representatives v. Burwell, 185 F. Supp. 3d
165 (D.D.C. 2016); see also Legal Opinion Re: Payments to Issuers
for Cost-Sharing Reductions (CSRs). Office of Attorney General.
https://www.hhs.gov/sites/default/files/csr-payment-memo.pdf (On
October 12, 2017, the Attorney General issued a legal opinion that
HHS did not have a Congressional appropriation with which to make
CSR payments. Sessions III, J. (2017, Oct. 11)).
---------------------------------------------------------------------------
If the APTC paid on behalf of an enrollee exceeds the PTC amount
allowed for the enrollee in a taxable year, section 36B(f)(2)(A) of the
Code requires repayment of the excess APTC the Department of the
Treasury paid to the issuer through an increase in the income tax on
the enrollee by the amount of the excess. However, section 36B(f)(2)(B)
of the Code substantially limits the amount of this tax increase or
repayment for people with household incomes less than 400 percent of
the FPL. Therefore, the statute does not allow the Federal Government
to recover a substantial portion of excess APTC payments. As such, it
is critical to establish an accurate estimate of household income
during the application and enrollment process to most accurately set
APTC payment amounts before the APTC payments are made. Otherwise, to
the extent household income estimates allow people to qualify for an
excess of APTC, a large portion of these excess APTC payments cannot be
recovered from the enrollee. In the case of individuals who
underestimate their income on their application, they can accumulate
large surprise tax liabilities.
To avoid improper payments of APTC, the ACA includes a set of
procedures for determining income eligibility that work together to
increase the accuracy of household income estimates provided on
applications for APTC. Section 1411(a) of the ACA requires HHS to
establish a program for determining, among other things, whether an
individual claiming PTC or CSR meets the income requirements. For
applicants claiming PTC or CSR, section 1411(b)(3)(A) of the ACA
requires them to provide income information from their most recent tax
return filing. If there are changes in circumstances from the most
recent tax filing or when the tax filer was not required to file taxes,
section 1411(b)(3)(C) of the ACA requires applicants to report
additional income information in coordination with the program under
section 1412 of the ACA for setting APTC amounts.
Section 1412(b)(1)(B) of the ACA requires APTC to be set on the
basis of the individual's household income for the most recent taxable
year for which information is available. To determine and verify
household income, it is imperative that consumers file a Federal income
tax return when they are required to do so. As such, the ACA relies on
people meeting their statutory obligations to file Federal income taxes
under sections 6011 and 6012 of the Code. However, section 1412(b)(2)
of the ACA establishes a separate set of procedures for determining
APTC if there are changes in circumstances from the most recent tax
filing or when the tax filer was not required to file taxes.
Section 1411 of the ACA sets out procedures for verifying the
information that enrollees provide on their application, including
information required under both sections 1411 and 1412 of the ACA.
Section 1411(c)(1) of the ACA requires Exchanges to submit an
applicant's information to HHS. Section 1411(c)(3) of the ACA then
requires HHS to submit income information to the IRS for the purposes
of eligibility. The details of this data exchange and disclosure of
taxpayer information are further specified at section 1414 of the ACA,
which includes additional procedures for the exchange of information
with Exchanges and State agencies to support income eligibility
determinations. In the case of income information provided on an
application that is not required to be submitted to the IRS for
verification--that is, any income estimates that are different from the
income reported on the applicant's previous tax return--section 1411(d)
of the ACA requires HHS to verify its accuracy and allows HHS to
delegate this responsibility to the Exchanges. Under section
1411(c)(4)(A) of the ACA, HHS must conduct these income verifications
and determinations through the electronic submission of both the
applicant's information and responses to the applicant, except that HHS
may use a different method for income inconsistencies than the IRS per
section 1411(c)(4)(B) of the ACA. If the information provided by the
applicant is verified under the foregoing procedures, HHS then
determines the applicant is eligible and notifies the Secretary of the
Treasury of the APTC amount to be paid, if applicable.\49\
---------------------------------------------------------------------------
\49\ Section 1411(e)(2)(A) of the ACA.
---------------------------------------------------------------------------
However, if the household income information provided by the
applicant is inconsistent with tax filing information from the IRS or
fails the verification under section 1411(d) of the ACA, section
1411(e)(4) of the ACA requires Exchanges to take additional steps to
verify income.\50\ When there is a household income inconsistency, also
known as a data matching issue (DMI), the Exchange must make a
reasonable effort to identify and address the causes of such
inconsistency, including those stemming from typographical or other
clerical errors, by contacting the applicant to confirm the accuracy of
the information, and by taking such additional actions as HHS, through
regulation or other guidance, may identify. If the household income
inconsistency persists, then the Exchange must notify the applicant and
give the applicant an opportunity within 90 calendar days from the date
the notice was sent to either present satisfactory documentary evidence
to the Exchange or resolve the inconsistency with the IRS or the HHS
verification source. If the household income inconsistency is not
resolved by the end of this 90-day period, section 1411(e)(4)(B)(ii) of
the ACA requires the Exchange to set the APTC and CSR based on income
information from the IRS and information provided to HHS under section
1411(d) of the ACA.
---------------------------------------------------------------------------
\50\ The responsibility for verifying eligibility here has
shifted entirely from HHS to the Exchanges. However, HHS retains
responsibility in States that have not established an Exchange. In
addition, HHS retains authority to regulate how Exchanges verify
eligibility at this stage.
---------------------------------------------------------------------------
To support verification and eligibility determinations, section
1413 of the ACA requires HHS to establish a system to streamline
eligibility determinations across all applicable State health care
subsidy programs, including QHP enrollment, PTCs, CSRs, Medicaid, the
Children's Health Insurance Program (CHIP), and BHPs in States that
elect to operate them. Within this system, States must develop a
secure, electronic interface and using this interface, participate in a
data matching program to establish, verify, and update eligibility for
State health care subsidy programs, including the APTC, on the basis of
reliable, third-party data. Collectively, we refer to these third-party
data sources, such as the Social Security Administration, DHS, and the
IRS, as trusted data sources. Importantly, this interface for
exchanging data must be compatible with the method for data
verification of the household income information provided on
applications under section 1411(c)(4) of the ACA.
In summary, under this statutory framework, HHS is responsible for
[[Page 12958]]
verifying and determining income eligibility. We are tasked with
verifying household income information with the IRS and verifying
household income information with other trusted data sources when the
IRS cannot provide enough information to verify income eligibility, or
the information they provide significantly differs from the household's
income attestation. The ACA further directs HHS to establish compatible
electronic information exchange systems for enrollment applications and
eligibility verification and determination. This creates a clear
expectation for HHS to develop a robust data matching program between
Federal agencies, State Exchanges, and other trusted data sources to
determine APTC payments using the most accurate income estimates.
Giving a Federal agency like HHS primary responsibility for verifying
and determining APTC eligibility follows from the fact that APTC
payments are Federal expenditures.
Exchanges operate as the intermediary between HHS and the
applicant. They provide the applicant's information to HHS and then HHS
has the primary responsibility for verifying the information. However,
when the IRS cannot verify the income information, HHS may delegate its
responsibility to verify household income to the Exchanges. Still, HHS
retains authority to regulate and guide how Exchanges verify this
household income information, as well as responsibility for the data
matching program used to establish, verify and update income
eligibility. As the intermediary, the Exchanges must also make the
final connection with the applicant to resolve any outstanding income
inconsistencies. The Exchanges' role here is to provide notice to the
applicant, collect any documentary evidence from the applicant, and
facilitate any final effort to resolve the inconsistency with the IRS
or other trusted data sources.
Applicants also bear important responsibilities in this process.
This primarily includes a responsibility to file Federal income taxes
for any year that they receive APTC and CSR and, if they have had a
change in circumstances or were not required to file taxes, to report
and attest to accurate income information. The ACA, however, requires
verification of applicants' attestations of household income under
section 1411(c) or (d), as referenced in section 1411(e)(4) of the ACA.
There is no statutory exception to this verification process. If the
applicant's household income cannot be verified, the applicant is
responsible for providing satisfactory documentary evidence or taking
further steps to resolve the inconsistency with the Federal information
sources. If the applicant fails to resolve the inconsistency, the APTC
amount must be based on the income data from Federal sources provided
to HHS under section 1411(c) of the ACA.
With that as background, we propose the following changes to the
processes in place related to verifying income eligibility for APTC and
CSR subsidies.
a. Failure To File Taxes and Reconcile APTC Process (Sec.
155.305(f)(4))
i. Delay of FTR Process Until After 2-Consecutive Years of FTR Removed
We propose to amend paragraph Sec. 155.305(f)(4) to reinstate the
previous policy that an Exchange may not determine a tax filer or their
enrollee eligible for APTC if: (1) HHS notifies the Exchange that APTC
were paid on behalf of the tax filer, or their spouse if the tax filer
is a married couple, for a year for which tax data would be utilized
for verification of household and family size, and (2) the tax filer
did not comply with the requirement to file a Federal income tax return
and reconcile APTC for that year.
In 2012, we first finalized the FTR policy in the Exchange
Establishment Rule (77 FR 18352 through 18353) to prevent a primary tax
filer or spouse who has failed to comply with tax filing rules from
accumulating additional Federal tax liabilities due to overpayment of
APTC. Since 2015, HHS has taken regulatory and operational steps to
help increase tax filer compliance with the filing and reconciliation
requirements under the Code as described at 26 CFR 1.36B-4(a)(1)(i) and
(a)(1)(ii)(A) by tying eligibility for future APTC to the tax filer's
reconciliation of past APTC paid. When the original FTR process was
first run in December 2015, only non-filers were identified as part of
the FTR process. IRS began to identify non-filers, non-reconcilers, and
tax filers with a valid tax filing extension in Fall 2016, and HHS
began taking action on non-reconcilers and extension tax filers in
addition to non-filers in Fall 2017.
As the operations behind the FTR process evolved, Exchanges
struggled to communicate with enrollees about the removal of APTC due
to their tax filing status. Due to these struggles, in the 2018 Payment
Notice (81 FR 94124), the FTR Recheck process was carved out of the
periodic data matching regulations at Sec. 155.330(e)(2) due to
concerns related to the protection of Federal tax information (FTI).
Additionally, to strengthen the FTR process, Exchanges on the Federal
platform added an additional check of an enrollee's FTR status after
the OEP ended. This process, referred to as FTR Recheck, is the process
that occurs early in the coverage year where Exchanges on the Federal
platform verify the tax filing status of enrollees who attested to
filing and reconciling during the OEP. During the comment period, many
State Exchanges expressed their frustration regarding their inability
to provide direct communications related to the tax filing status of
the tax filers or their enrollees. In response to their comments, HHS
carved out an exception to Sec. 155.305(f)(4) that stated Exchanges
could not deny APTC due to FTR unless ``direct notification'' was first
sent to the tax filer that they would lose their eligibility for APTC
related to their failure to file and reconcile. This change
necessitated FTI compliant infrastructure for Exchanges. In the 2019
Payment Notice (83 FR 16982), HHS updated the FTR policy to remove the
carve-out for direct notification. However, due to the earlier
regulations, HHS did not run FTR Recheck in Spring 2017 because HHS
would have been out of compliance with its own rule because it did not
yet have the infrastructure to send direct notices that contain FTI. In
Fall 2017, Exchanges on the Federal platform began sending direct
notices to tax filers explicitly stating that they would lose
eligibility for APTC due to their failure to comply with the
requirement to file their Federal income taxes and reconcile APTC.
During the COVID-19 public health emergency (PHE), FTR operations
were paused due to concerns that consumers who had filed and reconciled
would lose APTC due to IRS processing delays resulting from IRS
processing facility closures and a corresponding processing backlog of
paper filings.
In the 2024 Payment Notice (88 FR 25814), we amended the FTR
process to restrict an Exchange from determining a tax filer ineligible
for APTC until they have failed to file a Federal income tax return and
reconcile APTC for two-consecutive tax years. We made this change to
address operational challenges that required Exchanges to determine
someone ineligible for APTC without having up-to-date information on
the tax filing status of tax filers, to help consumers who may be
confused or may have received inadequate education on the requirement
to file and reconcile, to promote continuity of coverage for consumers
who may not be aware of the requirement to file and reconcile, and to
reduce the administrative burden on HHS.
[[Page 12959]]
When we adopted this two-tax year FTR process, we acknowledged it
could place consumers at a risk of increased tax liability. To mitigate
this concern, in the 2025 Payment Notice (89 FR 26298 through 26299),
we required Exchanges to issue FTR warning notices for enrollees in
Exchanges on the Federal platform who have not filed and reconciled for
one-tax year. We also acknowledged the risk for improper enrollment by
consumers who know they can ignore their FTR status for an additional
year, but concluded these instances would be limited as the majority of
enrollees comply with FTR. Despite the potential for large tax
liabilities and the risk of improper enrollment, we concluded that this
policy would have a positive impact on consumers, while still ensuring
program integrity as it would provide better continuity of coverage for
consumers who may not be aware of the requirement to file and
reconcile. We noted that we would continue to monitor the
implementation of this new policy, including whether certain
populations continue to experience large tax liabilities, and would
consider whether additional guidance, or any additional policy changes
in future rulemaking, are necessary.
Upon further analysis of enrollment data, we believe the new FTR
process places a substantially higher number of tax filers at a greater
risk of accumulating increased tax liabilities.\51\ We believe this is
because the current FTR process could incentivize tax filers to not
file and reconcile because they are allowed to keep APTC eligibility
for an additional year without filing their Federal income tax return
and reconciling APTC. If tax filers do not file and reconcile for two-
consecutive tax years, they could have an increasing tax liability due
to APTC that is not reconciled on the tax return. For example, if a tax
filer had projected their household income to be less than 200 percent
of the FPL, but had household income over 400 percent of the FPL when
filing their Federal income tax return, the requirement to repay their
excess APTC could constitute a major tax liability. Average APTC per
month for those receiving it is $548 for OEP 2024. Moreover, new
evidence shows there is a substantial risk of improper enrollment,
which we discuss further below.\52\
---------------------------------------------------------------------------
\51\ 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.
\52\ Blase, B.; Gonshorowski, D. (2024, June). The Great
Obamacare Enrollment Fraud. Paragon Health Institute. https://paragoninstitute.org/private-health/the-great-obamacare-enrollment-fraud.
---------------------------------------------------------------------------
In our previous rulemaking, we were concerned about consumers
losing their Exchange coverage once they lose their eligibility for
APTC, as they would no longer be able to pay their entire premium for a
second year under the 1 year FTR policy. This concern guided our
thought process in the 2024 Payment Notice when we amended the FTR
process to restrict an Exchange from determining a tax filer ineligible
for APTC until they have failed to file a Federal income tax return and
reconcile APTC for two-consecutive tax years.
According to our estimates in that rule (81 FR 25902), we found
approximately 116,000 enrollees with an FTR status were automatically
enrolled in an Exchange QHP without APTC during the OEP for PY 2020,
and that approximately 14,000 stayed enrolled without APTC by March
2020. We estimated all 102,000 enrollees who dropped coverage would
have retained coverage under the new FTR process. Among those who
dropped coverage, we estimated 20,400 (20 percent) would be reenrolled
in coverage without APTC due to an FTR status for two-consecutive tax
years. We estimated the continuity of coverage for the 81,600 who
remained covered in the second year, accounting for enrollment
retention rates, would likely increase APTC expenditures by $373
million beginning in 2025.
However, considering new evidence regarding improper enrollments,
it became apparent that the new FTR process could impede Exchange
efforts to mitigate improper enrollments. At the time, we did not
estimate the number of people with an FTR status who entered the OEP
and either disenrolled, actively reenrolled without APTC, or resolved
their FTR status and reenrolled with APTC. Due to concerns related to
the safeguarding of FTI, the Exchanges on the Federal platform are
unable to track specifically how many consumers originally identified
as FTR prior to the OEP ultimately resolved their FTR status. This kind
of information would have helped us fully understand the population
that might take advantage of the current FTR process. Nor did we
attempt to estimate the portion of people with FTR status who were
likely ineligible for APTC. Rather, we assumed continuity of coverage
with APTC was appropriate for everyone with an FTR status. Moreover, we
did not consider how changing the notice to reflect the new FTR process
would impact enrollment decisions. The prior FTR direct notice (for PY
2020 and earlier) gave notice that access to APTC would end if tax
filers failed to file and reconcile for one-tax year, while the current
one-tax year FTR direct notice for PY 2025 provides notice for tax
filers identified as having a one-tax year FTR status that they may
lose their APTC in the future if they do not file and reconcile their
APTC. Tax filers with a one-tax year FTR status or their enrollees are
directed to file their Federal income tax returns and reconcile their
APTC as soon as possible in the current one-tax year FTR direct notice.
Indirect notices for tax filers in both the one-tax year and two-tax
year FTR status cannot directly tell an enrollee that they need to file
their Federal income tax return, but encourage doing so in order to
ensure that they remain eligible for APTC, along with other reasons why
they may be at risk of losing APTC to mask FTI.
Upon further analysis of enrollment and tax filing data we believe
the current two-year FTR process places a substantially higher number
of consumers at risk of accumulating increased tax liabilities. We have
revisited the enrollment and tax filing data from the OEP for PY 2020,
as well as more recent enrollment data. During OEP 2025, the initial
year in which FTR was resumed, the data shows that approximately
356,000 potential reenrollments entered OEP 2025 with a two-tax year
FTR status and approximately 1,500,000 potential reenrollments entered
OEP 2025 with either a one-tax year FTR status, an extension of the
deadline to file their Federal income taxes, or had filed their Federal
income taxes but had not attached IRS Form 8962 to reconcile their
APTC. Under the current two-year policy for PY 2025, enrollees with a
two-tax year FTR status could have actively reenrolled (but not auto-
reenrolled) and attested to having filed and reconciled while IRS data
still shows them as not having filed taxes for the 2022 or 2023 tax
years, and the enrollees with a one-tax year FTR status could have
either actively or automatically reenrolled in an Exchange QHP without
meeting the requirement to file taxes for the 2023 tax year.
Historically, under the one-tax year FTR process, between 15 percent
and 20 percent of consumers originally identified at OEP as FTR end up
losing their APTC due to the FTR Recheck process. As of February 2025,
we do not have information on the number of consumers who were
identified as having a two-tax year FTR status before
[[Page 12960]]
the OEP and who have filed and reconciled in order to remain eligible
for APTC. It is probable that due to the increase in enrollment, under
the two-tax year FTR policy, the number of consumers who would remain
covered into the second year would be greater than the 81,600 we
previously estimated.
If most of these enrollees were eligible for APTC, then giving them
some extra time to resolve their FTR status might be justified
considering the potential confusion over the requirement to file and
reconcile. However, in the proposed 2019 Payment Notice (82 FR 51086),
we previously identified program integrity issues among tax filers who
fail to file and reconcile. When people received notice regarding their
failure to file and reconcile under the one-tax year FTR process,
approximately 70 percent of households receiving the notification took
appropriate action to file a tax return and reconcile associated
APTC.\53\ However, because tax filers for approximately 30 percent of
households receiving the notification did not take appropriate action,
we concluded that, absent evidence that they had filed and reconciled,
it was important for program integrity purposes that Exchanges
discontinue their APTC. A reason that may explain why this population
does not file their taxes and reconcile their APTC is due to the
administrative burden. IRS has noted that filing an individual tax
return takes an average of 8 hours and costs approximately $160.\54\
While there are numerous free file options as well as assistance for
low-income taxpayers, many taxpayers do not utilize those options.\55\
However, we continue to believe this high rate of people who failed to
take appropriate action to file and reconcile represents a program
integrity issue. The current policy aggravates this program integrity
problem by allowing those enrollees who failed to take appropriate
action to retain coverage into the second year.
---------------------------------------------------------------------------
\53\ Internal CMS data.
\54\ IRS. (2024). 1040 (and 1040-SR) Instructions. Dep't of
Treasury. https://www.irs.gov/pub/irs-pdf/i1040gi.pdf.
\55\ GAO. (2022, May 10). Why Don't More Taxpayers Take
Advantage of Free Help Filing Taxes Online? https://www.gao.gov/blog/why-dont-more-taxpayers-take-advantage-free-help-filing-taxes-online.
---------------------------------------------------------------------------
Furthermore, we believe the proposed one-tax year FTR process can
serve as a backstop to improper enrollments. The Paragon Health
Institute provides evidence that lead generation companies are
misleading enrollees with the promise of free coverage and other
enticements.\56\ In these cases, some people are likely not aware they
are enrolled in QHP coverage with APTC because, in response to
misleading advertisements promising cash or gift cards, they provided
enough personal information for agents, brokers, and web-brokers to
improperly enroll them in such coverage with APTC without their
knowledge.\57\ These schemes tend to target low-income people, many of
whom likely earn less than the thresholds for APTC eligibility. Under
these schemes, some agents, brokers, or web-brokers improperly enroll
people in QHP coverage with APTC who would not otherwise qualify.
Individuals who were improperly enrolled may not realize they are
enrolled in Exchange coverage until they receive a Form 1095-A. These
individuals can obtain a voided Form 1095-A and avoid improper tax
liabilities, but the process is burdensome and could lead to delays or
errors in tax filing. We believe that FTR status may provide a strong
indicator that a current enrollee entering the OEP has income that
makes the household ineligible for APTC. Generally, people with lower
incomes do not need to file taxes unless their income is over the
filing requirement. Because the income filing requirement for a single
filer with no self-employment income aligns with the eligibility
threshold for APTC--$14,600 for 2024 tax filing compared to $14,580 for
2024 APTC eligibility--people who inflate their income to qualify for
APTC will often have an income low enough to, absent the receipt of
APTC, not require them to file taxes. In this case, the FTR status
likely reflects a lack of understanding of the need to file taxes based
on the receipt of APTC which, if they still think they do not meet the
filing requirement based on their income, means they likely have an
income too low to meet the APTC eligibility threshold.
---------------------------------------------------------------------------
\56\ Blase, B; Kalisz, G. (2024, August). Unpacking The Great
Obamacare Enrollment Fraud. Paragon Health Institute. https://paragoninstitute.org/private-health/unpacking-the-great-obamacare-enrollment-fraud/.
\57\ Ibid.
---------------------------------------------------------------------------
We established the current two-tax year FTR process at the end of
the COVID-19 PHE. At that time, we had paused the removal of APTC under
the FTR process because the pandemic severely impacted the IRS' ability
to process tax returns for the 2019, 2020, and 2021 tax years.\58\
Continuing the FTR process during that time would have removed APTC
from substantial number of eligible enrollees who filed tax returns but
had not had their tax returns processed yet.
---------------------------------------------------------------------------
\58\ CMS. (2022, July 18). Failure to File and Reconcile (FTR)
Operations Flexibilities for Plan Year 2023. https://www.cms.gov/cciio/resources/regulations-and-guidance/ftr-flexibilities-2023.pdf.
---------------------------------------------------------------------------
While many enrollees did in fact file their Federal income taxes
and reconcile APTC while FTR was paused during the COVID-19 PHE, in
light of the substantial increase in improper enrollments HHS observed
during PY 2024, we believe that reverting back to the pre-existing FTR
policy, that is, the FTR policy in place before the COVID-19 PHE, is a
critical program integrity measure that could further protect Exchanges
and enrollees from improper enrollments. Specifically, we are concerned
that the current policy of pausing removal of APTC due to an FTR status
for an additional year could potentially let improperly enrolled
enrollees stay enrolled for another year undetected. If an improper
enrollment is not detected by the other methods that the Exchange has
implemented, the proposed one-tax year FTR process should act as a
backstop to ensure that an enrollee who is improperly enrolled loses
APTC after 1 year of failing to file and reconcile instead of 2 years
of failing to file and reconcile. For example, under the one-tax year
FTR process, people received a notice that they would lose their
eligibility for APTC unless they met the requirement to file and
reconcile. Whereas under the current two-tax year FTR process,
enrollees do not receive notification that they are imminently at risk
of losing their APTC until they have had an FTR status for 2 years. As
background, under the current process, Exchanges can choose to send (1)
a direct notice to tax filers, (2) an indirect notice to enrollees, or
(3) both a direct and indirect notice to enrollees with either one-tax
year and two-tax year FTR status. Enrollees with a one-tax year FTR
status can receive either a direct notice that they must file and
reconcile, but they are not at risk for losing APTC for the current
plan year if otherwise eligible, or an indirect notice that indirectly
tells the enrollee to ensure they have done all the actions necessary
to keep their APTC eligibility, including filing their Federal tax
return and reconciling their APTC. It is not until an enrollee receives
an FTR notice for the second tax year that they are instructed to file
and reconcile as soon as possible to avoid losing APTC for the
applicable plan year.
After reviewing the tax filing data, we remain concerned that
enrollees are accumulating tax liabilities due to misestimating their
income. Before the COVID-19 PHE, over 50 percent of people who filed
tax returns and reconciled APTC received excess APTC
[[Page 12961]]
for the 2016, 2017, 2018, and 2019 tax years.\59\ For those who filed
their taxes and reconciled their APTC, the accumulation of any tax
liability is limited to a single year. In 2022, excess liability
represented 11.5 percent of total APTC payments reported on tax
returns. This tax liability, if not paid by the taxpayer, will continue
to be an outstanding debt to the IRS and may accrue interest and
penalties. To mitigate any accumulation of liability, the longstanding
FTR process had disenrolled people from APTC after giving them over 6
months to resolve their FTR status after initial notification. The
current process could potentially provide up to 18 months after an
initial FTR notice is received for a tax filer to comply with the
requirement to file and reconcile their APTC. We no longer believe this
provides reasonable protection against accumulating tax liabilities.
---------------------------------------------------------------------------
\59\ IRS. (2024, Dec. 30). SOI Tax Stats--Individual Income Tax
Returns Line Item Estimates (Publications 4801 and 5385). Dep't of
Treasury. https://www.irs.gov/statistics/soi-tax-stats-individual-income-tax-returns-line-item-estimates-publications-4801-and-5385.
---------------------------------------------------------------------------
Furthermore, the current policy also undermines program integrity
by increasing the burden on taxpayers because, due to repayment
limitations discussed previously, not all ineligible enrollees are held
fully responsible for paying back unpaid liabilities. Those unpaid
liabilities add to Federal APTC expenditures. We did not previously
estimate the Federal cost of the current FTR process due to providing
coverage and APTC continuity to enrollees who were ineligible for APTC
and not liable for repaying the full excess of their APTC. We estimate
up to 18.5 percent of people currently in FTR status may be ineligible
for APTC based on the overall growth in the 100 to 150 percent of the
FPL population of the Exchanges on the Federal platform between 2019
and 2024, if the growth is due to noncompliant agents, brokers, and
web-brokers enrolling enrollees who are actually below the 100 percent
FPL threshold. However, this population would also be impacted by
numerous other proposals in this proposed rule as well as other actions
that HHS has taken over the past year to protect the Exchanges, and we
are unable to isolate the proposed impact of changing the FTR process
from the other proposals included in this rule. While we previously
assessed that the threat of IRS enforcement actions and penalties would
mitigate improper enrollments (88 FR 25818), these data trends indicate
that such consequences are insufficient to protect program integrity,
and therefore, additional policy changes are necessary.
These numbers highlight the importance of complying with the
statutory requirement to file a tax return. As discussed previously, an
enrollee's tax return provides a main basis for establishing an
accurate income estimate. Not filing a tax return undermines the
accuracy of the income estimate used to set the APTC amount. Moreover,
sections 6011 and 6012 of the Code, as implemented under 26 CFR 1.6011-
8, requires enrollees who receive APTC to file a tax return and
reconcile the APTC. We do not believe the ACA allows HHS to determine
an applicant whose taxpayer has failed to meet this requirement
eligible for APTC. As discussed previously, when the IRS does not have
tax return information to verify an applicant's income, section 1412 of
the ACA requires HHS to establish alternative procedures to determine
APTC when there is a change in circumstances or ``in cases where the
taxpayer was not required to file a return . . .''. Because the section
1412(b)(2)(B) only references cases where a tax filer was not required
to file a return, we do not believe an applicant who fails to meet the
requirement to file a return qualifies for this alternative process for
determining APTC. Therefore, under the ACA, we believe the original
regulations implementing the eligibility requirements in 2012 correctly
required Exchanges to determine an applicant ineligible for APTC if
they previously received APTC and failed to file a tax return (77 FR
18352 through 18353).
Overall, this new analysis of the enrollment and tax filing status
suggests a large number of people with FTR status are ineligible for
APTC and that pausing removal of APTC due to an FTR status allows
ineligible enrollees to accumulate tax liabilities. These additional
liabilities create a substantial financial burden for enrollees who
must repay the excess APTC and increase the Federal APTC expenditures.
Moreover, we believe the ACA statute does not allow HHS to determine
someone eligible for APTC if they failed to meet the requirement to
file a tax return. Therefore, to align regulations with the ACA,
protect people from accumulating additional Federal tax liabilities,
and reduce the Federal expenditures associated with APTC expenditures
for ineligible enrollees, we propose to reinstate the FTR process that
requires Exchanges to determine enrollees ineligible for APTC when HHS
notifies the Exchange that a taxpayer has failed to file a Federal
income tax return and reconcile their past APTC for a year for which
their tax data would be utilized to verify their eligibility.
We propose to implement the proposed one-year FTR process beginning
with OEP 2026 in the fall of 2025. This would allow enrollees currently
in a one-tax year FTR status to receive appropriate noticing informing
them of the urgent need to file their Federal income tax return and
reconcile APTC in order to remain eligible for APTC.
We seek comment on this proposal.
ii. Conforming Change to Notice Requirements
To conform with this proposed FTR process, we also propose to
revise the notice requirement at Sec. 155.305(f)(4)(i) and remove the
notice requirement at Sec. 155.305(f)(4)(ii). When we finalized the
current FTR process for PY 2025 in the 2024 Payment Notice (88 FR
25814) to require Exchanges to wait to discontinue APTC until the tax
filer has failed to file a tax return and reconcile their past APTC for
two-consecutive tax years, we did not impose a requirement for
Exchanges to notify such enrollee during the first year that they
failed to file and reconcile. We then amended Sec. 155.305(f)(4) in
the 2025 Payment Notice (89 FR 26298 through 26299) to require that all
Exchanges send one of two notices to tax filers or enrollees with an
FTR status for 1 year, and again in the 2026 Payment Notice (90 FR 4472
through 4473) to require that all Exchanges send one of two notices to
tax filers or enrollees with an FTR status for two-consecutive tax
years. Accordingly, for both an enrollee's first and second year with
an FTR status, all Exchanges must now either (1) notify the tax filer
directly of their FTR status and educate them of the need to file and
reconcile or risk being determined ineligible for APTC if they fail to
file and reconcile for a second consecutive year, or (2) send an
indirect notification to either the tax filer or their enrollee that
informs them they are at risk of being determined ineligible for APTC
in the future. The indirect notice must do so without indicating that
the tax filer has failed to file and reconcile their APTC for both the
first year and the second year that they have been found not to have
done so in order to protect FTI.
Because we are proposing to amend Sec. 155.305(f)(4) to require
Exchanges to determine people ineligible for APTC after one tax year of
FTR status rather than two consecutive tax years, the current notice
requirement aimed at tax filers in a two-tax year FTR status would no
longer apply. Therefore, we are proposing to revise the notice
[[Page 12962]]
requirement at Sec. 155.305(f)(4)(i) and remove the notice requirement
at Sec. 155.305(f)(4)(ii). We invite comment on this proposal.
To ensure tax filers and enrollees receive advanced notice of their
FTR status and the risk for being determined ineligible for APTC after
removing this notice requirement, we are proposing to reinstate the
notice procedures that existed before we established the current FTR
process for Exchanges on the Federal platform. As background, each
year, these procedures would provide a series of notices \60\ to
identified tax filers and enrollees beginning with two notices before
the OEP for those tax filers or enrollees who the IRS has identified to
HHS (and subsequently the Exchange) as not having filed and reconciled
APTC received during a prior year. The indirect notice would be
included in the Marketplace Open Enrollment Notice and would be sent to
the enrollee according to the communication preference set by the
household contact and would also be available in their online account
and to the Exchange call center. This notice educates the enrollee on
the requirements to file their Federal income taxes and reconcile their
APTC. The direct notice, which would not be available online or to the
Exchange call center, would be sent via U.S. mail directly to the tax
filer in order to protect FTI. The direct notice would serve to
unambiguously explain that the tax filer has been identified as having
failed to meet the requirement to file and reconcile and must come into
compliance to avoid termination of APTC. IRS data would then be checked
again in December and enrollees who have not attested to filing and
reconciling their APTC would lose their APTC for the next coverage
year. Tax filers may have filed and reconciled, but due to IRS
processing times, their application may still be flagged with an FTR
status during the OEP. To address this issue, enrollees could attest to
having filed and reconciled for a preceding tax year on their Exchange
application. Then to confirm the enrollee's attestation, Exchanges on
the Federal platform would perform another recheck of the IRS data in
the new coverage year. For enrollees who are still flagged with an FTR
status, we would send both an indirect FTR Recheck notice to the
household contact and a direct FTR Recheck notice to the tax filer
warning them a final time that they would lose eligibility for APTC,
unless they complete the requirement to file and reconcile. Finally, in
the spring, after a final recheck of the IRS data, Exchanges on the
Federal platform would terminate APTC for households the IRS indicates
have still not filed and reconciled. This process is summarized by
Table 1.
---------------------------------------------------------------------------
\60\ Notices can be found online here: https://www.cms.gov/marketplace/in-person-assisters/applications-forms-notices/notices.
[GRAPHIC] [TIFF OMITTED] TP19MR25.000
If enrollees have attested to filing and reconciling, enrollees
would be discontinued from APTC only after the IRS checks and rechecks
their FTR status four times. We believe this gives ample notice to
enrollees who may have been confused about the requirement to file and
reconcile and provides the IRS enough time to process tax returns for
enrollees who complied. We believe this procedure ensures that
enrollees who are eligible for coverage continue to receive coverage.
Under this proposed requirement at Sec. 155.305(f)(4)(i)(B), State
Exchanges would be responsible for administering their own notice
procedure with flexibility to send either direct notices containing
FTI, or indirect notices which do not contain any protected FTI, or
both.
We seek further comment on whether State Exchanges should be
required to align with Exchanges on the Federal platform on this
consumer noticing and recheck process.
b. 60-Day Extension To Resolve Income Inconsistency (Sec. 155.315)
We propose to remove Sec. 155.315(f)(7) which requires Exchanges
to provide an automatic 60-day extension in addition to the 90 days
currently provided by Sec. 155.315(f)(2)(ii) to allow applicants
sufficient time to provide documentation to verify household income.
According to section 1411(e)(4)(A) of the ACA, part of the process
to verify the accuracy of information provided on applications requires
Exchanges to provide applicants an opportunity to correct an
inconsistency with HHS or other trusted data sources when the
inconsistency or inability to verify the information is not resolved by
the Exchange. This requires Exchanges to give applicants notice of the
inability to resolve the inconsistency and verify the information.
Exchanges must also provide the applicant an opportunity to either
present satisfactory documentary evidence or resolve the inconsistency
with HHS or other trusted data sources during the 90-day period
beginning on the date on which the notice is sent to the applicant.
Section 1411(e)(4)(A) of the ACA also states HHS may extend the 90-day
period for enrollments occurring during 2014.
When we explained the legal basis for a 60-day extension in the
2024 Payment Notice (88 FR 25819), we stated the proposal aligns with
current
[[Page 12963]]
Sec. 155.315(f)(3), which provides extensions to applicants beyond the
existing 90 days if the applicant demonstrates that a good faith effort
has been made to obtain the required documentation during the period.
We noted that it is also consistent with the flexibility under section
1411(c)(4)(B) of the ACA to modify methods for verification of the
information where we determined such modifications would reduce the
administrative costs and burdens on the applicant. However, as
discussed previously, section 1411(c)(4)(B) of the ACA specifically
limits modifications on how information is exchanged and verified
between HHS and trusted data sources and does not extend to other
aspects of the verification process. Therefore, section 1411(c)(4)(B)
of the ACA does not provide a statutory basis to modify the length of
the 90-day response period.
Section 1411(e)(4)(A) of the ACA also limits modifications to the
90-day response period. This language allows HHS to extend the 90-day
period in 2014. This flexibility was clearly intended to accommodate
any issues that might arise during the first year HHS administered
eligibility determinations for premium and cost-sharing subsidies. By
expressly including this specific allowance to extend the 90-day period
for 2014, the language strongly suggests Congress did not intend to
allow any further extensions to the 90-day period. Therefore, we do not
believe Sec. 155.315(f)(7) conforms with the statute.
Based on this reading of the statute, we question whether the
extension of the 90-day period when an applicant demonstrates a good
faith effort to obtain documentation during the period under Sec.
155.315(f)(3) conforms with the statute. Due to the ad hoc nature of
this good faith effort extension, we believe this is likely an
appropriate use of our authority. In contrast, the automatic 60-day
extension, in effect, categorically suspends the 90-day period and
replaces it with a 150-day period which we believe falls well outside
our authority.
Even if the statute allowed an automatic 60-day extension, our
review of how applicants used the 60-day extension shows that the
benefits we previously anticipated have not materialized. When we
adopted the 60-day extension in the 2024 Payment Notice (88 FR 25819
through 25820), we determined the change would ensure consumers are
treated equitably, ensure continuous coverage, and strengthen the risk
pool. However, upon further review of the prior experience and the
current experience using the 60-day extension, we find the 60-day
extension largely does not deliver the benefits anticipated. Instead,
we find the change weakened program integrity.
We previously determined that 90 days is often an insufficient
amount of time for many applicants to provide income documentation,
since it can require multiple documents from various household members
along with an explanation of seasonal employment or self-employment,
including multiple jobs. The previous review of income DMI data
indicated that when consumers receive additional time, they are more
likely to successfully provide documentation to verify their projected
household income. Between 2018 and 2021, over one-third of consumers
who resolved their DMIs on the Exchange did so in more than 90 days.
While we previously found one-third of consumers who resolve income
DMIs used an extension between 2018 and 2021, our review from 2024
shows that applicants who successfully used the extension represent 55
percent of the total income DMIs. We also found that the percent of all
applicants with an income DMI who used an extension represent 60
percent of total income DMIs. After implementing the 60-day extension,
we did not see that the extension improved these statistics. Of those
who successfully resolved their income DMI in 2024, 58 percent used the
extension which is about the same as before in 2022. This suggests
that, before the automatic 60-day extension, anyone who needed a 60-day
extension was granted one under Sec. 155.315(f)(3), and the automatic
60-day extension only served to keep people who were able to provide
documentation within 60 days (instead of 120 days) covered for a longer
period. Additionally, we estimated this increased APTC expenditures by
$170 million in 2024. Therefore, we determined that the automatic 60-
day extension did not provide a meaningful benefit to consumers and
weakened program integrity.
We welcome comment on this topic and suggestions to alleviate this
concern.
As we discussed in other aspects of this proposed rule, there are
often countervailing impacts on the risk pool and program integrity
from the policy decisions we make. In this case, we stated in the 2024
Payment Notice (88 FR 25820) that consumers in the 25-35 age group were
most likely to lose their APTC eligibility due to an income DMI,
resulting in a loss of a population that, on average, has a lower
health risk, thereby negatively impacting the risk pool. Therefore, we
concluded that adding the automatic 60-day extension would improve the
risk pool by making it easier for younger and healthier populations to
enroll.
However, we must weigh this potential positive impact on the risk
pool against the substantial increase in APTC expenditures that we
identified from ineligible people who stay enrolled and receive APTC
for an additional 60 days. We believe the cost to taxpayers and decline
in program integrity outweigh any possible benefit to the risk pool.
Providing a 60-day extension for households with income DMIs only
serves to increase APTC payments and tax liabilities for ineligible
enrollees during the extension. Therefore, we believe the cost of the
extension outweighs the benefits. We seek comment on this proposal.
c. Income Verification When Data Sources Indicate Income Less Than 100
Percent of the FPL (Sec. 155.320(c)(3)(iii))
We propose to revise Sec. 155.320(c)(3)(iii) to require Exchanges
to generate annual household income inconsistencies in certain
circumstances when a tax filer's attested projected annual household
income is equal to or greater than 100 percent of the FPL and no more
than 400 percent of the FPL while the income amount represented by
income data returned by IRS and the SSA and current income data sources
is less than 100 percent of the FPL. This change would reinstate
provisions HHS finalized in the 2019 Payment Notice (83 FR 16985) but
were later vacated by the United States District Court for the District
of Maryland decided in City of Columbus, et al. v. Cochran, 523 F.
Supp. 3d 731 (D. Md. 2021). Though we believe we had a clear legal
basis for finalizing the provisions in the 2019 Payment Notice, we also
believe circumstances have substantially changed since the court
vacated the prior rulemaking, which provide justification to reinstate
the provisions. While we previously acknowledged in the 2019 Payment
Notice that we did not have firm data on the number of applicants who
might be inflating their income to gain APTC eligibility, we now have
clear evidence from enrollment data that shows potentially millions of
applicants are inflating their incomes or having applications submitted
on their behalf with inflated incomes.\61\
[[Page 12964]]
Additionally, while concerns were raised in City of Columbus, et al. v.
Cochran about consumers who may project a higher income than they
receive due to the nature of low-wage work making it difficult to
predict their annual household income, we believe enough consumers--and
the agents, brokers, and web-brokers helping them apply--are
intentionally inflating their incomes that justifies the creation of
this income DMI type, as data shows below.
---------------------------------------------------------------------------
\61\ Hopkins, B.; Banthin, J.; and Minicozzi, A. (2024, Dec.
19). How Did Take-Up of Marketplace Plans Vary with Price, Income,
and Gender? American Journal of Health Economics, 1(11). https://www.journals.uchicago.edu/doi/10.1086/727785.
---------------------------------------------------------------------------
Section 155.320(c)(3)(iii) sets forth the verification process when
household income attestations on applications increase from the prior
tax year or are higher than trusted data sources indicate. Generally,
if income data from our electronic data sources indicate a tax filer's
attested projected annual household income is more than the household
income amount represented by income data returned by the IRS and the
SSA and current income data sources, Sec. 155.320(c)(3)(iii) requires
the Exchange to accept the attestation without further verification.
Currently, Exchanges are generally not permitted to create
inconsistencies for consumers when the consumers' attested household
income is greater than the amount represented by income data returned
by IRS and the SSA and other trusted data sources.
However, in the 2019 Payment Notice (83 FR 16985), we concluded
that where electronic data sources reflect household income under 100
percent of the FPL and a consumer attests to household income between
100 percent of the FPL and 400 percent of the FPL and where the
attested household income exceeds the income reflected in trusted data
sources by more than a reasonable threshold, it would be reasonable to
request additional documentation to protect against overpayment of APTC
because the consumer's attested household income could make the
consumer eligible for APTC when income data from electronic data
sources suggest otherwise. Still today, the risk of APTC overpayments
under these circumstances is especially keen because tax filers may be
eligible for PTC with household income below 100 percent of the FPL if
APTC was paid based on the tax filer having estimated household income
of at least 100 percent of the FPL.\62\ Barring other changes in
circumstance, these tax filers will not have to repay any APTC. That
taxpayers are not required to repay APTC in these situations magnifies
the need for Exchanges to take additional reasonable steps to verify
the household incomes of persons for whom Federal trusted data services
report household income of less than 100 percent of the FPL.
---------------------------------------------------------------------------
\62\ See 26 CFR 1.36B-2(b)(6)(i). This rule does not apply if
the taxpayer, with intentional or reckless disregard for the facts,
provided incorrect information to the Exchange for the year of
coverage. See 26 CFR 1.36B-2(b)(6)(ii).
---------------------------------------------------------------------------
In the 2019 Payment Notice (83 FR 16985), we concluded it would be
reasonable to request additional documentation to protect against
overpayment of APTC despite not having firm data on the number of
applicants that might be inflating their income. We viewed this policy
as a critical program integrity measure to address the findings from a
U.S. Government Accountability Office (GAO) study on improper payments
that determined our control activities related to the accuracy of APTC
calculations were not properly designed.\63\ Specifically, this study
found that ``CMS does not check for potentially overstated income
amounts, despite the risk that individuals may do so in order to
qualify for advance PTC.'' \64\
---------------------------------------------------------------------------
\63\ U.S. Government Accountability Office (2017, July).
Improper Payments: Improvements Needed in CMS and IRS Controls over
Health Insurance Premium Tax Credit. P. 36. https://www.gao.gov/assets/d17467.pdf.
\64\ Ibid.
---------------------------------------------------------------------------
Based on this finding, the GAO recommended that HHS direct the CMS
Administrator to take the following action: ``Design and implement
procedures for verifying with IRS (1) household incomes, when attested
income amounts significantly exceed income amounts reported by IRS or
other third-party sources, and (2) family sizes.'' To support this
recommendation, the GAO cited its own testing of 93 applications which
found 11 applications for individuals residing in States that did not
expand Medicaid where IRS data provided to CMS during application
review indicated incomes less than 100 percent of the FPL.\65\ After
citing these GAO findings and recommendations, we concluded in the 2019
Payment Notice (83 FR 16986) that, particularly to the extent funds
paid for APTC cannot be recouped through the tax reconciliation
process, it is important to ensure these funds are not paid out
inappropriately in the first instance.
---------------------------------------------------------------------------
\65\ Ibid. at 37.
---------------------------------------------------------------------------
Though we cited evidence from the GAO study in the 2019 Payment
Notice (83 FR 16986), the United States District Court for the District
of Maryland in City of Columbus, et al. v. Cochran stated that HHS
``failed to point to any actual or anecdotal evidence indicating fraud
in the record.'' \66\ The court went on to conclude that ``HHS's
decision to prioritize a hypothetical risk of fraud over the
substantiated risk that its decision result in immense administrative
burdens at best, and a loss of coverage for eligible individuals at
worst, defies logic.'' We believe the court overlooked the GAO
recommendation in the rulemaking record which provided a clear legal
basis for finalizing the rule in the 2019 Payment Notice.
---------------------------------------------------------------------------
\66\ 523 F. Supp. 3d 731, 762 (D. Md. 2021).
---------------------------------------------------------------------------
After the court vacated our income verification requirements, we
reviewed data from the time period before the original income
verification requirement was implemented from a recent research study,
and believe that there is data to support that applicants inflated
their income. A recent study analyzing CMS enrollment data for the 39
States that used HealthCare.gov between 2015 and 2017 found that many
people with household incomes too low to qualify for APTC in States
that did not expand Medicaid have a strong incentive to attest to
income just above the eligibility threshold to obtain APTC.\67\ While
the data in the study predates the 2019 Payment Notice (83 FR 16986),
the study was published in 2024, and identifies vulnerabilities that
still exist today following the court's vacatur of the income
verification requirement. The study's authors found far higher numbers
of enrollees who reported household income just above the income
threshold in non-Medicaid expansion States versus Medicaid expansion
States. We believe this data is a strong indicator that increased
enrollment volume since 2021 has exacerbated the vulnerabilities the
study identified as existing between 2015 and 2017.
---------------------------------------------------------------------------
\67\ Hopkins, B.; Banthin, J.; and Minicozzi, A. (2024, Dec.
19). How Did Take-Up of Marketplace Plans Vary with Price, Income,
and Gender? American Journal of Health Economics, 1 (11). https://www.journals.uchicago.edu/doi/10.1086/727785.
---------------------------------------------------------------------------
In addition, the study identified that enrollees attested to very
precise household incomes that suggested they were aware of the income
thresholds to gain eligibility for APTC.\68\ This finding is consistent
with applicants who did not provide their best household income
estimate but instead provided an estimate to maximize the premium and
CSR subsidies they receive or were assisted in their applications by
entities who were aware of these thresholds and who could profit from
their enrollment. This leads us to believe that while some
[[Page 12965]]
consumers may have difficulty estimating their annual household income
due to the uncertainty present in low wage work, many consumers are
intentionally inflating their incomes. The study's authors then
compared actual enrollment on HealthCare.gov for enrollees who reported
household income just above the eligibility threshold from $11,760 to
$12,500 to estimated potential enrollment from Census surveys and found
actual enrollment was 136 percent higher than the total population of
potential enrollments.\69\
---------------------------------------------------------------------------
\68\ Ibid.
\69\ Ibid.
---------------------------------------------------------------------------
A more recent analysis of 2024 open enrollment data shows plan
selections on HealthCare.gov among people ages 19-64 who reported
household income between 100 percent and 150 percent of the FPL in non-
Medicaid expansion States were 70 percent higher than potential
enrollments estimated from Census data at that same income level.\70\
Based on this mismatch between enrollment and the eligible population,
this study estimates four to five million people improperly enrolled in
QHP coverage with APTC in 2024 at a cost of $15 to $20 billion.\71\
---------------------------------------------------------------------------
\70\ Blase, B.; Gonshorowski, D. (2024, June). The Great
Obamacare Enrollment Fraud. Paragon Health Institute. https://paragoninstitute.org/private-health/the-great-obamacare-enrollment-fraud.
\71\ Ibid.
---------------------------------------------------------------------------
As illustrated in Table 2, Federal tax return data also show a
substantial increase in the percent of returns with APTC that report
excess APTC at lower household income levels between 2019 and 2022.
Returns with household incomes above $15,000--just higher than the
income eligibility threshold for PTC--report largely consistent levels
of excess APTC returns as a percent of all APTC returns between 2019
and 2022. However, this percentage jumped for all reported incomes
below $15,000. This suggests a substantial increase in people who earn
less than the eligibility threshold for PTC who incorrectly report
higher incomes and then qualify for APTC.
[GRAPHIC] [TIFF OMITTED] TP19MR25.001
These data provide substantial evidence that applicants with
household incomes below the APTC income eligibility threshold are
strategically inflating their household incomes--or, based on evidence
described elsewhere in this rule, are getting assistance from agents,
brokers, or web-brokers who have a financial incentive to misstate
enrollee income to secure commissions from enrollments of consumers
who, absent financial assistance, would not enroll--when they apply for
APTC.\72\ Moreover, we believe the scale of actual enrollments in
excess of potential enrollments eligible for financial assistance in
certain States suggests evidence of improper enrollments, some by
agents and brokers.\73\ In these cases, enrollees may not even know
they are enrolled, and agents, brokers, and web-brokers strategically
enroll them at income levels just above the income eligibility
threshold so they qualify for fully subsidized plans. Enrollees never
need to pay a premium which would otherwise alert the enrollee to the
improper enrollment.\74\ Therefore, to strengthen program integrity and
reduce
[[Page 12966]]
the burden of APTC expenditures on taxpayers, we propose to require all
Exchanges to generate annual household income inconsistencies in
certain circumstances when applicants report a household income that is
greater than the income amount represented by income data returned by
the IRS and the SSA and current income data sources.
---------------------------------------------------------------------------
\72\ Blase, B; Kalisz, G. (2024, August). Unpacking The Great
Obamacare Enrollment Fraud. Paragon Health Institute. https://paragoninstitute.org/private-health/unpacking-the-great-obamacare-enrollment-fraud/.
\73\ See ibid.
\74\ For example, from January 2024 through August 2024, CMS
received 183,553 complaints that consumers were enrolled in coverage
through an Exchange on the Federal platform without their consent
(also known as an ``unauthorized enrollment''). Additionally, from
June 2024 through October 2024, CMS suspended 850 agents and
brokers' Marketplace Agreements for reasonable suspicion of
fraudulent or abusive conduct related to unauthorized enrollments or
unauthorized plan switches. CMS (2024, October). CMS Update on
Action 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.
---------------------------------------------------------------------------
Section 155.320(c)(3)(iii)(A) generally requires the Exchange to
accept a consumer's attestation to projected annual household income
when the attestation reflects a higher household income than what is
indicated in data from the IRS and SSA. This approach makes sense from
a program integrity perspective when both the attestation and data from
trusted data sources are over 100 percent of the FPL, since an
attestation that is higher than data from trusted data sources in that
situation would reflect a lower APTC than would be provided if the
information from trusted data were used instead. However, where
electronic data sources reflect income under 100 percent of the FPL, a
consumer attests to household income between 100 percent of the FPL and
400 percent of the FPL, and the attested household income exceeds the
income reflected in trusted data sources by more than some reasonable
threshold, we believe it would be reasonable, prudent, and even
necessary in light of the program integrity weaknesses just outlined to
request additional documentation, since the consumer's attested
household income could make the consumer eligible for APTC that would
not be available using income data from electronic data sources. In
cases where a consumer receives this DMI, but they do legitimately have
annual household income above 100 percent of the FPL, we believe that
the existing DMI process and corresponding time frame provides them
plenty of time and opportunities to confirm their annual household
income with minimal burden.
As discussed previously, sections 1411 through 1414 of the ACA
establish the framework for verifying and determining income
eligibility for APTC and CSR subsidies. Requiring further documentation
for verification when there is an income inconsistency between the
household income provided on the application and the income indicated
by the IRS and other data sources fits squarely within this statutory
framework. The statute compels HHS to, at a minimum, submit the income
information provided by applicants to the IRS for verification without
exception. Without additional documentation or other supporting
evidence, HHS would generally be compelled by statute to deny
eligibility for APTC and CSR subsidies based on the inconsistency with
IRS data. Importantly, this statutory framework does not include a
specific exception for income inconsistencies when IRS data indicate
income is below the APTC eligibility threshold and income information
provided on applications estimates a higher income above the APTC
eligibility threshold, and the household income attestation is lower
than income information from data sources by more than the acceptable
reasonable threshold. When the IRS cannot verify an applicant's income,
the statute requires HHS to take additional steps to verify income,
thus providing HHS clear discretion to use additional trusted data
sources. To support these verifications, section 1413 of the ACA
further requires HHS to establish data matching arrangements to verify
eligibility through reliable, third-party data sources. However, HHS
has discretion to not require the use of the data matching program if
its administrative and other costs outweigh its expected gains in
accuracy, efficiency, and program participation, such as when an
applicant reports higher household income than reported by trusted data
sources and both household income amounts are above 100 percent of the
FPL, illustrating no financial incentive for inflating household
income. In addition to the program integrity weaknesses discussed
previously, we believe this statutory framework compels HHS to request
additional documentation when applicants attest to household income
above 100 percent of the FPL, but trusted data sources show income
below 100 percent of the FPL. We request comments on whether adding
these additional data matching issue requirements will outweigh its
expected gains as described above.
Accordingly, we propose to modify Sec. 155.320(c)(3)(iii)(D) and
(c)(3)(vi)(C)(2) to specify that the Exchange would follow the
procedures in Sec. 155.315(f)(1) through (4) to create an annual
income data matching DMI for consumers if: (1) The consumer attested to
projected annual household income between 100 percent and 400 percent
of the FPL; (2) the Exchange has data from IRS and SSA that indicates
household income is below 100 percent of the FPL; (3) the Exchange has
not assessed or determined the consumer to have income within the
Medicaid or CHIP eligibility standard; and (4) the consumer's attested
projected annual household income exceeds the income reflected in the
data available from electronic data sources by a reasonable threshold
established by the Exchange and approved by HHS. We propose that a
reasonable threshold must not be less than 10 percent and can also
include a threshold dollar amount.\75\ We welcome comments on this
proposed reasonable threshold, especially comments that furnish data
that could help us ensure that it is properly calibrated to maximize
program integrity while minimizing unnecessary administrative burden.
Additionally, this requirement would not apply if an applicant is a
non-citizen who is lawfully present and ineligible for Medicaid by
reason of immigration status. In accordance with the existing process
in Sec. 155.315(f)(1) through (4), if the applicant fails to provide
documentation verifying their household income attestation, the
Exchange would redetermine the applicant's eligibility for APTC and
CSRs based on available IRS data, which under this proposal would
typically result in discontinuing APTC and CSR as required in Sec.
155.320(c)(3)(vi)(G). The adjustment and notification process would
work like other inconsistency adjustments laid out in Sec.
155.320(c)(3)(vi)(F). We are also proposing to modify Sec.
155.320(c)(3)(iii)(A) to add a cross-reference to paragraph Sec.
155.320(c)(3)(iii)(D).
---------------------------------------------------------------------------
\75\ This 10 percent threshold aligns with Annual Income
Threshold Adjustment FAQ guidance which was published on 10/22/21
here: https://www.cms.gov/cciio/resources/regulations-and-guidance/income-threshold-faq.pdf.
---------------------------------------------------------------------------
We estimate that answering verification questions and submitting
supporting documents would take consumers approximately 1 hour. We
believe such a burden is minimal and is significantly outweighed by the
benefit of APTCs for those individuals found to be eligible for them as
well as the benefits of reducing improper enrollment. Additionally,
even if consumers end up needing longer than the 1-hour estimation due
to difficulty in obtaining documentation that may be present, we
believe that the 90-day period given to resolve this DMI gives them
enough time, and if a consumer ends up needing more time, they are able
to request an extension in certain circumstances.
Finally, the statute compels HHS to verify household incomes with
the IRS data and directs HHS and Exchanges to take further steps to
verify income if the applicant's estimated household income is
inconsistent with the IRS data. While HHS does have some discretion to
use other third-party data sources for verification, we believe the
critical program integrity benefits to Federal
[[Page 12967]]
taxpayers from limiting opportunities for people to inflate their
income to qualify for APTC substantially exceeds the potential burden
on some applicants. We also believe this proposal would also help limit
tax filers' potential liability at tax reconciliation to repay excess
APTC.
We seek comment on this proposal.
d. Income Verification When Tax Data Is Unavailable (Sec.
155.320(c)(5))
We propose to remove Sec. 155.320(c)(5), which requires Exchanges
to accept an applicant's or enrollee's self-attestation of projected
annual household income when the Exchange requests tax return data from
the IRS to verify attested projected annual household income, but the
IRS confirms there is no such tax return data available. This
requirement currently operates as an exception to the requirement to
verify household income with other trusted data sources under Sec.
155.320(c)(1)(ii) and the alternative verification process under Sec.
155.320(c)(3)(vi). These provisions generally require that, in the
event the IRS and other trusted data sources cannot resolve a DMI,
applicants must submit documentary evidence or otherwise resolve the
DMI with the inconsistent information source. Therefore, by removing
this exception, this proposal would require Exchanges to verify
household income with other trusted data sources when tax return data
is unavailable and follow the full alternative verification process.
As we detailed previously in this preamble, there is a growing body
of evidence that shows a substantial number of improper enrollments on
the Exchanges. Some agents, brokers, and web-brokers and applicants are
taking advantage of weaknesses in the Exchanges' eligibility framework
to enroll consumers in coverage with APTC subsidies without their
knowledge and when consumers are not eligible. We believe the recent
change in the 2024 Payment Notice (88 FR 25818 through 25820) to allow
applicants to self-attest to income when IRS data is unavailable played
a key role in weakening the Exchange eligibility system.
We made the change to accept attestation when HHS successfully
contacted the IRS but IRS data was unavailable because we believed that
the standard alternative verification process was overly punitive to
consumers and burdensome to Exchanges when IRS data is unavailable. To
explain the punishing aspects of the prior alternative verification
process, we itemized the legitimate reasons for a tax return to be
unavailable aside from a consumer's failure to file a tax return,
including tax household composition changes (such as birth, marriage,
and divorce), name changes, or other demographic updates or mismatches.
We then concluded the consequence of receiving an income DMI and being
unable to provide sufficient documentation to verify projected
household income outweighs program integrity risks as, under Sec.
155.320(c)(3)(vi)(G), consumers are determined completely ineligible
for APTC and CSRs.
After revisiting this issue, we no longer believe the prior
alternative verification process was overly punitive. Our use of the
term punitive to characterize the process improperly suggests the
process involved a punishment when the process solely involved
establishing eligibility to receive a government benefit and did not
involve a judgment to mete out consequences for bad behavior. Instead,
the process focused on ensuring that applicants are eligible for APTC
to both protect against making improper payments and to protect the
applicant from accumulating unnecessary tax liabilities. As we reassess
the current verification process, we note that the existence of
legitimate reasons for tax return data to be unavailable does not
diminish the need to have an accurate estimate of income. As discussed
previously, an accurate household income estimate is a critical program
integrity element of the ACA's framework for verifying and determining
eligibility for APTC.
In making our reassessment, we investigated the difficulty of
providing documentation to verify household income and believe eligible
applicants can meet the requirement with relative ease. People with
legitimate reasons for not having tax data available like marriage, the
birth of child, name changes, and other demographic updates would have
the opportunity to be verified through other trusted data sources.
However, if other trusted data sources cannot verify the household
income and applicants must provide documentation, we previously
estimated (88 FR 25893) that consumers would take 1 hour to submit
documentation on average. We welcome comments on the accuracy of this
estimate of administrative burden. We believe eligible applicants would
likely have documentation to verify their household income as readily
available to them as the standard tax filer without an income DMI.
For these people, prior to the implementation of the 2024 Payment
Notice, we found that half of all resolved income DMIs generated when
IRS income data was unavailable were resolved within 90 days.
Therefore, to the extent applicants failed to resolve their income DMI,
we believe this largely reflects how the prior process successfully
stopped ineligible people from enrolling.
Regarding the burden on Exchanges, we previously estimated the
administrative task under the prior policy accounts for approximately
300,000 hours of labor annually on the Federal platform. We concluded
this was proportionally mirrored by State Exchanges, which may also
access approved State specific data sources to verify income data. We
expect APTC subsidized enrollment to be lower in the coming years.
Considering the amount of improper enrollments under the current
policy, we believe this administrative burden of requiring people with
an income DMI due to unavailable IRS data to provide documentation to
verify income is more than offset by the program integrity benefits.
In addition to the policy concerns mentioned above, we now believe
this policy violates statutory requirements for verifying income under
section 1411(d) of the ACA and addressing income inconsistencies under
section 1411(e)(4)(A) of the ACA. We previously stated that the
requirements for Exchanges under Sec. 155.320(c)(5) complied with
section 1411(c)(4)(B) of the ACA and section 1412(b)(2) of the ACA. We
address our reinterpretation of these statutes below.
This policy violates the express requirements of section
1411(e)(4)(A) of the ACA, which establishes a two-step process to
address income inconsistencies. First, Exchanges must make a reasonable
effort to identify and address the causes of income inconsistencies,
including through typographical or other clerical errors, by contacting
the applicant to confirm the accuracy of the information, and by taking
such additional actions as the Secretary of HHS (the Secretary),
through regulation or other guidance, may identify. Second, if step one
does not resolve the inconsistency, the Exchange must notify the
applicant of such fact and provide the applicant an opportunity to
present documentary evidence or resolve the inconsistency with the
source of the DMI during the 90-day period after the notice is sent.
We implemented the requirements of section 1411(e)(4)(A) of the ACA
at Sec. 155.315(f)(1) through (4). When tax return data and other
trusted data sources are unavailable, Sec. 155.320(c)(3)(vi) directs
Exchanges to
[[Page 12968]]
follow this process. There is no statutory exception to this process.
Nonetheless, Sec. 155.320(c)(5) requires Exchanges to accept
attestation without further verification when tax return data is
unavailable, which restricts Exchanges from following the statutorily
required process established under Sec. 155.315(f)(1) through (4). We
believe restricting Exchanges from using the process under Sec.
155.315(f)(1) through (4) violates section 1411(e)(4)(A) of the ACA.
We also believe our previous statutory justifications for the
current policy were mistaken. Previously, we stated the policy was
consistent with two statutory provisions: the flexibility under section
1411(c)(4)(B) of the ACA to modify methods for verification of the
information where we determine such modifications will reduce the
administrative costs and burdens on the applicant and section
1412(b)(2) of the ACA, which allows the Exchange to utilize alternate
verification procedures. After reviewing the statute, we no longer
believe the current policy is consistent with either of these statutory
provisions.
Regarding section 1411(c)(4)(B) of the ACA, this provision gives
HHS the authority to modify the methods used for the exchange and
verification of information. While we previously suggested this
provision gave HHS broad flexibility to modify any aspect of the
verification process under section 1411 of the ACA, we believe Congress
would have made a clearer statement if the intent were to grant such
broad flexibility. Rather, section 1411(c)(4)(B) provides flexibility
to ``modify the methods used under the program established by this
section for the Exchange and verification of information,'' (emphasis
added) which, based on the language and the surrounding context,
suggests the flexibility relates only to the methods used to exchange
and verify information between HHS and trusted data sources.
Looking closer at the statutory language, a footnote included in
the statute as published by the U.S. Government Publishing Office
explains how the word Exchange in the text ``[p]robably should not be
capitalized.'' \76\ We believe this is the correct reading, which then
strongly suggests Congress intended to limit modifications to how
information is exchanged and verified between HHS and trusted data
sources. The use of the term ``modify'' supports this more limited
reading. As the U.S. Supreme Court has explained, the word modify means
``to change moderately or in minor fashion'' \77\ and ``connotes
moderate change.'' \78\ Reading section 1411(c)(4)(B) of the ACA to
allow HHS to suspend the verification process entirely under certain
circumstances, as Sec. 155.320(c)(5) permits, would allow a more
dramatic change to the verification process than the term ``modify''
permits. This more modest reading is supported by how section 1411 of
the ACA appends this flexibility at the end of paragraph (c) which
addresses the verification of information contained in records of
specific Federal officials, including HHS under paragraph (d). Placing
the flexibility here strongly suggests this flexibility is directly
tied to the exchange and verification of information from the IRS, DHS,
SSA, and other sources HHS relies on under paragraph (d). This reading
is further strengthened by the statute's addition of a specific example
of the flexibility envisioned which focuses on modifying how the IRS
can provide income information under section 1411(c)(3) of the ACA.\79\
Because the flexibility under section 1411(c)(4)(B) of the ACA is
limited to modifications to how information is exchanged and verified
between HHS and trusted data sources, this flexibility does not extend
to other aspects of the verification process. In addition, it does not
provide flexibility to create exceptions to the requirement to verify
the accuracy of information.
---------------------------------------------------------------------------
\76\ Note 2 at 42 U.S.C. 18081(c)(4)(B). https://www.govinfo.gov/content/pkg/USCODE-2022-title42/html/USCODE-2022-title42-chap157-subchapIV-partB-sec18081.htm#18081_2_target.
\77\ Biden v. Nebraska, 600 U.S. 477, 494 (2023).
\78\ MCI Telecommunications v. AT&T, 512 U.S. 218 (1994)
(holding the Federal Communications Commission's decision to make
tariff filing optional for all nondominant long-distance carriers is
not a valid exercise of its authority to ``modify any requirement''
of 47 U.S.C. 203).
\79\ Presumption of Nonexclusive `Include' '':587 ``[T]he term
`including' is not one of all-embracing definition, but connotes
simply an illustrative application of the general principle.''
---------------------------------------------------------------------------
Similarly, the flexibility to utilize alternative verification
procedures under section 1412(b)(2) of the ACA when tax return
information is not available does not change or allow exceptions to the
basic requirement to verify the accuracy of the income information. We
previously stated the language in section 1412(b)(2) of the ACA
included permissive language that allowed the Exchange to utilize
alternative verification processes when an applicant was not required
to file a tax return. However, section 1412(b)(2) of ACA is not
permissive and does not directly reference the alternative verification
process. Rather, this provision mandates HHS to provide procedures for
making advance determinations of income eligibility for premium and
cost-sharing subsidies on the basis of information other than income
information from the most recent tax year for which the IRS has
information in cases where the application demonstrates substantial
changes in income, including cases where an applicant was not required
to file a tax return. This advanced determination program is
coordinated with the income eligibility determination and verification
program in section 1411 of the ACA. To comply with the application
requirements to determine eligibility for premium and cost sharing
subsidies under section 1411(b)(3)(C) of the ACA, applicants must
report any additional information required for advance determination
under section 1412(b)(2) of the ACA. As such, section 1412(b)(2) of the
ACA adds to the requirements of section 1411 of the ACA and does not
provide any additional flexibility to HHS.
Importantly, section 1412(b)(2) of the ACA puts HHS in charge of
establishing the procedures for determining APTC when there is a change
in circumstances or no tax return information. This makes sense
considering IRS data is limited to the taxes previously filed which
clearly does not help when there is no tax filing. Verifying any change
in circumstance beyond the deviation from previous tax filings also
requires access to additional income information sources. Therefore,
the ACA makes HHS responsible for verifying information not verified by
other Federal agencies and establishing the data matching program under
section 1413 of the ACA. The eligibility verification and determination
framework established under sections 1411 through 1414 of the ACA
clearly envisions HHS building out a robust process for verifying and
determining eligibility for APTC. Under this framework, we do not
believe section 1412(b)(2) of the ACA can be read to permit blanket
exceptions across this framework.
Because sections 1411(c)(4)(B) and 1412(b)(2) of the ACA do not
provide HHS with flexibility to change the overall framework for
verifying and determining eligibility for APTC, we do not believe the
statute authorizes HHS to provide exceptions to the statutory process
for resolving income inconsistencies with trusted data sources.
Therefore, to strengthen the program integrity of the eligibility
determination process for APTC, we propose to remove Sec.
155.320(c)(5).
We seek comment on this proposal.
[[Page 12969]]
4. Annual Eligibility Redetermination (Sec. 155.335)
We propose an amendment to the annual eligibility redetermination
regulation by adding Sec. 155.335(a)(3) and (n) to prevent enrollees
from being automatically re-enrolled in coverage with APTC that fully
covers their premium without taking an action to confirm their
eligibility information. Specifically, we propose under our authority
in section 1411(f)(1)(B) of the ACA, which directs the Secretary to
establish procedures by which the Secretary redetermines eligibility on
a periodic basis, to require at Sec. 155.335(a)(3) and (n) that when
an enrollee does not submit an application for an updated eligibility
determination on or before the last day to select a plan for January 1
coverage, in accordance with the effective dates specified in Sec.
155.410(f) and 155.420(b), as applicable, and the enrollee's portion of
the premium for the entire policy would be zero dollars after
application of APTC through the Exchange's annual redetermination
process (hereafter ``fully subsidized enrollees'' for purposes of this
section), all Exchanges must decrease the amount of the APTC applied to
the policy such that the remaining monthly premium owed by the enrollee
for the entire policy equals $5 for the first month and for every
following month that the enrollee does not confirm or update the
eligibility determination. Consistent with Sec. Sec. 155.310(c) and
(f), enrollees automatically re-enrolled with a $5 monthly premium
after APTC under this policy would be able to submit an application at
any point to confirm eligibility for APTC that covers the entire
monthly premium, and re-confirm their plan to thereby reinstate the
full amount of APTC for which the enrollee is eligible on a prospective
basis.
We propose at new Sec. 155.335(n)(1) that the FFEs and the SBE-FPs
must implement this change starting with annual redeterminations for
benefit year 2026. We propose at new Sec. 155.335(n)(2) that the State
Exchanges must implement it starting with annual redeterminations for
benefit year 2027.
We recognize that $5 may not provide a meaningful enough incentive
for individuals to re-confirm their income and plan and, as such, seek
comment on other options available to us to ensure program integrity in
re-enrollments. As discussed in the preamble, we are increasingly
concerned about the level of improper enrollments in QHPs and believe
that automatic re-enrollment of consumers into zero premium plans poses
a significant risk to continuing high levels of improper payments of
the APTC. We seek comment on the appropriate dollar amount individuals
could be required to pay under the proposed policy such that they would
be meaningfully incentivized to re-confirm their income and desired
plan after being automatically re-enrolled. We also seek comment on
whether any APTC payments should be made on behalf of individuals with
fully subsidized plans who have been automatically re-enrolled without
confirming their plan and income consistent with the limitation on
annual redeterminations when an Exchange does not have authorization to
obtain tax data as part of the redetermination process. Additionally,
we seek comment on if the program integrity concerns with automatic re-
enrollments outweigh any potential benefit of allowing exchanges to
automatically re-enroll consumers without the consumer taking any
action to affirmatively consent to continuing coverage for the
following plan year.
Previously in this preamble, we discussed the dramatic increase in
the number of improper enrollments in QHPs with APTC through the FFEs
and SBE-FPs. Among the most concerning problems are situations where an
agent, broker, or web-broker improperly enrolls a consumer in a fully
subsidized QHP without their knowledge. Because these enrollees do not
receive a monthly premium bill requiring action on their part, they may
not be aware they are enrolled. This lack of awareness allows agents,
brokers, and web-brokers to continue earning monthly commission
payments from issuers for these enrollments. Improper enrollments
presents the most concerning situation, but the availability of fully
subsidized QHPs that require no action on the part of enrollees also
leads to situations where enrollees inadvertently and improperly remain
enrolled after obtaining other coverage. As a result of either of these
scenarios, the enrollee is at risk of accumulating surprise tax
liabilities and the financial stress of resolving these liabilities.
Ultimately, the financial cost of consumers unknowingly or
inadvertently remaining enrolled in fully subsidized QHPs would fall
almost entirely on the Federal Government as Federal law limits
repayments of the premium tax credit for certain consumers,\80\ and the
Federal Government only recoups APTC payments from issuers for
enrollments that are cancelled after a consumer or other third party,
such as an issuer, discovers an improper enrollment and reports it to
the Exchanges.
---------------------------------------------------------------------------
\80\ Section 1401 of the ACA; Sec. 36B(f)(2)(B) of the Code.
---------------------------------------------------------------------------
The expansion of tax credits under the American Rescue Plan of 2021
(ARP) \81\ and Inflation Reduction Act of 2022 (IRA),\82\ significantly
increased the number of enrollees who initially enrolled in a fully
subsidized QHP. As a result, this significantly increased the number of
enrollees who remained enrolled in fully subsidized QHPs through the
automatic re-enrollment process. For the Exchanges on the Federal
platform, 2.68 million enrollees were automatically re-enrolled for
benefit year 2025 with APTC that fully covered their premium, compared
to 270,000 for benefit year 2019 (84 FR 229). The enhanced tax credits
are set to expire at the end of benefit year 2025, which means there
will be fewer enrollees who initially enroll in a fully subsidized QHP
and fewer enrollees who remain enrolled in fully subsidized QHPs
through the automatic re-enrollment process. However, fully subsidized
QHPs became available before enhanced tax credits were passed into law
and will continue to be available to some consumers after the
expiration of the enhanced tax credits. As discussed earlier in
preamble, in 2018, issuers began increasing silver plan premiums to
compensate for the cost of offering CSRs. In 2020, 900,000 consumers
were enrolled in fully subsidized bronze plans (89 FR 26321).
Additionally, in 2020, 77 percent of the consumer population with
household incomes at or below 150 percent of the FPL had access to a
fully subsidized bronze plan with 16 percent of the same population
having access to a fully subsidized silver plan in addition to the
fully subsidized bronze plan (89 FR 26321).
---------------------------------------------------------------------------
\81\ Public Law 117-2.
\82\ Public Law 117-169.
---------------------------------------------------------------------------
We believe the expanded availability of fully subsidized QHPs due
to silver loading creates a need for more active engagement during the
annual redetermination and re-enrollment process by enrollees who do
not pay monthly premiums in order to ensure the coverage is authorized
and desired by the enrollee. To address this issue, we believe it is
important to require enrollees who are redetermined to be eligible for
APTC that fully subsidizes their premium to take an active step to
confirm their eligibility information before continuing with fully
subsidized coverage. We believe that the changes proposed here are
critical to reduce the financial impact to consumers and to the Federal
Government of the
[[Page 12970]]
substantial increase in people who are improperly enrolled without
their knowledge by an agent, broker, or web-broker on the FFEs and SBE-
FPs and are then automatically re-enrolled, also without their consent;
or who intentionally enrolled through any Exchange but then did not
update their eligibility prior to re-enrollment and so have an
incorrect amount of APTC paid on their behalf. We believe the current
annual redetermination process puts fully subsidized enrollees at risk
of accumulating surprise tax liabilities and increases the cost of PTC
to the Federal Government because the law limits how much of the excess
APTC they are required to repay.\83\
---------------------------------------------------------------------------
\83\ Section 1401 of the ACA; Sec. 36B(f)(2)(B) of the Code.
---------------------------------------------------------------------------
In the 2021 Payment Notice proposed rule (85 FR 7088), we sought
comment on a proposal to modify the automatic re-enrollment process
such that any enrollee who would be automatically re-enrolled with APTC
that would cover the enrollee's entire premium would instead be
automatically re-enrolled without APTC. This would ensure that any
enrollee in this situation would need to return to the Exchange and
obtain an updated eligibility determination prior to having any APTC
paid on the consumer's behalf for the upcoming benefit year. We also
requested comments on a variation on this approach, in which APTC for
this population would be reduced to a level that would result in an
enrollee premium that is greater than zero dollars but not eliminated
entirely. Both approaches elicit, to varying degrees, a consumer's
active involvement in re-enrollment because any enrollment in a plan
with an enrollee premium that is greater than zero would require the
enrollee to take an action by making a premium payment to maintain
coverage or else face eventual termination of coverage for non-payment.
All but one commenter opposed modifying the automatic re-enrollment
process in these ways. Many believed that adopting the proposed changes
could disadvantage the lowest income group of Exchange enrollees by
taking away financial assistance for which they are eligible without
evidence that they are at greater risk of incurring overpayments of
APTC. Some commenters were specifically opposed to any requirement that
State Exchanges modify their automatic re-enrollment processes because
it would require costly IT system reconfigurations, consumer noticing
changes, and additional investments to support increased Exchange
customer service capacity that would be necessary to address consumer
confusion caused by the change.
Most commenters supported the current automatic re-enrollment
process, citing benefits such as the stabilization of the risk pool due
to the retention of lower risk enrollees who are least likely to
actively re-enroll, the increased efficiencies and reduced
administrative costs for issuers, the reduction of the numbers of
uninsured, lower premiums, and promotion of continuity of coverage.
Many commenters also believed that existing processes, including annual
eligibility redetermination, periodic data matching, and APTC
reconciliation, sufficiently safeguard against potential eligibility
errors and increased Federal spending. As a result, we did not finalize
any changes to the automatic re-enrollment process in the 2021 Payment
Notice (85 FR 29164), citing our belief that existing safeguards
against APTC overpayments were sufficient.
Given the heightened urgency of program integrity concerns with
APTC and automatic re-enrollments, as previously outlined, we seek
comment on these proposals once again. We also consider whether other
methods--such as outreach--could sufficiently prompt fully subsidized
enrollees to update or confirm their eligibility information and
actively re-enroll in coverage. Current outreach methods for the FFEs
and SBE-FPs, such as notices, emails, texts, and advertising, before
and during the open enrollment period are extensive and already
successfully prompt most enrollees to actively confirm or update their
information and actively select a plan. Most enrollees on the FFEs and
the SBE-FPs actively re-enroll by the applicable deadlines for January
1 coverage. Based on our experience operating the Exchanges on the
Federal platform, we do not believe additional or different
notifications would prompt action from fully subsidized enrollees who
choose not to submit an application for an updated eligibility
determination and actively re-enroll. However, we seek comment on this
idea.
Instead, we believe that it is necessary to prompt an affirmative
action by enrollees who would otherwise be fully subsidized through the
automatic re-enrollment process, whether such action be through a
premium payment or re-confirming their plan choice altogether. We are
again considering whether to automatically re-enroll these enrollees
without any APTC, which would require them to return to the Exchange
and obtain an updated eligibility determination prior to having any
APTC paid on their behalf for the upcoming year, or else be charged for
the full-price premium during automatic re-enrollment. As described in
this proposed rule, we propose to permit issuers to attribute past-due
premium amounts they are owed to the initial premium the enrollee pays
to effectuate new coverage. Removing all APTC during automatic re-
enrollment for fully subsidized enrollees is likely to create a
significant debt to the issuer, since the enrollee is unlikely to be
able to pay the full gross premium, which would harm the enrollee
financially and could impact their ability to effectuate new QHP
coverage. We therefore believe that this approach would create undue
financial hardship for these enrollees and act as a significant barrier
to accessing health coverage. We also believe this approach could
result in the loss of lower-risk enrollees, who are least likely to
actively re-enroll due to an inability to pay, which could destabilize
the market risk pool and increase premiums and the uninsured rate. We
seek comment on this idea and whether it would more sufficiently
mitigate the program integrity concerns we have described.
We then considered what enrollee portion of premium amount greater
than zero but less than the full price of the QHP would avoid consumer
harm but still achieve active participation by the enrollee. We are
proposing an amount of $5, which we believe would sufficiently balance
the need to require an enrollee to take action, without substantially
increasing the risk of undue financial hardship, such as termination
for non-payment of premiums, that a greater amount could cause.
Additionally, we believe that the $5 would still achieve the
desired effect of requiring an enrollee's active participation even if
their issuer has adopted a net percentage-based premium payment
threshold, under which enrollees must always pay at least 95 percent of
the enrollee-responsible portion of the premium. If issuers adopt such
a threshold, enrollees who have a $5 premium payment due to this
amendment to the annual redetermination process would be required to
pay at least $4.75 or else be placed in a grace period.
We believe our proposal, which decreases the amount of the APTC
applied to the policy such that the remaining premium owed by the
enrollee for the entire policy equals $5, strikes an appropriate
balance between encouraging active confirmation of eligibility
information and enrollment decision making and ensuring market
stability.
[[Page 12971]]
We seek comment on this proposal. Specifically, we seek comment on
whether an amount other than $5 would better address the program
integrity concerns we have described. In addition, we seek comment on
whether there are different policies or program measures that would
help to reduce eligibility errors and potential Federal Government
misspending, without adding additional burden for consumers.
A comparison of QHP enrollments to estimates of consumer-reported
QHP enrollments from national health insurance coverage surveys
strongly suggests there has been a large increase in the number of
people unknowingly enrolled in subsidized QHPs.\84\ Researchers
regularly track and study the ``Medicaid undercount'' which represents
the difference in actual Medicaid enrollments to what people report on
Census surveys.\85\ This research finds that U.S. Census Bureau surveys
undercount actual Medicaid enrollments, mostly due to people
misreporting that they do not have Medicaid, and found an increase in
the Medicaid undercount between 2019 and 2022. At least part of such
undercounts may be attributable to consumer misunderstanding when
responding to surveys--for example a Medicaid enrollee may erroneously
report not being enrolled in Medicaid due to the enrollee's familiarity
with the program under a different, State-specific name (for example,
Medicaid is called DenaliCare in the State of Alaska). We undertook a
similar analysis to assess whether there is a similar undercount for
subsidized coverage through the Exchanges. The comparison of actual
subsidized QHP enrollments to QHP enrollments reported on Census
surveys confirms this undercount exists and has grown substantially
since 2021. As Table 3 shows, the Current Population Survey (CPS)
undercount for enrollment in a QHP with APTC grew from 25 percent in
2021 to 50 percent in 2024. The undercount is even larger for consumers
with incomes less than 250 percent of FPL who likely qualify for CSRs.
The undercount for these consumers grew from 33 percent in 2021 to 57
percent in 2024.
---------------------------------------------------------------------------
\85\ See Peter Nelson, What the Medicaid Undercount reveals
about the Medicaid `Unwinding' (Center of the American Experiment
May 2024); Robert Hest, Elizabeth Lukanen, and Lynn Blewett,
Medicaid Undercount Doubles, Likely Tied to Enrollee Misreporting of
Coverage (SHADAC December 2022), available at https://www.shadac.org/publications/medicaid-undercount-doubles-20-21; State
Health Access Data Assistance Center, Phase VI Research Results:
Estimating the Medicaid Undercount in the Medical Expenditure Panel
Survey Household Component (MEPS-HC) (January 2010), available at
https://www.shadac.org/publications/snacc-phasevi-report; State
Health Access Data Assistance Center, Phase IV Research Results:
Estimating the Medicaid Undercount in the National Health Interview
Survey (NHIS) and Comparing False-Negative Medicaid Reporting in
NHIS to the Current Population Survey (CPS) (May 2009), available at
https://www.shadac.org/publications/snaccphase-iv-report; and State
Health Access Data Assistance Center, Phase II Research Results:
Examining Discrepancies between the National Medicaid Statistical
Information System (MSIS) and the Current Population Survey (CPS)
Annual Social and Economic Supplement (ASEC) (March 2008), available
at https://www.shadac.org/publications/snacc-phase-ii-report.
[GRAPHIC] [TIFF OMITTED] TP19MR25.002
Table 4 draws a similar comparison between the reported level of
Exchange coverage on the National Health Interview Survey (NHIS) \86\
and total effectuated enrollment through the Exchanges. Prior to the
enhanced PTC becoming law in 2021, the NHIS coverage estimates roughly
matched the actual effectuated QHP enrollment counts. But in 2022, the
NHIS undercounted effectuated QHP enrollment through Exchanges by 14.1
percent. This undercount increased to 19.3 percent in 2023 and edged up
to 20.2 percent in the first quarter of 2024.
---------------------------------------------------------------------------
\86\ OMB Control Number 0920-0214.
---------------------------------------------------------------------------
[[Page 12972]]
[GRAPHIC] [TIFF OMITTED] TP19MR25.003
The research on the Medicaid undercount referenced previously links
people with Medicaid coverage to their Census survey responses, which
shows most people who misreport not being enrolled in Medicaid report
having another form of coverage. Among this group, the largest portion
reports having employer coverage, followed by Medicare coverage, and
then Exchange coverage.\87\ Some of these people may have confused
their Medicaid coverage for Medicare or Exchange coverage. But these
findings suggest many people who misreport not having Medicaid
unknowingly retained multiple forms of coverage after assuming they
lost Medicaid coverage when they enrolled in new private coverage or
aged into Medicare.
---------------------------------------------------------------------------
\87\ Blewett, Lynn A. et al. State Health Data Assistance
Center, (2022, December) Medicaid Undercount Doubles, Likely Tied to
Enrollee Misreporting of Coverage. Available at: https://www.shadac.org/publications/medicaid-undercount-doubles-20-21.
---------------------------------------------------------------------------
Similar to the experience with the Medicaid undercount, the
increase in the undercount of people with APTC-subsidized coverage is
likely due to the increase in people with multiple forms of coverage.
CBO estimates that in 2023, approximately 28.7 million people \88\ had
multiple types of coverage, up from 27.7 million people in 2022 \89\
and 18 million in 2021.\90\ Considering that research identifies
response errors from survey participants as the main reason for the
Medicaid undercount, it is reasonable to assume the same is true for
the Exchange undercount. Both Medicaid managed care plans and
subsidized QHPs can have very low to no premium, can go unused by
healthier people, can be confused for other types of coverage, and are
available through the Exchanges. In addition, subsidized QHP enrollees
tend to share similar characteristics with Medicaid enrollees who
misreport at higher rates. This includes Medicaid enrollees who are
adults,\91\ employed,\92\ at higher income levels overlapping with APTC
income eligibility levels,\93\ and qualify for automatic re-
enrollment.\94\ Therefore, the dramatic increase in the Exchange
undercount after 2021 in both the CPS and NHIS strongly suggests a
substantial increase in the number of individuals with subsidized
Exchange coverage who misreport not having such coverage on surveys.
People may misreport coverage for various reasons, but the most likely
reason for the increase in this level of misreporting in 2022 is the
statutory change in 2021 expanding access to fully subsidized QHPs.\95\
Research on the increase in the Medicaid undercount links the increase
to the Medicaid continuous coverage condition under the COVID-19 PHE
that kept people unknowingly covered after they obtained other
coverage.\96\ Similar to the Medicaid continuous coverage condition,
under the current Exchange annual eligibility redetermination process,
someone with a fully subsidized QHP can remain continuously enrolled in
a QHP from year to year.\97\ The 2022 OEP was the first year where
people with fully
[[Page 12973]]
subsidized QHPs provided under the ARP entered the annual
redetermination process. Other policy changes and factors may have
contributed to the dramatic change in the Exchange undercount in 2022.
However, based on the similar experience with the Medicaid undercount,
we believe the ARP's expansion of fully subsidized QHP coverage in
combination with the existing annual eligibility redetermination
process--a process that does not require active participation from the
qualified enrollee--further allowed individuals to remain enrolled
without their knowledge.
---------------------------------------------------------------------------
\88\ Congressional Budget Office, (2004, June) Health Insurance
and Its Federal Subsidies: CBO and JCT's June 2024 Baseline
Projections. Available at: https://www.cbo.gov/system/files/2024-06/51298-2024-06-healthinsurance.pdf.
\89\ Congressional Budget Office, (2003, May) Health Insurance
and Its Federal Subsidies: CBO and JCT's May 2023 Baseline
Projections. Available at: https://www.cbo.gov/system/files/2023-09/51298-2023-09-healthinsurance.pdf.
\90\ Congressional Budget Office, (2002, May) Federal Subsidies
for Health Insurance Coverage for People Under Age 65: CBO and JCT's
May 2022 Baseline Projections. Available at: https://www.cbo.gov/system/files/2022-06/51298-2022-06-healthinsurance.pdf.
\91\ Davern M, Klerman JA, Baugh DK, Call KT, Greenberg GD. An
examination of the Medicaid undercount in the current population
survey: preliminary results from record linking. Health Serv Res.
2009 Jun;44(3):965-87. doi: 10.1111/j.1475-6773.2008.00941.x. Epub
2009 Jan 28. PMID: 19187185; PMCID: PMC2699917. Available at:
https://pmc.ncbi.nlm.nih.gov/articles/PMC2699917/ /PMC2699917/.
\92\ Boudreaux MH, Call KT, Turner J, Fried B, O'Hara B.
Measurement Error in Public Health Insurance Reporting in the
American Community Survey: Evidence from Record Linkage. Health Serv
Res. 2015 Dec;50(6):1973-95. doi: 10.1111/1475-6773.12308. Epub 2015
Apr 12. PMID: 25865628; PMCID: PMC4693849. Available at: https://pmc.ncbi.nlm.nih.gov/articles/PMC4693849/.
\93\ Davern M, Klerman JA, Baugh DK, Call KT, Greenberg GD. An
examination of the Medicaid undercount in the current population
survey: preliminary results from record linking. Health Serv Res.
2009 Jun;44(3):965-87. doi: 10.1111/j.1475-6773.2008.00941.x. Epub
2009 Jan 28. PMID: 19187185; PMCID: PMC2699917. Available at:
https://pmc.ncbi.nlm.nih.gov/articles/PMC2699917/ /PMC2699917/; and Boudreaux
MH, Call KT, Turner J, Fried B, O'Hara B. Measurement Error in
Public Health Insurance Reporting in the American Community Survey:
Evidence from Record Linkage. Health Serv Res. 2015 Dec;50(6):1973-
95. doi: 10.1111/1475-6773.12308. Epub 2015 Apr 12. PMID: 25865628;
PMCID: PMC4693849. Available at: https://pmc.ncbi.nlm.nih.gov/articles/PMC4693849/.
\94\ Kincheloe, Jennifer, et al. Health Affairs (2006),
GrantWatch: Report Can We Trust Population Surveys To Count Medicaid
Enrollees And The Uninsured? Volume 25, Number 4. Available at:
https://www.healthaffairs.org/doi/pdf/10.1377/hlthaff.25.4.1163.
\95\ Pub. L. 117-2.
\96\ Robert Hest, Elizabeth Lukanen, and Lynn Blewett, Medicaid
Undercount Doubles, Likely Tied to Enrollee Misreporting of Coverage
(SHADAC December 2022), available at https://www.shadac.org/publications/medicaid-undercount-doubles-20-21.
\97\ Note that existing procedures under Sec. 155.335 prohibit
the indefinite continuation of APTC through auto re-enrollment in
various circumstances, including for tax filers who do not comply
with the failure to file and reconcile rules or whose authorization
for the Exchange to obtain tax data from the IRS has expired (which
is limited to 5 years).
---------------------------------------------------------------------------
As the data discussed previously shows, individuals with Exchange
coverage appear increasingly less likely to accurately report their
coverage in survey data. Recent APTC changes that increased the
availability of fully subsidized coverage likely enabled more people to
stay enrolled in Exchange coverage without their knowledge, which is a
clear program integrity issue. To address this issue, we believe it is
important to require qualified enrollees who are redetermined to be
eligible for APTC that fully subsidizes their premium to take an active
step to confirm their eligibility information before continuing with
fully subsidized coverage. We seek comment on this proposal.
5. Annual Eligibility Redetermination (Sec. 155.335(j))
We propose to amend the automatic re-enrollment hierarchy by
removing Sec. 155.335(j)(4), which currently allows Exchanges to move
a CSR-eligible enrollee from a bronze QHP and re-enroll them into a
silver QHP for an upcoming plan year, if a silver QHP is available in
the same product with the same provider network and with a lower or
equivalent net premium after the application of APTC as the bronze plan
into which the enrollee would otherwise have been re-enrolled. In
effect, this current policy allows Exchanges to terminate an enrollee's
coverage through a bronze QHP without the enrollee's active
participation. These proposals would leave in place the requirements
for Exchanges to take into account network similarity to the enrollee's
current year plan when re-enrolling enrollees whose current year plans
are no longer available, but would remove the re-enrollment hierarchy
standards at Sec. 155.335(j)(4) that require Exchanges to take into
account differences between the consumer's current plan and new plan in
situations where the renewal process places a consumer in a different
plan (88 FR 25822). Accordingly, these amendments would better support
consumer choice and restrict Exchanges from enrolling consumers in a
new plan based on factors beyond the retention of the most similar plan
available. We also propose amendments to Sec. 155.335(j)(1) and (2) to
conform with the removal of Sec. 155.335(j)(4).
In the Exchange Establishment Rule (77 FR 18374), we implemented
standards for annual eligibility redetermination and renewal of
coverage under Sec. 155.335(j) which required Exchanges to, if an
enrollee remains eligible for coverage in a QHP upon annual
redetermination, automatically re-enroll the enrollee in the QHP
selected the previous year unless the enrollee terminates coverage,
including termination of coverage in connection with enrollment in a
different QHP. This rulemaking implemented procedures to redetermine
the eligibility of individuals on a periodic basis in appropriate
circumstances as required by section 1411(f)(1)(B) of the ACA.
We later adopted amendments to Sec. 155.335(j) in the Annual
Eligibility Redeterminations Rule (79 FR 52998 through 53001) which
added a re-enrollment hierarchy to address situations where an issuer
cannot re-enroll an enrollee in the plan they chose the previous year
because the plan is no longer available. This hierarchy provided a
structured process for renewal and re-enrollment into a new plan when
the current plan was no longer available. We designed the process to
limit the differences between the consumer's current plan and new plan.
In response to this proposed rule, commenters expressed concern over
consumers losing access to APTC and CSRs if they are re-enrolled into a
product outside the Exchange. In response, we affirmed that while the
guaranteed renewability requirements under section 2703(c) of the PHS
Act and Sec. 147.106(c) would require the issuer, at the option of the
individual, to re-enroll a current enrollee in their same product
outside the Exchange if the issuer stopped offering that product
through the Exchange but continued to offer it outside of the Exchange,
issuers would still be subject to the re-enrollment hierarchy with
regards to an enrollee's on-Exchange coverage and therefore must,
subject to applicable State law, re-enroll in accordance with the
hierarchy even if it results in re-enrollment in a plan under a
different product offered by the same issuer. To harmonize these
requirements, we stated that an enrollment completed pursuant to the
re-enrollment hierarchy in Sec. 155.335(j) would be considered a
renewal of the enrollee's coverage, provided the enrollee also is given
the option to renew coverage within the consumer's current product
outside the Exchange. We further noted our intent to evaluate this
policy and potentially provide future guidance on how an issuer
continuing to offer an enrollee's product outside the Exchange can
comply with the guaranteed renewability provisions.
In the 2017 Payment Notice (81 FR 12270), we amended the hierarchy
to give Exchanges flexibility to re-enroll consumers into plans of
other Exchange issuers if the consumer is enrolled in a plan from an
issuer that does not have another plan available for re-enrollment
through the Exchange. In the 2024 Payment Notice (88 FR 25821 through
25822), we further amended the hierarchy and established the ``bronze
to silver crosswalk policy'' to allow Exchanges to direct re-enrollment
for enrollees who are eligible for CSRs from a bronze QHP to a silver
QHP if a silver QHP is available within the same product, with the same
provider network, and with a lower or equivalent premium after the
application of APTC as the bronze level QHP into which the Exchange
would otherwise re-enroll the enrollee (in other words, if the silver
QHP has a lower or equivalent ``net premium''). In effect, this change
allowed Exchanges to terminate an enrollee's coverage in a bronze QHP
and re-enroll them in a silver QHP. We made this change after
concluding the bronze to silver crosswalk would help to ensure that
additional enrollees are able to benefit from more generous coverage at
a lower cost to the enrollee that provides the same benefits and
provider network. Some commenters on this rule (88 FR 25823) expressed
concerns that re-enrolling a consumer into an alternative QHP when the
consumer's current plan remains available on the Exchange would violate
the guaranteed renewability requirements with which issuers must
comply. In response, we explained in the 2024 Payment Notice (88 FR
25823 through 25824) how the change is consistent with the explanation
of the guaranteed renewability requirements in the Annual Eligibility
Redeterminations Rule discussed previously.
We have revisited whether the consumer benefits that motivated the
current requirements at Sec. 155.335(j)(4) continue to outweigh the
problems we previously acknowledged some consumers would face if the
Exchange terminated a consumer's prior choice in coverage. In 2024
Payment Notice proposed rule (87 FR 78206, 78259), we proposed to amend
Sec. 155.335(j) to
[[Page 12974]]
provide greater financial security to bronze plan enrollees who do not
actively re-enroll and may not be aware that a more generous silver
plan at the same or lesser cost may be available with dramatically more
costs covered by the plan. At the time, we highlighted that some of
these consumers may have been initially enrolled before the more
generous APTC became available with the passage of the ARP as extended
by the IRA,\98\ and may not have been initially income-based CSR-
eligible when they first enrolled, or may have been helped by an agent,
broker, web-broker, or Navigators who did not adequately explain the
benefits of silver enrollment for CSR-eligible enrollees. Today, this
lack of awareness of more generous subsidies due to their newness is no
longer an issue. We believe consumers and the agents, brokers, web-
brokers, and Navigators who help them are largely aware of the more
generous subsidies.\99\ Therefore, we believe the consumer awareness
problem the bronze to silver crosswalk policy aimed to address is
substantially less today. Moreover, since the enhanced subsidies under
the IRA expire at the end of this year, this policy's goal of
increasing consumer awareness of these enhanced subsidies is no longer
relevant.
---------------------------------------------------------------------------
\98\ With the passage of the IRA, these enhanced subsidies were
extended for an additional 3 years (through 2025).
\99\ For example, see the January 2025 Marketplace 2025 Open
Enrollment Period Report: National Snapshot (https://www.cms.gov/newsroom/fact-sheets/marketplace-2025-open-enrollment-period-report-national-snapshot-2) and informational materials such as those
available on HealthCare.gov: https://www.healthcare.gov/more-savings/.
---------------------------------------------------------------------------
With fewer people benefiting from the policy today, we believe
there is now a greater harm to enrollees when the Exchange terminates
an enrollee's enrollment in a bronze QHP which they had previously
chosen. After we proposed the crosswalk policy currently at Sec.
155.335(j)(4), as noted in the 2024 Payment Notice (88 FR 25823),
several commenters expressed concerns about the bronze to silver
crosswalk proposal. Some commenters expressed concern that the proposal
would cause consumer confusion, and they cautioned against interpreting
consumer inaction as indifference. In particular, these commenters
noted that consumers sometimes research their options and make a
decision to allow themselves to be auto re-enrolled, without taking
action on HealthCare.gov. These commenters also noted that consumers
select plans for many reasons other than the monthly premium amount,
including provider network, benefit structure, and health savings
account (HSA) eligibility, and raised the concern that auto re-
enrolling some consumers from a bronze plan to a silver plan would
disregard these consumer priorities. Some commenters also expressed
concern that consumers who are auto re-enrolled into a silver plan
could incur unexpected tax liability, including consumers aware of
their auto re-enrollment, if their APTC amount was determined based on
inaccurate household income for the future year, which is a particular
risk for hourly workers.
We explained in the 2024 Payment Notice (88 FR 25824) that
consumers auto re-enrolled from a bronze to a silver QHP because of
this new policy would not experience network changes or benefit changes
because of the policy, since Sec. 155.335(j)(5) only permits Exchanges
to apply the policy for consumers who have access to a silver plan in
the same product and with a Provider Network ID that matches that of
their future year bronze plan. However, considering there is now
substantially more consumer awareness around the availability of more
generous subsidies, we believe the concerns commenters expressed over
creating consumer confusion, respecting consumer choice, and the
potential for enrollees to incur unexpected tax liability outweigh the
benefits of moving from bronze to silver plans enrollees who may not be
aware that the silver plan provides lower cost sharing at the same or
lesser premium.\100\ Moreover, we acknowledge how the current rule
terminates coverage that the consumer may have actively chosen, or, if
they were auto re-enrolled into the plan, may reasonably expect to be
auto re-enrolled into it again, which represents a major intervention
and interference with the consumer experience. We believe this level of
interference requires a stronger policy basis than we previously
acknowledged. We agree with commenters on the 2024 Payment Notice (88
FR 25823) who raised the concern that consumers should be able to rely
on an assumption that the Exchange will re-enroll them in the same plan
as the enrollee's current QHP if it is still available through the
Exchange, and who advocated for HHS to improve decision-making tools on
HealthCare.gov instead of changing consumers' default plan selections.
Providing consumers with the information they need to make informed
choices, and then honoring consumer choices, is a matter of trust. We
believe the current requirements unnecessarily risks undermining this
trust, and we will continue to explore and work to improve upon
strategies that help consumers to make decisions that are best for
themselves and their families based on their financial situations and
health care needs.
---------------------------------------------------------------------------
\100\ As discussed in the 2024 Payment Notice, enrollees who
were auto re-enrolled from a bronze to a silver QHP under Sec.
155.335(j)(4) could incur unexpected tax liability if their APTC
amount was determined based on inaccurate household income for the
future year, either because an enrollee did not update their
household income in advance of the new plan year or because they
estimated their income incorrectly. An enrollee in bronze coverage
who does not need to use the entire amount of the APTC for which
they qualify towards their premiums during the year has some
protection against tax liability in the event of an unexpected
increase in household income, and they may have a larger tax
liability upon tax filing if the APTC they apply to a monthly silver
plan premium is greater than the amount they would have had to apply
to a monthly bronze plan premium, and this APTC exceeds the PTC
amount for which they ultimately qualify when they file their taxes.
---------------------------------------------------------------------------
Because we believe Sec. 155.335(j)(4) unnecessarily risks harming
the consumer experience without sufficient benefit, we propose to
remove Sec. 155.335(j)(4).
We seek comment on this proposal.
6. Premium Payment Threshold (Sec. 155.400)
We propose to modify Sec. 155.400(g) to remove paragraphs (2) and
(3), which establish an option for issuers to implement a fixed dollar
and gross percentage-based premium payment threshold (if the issuer has
not also adopted a net percentage-based premium threshold), and modify
155.400(g) to reflect the removal of paragraphs (2) and (3). Under
these provisions, issuers on the Exchanges can implement (1) a
percentage-based premium payment threshold policy; and (2) a fixed-
dollar premium payment threshold policy. However, to preserve the
integrity of the Exchanges, we believe it is important to ensure that
enrollees do not remain enrolled in coverage for extended periods of
time without paying at least some of the premium owed, and therefore
propose to limit issuers to the net percentage-based premium payment
threshold established in the 2017 Payment Notice (81 FR 12271), and
modified in the 2026 Payment Notice (90 FR 4475 through 4478) to allow
issuers to set at 95 percent of the net premium or higher.
In the 2026 Payment Notice (90 FR 4475 through 4478), we
implemented an option for issuers to establish a fixed-dollar premium
payment threshold policy, under which issuers can consider enrollees to
have paid all amounts due during the following circumstance: the
enrollees pay an amount that is less than the total premium owed and
the unpaid remainder of which is equal to or less
[[Page 12975]]
than a fixed-dollar amount of $10 or less, adjusted for inflation, as
prescribed by the issuer. In addition, we implemented a gross
percentage-based premium payment threshold policy, under which issuers
can consider enrollees to have paid all amounts due when the enrollee
pays an amount that is equal to or greater than 98 percent of the gross
premium, including payments of APTC, as prescribed by the issuer. If an
enrollee satisfies the fixed-dollar or gross percentage-based premium
payment threshold policy, the issuer may avoid triggering a grace
period for non-payment of premium or avoid terminating the enrollment
for non-payment of premium. However, these premium payment thresholds
may not be applied to the binder payment.
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).
In the 2026 Payment Notice (90 FR 4478), we stated that it was
important to give issuers additional flexibility to maintain coverage
for enrollees who owe only de minimis amounts of premium. In addition,
we also stated that even though the fixed dollar threshold amount may
represent a large percentage of an enrollee's portion of the premium
less APTC, triggering a grace period or terminating enrollment through
the Exchange was too severe a consequence for non-payment of such
limited dollar amounts.
Since the publication of the 2026 Payment Notice (90 FR 4478), the
open enrollment period for 2025 individual market coverage has ended
and we have compiled data regarding enrollments effectuated during the
open enrollment period. Those data reflect a continuing increase in
improper enrollments on the Exchanges. For example, in December 2024
HHS received 7,134 consumer complaints of improper enrollments, an
increase from the 5,032 complaints received in December 2023.Although
these numbers represent a decrease from the high of 39,985 complaints
received in February 2024,\101\ the fact that the number of complaints
for 2024 remains substantially higher than for 2023 demonstrates that
previous program integrity measures \102\ have not resulted in a
decrease in improper enrollments such that additional measures are not
necessary. This has caused us to reconsider the need for additional
program integrity measures, as reflected throughout this proposed rule,
and in particular whether the new premium threshold provisions
appropriately safeguard program integrity and whether the value of the
new premium threshold provisions outweighs the potential harms to
program integrity. Given the increased need to protect program
integrity reflected in the enrollment data, and the limited probability
that any issuer has implemented one of the new types of available
premium threshold policies, we believe the burden of eliminating these
policies on issuers and consumers is outweighed by the potential
increase in program integrity.
---------------------------------------------------------------------------
\101\ From internal HHS data, using the most recent numbers
available. HHS has previously published data on consumer complaints
of unauthorized enrollments, such as in the update published in
October 2024. CMS (2024, October). CMS Update on Action 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.
\102\ Measures such as those announced in our update from
October 2024 on preventing unauthorized agent and broker activity.
CMS (2024, October). CMS Update on Action 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.
---------------------------------------------------------------------------
Under both the fixed dollar and gross percentage-based thresholds,
it is possible for enrollees in certain circumstances to avoid paying
premium for multiple months before entering delinquency or losing
coverage. For example, an enrollee whose premium after the application
of APTC was $1 (and where the issuer had adopted a $10 premium
threshold policy) could, after paying binder, not pay any premium for
the next 9 months before they would enter delinquency, and due to the
APTC grace period would not have coverage terminated for an additional
3 months (though the termination would be effective the last day of the
first month of grace). In instances where an issuer implemented a gross
premium threshold of 98 percent, an enrollee's gross premium might be
$600, making their threshold $12; if the consumer owed $2 after
application of APTC, they could, after paying binder, not pay any
premium for the next 6 months before they would enter delinquency, and
due to the APTC grace period would not have coverage terminated for an
additional 3 months (though the termination would be effective the last
day of the first month of grace). This policy therefore increases the
risk that improper enrollments remain undetected, since the enrollee is
less likely to receive invoices, and a delinquency \103\ or termination
notice alerting them to the improper enrollment in the case that the
individual or entity submitting the improper enrollment used false
contact information. In addition, an enrollee who stops paying premium
in the belief that this would lead to termination of coverage may
instead find that the coverage has continued for several months due to
the issuer having implemented a fixed dollar or gross percentage-based
premium threshold, with the additional risk that the enrollee has
accumulated a large amount of debt if the issuer has adopted a gross
premium percentage-based threshold and the enrollee's pre-APTC premium
is much higher than the de minimis $10 fixed dollar threshold. In
contrast, this is not the case with the long-established net
percentage-based threshold, under which enrollees must always pay at
least some premium to avoid delinquency or loss of coverage (in cases
where the premium is not covered 100 percent by APTC).
---------------------------------------------------------------------------
\103\ Per Sec. 156.270(f), if an enrollee is delinquent on
premium payment, the QHP issuer must provide the enrollee with
notice of such payment delinquency. Issuers offering QHPs in
Exchanges on the Federal platform must provide such notices promptly
and without undue delay, within 10 business days of the date the
issuer should have discovered the delinquency.
---------------------------------------------------------------------------
We also received and addressed one comment in the 2026 Payment
Notice (90 FR 4479 through 4480) \104\ that stated that the fixed-
dollar threshold would incentivize improper 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 suggested that agents, brokers, or web-brokers would be
incentivized to enroll consumers in an Exchange plan with a generous
premium policy threshold (such as the gross premium percentage-based
threshold), in which the consumer would be less likely to lose coverage
due to not paying premiums, to secure a commission each time the policy
is renewed. At the time we disagreed with this statement, as we did not
believe that the fixed-dollar and gross-premium percentage-based
thresholds alone would cause an increase in the incidences of improper
enrollments by agents, brokers, and
[[Page 12976]]
web-brokers, but we do recognize that there is an incentive for agents,
brokers, or web-brokers to enroll consumers in plans with a generous
premium policy since they would allow collection of monthly commission
for a longer period of time. We believed that our efforts in calendar
year 2024 to implement certain system changes \105\ and strengthen
oversight of agents and brokers would substantially reduce incidences
of improper enrollments. However, as noted previously, due to the
continued high number of complaints of improper enrollments, it has
become apparent that additional program integrity measures are
necessary. Given the multiple avenues that some agents and brokers to
date have taken to improperly enroll consumers in QHPs offered on
Exchanges, we are now reconsidering the impact that the fixed-dollar
and gross-premium percentage-based thresholds may have in obscuring
improper enrollments from the victim of the improper enrollment by
delaying the time it would take for the consumer to be placed in the
grace period and informed of their delinquency.
---------------------------------------------------------------------------
\104\ Comment ID CMS-2024-0210, 11/12/2025, available at https://www.regulations.gov/comment/CMS-2024-0311-0210.
\105\ See CMS. (2024, Oct. 14). 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.
---------------------------------------------------------------------------
We also received and addressed several comments in the 2026 Payment
Notice (90 FR 4478) that stated that the fixed-dollar and gross-premium
percentage-based thresholds would prevent disruptions of care caused by
terminating enrollees for owing small amounts of premium.
However, because of the program integrity concerns we have stated,
we remain concerned that these policies allow enrollees to unknowingly
remain in coverage they did not consent to be enrolled in or remain in
coverage that they no longer need or are utilizing, if a third party or
agent, broker, or web broker paid the enrollee's binder payment on
their behalf in order to effectuate enrollment. In the October 10, 2024
Federal Register (89 FR 82366 through 82369), we provided an analysis
of Exchange data for PY 2023, where we found that there were 184,111
total policies terminated for non-payment in which $10 or less was owed
by the enrollee, representing approximately 12.25 percent of the total
number of policies terminated for non-payment that year. As such, we
estimate that, if finalized, this rule would likely result in about
184,111 policy terminations after application of the available grace
period. This would likely be representative of both enrollees who
desired coverage but failed to take the necessary action, and enrollees
who were unaware of their coverage either because they had intended for
it to terminate due to nonpayment, or because they were improperly
enrolled by agents, brokers, or web-brokers.
We have also become aware of instances in which consumers who are
enrolled in Medicaid are, without their knowledge or consent, enrolled
into unwanted QHP coverage with APTC for which they are not eligible.
In 2024, we received 44,151 complaints alleging that Medicaid
beneficiaries were enrolled without their consent into QHP plans, of
which 12,954 were deemed medically urgent.\106\ These cases have caused
disruptions in coverage for consumers, due to Medicaid's refusal to pay
for services \107\ when the consumer is enrolled in a QHP, and has also
caused delays in payments to health care providers. As noted above, we
expect that the removal of these premium threshold options will make it
more difficult for some agents, brokers, and web-brokers to keep
consumers enrolled without their knowledge or consent, and thereby
reduce the potential for these kinds of disruptions in coverage.
---------------------------------------------------------------------------
\106\ See Sec. 156.1010(e).
\107\ As required by section 1902(a)(25) of the Social Security
Act, Medicaid is the payer of last resort.
---------------------------------------------------------------------------
HHS has also previously taken steps to address concerns about
enrollees losing their coverage, such as the requirement at Sec.
156.270(d) that issuers must provide a grace period of 3 consecutive
months for an enrollee who is receiving the benefit of APTC and fails
to timely pay premiums. In addition, Sec. 156.270(f) requires QHP
issuers to provide enrollees with notice of payment delinquency when an
enrollee is delinquent on premium payment, promptly and without undue
delay, within 10 business days of the date the issuer should have
discovered the delinquency. These requirements ensure that enrollees
receive notice and are thus aware well in advance of the risk of losing
their coverage if they do not take action to pay their past due
premiums.
We seek comments on this proposal.
7. Annual Open Enrollment Period (Sec. 155.410)
We propose to amend Sec. 155.410(e), which provides the dates for
the annual individual market Exchange OEP in which qualified
individuals and enrollees may apply for or change coverage in a QHP.
Specifically, we propose to add Sec. 155.410(e)(5) and (f)(4) to
change the OEP for benefit years starting January 1, 2026, and beyond
so that it begins on November 1 and runs through December 15 of the
calendar year preceding the benefit year and to set an effective date
of January 1 for QHP selections received by the Exchange on or before
this December 15 OEP end date. The Exchange OEP is extended by cross-
reference to non-grandfathered individual health insurance coverage,
both inside and outside of an Exchange, under the guaranteed
availability regulations at Sec. 147.104(b)(1)(ii). We also are making
conforming revisions to Sec. 155.410(e)(4) and (f)(3).
In previous rulemaking, we have adjusted the length of the OEP to
account for various circumstances impacting the stability of the risk
pool, Exchange operations, and the consumer experience (see Table 5
below). In setting the OEP, as we explained when we set the initial
enrollment period in the Exchange Establishment Rule (77 FR 18387), we
attempt to balance the risk of adverse selection--a situation where
individuals with higher risk are more likely to select coverage than
healthy individuals--with the need to ensure that consumers have
adequate opportunity to enroll in QHPs through an Exchange. We
established a lengthy initial enrollment period lasting from October 1,
2013, to March 31, 2014, to allow time for individuals and families to
explore their new coverage options and provide outreach and education
to raise awareness. However, recognizing the need to limit adverse
selection, we established a much shorter OEP for the PY 2015 and beyond
running from October 15 to December 7. Due to challenges in the first
year, in the 2015 Payment Notice (79 FR 13796 through 13797, 13838),
the PY 2015 OEP was delayed and extended to run from November 15 to
February 15 to give more time to collect additional rating experience
to help reduce 2015 premium rates. The change also gave issuers another
month to prepare to accept applications and staggered the Exchange OEP
from that of Medicare Advantage. In the 2016 Payment Notice (80 FR
10795 through 10797, 10866), for PY 2016, we set the OEP to run from
November 1 to January 31. While we had proposed a shorter OEP, we
finalized this more modest change primarily to limit the burden of a
shift on Exchanges still experiencing implementation challenges. As
Exchange operations became more stable, in the 2017 Payment Notice (81
FR 12273, 12343), we removed the prior extensions to the OEP and set it
to run from November 1 to December 15 for PY
[[Page 12977]]
2019 and beyond. We gave Exchanges and issuers 2 years to prepare for
this shift by extending the PY 2016 OEP start and end dates to PY 2017.
This reestablished a permanent policy of a December 15 OEP end date for
PY 2019 and beyond to support a full year of coverage and reduce
adverse selection risk for issuers. However, in response to increasing
challenges to the stability of the individual market and after
concluding the market and issuers were ready for the adjustment sooner,
we decided in the Market Stabilization Rule (82 FR 18353, 18381) to
implement this permanent OEP policy a year ahead of schedule for PY
2018. At the time, we acknowledged the shorter period could lead to a
reduction in enrollees, primarily younger and healthier enrollees who
usually enroll late in the enrollment period. However, we concluded the
positive impacts on consumers and market stability outweighed this
potential decline in enrollment.
---------------------------------------------------------------------------
\108\ See CMS (2018). Public Use Files: FAQs, https://www.cms.gov/research-statistics-data-and-systems/statistics-trends-and-reports/marketplace-products/downloads/2018_public_use_file_faqs.pdf.
\109\ See CMS (2019). Public Use Files: FAQs. https://www.cms.gov/research-statistics-data-and-systems/statistics-trends-and-reports/marketplace-products/downloads/2019publicusefilesfaqs.pdf.
\110\ See CMS (2020). Public Use Files: FAQs. https://www.cms.gov/files/document/2020-public-use-files-faqs.pdf.
\111\ See CMS (2021). Public Use Files: FAQs. https://www.cms.gov/files/document/2021-public-use-files-faqs.pdf.
[GRAPHIC] [TIFF OMITTED] TP19MR25.004
Consistent with our original policy establishing a December OEP end
date for PY 2015 that promotes a full year of coverage, we maintained
an OEP set to November 1 to December 15 for PYs 2018, 2019, 2020, and
2021. During this
[[Page 12978]]
time, we observed several benefits from a 45-day OEP that ends on
December 15 for coverage starting January 1 compared to OEPs ending on
February 15 for benefit year 2015 and January 31 for benefit years 2016
and 2017. As discussed in the 2022 Payment Notice proposed rule (86 FR
35167 through 35168), prior enrollment data suggested that the majority
of new consumers to the Exchange selected plans prior to December 15 so
they had coverage beginning January 1. We believe this data shows
consumers became accustomed to the deadline. Also, it reduces consumer
confusion by aligning more closely with the open enrollment dates for
other coverage for many employer-based health plans. We also observed
that consumer casework volumes related to coverage start dates and
inadvertent dual enrollment decreased in the years after the December
15 end date was adopted, suggesting that the consumer experience, as
well as program integrity, was improved by having a singular deadline
of December 15 to enroll in coverage for the upcoming plan year. We
noted how confusion over the deadline could cause someone to wait until
January 15 and miss out on a whole month of coverage. In addition, the
extended OEP requires enrollment assisters to stretch budget resources
over an additional month.
In the 2022 Payment Notice proposed rule (86 FR 35168), we also
identified negative impacts from a 45-day OEP that ends December 15. In
particular, we observed that consumers who receive financial
assistance, who do not actively update their applications during the
OEP, and who are automatically re-enrolled into a plan are subject to
unexpected plan cost increases if they live in areas where the second
lowest-cost silver plan has dropped in price relative to other
available plans. In this situation, consumers would experience a
reduction in their allocation of APTC based on the second lowest-cost
silver plan price but are often unaware of their increased plan
liabilities until they receive a bill from the issuer in early January,
after the OEP has concluded. We noted that extending the OEP end date
to January 15 would allow these consumers the opportunity to change
plans after receiving updated plan cost information from their issuer
and to select a new plan that is more affordable to them. We also noted
concerns from some Navigators, certified application counselors (CACs),
agents, and brokers regarding a lack of time to fully assist all
interested Exchange applicants with comparing their different plan
choices. In light of these negative impacts, we sought comment on
whether an extended OEP would provide a balanced approach to provide
consumers additional time to make informed choices and increase access
to health coverage, while mitigating risks of adverse selection,
consumer confusion, and issuer and Exchange operational burden. While
some commenters expressed substantial concern over these risks, we
concluded the experience from State Exchanges that extend their OEP
suggested an extension in January does result in increased enrollments
and would not introduce adverse selection into the market. Therefore,
we concluded the negative impacts of an OEP ending in December
justified extending the OEP to end on January 15 for PY 2022 and
beyond. This extension to the OEP has now been in place for PYs 2022,
2023, 2024, and 2025. We refer readers to Table 5 for a summary of OEPs
in effect from PY 2014 to PY 2025.
With our experience implementing this extended OEP over the past 4
years, we have had the opportunity to more closely assess whether this
extension achieves the right balance between an adequate opportunity to
enroll in a QHP and the added risk for adverse selection, consumer
confusion, and unnecessary burden on issuers and Exchanges. This
assessment reveals that only a small number of consumers took advantage
of the additional time to switch to a lower-cost plan after receiving a
bill from their issuer in January with higher plan costs. During the
most recent OEP, fewer than 3 percent of enrollees (470,000
individuals) ended their FFE or SBE-FP coverage between December 15,
2024, and January 15, 2025, including those enrollees who switched to
other plans as well as those who did not. We also compared the
enrollment growth for Exchanges on the Federal platform to State
Exchanges under the previous December 15 end date. While most State
Exchanges (12 out of 20) use the same enrollment schedule as Exchanges
on the Federal platform, 7 State Exchanges use enrollment windows past
January 15.\112\ For the best comparison, we focused on enrollment
among people enrolled in APTC subsidized plans without CSRs. This
controlled for the variable of whether States expanded Medicaid or
not.\113\ From 2017 (the year before the end date changed to December
15) to 2021 (the last year of the December 15 end date), we found that
Exchanges on the Federal Platform experienced a larger (47 percent)
growth in enrollment among people who enrolled in coverage with only
APTC compared to 28 percent growth among people enrolled with only APTC
through State Exchanges. This suggests the change to the December 15
OEP end date did not compromise access to coverage for people selecting
plans through the Exchanges on the Federal platform.
---------------------------------------------------------------------------
\112\ See CMS. (2024, Oct. 17). State-based Marketplaces: 2025
Open Enrollment. https://www.cms.gov/files/document/state-exchange-oe-chart-py-2025.pdf.
\113\ Whether or not a State expanded Medicaid can have a
substantial impact on enrollment between States.
---------------------------------------------------------------------------
Our analysis found that 3 percent of enrollees in Exchanges on the
Federal platform did drop their coverage renewals after December 15
during the most recent extended OEP. Some of these people may have
switched to a more affordable plan after receiving a bill in January
with unexpected plan costs. However, we expect that upon finalizing the
proposed addition of Sec. 155.335(n), a higher proportion of enrollees
will actively re-enroll and compare their plan options prior to
December 15, reducing the need for changes after December 15. To the
extent people are switching coverage during the extended period, this
may also be due, in part, to improper plan switching. As we have noted
elsewhere, we recently began receiving substantially more consumer
complaints alleging improper enrollments by agents and brokers who
switch enrollees to new QHPs offered on the Exchange or update
enrollees' current policies without their knowledge, to capture their
commissions.\114\ However, we also note that when the enhanced
subsidies made available under the ARP and IRA expire at the end of
2025, plan costs for the majority of Exchange enrollees will increase,
so there may be an increase in the proportion of enrollees seeking to
drop coverage or change plans for PY 2026 after December 15, 2025. Due
to changing plan costs, enrollees may need more time to make their PY
2026 plan selections. We request comment on whether to delay the
effective date for the proposal to update the OEP end date until the
OEP preceding PY 2027, given the special circumstances for PY 2026
financial assistance.
---------------------------------------------------------------------------
\114\ Based on internal CMS data, in the first 3 months of 2024,
we received 50,000 complaints of improper enrollments and 40,000
complaints of improper plan switches attributed due to agent or
broker noncompliant behavior.
---------------------------------------------------------------------------
Based on the foregoing analysis, we do not anticipate that changing
the OEP end date from January 15 to December 15 would have a negative
impact on a consumer's opportunity to enroll in QHPs through an
Exchange. We do believe the change would reduce
[[Page 12979]]
consumer confusion over the two deadlines under the current OEP that
can increase administrative burdens and lead people to miss a whole
month of coverage in January. Consistent with our observations after
the December 15 end date was adopted for the 2018 OEP, we expect that
consumer casework volumes related to coverage start dates and
inadvertent dual enrollment would decrease if the same policy is put in
place for the 2026 OEP. Reducing the OEP by a month should also reduce
burdens on Exchanges, issuers, and people who assist with plan
selections; however, the Federal government, State Exchanges, and
issuers may incur costs if additional outreach is needed to alert
consumers of the change in OEP end date. We will continue to leverage
various methods to inform consumers before and during the Open
Enrollment Period of key items and changes, including sending
Marketplace Open Enrollment and Annual Redetermination Notices;
developing advertising campaigns on television, radio, social media,
and other platforms; collaborating with assistors; and utilizing the
HealthCare.gov website as a central hub of information. We seek comment
on how changing the OEP end date to December 15 would impact QHP
enrollment opportunities, consumer confusion, and burden.
In making this proposal, we note the crucial role the OEP plays in
protecting the stability of the individual market risk pool within the
structure of the ACA. Adverse selection remains a serious concern under
the ACA's guaranteed availability and modified community rating
requirements. The average plan liability risk score in the individual
market remains substantially higher than the small group market,
showing that higher-than-average risks continue to select into the
individual market. This higher risk leads to higher premiums for those
who purchase coverage through the individual market. Enrollment periods
are one of the few tools established by the ACA to mitigate adverse
selection and contribute to a more stable, affordable market.
We previously noted that the experience from State Exchanges
operating their own eligibility and enrollment platforms suggests that
extending the OEP into January does not introduce adverse selection
into the market. However, this conclusion was based largely on comments
we received from State Exchanges that did not include supporting
evidence. Other commenters expressed the opposite view that the risk of
adverse selection warranted keeping the December 15 end date. We
understood there was still an ongoing risk of adverse selection when we
decided to extend the OEP end date to January 15. However, we concluded
this risk of adverse selection was outweighed by the benefits of
increased consumer enrollments and opportunities to switch plans for
consumers with unexpected plan costs.
Our new analysis of this experience extending the OEP to end
January 15 suggests that these benefits did not materialize.
Accordingly, without any clear benefit, we no longer believe the
benefits of the OEP extension outweigh the risk of adverse selection.
We welcome comments on whether the risk of adverse selection supports
changing the OEP end date to December 15.
We anticipate that if an OEP end date of December 15 were
finalized, this change would apply to all Exchanges, including State
Exchanges, for the 2026 coverage year and beyond. While we have
previously given State Exchanges the flexibility to extend their OEPs,
the previous analysis suggests these extensions do not increase
enrollment. Accordingly, we believe all extensions, regardless of the
Exchange platform, present an unnecessary risk of adverse selection.
Any increase in adverse selection due to these extensions may increase
premiums which, in turn, increases the Federal cost of PTC subsidies
and undermines affordability for people who do not qualify for
subsidies. Applying this proposal to State Exchanges would be
consistent with our decision to apply the December 15 end date for the
2018 OEP and beyond on a nationwide basis.
We recognize that the proposal to adopt and transition to a
consistent OEP start and end date might lead to operational
difficulties for State Exchanges. We have previously recognized that
State Exchanges could use existing regulatory authority to supplement
the OEP with an SEP as a transitional measure. Given our proposal to
adopt a standard OEP, we seek comment on whether we should also
prohibit Exchanges from extending an OEP through application of a
blanket special enrollment period. Where available, we request that
comments include data demonstrating the impact of the OEP end date on
enrollment and adverse selection. Additionally, we seek comment on the
overall effects and impacts of OEP duration and OEP placement within
the calendar year, including suggestions regarding the ideal duration
and placement to minimize adverse selection and maximize consumer
choice.
8. Monthly Special Enrollment Period for APTC-Eligible Qualified
Individuals with a Projected Household Income at or Below 150 Percent
of the Federal Poverty Level (Sec. 155.420)
We propose to remove Sec. 155.420(d)(16) to repeal the monthly SEP
for APTC-eligible qualified individuals with a projected annual
household income at or below 150 percent of the FPL, which we refer to
as the ``150 percent FPL SEP.'' To conform existing regulations to the
repeal of this SEP, we also propose to remove Sec.
155.420(a)(4)(ii)(D) (which adds plan category limitations and permits
eligible enrollees and their dependents to use the 150 percent FPL SEP
to change to a silver level plan), Sec. 155.420(b)(2)(vii) (regarding
when coverage is effective for this SEP), and Sec. 147.104(b)(2)(i)(G)
(as discussed in section III.A.1 of this preamble). We also propose to
amend the introductory text of Sec. 155.420(a)(4)(iii) to remove
reference to paragraph (d)(16). Finally, we also propose to revise
paragraphs (a)(4)(ii)(B) and (a)(4)(ii)(C) to move the placement of the
word ``or'' for clarity given the proposed removal of paragraph
(a)(4)(ii)(D).
We created the 150 percent FPL SEP to provide additional
opportunities for low-income consumers to take advantage of free or
low-cost coverage that section 9661 of the ARP made available on a
temporary basis during the COVID-19 PHE. When we first finalized this
SEP and then made it permanent in the 2025 Payment Notice (89 FR
26320), we projected it would increase premiums due to adverse
selection and, as a result, increase both the financial hardship on
consumers who pay the full premium and the Federal cost of APTC. While
we previously concluded the enrollment benefits of this SEP outweighed
these costs and risks for adverse selection, more experience with this
SEP suggests it has substantially increased the level of improper
enrollments, as well as increased the risk for adverse selection, as
the 150 percent FPL SEP incentivizes consumers to wait until they are
sick to enroll in Exchange coverage. We encourage commenters and other
interested parties to provide comments on whether and how the 150
percent FPL SEP has exacerbated these issues. Finally, we believe that
the single, best interpretation of the statute is that it does not
authorize the Secretary to add the 150 percent FPL SEP to the list of
SEPs enumerated at sections 1311(c)(6)(C) and (D) of the ACA.
As background, section 9661 of the ARP amended section 36B(b)(3)(A)
of
[[Page 12980]]
the Code to decrease the applicable percentages used to calculate the
amount of household income a taxpayer is required to contribute to
their second lowest cost silver plan for tax years 2021 and 2022.\115\
For those with household incomes at or below 150 percent of the FPL,
the new applicable percentage is zero. The IRA extended this provision
to the end of PY 2025. As a result of these changes, many low-income
consumers whose QHP coverage can be fully subsidized by the APTC have
one or more options to enroll in a silver-level plan without needing to
pay a premium after the application of APTC.
---------------------------------------------------------------------------
\115\ Public Law 117-2.
---------------------------------------------------------------------------
To provide certain low-income individuals with additional
opportunities to newly enroll in this fully subsidized or low-cost
coverage, in part 3 of the 2022 Payment Notice (86 FR 53429 through
53432), we finalized, at the option of the Exchange, a new monthly SEP
for APTC-eligible qualified individuals with projected household income
at or below 150 percent of the FPL. We also finalized a provision
stating that this SEP is available only during periods of time when a
taxpayer's applicable percentage, which is used to calculate the amount
of household income a tax filer is required to contribute to their
second lowest cost silver plan, is set at zero, such as during tax
years 2021 through 2025, as provided by section 9661 of the ARP and
extended by the IRA. As background, the applicable percentages are used
in combination with other factors, including annual household income
and the cost of the benchmark plan, to determine the PTC amount for
which a taxpayer can qualify to help pay for a QHP on an Exchange for
themselves and their dependents. These decreased percentages generally
result in increased PTC for PTC-eligible tax filers.
In the 2025 Payment Notice (89 FR 26320), we removed the limitation
that the 150 percent FPL SEP is available only during periods of time
when the applicable percentage is set to zero. However, given concerns
regarding the growth of improper enrollments using this SEP, we are
proposing that this SEP would end as of the effective date of the final
rule, and not in December 2025, when the provisions extended by the IRA
sunset. We believe ending the 150 percent FPL SEP across all Exchanges
immediately is necessary due to the rise in improper enrollments, as
the 150 percent FPL SEP was one of the primary mechanisms that certain
agents, brokers, and web-brokers used to conduct unauthorized
enrollments to improperly enroll consumers in fully subsidized Exchange
plans.
While we previously concluded that the benefits of increased access
outweighed the risk of premium increases, new information suggests the
expanded availability of fully subsidized plans (referred to as zero-
dollar plans in previous rulemaking),\116\ combined with easier access
to these fully subsidized plans through the 150 percent FPL SEP, led to
a substantial increase in improper enrollments. The existence of fully
subsidized plans by itself creates an opportunity for some agents,
brokers, and web-brokers to conduct improper enrollments of consumers
in Exchange coverage without them knowing, because without a premium,
there is no ongoing need for consumer engagement following completed
enrollment in an Exchange plan. Based on our own analysis, we have
identified various mechanisms that some agents, brokers, and web-
brokers have exploited to conduct unauthorized enrollments to
improperly enroll consumers in Exchange coverage without their consent.
For example, an agent, broker, or web-broker can enroll a consumer
without the consumer's knowledge and earn a commission for each
consumer enrolled. An agent, broker, or web-broker can also change the
agent of record for an existing enrollee and take the commission from
the existing agent, broker, or web-broker. An agent, broker, or web-
broker can switch an enrollee to a new health plan without the
consumer's consent to capture the new commission. An agent, broker, or
web-broker can also split up a household and enroll them in multiple
plans to capture multiple commissions.
---------------------------------------------------------------------------
\116\ In previous rulemaking, we referred to fully subsidized
plans as zero-dollar plans. This former characterization suggested
there is no premium. But health issuers do receive a full premium
for every plan they sell. For people with incomes between 100 and
150 percent of the FPL, this premium is fully subsidized by the
Federal taxpayer.
---------------------------------------------------------------------------
Because of these practices, in 2024, we implemented various system
and logic changes to decrease and/or prevent some agent, broker, and
web-broker behavior in an effort to mitigate improper enrollments, and
we have observed some improvements. However, we believe that so long as
there is no premium cost for the consumer, these enrollments can
continue to go unnoticed until an enrollee tries to use a health plan
the agent, broker, or web-broker canceled or eventually learns they
must reconcile surprise APTC on their taxes. In December 2024 we
received 7,134 consumer complaints of improper enrollments, an increase
from the 5,032 complaints received in December 2023. Although these
numbers represent a decrease from the high of 39,985 complaints
received in February 2024, the fact that the number of complaints for
2024 remains substantially higher than for 2023 demonstrates that
previous program integrity measures have not resulted in a decrease in
potential improper enrollments such that additional measures are not
necessary. This has caused us to reconsider the existence of the 150
percent FPL SEP as it continues to serve as a mechanism for some
agents, brokers, and web-brokers to circumvent the protections that we
have put into place, and even reverse some of the gains we have made in
mitigating agent, broker, and web-broker improper enrollments.
On April 12, 2024, a class of plaintiffs, including Exchange
consumers and insurance agents, filed a complaint against certain
agents and marketing companies alleging a conspiracy to conduct
unauthorized enrollments and change enrollments to improperly capture
commissions.\117\ The complaint alleges that the false ads created by
the defendants ``resulted in hundreds of thousands of enrollments by
class members.'' \118\ Enrollment data for the 2024 OEP suggest
improper enrollments may be significantly more widespread than the
parties involved in this case. A comparison of plan selections during
the 2024 OEP and U.S. Census Bureau population estimates show the
number of plan selections among people reporting household incomes
between 100 and 150 percent of the FPL exceeded the number of potential
enrollees within this FPL range in nine States.\119\ This analysis
estimates between 4 to 5 million improper enrollments in 2024 at a cost
of $15 to $26 billion in improper PTC payments.\120\
---------------------------------------------------------------------------
\117\ Complaint, Conswallo Turner et al. v. Enhance Health, et
al., Case 0:24-cv-60591-MD. (S.D. Fla.2024).
\118\ Ibid. at 56.
\119\ Blase, B.; Gonshorowski, D. (2024, June). The Great
Obamacare Enrollment Fraud. Paragon Health Institute. https://paragoninstitute.org/private-health/the-great-obamacare-enrollment-fraud.
\120\ Ibid.
---------------------------------------------------------------------------
Our own analysis confirms that the number of plan selections for
people with household incomes between 100 and 150 percent of the FPL
exceeds the population of people at that income level based on U.S.
Census Bureau surveys. At the extreme, 2.7 million Floridians claimed a
household income between 100 and 150 percent of the FPL and selected
plans through HealthCare.gov during the 2024 OEP.
[[Page 12981]]
Yet, 2022 Census surveys estimate that only 1.5 million people who live
in Florida fall within that income level.\121\ Unlike the previously
cited analysis by the Paragon Health Institute (see footnote 35), our
comparison includes everyone under the age of 65 and therefore includes
people who are unlikely Exchange enrollees such as Medicaid-eligible
children, people with disabilities on Medicaid and Medicare, and people
who receive coverage through their employer. Therefore, it
underrepresents the level of improper enrollments. This disparity
between the number of plan selections and Census population estimates
suggests there were likely over 1 million improper enrollments in
Florida alone. Several other States have similar patterns of more
enrollees reporting household income between 100 and 150 percent of the
FPL than people who would be eligible in the State for Exchange
coverage with income in that category.\122\ We encourage commenters and
other interested parties to share their experiences in their respective
States, including the extent of improper enrollments and other data
disparities.
---------------------------------------------------------------------------
\121\ U.S. Census Bureau (2022). American Community Survey.
Dep't of Commerce. https://www.census.gov/programs-surveys/acs/data.html.
\122\ Ibid.
---------------------------------------------------------------------------
As such, the 150 percent FPL SEP expands the opportunities for some
agents, brokers, and web-brokers to conduct unauthorized enrollments
for people in fully subsidized plans at any time during the year. By
design, anyone who reports a projected household income at or below 150
percent of the FPL on their application can enroll in a QHP or change
from one QHP to another at any time during the year. This allows
agents, brokers, and web-brokers to conduct unauthorized enrollments or
change enrollments any time during the year when they gain access to
the personally identifiable information that allows them to falsely
represent someone. Before the implementation of the 150 percent FPL
SEP, we received a handful of complaints from consumers about improper
enrollments or plan switching. In contrast, in the first 3 months of
2024, we received 50,000 complaints of improper enrollments and 40,000
complaints of unauthorized plan switches attributed due to agent or
broker noncompliant conduct and improper enrollments. For these
reasons, we believe that by immediately ending this SEP as of the
effective date of the final rule, the Exchanges would be protecting
consumers by preventing improper enrollments in addition to working to
stem the negative effects of adverse selection on the risk pool, thus
moving towards a more stable individual market risk pool.
In addition to concerns over improper enrollments, we remain
concerned over the ability of consumers at or below 150 percent of the
FPL to wait to enroll until they need health care services, resulting
in adverse selection. Additional research is necessary to accurately
quantify the negative impacts of this behavior to the risk pool, and we
seek comment on this issue from the public. With respect to improper
enrollments, we recognized the need to revise the Federal platform
process for pre-enrollment verification for SEPs and to reinforce that
process so that SEPs are not being abused and misused. This
reinforcement of pre-enrollment verification for SEPs would strengthen
program integrity measures, deter agents, brokers, and web-brokers from
engaging in improper enrollments and enrolling unsuspecting consumers
in QHP coverage through the Exchanges without their knowledge or
consent, and stabilize the individual market risk pool. We propose
changes to pre-enrollment verification for SEPs at Sec. 155.420(g) of
this proposed rule.
Our concern over people waiting to enroll is substantially
heightened by the flexibility consumers, as well as agents, brokers,
and web-brokers acting on behalf of consumers, receive when estimating
their annual household income on their application, along with the
limits on how much low-income people must pay to reconcile any
misestimate on their taxes. While a tax filer would need to reconcile a
poor income estimate on their taxes, under statute, some tax filers
need only repay a small portion of excess APTC. This is referred to as
the excess APTC repayment limit. For single filers with household
incomes less than 200 percent of the FPL, the amount they must pay back
is limited to $375 in 2024.\123\ The limit is $950 for single filers
with household incomes from 200 to less than 300 percent of the FPL and
$1,575 for single filers with household incomes from 300 to less than
400 percent of the FPL. With wide flexibility in estimating household
income and minimal penalties for misestimates, the 150 percent FPL SEP
is an ideal enrollment loophole for some agents, brokers, and web-
brokers seeking to increase enrollment commissions. Additionally, it
can result in a large portion of people who fail to enroll in coverage
until they incur significant health care expenses, introducing high
adverse selection risks for issuers, which are then reflected in higher
premiums and associated Federal spending on premium subsidies. This SEP
has certainly been abused by some agents, brokers, and web-brokers, who
are aware of the excess APTC repayment limits and who have
inappropriately marketed ``free'' plans to enrollees.124 125
---------------------------------------------------------------------------
\123\ IRS (n.d.) Rev. Proc. 2023-34. Dep't of Treasury. https://www.irs.gov/pub/irs-drop/rp-23-34.pdf.
\124\ Appleby, J. (2024, April 8). Rising Complaints of
Unauthorized Obamacare Plan-Switching and Sign-Ups Trigger Concern.
KFF Health News. https://kffhealthnews.org/news/article/aca-unauthorized-obamacare-plan-switching-concern/.
\125\ Chang, D. (2023, June 12). Florida Homeless People Duped
into Affordable Care Act Plans They Can't Afford. Tampa Bay Times.
https://www.tampabay.com/news/florida-politics/2023/06/12/florida-homeless-people-duped-into-affordable-care-act-plans-they-cant-afford/.
---------------------------------------------------------------------------
This wide flexibility in estimating income may also be open to
misuse by Navigators and CACs. While Navigators and CACs may not
receive a direct financial incentive for improper enrollments, they may
still have incentives to encourage or allow applicants to underestimate
their income to take advantage of fully subsidized plans outside of the
OEP. Navigators and CACs, for example, still have incentives to hit and
exceed enrollment targets. The number of consumers assisted with
enrollment or re-enrollment in a QHP is one of the project goals we
list in the Navigator grant application.\126\ Navigators must provide
progress reports to CMS and future grant funding levels are based in
part on progress toward this goal.\127\ Navigators and CACs may even
believe it is their mission to encourage or allow applicants to
aggressively understate their income to gain more affordable coverage.
We seek comments on this issue and the proposal generally.
We are working hard to address the increase in improper enrollments
to ensure only eligible people enroll in all plans, but especially
fully subsidized plans. While we believe stronger enforcement measures
can substantially reduce improper enrollments, we believe improper
enrollments would continue to be a problem so long as there is access
to fully subsidized plans combined with even easier access through the
150 percent FPL SEP. Even if we were able to reduce the problem of some
agents, brokers, and web-brokers enrolling consumers in Exchange
coverage without their knowledge or consent, substantial issues remain
with consumers taking advantage of the 150 percent FPL SEP by falsely
representing their household income on their Exchange applications.
Because of this, we believe that ending the 150 percent FPL SEP remains
one of
[[Page 12982]]
the most critical ways to mitigate this risk of improper enrollments
and protect the individual risk pool. We also believe that the
loopholes and incentives created by the 150 percent FPL SEP are too
large to simply police retrospectively.
In the 2025 Payment Notice (89 FR 26321), we reviewed the
enrollment experience and found that the percent of Exchange enrollees
on the Federal platform who had projected annual household income of
less than 150 percent of the FPL increased from 41.8 percent in 2022 to
46.9 percent in 2023, after the implementation of the 150 percent FPL
SEP. At the time, we concluded this suggested the policy was
successful. We also analyzed the availability of fully subsidized plans
in 2020 before enhanced subsidies became temporarily available under
the ARP and IRA. We found 77 percent of the consumer population at or
below 150 percent of the FPL had access to fully subsidized bronze
plans and 16 percent had access to fully subsidized silver plans. Based
on this finding, we concluded the risk of adverse selection was
mitigated by the broad access to fully subsidized plans because
consumers with fully subsidized plans would not have a financial
incentive to drop their Exchange plan when healthy and resume coverage
when sick. Nevertheless, we still projected the 150 percent FPL SEP
would increase premiums by 3 to 4 percent (89 FR 26405).
These conclusions no longer seem valid considering the recent
Conswallo Turner et al. v. Enhance Health, et al., litigation, higher
numbers of consumer complaints about to unauthorized plan switching and
improper enrollments, and a sharp increase in enrollment relative to
the population with household income under 150 percent of the FPL in PY
2024. This new information suggests the increase in the portion of
Exchange enrollees who report household incomes under 150 percent of
the FPL is driven by improper enrollments. In addition, it highlights
how the adverse selection issue for the 150 percent FPL SEP does not
primarily involve concerns over consumers dropping coverage when
healthy and resuming coverage when sick. People already enrolled in
fully subsidized plans clearly have little incentive to drop their
plan. The adverse selection issue surfaces from people who do not
enroll in a fully subsidized plan during the OEP and, instead, wait to
enroll when sick. People who wait can avoid enrollment if they never
become sick and, therefore, avoid contributing when healthy. Many
consumers can also wait and know, if they do become sick, they would
qualify for the 150 percent FPL SEP, due to the widespread evidence
that millions of people have enrolled in this income level who do not
have such household income and are subject to limitations on repayments
of excess tax credits.
Based on this analysis, we believe the impact of the 150 percent
FPL SEP on premiums absent IRA subsidies is less than the 3 to 4
percent we previously projected in the 2025 Payment Notice. After fully
accounting for the impact of people not enrolling during the OEP and
waiting to enroll until sick, we project the premium impact of the
current policy is between 0.5 to 3.6 percent. Based on the premium
increase and the increase in improper enrollments which was exacerbated
by our previous SEP policy, we do not believe that the benefits of
increased access to coverage for low-income consumers outweighs the
risk of higher premiums and improper enrollments. In fact, we believe
that the costs may exceed the benefits and we encourage commenters and
other interested parties to provide comments on the cost impact the 150
percent FPL SEP.
We note that improper enrollments resulting from the 150 percent
FPL SEP may mitigate premium increases caused by adverse selection from
this SEP. Individuals who are unknowingly enrolled through the 150
percent FPL SEP would not file insurance claims and, therefore, would
improve the risk pool. While these negative impacts from the 150
percent FPL SEP are related, we do account for them separately in our
consideration. The ACA authorizes the Secretary only to require an
Exchange to provide for the SEPs listed at sections 1311(c)(6)(C) and
(D) of the ACA, and nothing more. Where a statute such as sections
1311(c)(6)(C) and (D) of the ACA provides a list, the ``specific and
comprehensive statutory list necessarily controls over the
[Secretary's] general authorization,'' \128\ such as the one in in
sections 1321(a)(1)(A), (B), and (C) of the ACA, which authorizes the
Secretary to ``issue regulations setting standards for meeting the
requirements . . . with respect to'' the establishment and operation of
Exchanges, the offering of qualified health plans through Exchanges,
and ``such other requirements as the Secretary determines
appropriate.''
---------------------------------------------------------------------------
\128\ Texas Med. Ass'n v. U.S. Dep't of Health and Human
Servs.,--F.4th--, 2024 WL 3633795, *8 (Aug. 2, 2024) (citing Nat'l
Pork Producers Council v. EPA, 635 F.3d 738, 753 (5th Cir. 2011);
Texas v. U.S., 809 F.3d 134, 179, 186 (5th Cir. 2015), aff'd by an
equally divided court, 579 U.S. 547 (2016)).
---------------------------------------------------------------------------
Section 1311(c)(6)(C) of the ACA mandates that the Secretary
require an Exchange to provide for ``special enrollment periods
specified in section 9801 of the Code of 1986 and other special
enrollment periods under circumstances similar to such periods under
part D of title XVIII of the Social Security Act.'' The circumstances
underlying the 150 percent FPL SEP are dissimilar to the circumstances
for Medicare Part D SEPs under section 1860D-1(b)(3) of the Act, which
are: involuntary loss of creditable prescription drug coverage; errors
in enrollment; exceptional conditions; Medicaid coverage; and
discontinuance of a Medicare Advantage Prescription Drug (MA-PD)
election during the first year of eligibility. The 150 percent FPL SEP
is likewise not one of the SEPs specified in section 9801 of the Code,
nor similar to such SEPs.
This interpretation aligns with our overall experience regarding
the role that enrollment periods play in mitigating adverse selection
within the structure of the ACA. We have thoroughly considered our
experience with the program before and after the implementation of the
150 percent FPL SEP and assessed the fit between the rationale for this
SEP and the policy consequences that flow from it. Based on this
expanded body of experience, we believe that Congress was prescient to
provide the Secretary with a comprehensive statutory list of SEPs that
omitted the 150 percent FPL SEP. We seek comments on this proposal.
A commenter on the 2025 Payment Notice (89 FR 26323) also
questioned whether it was lawful for HHS to implement the 150 percent
FPL SEP. The statute requires a specific set of SEPs that focus on
giving people an opportunity to enroll mid-year if they experience a
change in their life circumstances, such as a move or the loss of job.
In contrast, the 150 percent FPL SEP allows people to enroll at any
time during the year based on their existing income, not a change in
their income. We request further comment on this proposal.
9. Pre-enrollment Verification for Special Enrollment Period (Sec.
155.420(g))
We propose to amend Sec. 155.420(g) to reinstate (with
modifications) the requirement that Exchanges on the Federal platform
must conduct pre-enrollment verification of eligibility of applicants
for other categories of individual market SEPs in line with operations
prior to the implementation of the 2023 Payment Notice and to eliminate
the provision that states that Exchanges on the Federal platform will
[[Page 12983]]
conduct pre-enrollment special enrollment verification of eligibility
only for special enrollment periods under paragraph (d)(1) of this
section.\129\ We propose to further amend Sec. 155.420(g) to require
all Exchanges to conduct pre-enrollment verification of eligibility for
at least 75 percent of new enrollments through SEPs.
---------------------------------------------------------------------------
\129\ Currently, Sec. 155.420(g) provides that Exchanges on the
Federal platform will conduct pre-enrollment special enrollment
verification of eligibility only for special enrollment periods for
loss of minimum essential coverage. Prior to the implementation of
the 2023 Payment Notice, Exchanges on the Federal platform conducted
manual verification for five SEPs: marriage, adoption, moving to a
new coverage area, loss of minimum essential coverage, and Medicaid/
CHIP Denial.
---------------------------------------------------------------------------
In the 2018 Payment Notice proposed rule (81 FR 61456, 61502), we
expressed a commitment to making sure that SEPs are available to those
who are eligible for them and equally committed to avoiding any misuse
or abuse of SEPs. To avoid misuse and abuse, we implemented
verification processes for SEPs in the Market Stabilization Rule (82 FR
18357 through 18358).\130\ In setting these processes, we acknowledged
in the Market Stabilization Rule (82 FR 18357 through 18358) competing
concerns over how verification can impact the individual market risk
pool and, in turn, impact premium affordability.
---------------------------------------------------------------------------
\130\ 82 FR 18346.
---------------------------------------------------------------------------
Verification protects the risk pool from ineligible individuals
enrolling only after they become sick or otherwise need expensive
health care services or medical products/equipment. However,
verification can also undermine the risk pool by imposing a barrier to
eligible enrollees, which may deter healthier, less motivated
individuals from enrolling. After analyzing enrollment and risk pool
data against these competing concerns, we believe the current SEP
verification requirements do not provide enough protection against
misuse and abuse. This negatively impacts both the risk pool and
program integrity around determining eligibility for APTC and CSR
subsidies. We believe the positive impact of verification on the risk
pool far exceeds the potential negative impact on the risk pool.
Therefore, we propose to amend Sec. 155.420(g) to remove the provision
that limits Exchanges on the Federal platform to conducting pre-
enrollment verification for only the loss of minimum essential coverage
SEP, which would allow us to reinstate pre-enrollment verification for
other SEPs on Exchanges on the Federal platform. We further propose to
amend Sec. 155.420(g) to require all Exchanges to conduct pre-
enrollment eligibility verification for SEPs.
Section 1311(c)(6) of the ACA requires that Exchanges establish
enrollment periods, including SEPs for qualified individuals, for
enrollment in QHPs. Section 1311(c)(6)(C) of the ACA directs the
Secretary to require Exchanges to provide for the SEPs specified in
section 9801 of the Code and other SEPs under circumstances similar to
such periods under part D of title XVIII of the Act. Section 2702(b)(2)
of the PHS Act also directs issuers in the individual and group market
to establish SEPs for qualifying events under section 603 of the
Employee Retirement Income Security Act of 1974. Section 1321(a)(1)(A)
of the ACA and section 2792(b)(3) of the PHS Act directs the Secretary
to issue regulations with respect to these requirements.
Prior to June 2016, we largely permitted individuals seeking
coverage through the Exchanges to self-attest to their eligibility for
most SEPs and to enroll in coverage without further verification of
their eligibility or without submitting proof of prior coverage. After
a GAO undercover testing study of SEPs observed that self-attestation
could allow applicants to obtain subsidized coverage they would
otherwise not qualify for and then found 9 of 12 of GAO's fictitious
applicants were approved for coverage on the Federal and selected State
Exchanges, we began implementing policies to curb potential abuses of
SEPs.\131\ In 2016 we added warnings on HealthCare.gov regarding
inappropriate use of SEPs. We also eliminated several SEPs and
tightened certain eligibility rules.\132\ Also in 2016, we announced
retrospective audits of a random sampling of enrollments through SEPs
for loss of minimum essential coverage and permanent move, two commonly
used SEPs. Additionally, we created the Special Enrollment Confirmation
Process under which consumers enrolling through common SEPs were
directed to provide documentation to confirm their eligibility.\133\
Finally, we proposed to implement (beginning in June 2017) a pilot
program for conducting pre-enrollment verification of eligibility for
certain SEPs.\134\
---------------------------------------------------------------------------
\131\ GAO. (2016 Nov.). Patient Protection and Affordable Care
Act: Results of Enrollment Testing for the 2016 Special Enrollment
Period, GAO-17-78. https://www.gao.gov/products/gao-17-78.
\132\ CMS. (2016, Feb. 24). Fact Sheet: Special Enrollment
Confirmation Process. https://www.cms.gov/newsroom/fact-sheets/fact-sheet-special-enrollment-confirmation-process.
\133\ Ibid.
\134\ CMS. (n.d.). Pre-Enrollment Verification for Special
Enrollment Periods. https://www.cms.gov/cciio/resources/fact-sheets-and-faqs/downloads/pre-enrollment-sep-fact-sheet-final.pdf.
---------------------------------------------------------------------------
In response to the deteriorating stability of the individual health
insurance market leading into PY 2017, we implemented the Market
Stabilization Rule (82 FR 18355 through 18356) in 2017 which
sidestepped the pilot program and, instead, took quick action to
require pre-enrollment verification for most SEPs. Understanding the
potential for verifications to deter eligible people from enrolling, we
studied the initial consumer experience with this pre-enrollment
verification process and published our findings in 2018.\135\ For PY
2017, this report showed that we averaged a response time of 1-to-3
days to review consumer-submitted documents. In addition, the vast
majority (over 90 percent) of SEP applicants who made a plan selection
and were required to submit documents to complete enrollment were able
to successfully verify their eligibility for the SEP. We conducted
additional research for the following plan years through 2021. Based on
data from PY 2019, the last year prior to the PHE which greatly
impacted SEPV processing, the majority of consumers (73 percent) were
able to submit documents within 14 days of their SEP verification issue
(SVI) being generated. Also, we found that the majority of consumers
(63 percent) were able to fully resolve their SVI within 14 days of it
being generated. That resolution percentage increases to 86 percent by
30 days.\136\ We also found that for PY 2019, only approximately 14
percent or 75,500 individuals were unable to resolve their SVI out of
the total population of SEP consumers who received an SVI.
---------------------------------------------------------------------------
\135\ CMS. (2018, July 2). The Exchanges Trends Report. https://www.cms.gov/CCIIO/Programs-and-Initiatives/Health-Insurance-Marketplaces/Downloads/2018-07-02-Trends-Report-3.pdf.
\136\ More consumers resolve passed 30 days due to extensions
that they are eligible to receive.
---------------------------------------------------------------------------
In the 2023 Payment Notice (87 FR 27278), we noted that pre-
enrollment verification can also negatively impact the risk pool. At
that time, we did not analyze the experience of people applying for
SEPs to assess the impact on the risk pool. Rather, it was our
perception that the extra step required by verification can deter
eligible consumers from enrolling in coverage through an SEP, which in
turn, can negatively impact the risk pool because younger, often
healthier, consumers submit acceptable documentation to verify their
SEP eligibility at much lower rates than older consumers. To mitigate
this potential negative impact on the risk pool and streamline the
[[Page 12984]]
consumer experience, we then eliminated pre-enrollment verification for
every SEP with the exception of the SEP for new consumers who attest to
losing minimum essential coverage.
Since the implementation of pre-enrollment verification for SEPs in
the Market Stabilization Rule, we continue to monitor pre-enrollment
verification to determine its impact, including on enrollments by
different groups of individuals affected by the process. After three
years of experience applying pre-enrollment verification to only the
SEP for losing minimum essential coverage, we reviewed whether this
policy achieves the right balance between reducing enrollment barriers
and protecting against abuse and misuse of SEPs. This review shows the
prior use of pre-enrollment verification for all SEPs achieved the
better balance. As noted previously in this section, our initial review
of pre-enrollment verification during PY 2017 did not find any
substantial enrollment barrier. We applied this same analysis to PY
2018 and PY 2019 before the COVID-19 PHE changed patterns of the SEP
use and found pre-enrollment verification continued to not present any
substantial enrollment barrier. We also compared the use of SEPs before
and after the implementation of pre-enrollment verification for PY
2017. This comparison revealed a substantial shift to SEPs that were
not subject to pre-enrollment verification that required consumers to
submit documentation, suggesting agents, brokers, and people had been
previously abusing SEPs and shifted to special enrollment that did not
require document submissions to continue this potential abuse of SEPs.
When we sought feedback on the proposal to reduce pre-enrollment
verification for SEPs in PY 2023 in the 2023 Payment Notice (88 FR
27278 through 27279), one commenter pointed out that data from the HHS-
operated risk adjustment model, specifically the factors related to
partial-year enrollments, showed a significant decrease in the negative
impact of these enrollments on the overall risk pool from 2017 to
2022.\137\ This suggests that individuals who enroll for only part of
the year--who are more likely to use SEPs--now pose a smaller risk to
the insurance pool than they did in the past. The commenter concluded
that a likely factor is that fewer people are abusing SEPs to wait to
get coverage until they need care due to pre-enrollment SEP
verification. Another commenter noted how loss ratios for SEP
enrollments, as compared to OEP enrollments, increased after pre-
enrollment verifications were relaxed during the COVID-19 public health
emergency.\138\ We reviewed enrollment patterns and found there was a
substantial increase in the enrollment duration after the
implementation of pre-enrollment verification for all SEPs, which adds
another data point suggesting pre-enrollment verification helped
encourage continuous enrollment by making it more difficult to engage
in strategic enrollment and disenrollment. Consistent with the comment
to the 2023 Payment Notice, partial year enrollment factors did improve
after PY 2017. Issuer-level enrollment data similarly shows a decline
in the percent of disenrollments as a percent of total enrollments from
about 20 percent in PY 2017 to about 12 percent in PY 2019.\139\ After
we reduced pre-enrollment verification for SEPs for PY 2023, the
average number of months enrolled per consumer declined from 4.5 months
in PY 2022 to 4.3 months in PY 2023.\140\ While this decline may be
due, in part, to an increase in mid-year enrollments from people being
disenrolled from Medicaid after the Medicaid continuous enrollment
condition ended on April 1, 2023, it may also be linked to the
reduction in pre-enrollment verification for SEPs.
---------------------------------------------------------------------------
\137\ Comment ID CMS-2021-0196-0196, 01/27/2022 available at
https://www.regulations.gov/comment/CMS-2021-0196-0196.
\138\ Comment ID CMS-2021-0196-0222, 01/27/2022 available at
https://www.regulations.gov/comment/CMS-2021-0196-0222.
\139\ Derived from issuer enrollment data, CMS. (2024, Sept.
10). Issuer Enrollment Data. https://www.cms.gov/marketplace/resources/data/issuer-level-enrollment-data.
\140\ Ibid.
---------------------------------------------------------------------------
We acknowledge pre-enrollment verification can deter eligible
consumers from enrolling in coverage through an SEP because of the
burden of document verification. However, as noted previously, our
prior analyses show the verification process does not impose a
substantial burden and therefore should not be a barrier to enrollment.
We also note that documentation to verify SEPs is generally easy for
applicants to access and provide to Exchanges. Applicants should have
ready access to official documents acknowledging employer separations,
loss of minimum essential coverage, marriage, divorce, births,
adoptions, death, gaining lawful presence or citizenship certificates,
a new address, or a release from incarceration. Pre-Enrollment SEP
Verification takes place simultaneously with the consumer's SEP
timeline on the Federal platform currently. This means that Pre-
Enrollment SEP Verification takes place while the consumer's SEP
timeline is running.\141\ Typically, the SEP window on the Exchanges on
the Federal platform is 60 days from when a consumer experiences a
qualifying event and a Special Enrollment Period Verification Issue
(SVI) is triggered when a consumer selects a plan during that
timeframe.
---------------------------------------------------------------------------
\141\ Descriptions and information on the length of SEPs can be
found at 45 CFR 155.420(c).
---------------------------------------------------------------------------
In addition, we previously found younger people submit acceptable
documentation to verify their SEP eligibility at lower rates than older
consumers, which can negatively impact the risk pool as younger
consumers use less health care on average.\142\ While successful
submission rates might be lower for younger people, the overall effect
on the risk pool is minimal because it is a very small number of
younger enrollees relative to older enrollees. This small impact on the
total enrollment among younger people from SEPs would not lead to a
meaningful increase in the proportion of young people enrolled and, as
a result, not lead to a meaningful improvement to the risk pool.
Therefore, we expect any negative impact on the risk pool would be
minimal and substantially outweighed by the reductions in people
misusing and abusing SEPs.
---------------------------------------------------------------------------
\142\ This statistic is based on SEPV resolution data from PY
2019.
---------------------------------------------------------------------------
The weight of the data analysis presented here shows how the
implementation of pre-enrollment verification for applicable SEPs
reduced misuse and abuse of SEPs without deterring eligible people from
enrolling in coverage in a measurable way. This improves the risk pool
by restricting people from gaming SEPs to wait to enroll until they
need health care services. An improved risk pool lowers premiums which,
in turn, makes health coverage more affordable for unsubsidized
enrollees and lowers the average APTC by lowering the average premium
for the benchmark plan used to set APTC. Moreover, pre-enrollment
verification for SEPs strengthens program integrity by denying
ineligible enrollments and discouraging ineligible enrollees who know
they cannot meet verification standards from attempting to enroll
which, in turn, reduces Federal subsidies to ineligible consumers who
would otherwise enroll and receive APTC and CSR subsidies.
Consequently, this proposal would reduce Federal expenditures by both
lowering the average APTC paid due to a reduction in the benchmark plan
premium used to calculate APTC and reducing the number of ineligible
people who would otherwise improperly enroll in APTC-
[[Page 12985]]
and CSR-subsidized coverage. Therefore, we propose to amend Sec.
155.420(g) to remove the limitation on Exchanges on the Federal
platform to conduct pre-enrollment verification for only the loss of
minimum essential coverage special enrollment and also reinstate (with
modifications) pre-enrollment verification requirement for other
categories of SEPs.
In implementing pre-enrollment verifications for SEPs in the Market
Stabilization Rule (82 FR at 18356), HHS did not require that all
Exchanges conduct SEP verifications, in order to allow State Exchanges
to determine the most appropriate way to ensure the integrity of the
SEPs. Currently, all State Exchanges have flexibility under Sec.
155.420(g) to conduct pre-enrollment verification of SEPs. Based on our
analysis of the data showing how SEP verifications successfully
encouraged continuous enrollment on Exchanges on the Federal platform,
we believe State Exchange enrollments would benefit from implementing a
similar policy.
We also believe State Exchanges now have more experience with
conducting SEP verifications, which would make broader implementation
less burdensome than before. We welcome comments regarding this
proposal including State Exchanges' expectations regarding the time and
expense needed to comply. Currently, all but four State Exchanges
conduct either pre- or post-enrollment verification of at least one
special enrollment type, and most State Exchanges had previously
implemented a process to verify the vast majority of SEPs requested by
consumers. Therefore, we propose to amend Sec. 155.420(g) to require
all Exchanges to conduct eligibility verification for SEPs.
We also propose to require that Exchanges, including all State
Exchanges, conduct SEP verification for at least 75 percent of new
enrollments through SEPs for consumers not already enrolled in coverage
through the applicable Exchange. We are proposing that Exchanges must
verify at least 75 percent of such new enrollments based on the current
volume of SEP verification by Exchanges. The 75 percent threshold was
chosen since we believe that most States would be able to meet this
threshold by verifying at least their two or three largest SEP types
based on current SEP volumes. If the Exchange is unable to verify the
consumer's eligibility for enrollment through the SEP, then the
consumer is not eligible for enrollment through the Exchange under that
SEP, and any plan selection under that SEP would have to be canceled.
Should an enrollment under an SEP for which eligibility cannot be
verified become effectuated, the enrollment through the Exchange may be
terminated in accordance with Sec. 155.430(b)(2)(i). If an Exchange
chooses to pend a plan selection prior to enrollment, and the Exchange
cannot verify eligibility for the SEP, then the consumer would be found
ineligible for the SEP, and the plan selection would not result in an
enrollment. The determination of how many enrollments would constitute
75 percent would be required to be based on enrollment through all
SEPs. This would provide Exchanges with implementation flexibility so
they can continue to decide which special enrollment types to verify
and the best way to conduct that verification. Exchanges would not be
required to verify eligibility for all SEPs, since the cost to verify
eligibility for SEP triggering events with very low volumes could be
greater than the benefit of verifying eligibility for them.
While we propose to eliminate the current flexibility Exchanges
have under Sec. 155.420(g) to provide exceptions to SEP verification
processes, we continue certain flexibilities that State Exchanges
currently have to design eligibility verification processes that are
appropriate for their market and Exchange consumers, such that State
Exchanges may have such flexibility in their approaches for meeting the
requirement proposed at Sec. 155.420(g) to verify eligibility for an
SEP. Specifically, under Sec. 155.315(h), State Exchanges have the
flexibility to propose alternative methods for conducting required
verifications to determine eligibility for enrollment in a QHP under
subpart D, such that the alternative methods proposed reduce the
administrative costs and burdens on individuals while maintaining
accuracy and minimizing delay. We propose to use the existing authority
at Sec. 155.315(h) to allow State Exchanges to request HHS approval
for use of alternative processes for verifying eligibility for SEPs as
part of determining eligibility for SEPs under Sec. 155.305(b).\143\
This would allow, for instance, the State Exchanges that have
administrative burden and cost concerns the option to coordinate with
HHS to devise and agree upon the best approach for SEP verification for
their specific population. We recognize that State Exchanges may vary
in their approach and technical capabilities relating to verification
of SEPs and may need additional time to implement this requirement.
Therefore, we are proposing to allow Exchanges until PY 2026 to
implement SEP verification. We welcome comment on this topic and
suggestions to alleviate this concern.
---------------------------------------------------------------------------
\143\ Such requests would be made through the State-based
Marketplace Annual Reporting Tool (SMART; OMB Control Number 0938-
1244).
---------------------------------------------------------------------------
We seek comment on these proposals. With respect to SEP
verification, we seek comment from States about the 75 percent
verification threshold and whether it should be based on past year SEP
enrollments or some other appropriate metric such as future year
projections understanding that unforeseen events may occur that may
drive up or down enrollments from year-to-year. We also understand that
State Exchanges have matured and that even smaller State Exchanges may
find applying pre-verification to all new enrollments through SEPs less
burdensome than the first time we proposed this policy. Therefore, we
also invite comment on whether State Exchanges believe it to be
feasible to apply pre-enrollment verification to enrollments through
SEPs beyond the stated 75 percent in alignment with our proposed goal
for Exchanges on the Federal platform.
C. Part 156--Health Insurance Issuer Standards Under the Affordable
Care Act, Including Standards Related to Exchanges
1. Prohibition on Coverage of Sex-Trait Modification as an EHB (Sec.
156.115(d))
We propose to amend Sec. 156.115(d) to provide that issuers of
non-grandfathered individual and small group market health insurance
coverage--that is, issuers of coverage subject to EHB requirements--may
not provide coverage for sex-trait modification as an EHB beginning
with PY 2026.
Section 1302(a) of the ACA provides for the establishment of an EHB
package that includes coverage of EHB (as defined by the Secretary of
HHS), cost-sharing limits, and AV requirements. Among other things, the
law directs that the scope of the EHB be equal in scope to the benefits
provided under a typical employer plan and that they include at least
the 10 general categories outlined in the statute and the items and
services covered within those categories.\144\
---------------------------------------------------------------------------
\144\ See section 1302(b)(2)(A) of the ACA. See also section
1302(b)(1) of the ACA, delineating the 10 general categories of EHB:
ambulatory patient services; emergency services; hospitalization;
maternity and newborn care; mental health and substance use disorder
services, including behavioral health treatment; prescription drugs;
rehabilitative and habilitative services and devices; laboratory
services; preventive and wellness services and chronic disease
management; and pediatric services, including oral and vision care.
---------------------------------------------------------------------------
Section 156.115(d) currently provides that for plan years beginning
on or before January 1, 2026, an issuer of a
[[Page 12986]]
plan offering EHB may not include routine non-pediatric dental
services, routine non-pediatric eye exam services, long-term/custodial
nursing home care benefits, or non-medically necessary orthodontia as
EHB; and, for plan years beginning on or after January 1, 2027, an
issuer of a plan offering EHB may not include routine non-pediatric eye
exam services, long-term/custodial nursing home care benefits, or non-
medically necessary orthodontia as EHB. In the EHB Rule (78 FR 12845),
we stated that routine non-pediatric dental services are not typically
included in the medical plans offered by employers and are often
provided as excepted benefits by the employer. We accordingly proposed
and finalized the rule prohibiting issuers from covering these services
as EHB.145 146
---------------------------------------------------------------------------
\145\ 78 FR 12845.
\146\ In the 2025 Payment Notice (89 FR at 26343), we removed
routine non-pediatric dental services from Sec. 156.115(d).
---------------------------------------------------------------------------
On January 20, 2025, President Trump issued Executive Order 14168,
``Defending Women From Gender Ideology Extremism and Restoring
Biological Truth to the Federal Government'' (E.O. 14168) that requires
agencies to ``take all necessary steps, as permitted by law, to end the
Federal funding of gender ideology.'' Then, on January 28, 2025,
President Trump issued Executive Order 14187, ``Protecting Children
From Chemical and Surgical Mutilation'' (E.O. 14187) that directs the
Secretary of HHS to take all appropriate actions consistent with
applicable law to end the chemical and surgical mutilation of children.
The phrase ``chemical and surgical mutilation'' in E.O. 14187 means the
use of puberty blockers, sex hormones, and surgical procedures that
attempt to transform an individual's physical appearance to align with
an identity that differs from his or her sex or that attempt to alter
or remove an individual's sexual organs to minimize or destroy their
natural biological functions. As noted in the definition of ``chemical
and surgical mutilation'' in E.O. 14187, this phrase sometimes is
referred to as ``gender affirming care,'' and is referred to in this
proposed rule as ``sex-trait modification.'' For purposes of this
definition, the term ``sex'' is a person's immutable biological
classification as either male or female; the term ``female'' is a
person of the sex characterized by a reproductive system with the
biological function of producing eggs (ova); and the term ``male'' is a
person of the sex characterized by a reproductive system with the
biological function of producing sperm.\147\ Because coverage of sex-
trait modification is not typically included in employer-sponsored
plans, and EHB must be equal in scope to a typical employer plan, we
propose to add ``sex-trait modification'' to the list of items and
services that may not be covered as EHB beginning in PY 2026.
---------------------------------------------------------------------------
\147\ Office of Women's Health (2025, Feb. 19). Sex-Based
Definitions. Dep't of Health and Human Services. Retrieved March 6,
2025, from https://womenshealth.gov/article/sex-based-definitions.
---------------------------------------------------------------------------
Although the fact that sex-trait modification is not typically
included in employer-sponsored plans is an independent, sufficient, and
legally compelled reason for this rule, the agency acknowledges recent
executive orders that have been subject to preliminary injunctions. The
agency makes this proposal independently of the executive orders
because sex-trait modification is not typically included in employer
health plans and therefore cannot legally be covered as EHB. The agency
acknowledges that two courts have issued preliminary injunctions
relating to the executive orders described above, and the agency does
not rely on the enjoined sections of the executive orders in making
this proposal.
In particular, the United States District Court for the Western
District of Washington has issued a preliminary injunction that
enjoined defendant agencies ``from enforcing or implementing section 4
of Executive Order 14187 within the Plaintiff States,'' as well as
``sections 3(e) or 3(g) of Executive Order 14168 to condition or
withhold Federal funding based on the fact that a health care entity or
health professional provides gender-affirming care within the Plaintiff
States.'' Washington v. Trump, No. 2:25-CV-00244-LK, 2025 WL 659057, at
*28 (W.D. Wash. Feb. 28, 2025). The United States District Court for
the District of Maryland has issued a preliminary injunction that
enjoins the Federal defendants in that case ``from conditioning,
withholding, or terminating Federal funding under section 3(g) of
Executive Order 14168 and section 4 of Executive Order 14187, based on
the fact that a healthcare entity or health professional provides
gender-affirming medical care to a patient under the age of nineteen''
and required a written notice ``instruct[ing] the aforementioned groups
that Defendants may not take any steps to implement, give effect to, or
reinstate under a different name the directives in section 3(g) of
Executive Order 14168 or section 4 of Executive Order 14187 that
condition or withhold Federal funding based on the fact that a
healthcare entity or health professional provides gender-affirming
medical care to a patient under the age of nineteen.'' PFLAG, Inc. v.
Trump, No. CV 25-337-BAH, 2025 WL 685124, at *33 (D. Md. Mar. 4, 2025).
If finalized, the rule proposed here would not conflict with those
preliminary injunctions because, among other things, it would be based
on independent legal authority and reasons and not the enjoined
sections of the executive orders. In any event, any final rule on this
issue would not be effective until PY 2026, and would not be
implemented, made effective, or enforced in contravention of any court
orders.
With regard to whether or not sex-trait modification is typically
included in an employer-sponsored plan, we are aware that employer-
sponsored plans often exclude coverage for some or all sex-trait
modification, and it is our understanding that these exclusions may
include use of puberty blockers, sex hormones, and surgical procedures
identified in E.O. 14187. This includes many small group plans that do
not cover such services; we note that 42 States chose or defaulted to
small group plans as their EHB-benchmark plan selections in 2014 and
2017.\148\ In addition, of those employer-sponsored plans that do cover
sex-trait modification, these EHB-benchmark plan documents would
indicate that there is inconsistency nationwide with respect to the
scope of benefits included. The infrequent and inconsistent coverage of
such benefits is also apparent in the treatment of sex-trait
modification by the States and territories, which provides further
support that coverage of these benefits is not typical: our
understanding is that the majority of States and territories do not
include coverage for sex-trait modification in State employee health
benefit plans or mandate its coverage in private health insurance
coverage.\149\ In addition, 12 States and 5 territories do not mention
or have no clear policy regarding sex-trait modification in their
employee health benefit plans, and 14 States explicitly exclude sex-
trait modification from their State employee health benefit plans.\150\
---------------------------------------------------------------------------
\148\ CMS. (2016, April 8). Final List of BMPs. https://www.cms.gov/cciio/resources/data-resources/downloads/final-list-of-bmps_4816.pdf.
\149\ Movement Advancement Project. 2025. ``Equality Maps:
Healthcare Laws and Policies.'' https://www.mapresearch.org/equality-maps/healthcare_laws_and_policies. Accessed Feb. 23, 2025.
\150\ Ibid.
---------------------------------------------------------------------------
We believe that coverage of sex-trait modification may be sparse
among
[[Page 12987]]
typical employer plans because the rate of individuals utilizing sex-
trait modification is very low; less than 1 percent of the U.S.
population seeks forms of sex-trait modification; \151\ this low
utilization is apparent in the External Data Gathering Environment
(EDGE) limited data set.\152\ In this data set, which encompasses the
majority of health insurance enrollees covered outside of large group
plans, approximately 0.11 percent of enrollees in non-grandfathered
individual and small group market plans utilized sex-trait modification
during PYs 2022 and 2023.\153\
---------------------------------------------------------------------------
\151\ See, Hughes, L.; Charlton, B.; Berzansky, I.; et. al.
(2025, Jan. 6). Gender-Affirming Medications Among Transgender
Adolescents in the US, 2018-2022. JAMA Pediatr. 179(3):342-344.
https://jamanetwork.com/journals/jamapediatrics/fullarticle/2828427;
see also, Dai, D.; Charlton, B.; Boskey, E.; et. al. (2024, June
27). Prevalence of Gender-Affirming Surgical Procedures Among Minors
and Adults in the US. JAMA Netw Open. 7(6):e2418814. https://jamanetwork.com/journals/jamanetworkopen/fullarticle/2820437.
\152\ The EDGE limited data set contains certain masked
enrollment and claims data for on- and off-Exchange enrollees in
risk adjustment covered plans in the individual and small group
(including merged) markets, in States where HHS operated the risk
adjustment program required by section 1343 of the ACA, and is
derived from the data collected and used for the HHS-operated risk
adjustment program.
\153\ See https://www.cms.gov/data-research/files-order/limited-data-set-lds-files/enrollee-level-external-data-gathering-environment-edge-limited-data-set-lds. To request the EDGE limited
data set, refer to the instructions at https://www.cms.gov/data-research/files-for-order/limited-data-set-lds-files.
---------------------------------------------------------------------------
We note that nothing in this proposal would prohibit health plans
from voluntarily covering sex-trait modification as a non-EHB
consistent with applicable State law, nor would it prohibit States from
requiring the coverage of sex-trait modification, subject to the rules
related to State-mandated benefits at Sec. 155.170.
We are also aware that some stakeholders do not believe that sex-
trait modification services fit into any of the 10 categories of EHB
and, therefore, do not fit within the EHB framework even if some
employers cover such services.\154\ As discussed later, the items and
services that comprise sex-trait modification are performed to align or
transform an individual's physical appearance with an identity that
differs from his or her sex. We are also concerned about the scientific
integrity of claims made to support their use in health care settings.
As such, we seek comment on whether it would be appropriate to exclude
sex-trait modification as an EHB.
---------------------------------------------------------------------------
\154\ EHB categories defined in Section 1302(b) are ambulatory
patient services, emergency services, hospitalization, maternity and
newborn care, mental health and substance use disorders--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.
---------------------------------------------------------------------------
Consistent with the other listed benefits that issuers must not
cover as an EHB at Sec. 156.115(d), we are not proposing a definition
of ``sex-trait modification.'' However, we solicit comment on whether
we should adopt a formal definition of ``sex-trait modification,''
whether there are current issuer standards with regards to what is
considered ``sex trait modification''; and how such a definition could
best account for the items and services currently covered or excluded
as sex-trait modification by plans subject to the EHB requirement.
We also recognize that there are some medical conditions, such as
precocious puberty, or therapy subsequent to a traumatic injury, where
items and services that are also used for sex-trait modification may be
appropriate. We seek comments regarding whether we should define
explicit exceptions to permit the coverage of such items and services
as EHB for other medical conditions, and what those conditions are, for
potential inclusion in finalizing as part of this rule.
Pursuant to Sec. 155.170(a)(2), a covered benefit in a State's
EHB-benchmark plan is considered an EHB. There is no obligation for the
State to defray the cost of a State mandate enacted after December 31,
2011, that requires coverage of a benefit covered in the State's EHB-
benchmark plan. If a State mandates coverage of a benefit that is in
its EHB-benchmark plan, the benefit will continue to be considered EHB
and the State will not have to defray the costs of that mandate.
However, if at a future date the State updates its EHB-benchmark plan
under Sec. 156.111 and removes the mandated benefit from its EHB-
benchmark plan, the State may have to defray the costs of the benefit
under the factors set forth at Sec. 155.170 as it will no longer be an
EHB after its removal from the EHB-benchmark plan.
There are some State EHB-benchmark plans that currently cover sex-
trait modification as an EHB. Other State EHB benchmark plans provide
coverage for sex-trait modification, but do not explicitly mention sex-
trait modification or any similar term.\155\ If this proposal is
finalized as proposed, health insurance issuers will be prohibited from
providing coverage for sex-trait modification as an EHB in any State
beginning in PY 2026. If any State separately mandates coverage for
sex-trait modification outside of its EHB-benchmark plan, the State
would be required to defray the cost of that State mandated benefit as
it would be considered in addition to EHB pursuant to Sec. 155.170.
However, if any such State does not separately mandate coverage of sex-
trait modification outside of its EHB-benchmark plan, there would be no
defrayal obligation. States may consider mandating coverage of sex-
trait modification in the future, in which case defrayal obligations at
Sec. 155.170 would apply, and CMS would enforce the defrayal
obligations appropriately. Further, issuers in States in which sex-
trait modification is currently an EHB would also be prohibited from
covering it as an EHB beginning in PY 2026. However, they may opt to
continue covering sex-trait modification consistent with applicable
State law, but not as an EHB. We seek comment on whether additional
program integrity measures are necessary to ensure Federal subsidies do
not continue to fund sex-trait modification if this proposal is
finalized.
---------------------------------------------------------------------------
\155\ The EHB-benchmark plans for California, Colorado, New
Mexico, Vermont, and Washington specifically include coverage of
some sex-trait modification. The EHB-benchmark plans of six other
States do not expressly include or exclude coverage of sex-trait
modification. The EHB-benchmark plans of 40 States include language
that excludes coverage of sex-trait modification.
---------------------------------------------------------------------------
Lastly, we seek comment on the proposed effective date of this
proposal. We are proposing PY 2026 as the beginning effective date for
when issuers subject to EHB requirements would be prohibited from
covering sex-trait modification as an EHB. We seek comment specifically
on the impact that this proposal would have, if finalized, on health
insurance coverage in the individual, small group, and large group
markets for PY 2026, or whether an earlier or later effective date is
justified.
We seek comment on this proposal.
2. Premium Adjustment Percentage (Sec. 156.130(e))
We propose to update the premium adjustment percentage methodology
to establish a premium growth measure that captures premium changes in
the individual market in addition to employer-sponsored insurance (ESI)
premiums for PY 2026 and beyond. Based on the proposed update to the
premium adjustment methodology, we propose values for the PY 2026
premium adjustment percentage, maximum annual limitation on cost
sharing, reduced maximum annual limitations on cost sharing, and
required contribution percentage. If this proposal is finalized as
proposed, the values for the PY 2026 premium adjustment percentage,
maximum annual limitation
[[Page 12988]]
on cost sharing, reduced maximum annual limitations on cost sharing,
and required contribution percentage proposed in this rule would
supersede the values published in the guidance document ``Premium
Adjustment Percentage, Maximum Annual Limitation on Cost Sharing,
Reduced Maximum Annual Limitation on Cost Sharing, and Required
Contribution Percentage for the 2026 Benefit Year'' published on CMS'
website on October 8, 2024 (October 2024 PAPI Guidance).\156\
---------------------------------------------------------------------------
\156\ See CMS. (2024, Oct. 8). Premium Adjustment Percentage,
Maximum Annual Limitation on Cost Sharing, Reduced Maximum Annual
Limitation on Cost Sharing, and Required Contribution Percentage for
the 2026 Benefit Year. https://www.cms.gov/files/document/2026-papi-parameters-guidance-2024-10-08.pdf.
---------------------------------------------------------------------------
Section 1302(c)(4) of the ACA directs the Secretary to determine an
annual premium adjustment percentage, the measure of premium growth
that is used to set the rate of increase for the following three
parameters: (1) the maximum annual limitation on cost sharing (defined
at Sec. 156.130(a)); (2) the required contribution percentage used to
determine eligibility for certain exemptions under section 5000A of the
Code (defined at Sec. 155.605(d)(2)(iii)); and (3) the employer shared
responsibility payment amounts under section 4980H(a) and (b) of the
Code (see section 4980H(c)(5) of the Code). Section 1302(c)(4) of the
ACA and Sec. 156.130(e) provide that the premium adjustment percentage
is the percentage (if any) by which the average per capita premium for
health insurance coverage for the preceding calendar year exceeds such
average per capita premium for health insurance for 2013. Section
156.130(e) also provides that this percentage will be published in
guidance in January of the calendar year preceding the benefit year for
which the premium adjustment percentage is applicable, unless HHS
proposes changes to the methodology, in which case, HHS will publish
the annual premium adjustment percentage in an annual HHS notice of
benefit and payment parameters or another appropriate rulemaking.
The 2015 Payment Notice (79 FR 13744) and 2015 Market Standards
Rule (79 FR 30240) established a methodology for estimating the average
per capita premium for purposes of calculating the premium adjustment
percentage for PY 2015 and beyond. Beginning with PY 2015, the premium
adjustment percentage was calculated based on the estimates and
projections of average per enrollee ESI premiums from the NHEA, which
are calculated by the CMS Office of the Actuary. In the 2015 Payment
Notice proposed rule (78 FR 72359 through 72361), we proposed that the
premium adjustment percentage be calculated based on the projections of
average per enrollee private health insurance premiums from the NHEA.
Based on comments received, we finalized in the 2015 Payment Notice (79
FR 13801 through 13804) use of per enrollee ESI premiums from the NHEA
in the premium adjustment percentage methodology. We finalized use of
per enrollee ESI premiums because these premiums reflected trends in
health care costs without being skewed by individual market premium
fluctuations resulting from the early years of implementation of the
ACA market rules. However, recognizing that ESI premiums did not
comprehensively reflect premiums for the entire market, we noted in the
2015 Payment Notice (79 FR 13801 through 13804) that we may propose to
change our methodology after the initial years of implementation of the
market rules, once the premium trend is more stable.
In the 2020 Payment Notice proposed rule (84 FR 285 through 289),
we noted that we believed the premium trend in the individual market
had stabilized and, therefore, proposed to change the premium
adjustment percentage methodology to comprehensively reflect premium
changes across all affected markets as we had suggested in the 2015
Payment Notice (79 FR 13801 through 13804). Based on the general trend
of stabilizing premiums and our conclusion that including individual
market premium changes going forward would more accurately reflect true
premium growth, in the 2020 Payment Notice (84 FR 17537 through 17541),
we finalized the proposal to use per enrollee private health insurance
premiums from the NHEA (excluding Medigap and property and casualty
insurance) in the premium adjustment percentage calculation.
In the 2022 Payment Notice proposed rule (85 FR 78633 through
78635), we proposed a premium adjustment percentage using the
methodology adopted in the 2020 Payment Notice (84 FR 17537 through
17541). In addition, we proposed to amend Sec. 156.130(e) to,
beginning with PY 2023, set the premium adjustment percentage in
guidance separate from the annual notice of benefit and payment
parameters, unless we were to propose a change to the methodology for
calculating the parameters, in which case, we would do so through
notice-and-comment rulemaking. We finalized this latter proposal in
part 2 of the 2022 Payment Notice (86 FR 24237 through 24238). Although
we did not propose to change the methodology for calculating the
premium adjustment percentage in this proposed rule, we finalized a new
methodology in part 2 of the 2022 Payment Notice (86 FR 24233 through
24237) that readopted the measure of premium growth for PY 2022 and
beyond using the NHEA projections of average per enrollee ESI premium,
which was the methodology used for PY 2015 through PY 2019. Although we
did not propose to change the methodology in the 2022 Payment Notice
proposed rule, we nonetheless received comments requesting that we
revert to the use of the NHEA ESI premium measure to estimate premium
growth. We finalized this change after concluding it was consistent
with the will and interest of interested parties and would mitigate the
uncertainty regarding premium growth during the COVID-19 PHE.
Additionally, we concluded that this methodology aligned with the
policy objectives in the January 28, 2021 Executive Order on
Strengthening the Affordable Care Act and Medicaid (86 FR 7793) \157\
and the ARP,\158\ which both emphasized making health coverage
accessible and affordable for consumers of all income levels.
---------------------------------------------------------------------------
\157\ We note that the January 20, 2025 Executive Order on
Initial Rescissions of Harmful Executive Orders and Actions (90 FR
8237) revoked Executive Order 14009 of January 28, 2021
(Strengthening Medicaid and the Affordable Care Act).
\158\ ARP, Public Law 117-2.
---------------------------------------------------------------------------
Because the COVID-19 PHE has ended \159\ and should no longer
impact the premium adjustment percentage, and because evidence
described below now suggests that the COVID-19 PHE did not impact
premiums as we anticipated in part 2 of the 2022 Payment Notice (86 FR
24233 through 24237), we now propose to revert to the methodology for
calculating the premium adjustment percentage that we established in
the 2020 Payment Notice (84 FR 17537 through 17541). Specifically, we
propose to calculate the premium adjustment percentage for PY 2026 and
beyond using an adjusted private individual and group market health
insurance premium measure, which is similar to NHEA's private health
insurance premium measure.\160\ NHEA's private health insurance premium
measure includes premiums
[[Page 12989]]
for ESI, ``direct purchase insurance,'' which includes individual
market health insurance purchased directly by consumers from health
insurance issuers, both on and off the Exchanges, Medigap insurance,
and the medical portion of accident insurance (``property and
casualty'' insurance). The measure we propose to use includes NHEA
estimates and projections of ESI and direct purchase insurance
premiums, but would exclude premiums for Medigap and property and
casualty insurance (we refer to the proposed measure as ``private
health insurance (excluding Medigap and property and casualty
insurance),'' consistent with the approach finalized in the 2020
Payment Notice (84 FR 17537 through 17541).
---------------------------------------------------------------------------
\159\ HHS. (2023, May 11). HHS Secretary Xavier Becerra
Statement on End of the COVID-19 Public Health Emergency. https://public3.pagefreezer.com/browse/HHS.gov/02-01-2024T03:56/https://www.hhs.gov/about/news/2023/05/11/hhs-secretary-xavier-becerra-statement-on-end-of-the-covid-19-public-health-emergency.html.
\160\ See Table 17 of the ``NHE Projections--Tables (ZIP)'' link
available at https://www.cms.gov/data-research/statistics-trends-and-reports/national-health-expenditure-data/projected.
---------------------------------------------------------------------------
We are proposing to exclude Medigap and property and casualty
insurance from the premium measure since these types of coverage are
not considered primary medical coverage for individuals who elect to
enroll.\161\ For example, Medigap coverage supplements Original
Medicare \162\ Plan coverage by helping to pay certain out-of-pocket
costs not covered by Original Medicare such as co-payments,
coinsurance, and deductibles. Specifically, to calculate the premium
adjustment percentage for PY 2026, the measures for 2013 and 2025 would
be calculated as private health insurance premiums minus premiums paid
for Medigap insurance and property and casualty insurance, divided by
the unrounded number of unique private health insurance enrollees with
comprehensive coverage (that is, excluding supplemental coverage such
as Medigap and property and casualty insurance from the count of
enrollees in the denominator). These results would then be rounded to
the nearest $1 followed by a division of the 2025 figure by the 2013
figure rounded to 10 significant digits. The proposed premium measure
would reflect cumulative, historic growth in premiums for private
health insurance markets (excluding Medigap and property and casualty
insurance) from 2013 onwards.
---------------------------------------------------------------------------
\161\ Section 1302(c)(4) of the ACA refers to ``the average per
capita premium for health insurance coverage in the United States.''
The term ``health insurance coverage'' is defined in 42 U.S.C.
300gg-91(b)(1) as ``benefits consisting of medical care (provided
directly, through insurance or reimbursement, or otherwise and
including items and services paid for as medical care) under any
hospital or medical service policy or certificate, hospital or
medical service plan contract, or health maintenance organization
contract offered by a health insurance issuer.''
\162\ Original Medicare includes Medicare Part A (Hospital
Insurance) and Medicare Part B (Medical Insurance) and covers
services such as inpatient hospital care, outpatient services and
office visits, tests, and preventive services. See, for example,
CMS. (n.d.). What Original Medicare Covers. https://www.medicare.gov/providers-services/original-medicare.
---------------------------------------------------------------------------
We believe this proposal aligns closely with the criteria we have
previously used for establishing the premium adjustment percentage
methodology. As discussed in the 2015 Payment Notice (79 FR 13801
through 13804) and 2020 Payment Notice (84 FR 17537 through 17541), we
considered four criteria when finalizing the premium adjustment
percentage methodology for those plan years:
(1) Comprehensiveness--the premium adjustment percentage should be
calculated based on the average per capita premium for health insurance
coverage for the entire market, including the individual and group
markets, and both fully insured and self-insured group health plans;
(2) Availability--the data underlying the calculation should be
available by the summer of the year that is prior to the calendar year
so that the premium adjustment percentage can be published in the
annual HHS notice of benefit and payment parameters in time for issuers
to develop their plan designs;
(3) Transparency--the methodology for estimating the average
premium should be easily understandable and predictable; and
(4) Accuracy--the methodology should have a record of accurately
estimating average premiums.
Using this methodology, we originally proposed a more comprehensive
measure that reflected the entire market in the 2015 Payment Notice
proposed rule (78 FR 72359 through 72361). We only deviated from fully
following the comprehensiveness criteria in the 2015 Payment Notice (79
FR 13801 through 13804) to account for the significant changes
occurring in the individual market during the initial years of the
implementation of the ACA's insurance market rules. As we noted at that
time, under these market rules, the individual market was likely to be
the most affected by changes in benefit design and market composition.
Due to the uncertainty over how these changes would impact enrollment
and enrollee claims experience, the individual market was also more
likely to be subject to risk premium pricing to account for this
uncertainty. Thus, we anticipated a level of premium volatility in the
individual market that may compromise the criteria for accuracy in
estimating the premium for the entire market. As noted previously, we
further anticipated changing the methodology once the premium trend was
more stable and, accordingly, we then changed the methodology in the
2020 Payment Notice (84 FR 17537 through 17541) to include individual
market premiums after premium trends stabilized.
When we established the current premium adjustment percentage
methodology in part 2 of the 2022 Payment Notice (86 FR 24233 through
24237), we focused on how we believed the change would mitigate the
uncertainty regarding premium growth during the COVID-19 PHE and
outlined similar concerns over the accuracy of premium estimates as we
had during the initial years of the ACA's market rules. Specifically,
we referenced that private health insurance premiums are more likely to
be influenced by risk premium pricing, or premium pricing based on
changes in benefit design and market composition in the individual
market. Particularly during times of economic uncertainty, such as that
experienced as a result of the COVID-19 PHE, we noted how private
health insurance premium growth could reflect issuer uncertainty in
market developments and could be reflected in the NHEA private
insurance premium measure (excluding Medigap and property and casualty
insurance). Due to these concerns, we noted that we believed NHEA ESI
premium data would provide a more stable premium measure. Therefore, we
concluded that using the NHEA ESI premium measure would provide a more
appropriate and fair measure of average per capita premiums for health
insurance coverage when considering the goal of consumer protection.
We published the current premium adjustment percentage methodology
in part 2 of the 2022 Payment Notice (86 FR 24233 through 24237) on May
5, 2021, during the COVID-19 PHE. As noted above, we finalized this
methodology after concluding in part that it was consistent with the
will and interest of interested parties. After taking into
consideration changes in circumstances since this time (including the
end of the COVID-19 PHE) and examining new data on health insurance
premiums that have since become available, we believe it is appropriate
to add individual market premiums back to the premium adjustment
percentage methodology. We acknowledge that a higher number of comments
can suggest a position we should consider more closely. However, we
must also consider that many parties who comment on rulemaking may
represent the will of special interests who do not necessarily
represent all special interests or the general public interest in the
faithful and efficient administration of the
[[Page 12990]]
statute. It is not uncommon to receive comments that only represent one
side and no opposing comments that might represent other special
interests or a more general interest in good governance or the equities
of the taxpayer. As our constitutional role is to faithfully execute
the statute, we are responsible for considering all comments, as well
as perspectives that may not be fully represented in comments, within
the context of what the statute requires.
We have also revisited the rationale for establishing the current
premium adjustment percentage based, in part, on how it aligns with
certain policy objectives, such as objectives that emphasize making
health coverage accessible and affordable for consumers of all income
levels. Specifically, the ACA directs the Secretary to base the premium
adjustment percentage on ``the average per capita premium for health
insurance coverage in the United States'' \163\ and does not provide
further direction on the premium measure to use, giving the Secretary
discretion over what premium measure to select. Consideration of other
policy objectives in selecting this premium measure should not
undermine or weaken the specific objective that Congress intended for
the statutory provision to meet. Here, the premium adjustment
percentage is the mechanism in the ACA meant to ensure that certain
parameters of the ACA change with health insurance premiums over time.
As such, the premium adjustment percentage serves a specific objective
to ensure that annual limits on cost sharing, eligibility for hardship
exemptions, and employer shared responsibility payment amounts remain
aligned with premium growth to account for future inflation. We believe
accounting for other policy objectives, such as making coverage more
accessible and affordable or reducing the burden on taxpayers, can only
serve to distort the alignment the ACA requires HHS to maintain between
premium growth and the parameters subject to the premium adjustment
percentage. Therefore, we continue to believe the four criteria of
comprehensiveness, availability, transparency, and accuracy that we
first identified in the 2015 Payment Notice (79 FR 13801 through 13804)
remain the best guide for setting a methodology that supports the
objective of the premium adjustment percentage within the statute.
---------------------------------------------------------------------------
\163\ See Section 1302(c)(4) of the ACA.
---------------------------------------------------------------------------
Although we did not reference these criteria in part 2 of the 2022
Payment Notice (86 FR 24233 through 24237), part of our justification
did align with how we used the criteria in the 2015 Payment Notice (79
FR 13801 through 13804). Specifically, we were concerned that there was
a potential for uncertainty in the private health insurance premium
measure that includes the individual market due to issuer responses to
the COVID-19 PHE, impacting the accuracy of a premium measure that
included individual market premiums. However, we now have evidence that
the COVID-19 PHE did not create the same uncertainty in the individual
market that was present during the initial implementation of the ACA.
As discussed previously, we decided to not use individual market
premiums in the 2015 Payment Notice (79 FR 13801 through 13804) due to
the uncertainty over how the ACA's market rules would change benefit
designs and market composition of the individual market and how this
uncertainty would be more likely to subject the individual market to
risk premium pricing than the ESI market. We largely made the same
points in part 2 of the 2022 Payment Notice (86 FR 24233 through 24237)
to justify not using individual market premiums due to uncertainty
around the COVID-19 PHE. Yet, the COVID-19 PHE did not introduce new
benefit designs as the implementation of the ACA's market rules did.
The COVID-19 PHE also did not introduce a clear and distinctive risk to
the market composition of the individual market. Individual and group
markets were similarly exposed to the health risks associated with the
COVID-19 PHE. Although there was uncertainty over whether the
individual market would enroll more people who lost ESI due to COVID-19
PHE-related job losses, there was no reason to believe this population
would introduce a higher risk to the individual market pool. By
comparison, in the early period of implementation, the ACA's market
rules were expected to shift large numbers of people with potentially
high claims costs who lacked insurance or were covered in State high-
risk pools into the individual market risk pool. Consequently, the
individual market premiums were not subject to any more uncertainty due
to the COVID-19 PHE than ESI premiums and each market would, therefore,
likely face similar levels of risk premium pricing due to the COVID-19
PHE. Based on this analysis, we do not believe that the rationales we
cited in part 2 of the 2022 Payment Notice (86 FR 24233 through 24237)
continue to justify removing individual market premiums from the
premium adjustment methodology.
After reviewing trends between individual premiums and ESI
premiums, we now believe that individual premiums remained stable
during the COVID-19 PHE. As shown in Table 6, per enrollee expenditure
growth from the NHEA historical tables was actually more stable in the
on-Exchange individual market than ESI during the COVID-19 PHE, with
significantly lower premium growth rates in every year from 2019
through 2023.\164\ Moreover, premiums for other forms of direct
purchase insurance,\165\ which would also be included in the private
health insurance premiums (excluding Medigap and property and casualty
insurance) measure have had lower growth rates than ESI from 2021
through 2023 and have experienced lower growth rates since 2019 than in
[[Page 12991]]
years prior to the COVID-19 PHE. Similarly, a comparison of premiums
from medical loss ratio data \166\ in Table 7 shows individual market
premiums remained more stable than small group and large group premiums
from 2019 through 2023. In addition, based on our review of premium
trends before 2014, individual market premium trends were also
comparably stable to ESI. Taken together, these data suggest that the
COVID-19 PHE did not result in greater volatility in the individual
market than in the ESI market as had been anticipated in part 2 of the
2022 Payment Notice (86 FR 24233 through 24237). Instead, the premium
data show premium trends remained generally stable between individual
and ESI markets outside the initial years of the ACA's market rules
including years impacted by the COVID-19 PHE, suggesting that a more
comprehensive measure of premium growth for these years would also be a
more accurate measure. As such, we do not believe there is a
justification for de-prioritizing the comprehensiveness criterion by
excluding individual market premiums from the premium adjustment
percentage methodology for PY 2026 and beyond.
---------------------------------------------------------------------------
\164\ See the ``NHE Tables'' link under the ``Downloads
Section'' at CMS. (2024, Dec. 18). NHE Historical Data. https://www.cms.gov/data-research/statistics-trends-and-reports/national-health-expenditure-data/historical (Page Updated December 18, 2024;
Retrieved January 29, 2025). We use the historical tables for this
analysis because they reflect estimates of actual 2023 values and
have been updated more recently than the projected tables used to
calculate the premium adjustment percentage. The historical tables
do not include a grouped measure of private health insurance
premiums (excluding Medigap and property and casualty insurance), so
we have separate columns for On Exchange and Other Direct Purchase,
which are the major components of the proposed premium measure. The
projected tables include a measure of private health insurance
premiums (excluding Medigap and property and casualty insurance),
but do not include separate measures of On Exchange and Other Direct
Purchase premiums and only include projections of values (that is,
non-historical values) after 2022. The projected tables are expected
to be updated in the summer 2025 to match the values in the
historical tables through 2023 for ESI premiums and will also
include updated historical values for private health insurance
premiums (excluding Medigap and property and casualty insurance) at
that time. Consistent with the policy finalized in the 2021 Payment
Notice (85 FR 29227 through 29229), even if the NHEA projected
tables are updated before the publication of the final rule, we will
finalize the payment parameters that depend on the NHEA projected
tables data, including the premium adjustment percentage and
required contribution percentage, based on the data that are
available as of the publication of the proposed rule to increase the
predictability of benefit design.
\165\ This category of insurance premiums includes insurance
purchased on the private market that is not associated with an
employer or a Medigap or Exchange plan. Examples of direct purchase
insurance include group plans purchased through AARP or other
associations, individual market plans (both plans that are subject
to the ACA market rules and those that are not subject to all the
ACA market rules, such as grandfather and grandmother plans), Short-
Term Limited Duration (STLD) health plans, and the Basic Health
Program (BHP). See the Definitions, Sources, and Methods used for
the OACT estimates, available at: CMS. (December 18, 2024). NHE
Historical Data. https://www.cms.gov/data-research/statistics-trends-and-reports/national-health-expenditure-data/historical.
\166\ See the Public Use Files for Medical Loss Ratio reporting
available at CMS. (December 23, 2024). Medical Loss Ratio Data and
System Resources. https://www.cms.gov/marketplace/resources/data/medical-loss-ratio-data-systems-resources.
[GRAPHIC] [TIFF OMITTED] TP19MR25.005
[GRAPHIC] [TIFF OMITTED] TP19MR25.006
We believe removing individual market premiums from the premium
adjustment percentage methodology was an unnecessary policy change that
seemed reasonable during the COVID-19 PHE. As noted previously, this
deviation from the full application of the four criteria we first
identified in the 2015 Payment Notice (79 FR 13801 through 13804) was
intended to favor accuracy over comprehensiveness. However, our
analysis of recent data suggests that the justification we cited in
part 2 of the 2022 Payment Notice (86 FR 24233 through 24237) that
individual market premiums were at greater risk of a volatile response
to the COVID-19 PHE did not prove to be correct.
Using the private health insurance premium measure data (excluding
Medigap and property and casualty insurance) proposed above, we propose
that the premium adjustment percentage for PY 2026 be the percentage
(if any) by which the most recent NHEA projection of per enrollee
premiums for private health insurance (excluding Medigap and property
and casualty
[[Page 12992]]
insurance) for 2025 ($7,885) exceeds the most recent NHEA estimate of
per enrollee premiums for private health insurance (excluding Medigap
and property and casualty insurance) for 2013 ($4,714).\167\ Using this
formula, the proposed premium adjustment percentage for 2026 would be
1.6726771319 ($7,885/$4,714), which would be an increase in private
health insurance (excluding Medigap and property and casualty
insurance) premiums of approximately 67.3 percent over the period from
2013 to 2025 and would reflect an overall growth rate for this period
that would be approximately 7.2 percentage points higher than the
overall growth rate reflected by the previously published PY 2026
premium adjustment percentage \168\ (1.6002042901).
---------------------------------------------------------------------------
\167\ The 2013 and 2025 premiums used for this calculation
reflect the latest NHEA data. The series used in the determinations
of the adjustment percentages can be found in Tables 1 and 17 on the
CMS website, which can be accessed by clicking the ``NHE Projections
2023-2032--Tables'' link located in the Downloads section at https://www.cms.gov/data-research/statistics-trends-and-reports/national-health-expenditure-data/projected. A detailed description of the NHE
projection methodology is available at CMS. (2024, June 12).
Projections of National Health Expenditures and Health Insurance
Enrollment: Methodology and Model Specification. https://www.cms.gov/research-statistics-data-and-systems/statistics-trends-and-reports/nationalhealthexpenddata/downloads/projectionsmethodology.pdf
\168\ See CMS. (2024, Oct. 8). Premium Adjustment Percentage,
Maximum Annual Limitation on Cost Sharing, Reduced Maximum Annual
Limitation on Cost Sharing, and Required Contribution Percentage for
the 2026 Benefit Year. https://www.cms.gov/files/document/2026-papi-parameters-guidance-2024-10-08.pdf.
---------------------------------------------------------------------------
We believe that our proposal to use per enrollee private health
insurance premiums (excluding Medigap and property and casualty
insurance) in the premium adjustment percentage calculation could
result in a more comprehensive and higher overall estimate of premium
growth rate for the foreseeable future than if we continued to use only
ESI premiums as in prior plan years. This higher overall growth rate is
driven by the fact that, between 2015 and 2018, private individual
health insurance market per enrollee premiums offered on-Exchange grew
faster than ESI premiums, most notably in PY 2017 and PY 2018 (See
Table 6). However, we note that on-Exchange individual market premiums
\169\ have grown more slowly than ESI premiums since 2019. If this
trend continues, then the immediate impact of a higher overall premium
growth rate for PY 2026 could be reduced in the future, which may lead
to a lower overall growth rate over the long-term.
---------------------------------------------------------------------------
\169\ See the ``NHE Tables'' link under the ``Downloads
Section'' at CMS. (2024, Dec. 18). NHE Historical Data. https://www.cms.gov/data-research/statistics-trends-and-reports/national-health-expenditure-data/historical (Page Updated December 18, 2024;
Retrieved January 29, 2025). We use the historical tables for this
analysis because they reflect estimates of actual 2023 values and
have been updated more recently than the projected tables used to
calculate the premium adjustment percentage. The historical tables
do not include a grouped measure of private health insurance
premiums (excluding Medigap and property and casualty insurance), so
we have separate columns for On Exchange and Other Direct Purchase,
which are the major components of the proposed premium measure. The
projected tables include a measure of private health insurance
premiums (excluding Medigap and property and casualty insurance),
but do not include separate measures of On Exchange and Other Direct
Purchase premiums and only include projections of values (that is,
non-historical values) after 2022. The projected tables are expected
to be updated in the summer 2025 to match the values in the
historical tables through 2023 for ESI premiums and will also
include updated historical values for private health insurance
premiums (excluding Medigap and property and casualty insurance) at
that time. Consistent with the policy finalized in the 2021 Payment
Notice (85 FR 29227 through 29229), even if the NHEA projected
tables are updated before the publication of the final rule, we will
finalize the payment parameters that depend on the NHEA projected
tables data, including the premium adjustment percentage and
required contribution percentage, based on the data that are
available as of the publication of the proposed rule to increase the
predictability of benefit design.
---------------------------------------------------------------------------
We anticipate that this proposed change could have several impacts
on the health insurance market. As explained above, the premium
adjustment percentage is used to set the rate of increase for the
maximum annual limitation on cost sharing, the required contribution
percentage used to determine eligibility for certain exemptions under
section 5000A of the Code, and the employer shared responsibility
payment amounts under section 4980H(a) and (b) of the Code.
Accordingly, a more comprehensive premium adjustment percentage that
reflects a faster premium growth rate would result in a higher maximum
annual limitation on cost sharing, higher reduced annual limitations on
cost sharing, a higher required contribution percentage, and higher
employer shared responsibility payment amounts than if the current
premium adjustment percentage premium measure (ESI only) were used for
PY 2026.
Furthermore, to date the Department of the Treasury and the IRS
have used the same measures for determining the applicable percentage
in section 36B(b)(3)(A) of the Code and the required contribution
percentage in section 36B(c)(2)(C) of the Code as those selected by HHS
for the calculation of the premium adjustment percentage.\170\ The
applicable percentage in section 36B(b)(3)(A) of the Code is used to
determine the amount an individual must contribute to the cost of an
Exchange QHP and thus relates to the amount of the individual's PTC.
This is because, in general, an individual's PTC is the lesser of (1)
the premiums paid for the Exchange QHP, and (2) the excess of the
premium for the benchmark plan over the contribution amount. The
contribution amount is the product of the individual's household income
and the applicable percentage.
---------------------------------------------------------------------------
\170\ Section 36B(b)(3)(A)(ii) of the Code generally provides
that the applicable percentages are to be adjusted after 2014 to
reflect the excess of the rate of premium growth over the rate of
income growth for the preceding year. Section 36B(c)(2)(C) of the
Code provides that the required contribution percentage is to be
adjusted after 2014 in the same manner as the applicable percentages
are adjusted in section 36B(b)(3)(A)(ii) of the Code. The Department
of the Treasury and the IRS has provided in annual guidance that the
rate of premium growth for purposes of the section 36B provisions
would be based on the same measures HHS selected following HHS'
establishment of the methodology for calculating premium growth for
purposes of the premium adjustment percentage using NHEA ESI for
benefit years 2015-2019 (See IRS Rev. Proc. 2014-37), NHEA private
health insurance (excluding Medigap and property and casualty
insurance) for PYs 2020-2021 (See IRS Rev. Proc. 2019-29), and NHEA
ESI for PYs 2022-2025 (See IRS Rev. Proc. 2021-36).
---------------------------------------------------------------------------
The required contribution percentage in section 36B(c)(2)(C) of the
Code is used to determine whether an offer of ESI is considered
affordable for an individual, which relates to eligibility for the PTC
because an individual with an offer of affordable ESI that provides
minimum value is ineligible for the PTC. Specifically, an offer of ESI
is considered affordable for an individual if the employee's required
contribution for ESI is less than or equal to the required contribution
percentage (set at 9.5 percent in 2014) of the individual's household
income.\171\
---------------------------------------------------------------------------
\171\ See also IRS Notice 2015-87, Q&A 12 for discussion of the
adjustment of the required contribution percentage as applied for
certain purposes under sections 4980H and 6056 of the Code.
---------------------------------------------------------------------------
Section 36B(b)(3)(A)(ii) of the Code generally provides that the
applicable percentages are to be adjusted after 2014 to reflect the
excess of the rate of premium growth over the rate of income growth for
the preceding year. Section 36B(c)(2)(C) of the Code provides that the
required contribution percentage is to be adjusted after 2014 in the
same manner as the applicable percentages are adjusted in section
36B(b)(3)(A)(ii) of the Code. As noted above, the Department of the
Treasury and the IRS have provided in annual guidance that the rate of
premium growth for purposes of these section 36B provisions is based on
the same measures as those selected by HHS for the calculation of the
[[Page 12993]]
premium adjustment percentage.\172\ If we finalize a change to the
premium measure used in the premium adjustment percentage for PY 2026,
we expect the Department of the Treasury and the IRS to adopt the same
premium measure for purposes of future indexing of the applicable
percentage and required contribution percentage under section 36B of
the Code.
---------------------------------------------------------------------------
\172\ Section 36B(b)(3)(A)(ii) of the Code generally provides
that the applicable percentages are to be adjusted after 2014 to
reflect the excess of the rate of premium growth over the rate of
income growth for the preceding year. Section 36B(c)(2)(C) of the
Code provides that the required contribution percentage is to be
adjusted after 2014 in the same manner as the applicable percentages
are adjusted in section 36B(b)(3)(A)(ii) of the Code. The Department
of the Treasury and the IRS has provided in annual guidance that the
rate of premium growth for purposes of the section 36B provisions
would be based on the same measures HHS selected following HHS'
establishment of the methodology for calculating premium growth for
purposes of the premium adjustment percentage using NHEA ESI for
benefit years 2015-2019 (See IRS Rev. Proc. 2014-37), NHEA private
health insurance (excluding Medigap and property and casualty
insurance) for PYs 2020-2021 (See IRS Rev. Proc. 2019-29), and NHEA
ESI for PYs 2022-2025 (See IRS Rev. Proc. 2021-36).
---------------------------------------------------------------------------
We anticipate that a measure of premium growth that reflects a
faster premium growth rate would increase the portion of the premium
the consumer is responsible for paying and therefore would decrease the
amount of PTC for which consumers qualify under section 36B(b)(3)(A) of
the Code. It also would increase the required contribution percentage
under section 36B(c)(2)(C) of the Code, such that individuals with an
offer of ESI would be more likely to be ineligible for the PTC.
Therefore, we anticipate that adding individual premiums to the premium
adjustment methodology would reduce the tax expenditure associated with
PTCs. However, we anticipate this reduction in the availability of PTC
would increase net premiums for consumers who are currently eligible
for PTC and, as a result, contribute to a small decline in Exchange
enrollment. It is possible that this could ultimately result in small
net premium increases for enrollees that remain in the individual
market, both on and off the Exchanges, if healthier enrollees elect not
to purchase Exchange coverage.
Additionally, we are aware that the annual limitation on cost
sharing is often a limiting factor for issuers in designing plan
parameters that meet the permissible de minimis ranges for bronze plans
at Sec. 156.140.\173\ The increase in the premium adjustment
percentage and maximum annual limitation on cost sharing created by
incorporating the more comprehensive measure of private health
insurance premiums (excluding Medigap and property and casualty
insurance) may help to provide additional flexibility for issuers to
design plans at the bronze metal level by allowing issuers to meet AV
requirements through lower deductibles, coinsurance, and copay
parameters rather than through setting a maximum out-of-pocket limit
equal or less than the lower maximum annual limitation on cost sharing
calculated using the ESI-based premium adjustment percentage.
---------------------------------------------------------------------------
\173\ Section 156.140 defines bronze health plans as a health
plan that has an AV of 60 percent.
---------------------------------------------------------------------------
We seek comment on the proposal to revert to the premium adjustment
percentage methodology finalized in the 2020 Payment Notice (84 FR
17537 through 17541) using private health insurance premiums (excluding
Medigap and property and casualty insurance premiums) to estimate the
growth in premiums for PY 2026 and beyond. We also seek comment on the
proposed premium adjustment percentage for PY 2026 of 1.6726771319.
Additionally, based on the proposed PY 2026 premium adjustment
percentage, we propose the following cost-sharing parameters for PY
2026, including the maximum annual limitation on cost sharing, the
reduced maximum annual limitations on cost sharing, and the required
contribution percentage in the following subsections.
a. Maximum Annual Limitation on Cost Sharing for PY 2026
Under Sec. 156.130(a)(2)(i), for PY 2026, cost sharing for self-
only coverage may not exceed the dollar limit for calendar year 2014
increased by an amount equal to the product of that amount and the
premium adjustment percentage for PY 2026. Under Sec.
156.130(a)(2)(ii), for other than self-only coverage, the limit is
twice the dollar limit for self-only coverage. Under Sec. 156.130(d),
these amounts must be rounded down to the next lowest multiple of $50.
Using the proposed premium adjustment percentage of 1.6726771319 for PY
2026, and the 2014 maximum annual limitation on cost sharing of $6,350
for self-only coverage, which was published by the IRS on May 2,
2013,\174\ we propose that the PY 2026 maximum annual limitation on
cost sharing would be $10,600 for self-only coverage and $21,200 for
other than self-only coverage. This represents approximately a 15.2
percent increase from the PY 2025 parameters of $9,200 for self-only
coverage and $18,400 for other than self-only coverage and
approximately a 4.4 percent increase from the previously published PY
2026 parameters of $10,150 for self-only coverage and $20,300 for other
than self-only coverage.\175\
---------------------------------------------------------------------------
\174\ See IRS. (n.d.) Rev. Proc. 2013-25. Dep't of Treasury.
http://www.irs.gov/pub/irs-drop/rp-13-25.pdf.
\175\ CMS. (2024, Oct. 8). Premium Adjustment Percentage,
Maximum Annual Limitation on Cost Sharing, Reduced Maximum Annual
Limitation on Cost Sharing, and Required Contribution Percentage for
the 2026 Benefit Year. https://www.cms.gov/files/document/2026-papi-parameters-guidance-2024-10-08.pdf.
---------------------------------------------------------------------------
We seek comment on this proposal.
b. Reduced Maximum Annual Limitation on Cost Sharing for PY 2026
The reduced maximum annual limitations on cost sharing for cost-
sharing plan variations are determined using the methodology we
established in the 2014 Payment Notice. In the 2014 Payment Notice (78
FR 15410), we established standards related to the provision of these
cost-sharing reductions (CSRs). Specifically, in 45 CFR part 156,
subpart E, we specified that QHP issuers must provide CSRs by
developing plan variations, which are separate cost-sharing structures
for each eligibility category that change how the cost sharing required
under the QHP is to be shared between the enrollee and the Federal
Government.\176\ At Sec. 156.420(a), we detailed the structure of
these plan variations and specified that QHP issuers must ensure that
each silver plan variation has an annual limitation on cost sharing no
greater than the applicable reduced maximum annual limitation on cost
sharing specified in the annual HHS guidance or HHS notice of benefit
and payment parameters. Although the amount of the reduction in the
maximum annual limitation on cost sharing is specified in section
1402(c)(1)(A) of the ACA, section 1402(c)(1)(B)(ii) of the ACA states
that the Secretary may adjust the cost sharing limits to ensure that
the resulting limits do not cause the AV of the health plans to exceed
the levels specified in section 1402(c)(1)(B)(i) of the ACA (that is,
70 percent, 73 percent, 87 percent, or 94 percent, depending on the
income of the enrollee).
---------------------------------------------------------------------------
\176\ On October 12, 2017, the Attorney General issued a legal
opinion that HHS did not have a Congressional appropriation with
which to make CSR payments. Sessions III, J. (2017, Oct. 11). Legal
Opinion Re: Payments to Issuers for Cost-Sharing Reductions (CSRs).
Office of Attorney General. https://www.hhs.gov/sites/default/files/csr-payment-memo.pdf.
---------------------------------------------------------------------------
We note that for PY 2026, as described in Sec. 156.135(d), States
are permitted to request HHS approval of State-specific datasets for
use as the standard population to calculate AV.
[[Page 12994]]
For PY 2026, no State submitted a dataset by the September 1, 2024
deadline.
As indicated in Table 8, we are proposing the values of the PY 2026
reduced maximum annual limitation on cost sharing for self-only
coverage at $3,500 for enrollees with household income greater than or
equal to 100 percent of the FPL and less than or equal to 150 percent
of the FPL, $3,500 for enrollees with household income greater than 150
percent of the FPL and less than or equal to 200 percent of the FPL,
and $8,450 for enrollees with household income greater than 200 and
less than or equal to 250 percent of the FPL, as calculated using the
proposed PY 2026 premium adjustment percentage and proposed PY 2026
maximum annual limitation on cost sharing. These proposed values
reflect 4.3 to 4.5 percent increases relative to the previously
published PY 2026 parameters.\177\
---------------------------------------------------------------------------
\177\ See CMS. (2024, Oct. 8). Premium Adjustment Percentage,
Maximum Annual Limitation on Cost Sharing, Reduced Maximum Annual
Limitation on Cost Sharing, and Required Contribution Percentage for
the 2026 Benefit Year. https://www.cms.gov/files/document/2026-papi-parameters-guidance-2024-10-08.pdf.
[GRAPHIC] [TIFF OMITTED] TP19MR25.007
Generally, to confirm consistency with past results of the analysis
for the reduced maximum annual limitation on cost sharing, we tested
the proposed PY 2026 reduced maximum annual limitations for cost
sharing on the AV levels of silver level QHPs with varying cost sharing
structures. We previously conducted this analysis in the October 2024
PAPI Guidance \178\ with the following parameters for PY 2026 test
plans: the test QHPs included a preferred provider organization (PPO)
with typical cost sharing structure ($8,850 annual limitation on cost
sharing, $3,250 deductible, and 25 percent in-network coinsurance
rate); a PPO with a lower annual limitation on cost sharing ($6,650
annual limitation on cost sharing, $4,500 deductible, and 25 percent
in-network coinsurance rate); and a health maintenance organization
(HMO) ($8,850 annual limitation on cost sharing, $3,700 deductible, 25
percent in-network coinsurance rate, and the following services with
copayments that are not subject to the deductible or coinsurance: $2500
inpatient stay per day, $1200 emergency department visit, $35 primary
care office visit, and $80 specialist office visit). We repeated this
analysis for the proposed PY 2026 reduced annual limitations on cost
sharing using the same test plans used in the October 2024 PAPI
Guidance.\179\
---------------------------------------------------------------------------
\178\ CMS. (2024, Oct. 8). Premium Adjustment Percentage,
Maximum Annual Limitation on Cost Sharing, Reduced Maximum Annual
Limitation on Cost Sharing, and Required Contribution Percentage for
the 2026 Benefit Year. https://www.cms.gov/files/document/2026-papi-parameters-guidance-2024-10-08.pdf.
\179\ Ibid.
---------------------------------------------------------------------------
We entered these test plans into a draft version of PY 2026 AV
Calculator and observed how the proposed PY 2026 reductions in the
maximum annual limitation on cost sharing specified in the ACA affected
the AVs of the plans. We found that the proposed PY 2026 reductions in
the maximum annual limitation on cost sharing using the parameters
specified in section 1402(c)(1)(A)(i) the ACA for enrollees with a
household income greater than or equal to 100 percent of the FPL and
less than or equal to 150 percent of the FPL (\2/3\ reduction in the
maximum annual limitation on cost sharing), and greater than 150
percent of the FPL and less than or equal to 200 percent of the FPL
(\2/3\ reduction), would not cause the AV of any of the model QHPs to
exceed the AV levels of 94 and 87 percent, specified in sections
1402(c)(2)(A) and (B) of the ACA for each of these income bands,
respectively.
[[Page 12995]]
As with prior years, and as with the findings described in the
October 2024 PAPI Guidance,\180\ we continue to find that using the
reduction in the maximum annual limitation on cost sharing specified in
section 1402(c)(1)(A)(ii) of the ACA for enrollees with a household
income greater than 200 percent of the FPL and less than or equal to
250 percent of the FPL (\1/2\ reduction) would cause the AVs of
multiple of the test QHPs to exceed the AV level of 73 percent
specified for this income band in section 1402(c)(1)(B)(i)(III) of the
ACA. Furthermore, as with prior years, for individuals with household
incomes greater than 250 and less than or equal to 300 percent of the
FPL, or greater than 300 and less than or equal to 400 percent of the
FPL without any change in other forms of cost sharing, the reductions
in the maximum annual limitation on cost sharing specified in sections
1402(c)(1)(A)(ii) and (iii) of the ACA would cause an increase in AV
for multiple of the test QHPs that exceeds the maximum 70 percent level
set forth for these income bands in section 1402(c)(1)(B)(i)(IV) of the
ACA.
---------------------------------------------------------------------------
\180\ Ibid.
---------------------------------------------------------------------------
Therefore, as has been the case since the 2015 Payment Notice (79
FR 13803 through 13804), we propose to continue to reduce the maximum
annual limitation on cost sharing by \2/3\ for enrollees with a
household income greater than or equal to 100 percent of the FPL and
less than or equal to 200 percent of the FPL, \1/5\ for enrollees with
a household income greater than 200 percent of the FPL and less than or
equal to 250 percent of the FPL, and no reduction for individuals with
household incomes greater than 250 percent of the FPL and less than or
equal to 400 percent of the FPL for PY 2026. The resulting proposed PY
2026 reduced maximum annual limitations on cost sharing are displayed
in Table 8 above.
c. Proposed Required Contribution Percentage at Sec. 155.605(d)(2) for
PY 2026
We calculate the required contribution percentage for each plan
year using the most recent projections and estimates of premium growth
and income growth over the period from 2013 to the preceding calendar
year (that is, the 2025 calendar year, in the case of PY 2026 required
contribution percentage). Accordingly, we are proposing the required
contribution percentage for PY 2026, calculated using income and
premium growth data for the 2013 and 2025 calendar years.
Section 5000A of the Code imposes an individual shared
responsibility payment on non-exempt individuals who do not have MEC
for each month. Under Sec. 155.605(d)(2), an individual is allowed a
coverage exemption (the affordability exemption) for months in which
the amount the individual would pay for MEC exceeds a percentage,
called the required contribution percentage, of the individual's
household income. Although the Tax Cuts and Jobs Act \181\ reduced the
individual shared responsibility payment to $0 for months beginning
after December 31, 2018, the required contribution percentage is still
used to determine whether individuals ages 30 and above qualify for an
affordability exemption that would enable them to enroll in
catastrophic coverage under Sec. 155.305(h).
---------------------------------------------------------------------------
\181\ Public Law 115-97, 131 Stat, 2054.
---------------------------------------------------------------------------
The initial 2014 required contribution percentage under section
5000A of the Code was 8 percent. For plan years after 2014, section
5000A(e)(1)(D) of the Code and Treasury regulations at 26 CFR 1.5000A-
3(e)(2)(ii) provide that the required contribution percentage is the
percentage determined by the Secretary that reflects the excess of the
rate of premium growth between the preceding calendar year and 2013,
over the rate of income growth for that period.
As the measure of income growth for a calendar year, we established
in the 2017 Payment Notice (81 FR 12281 through 12282) that we would
use NHEA projections of per capita personal income (PI). The rate of
income growth for PY 2026 is the percentage (if any) by which the NHEA
Projections 2023-2032 value for per capita PI for the preceding
calendar year ($74,083 for 2025) exceeds the NHEA Projections 2023-2032
value for per capita PI for 2013 ($44,559), carried out to ten
significant digits. The rate of income growth from 2013 to 2025 is
therefore 1.6625821944 ($74,083/$44,559). Using PY 2026 premium
adjustment percentage proposed in this rule, the excess of the rate of
premium growth over the rate of income growth for 2013 to 2025 would be
1.6726771319 / 1.6625821944, or 1.0060718427. This results in the
proposed PY 2026 required contribution percentage under section 5000A
of the Code of 8.00 x 1.0060718427 or 8.05 percent, when rounded to the
nearest one-hundredth of 1 percent, an increase of approximately 0.77
percentage points above the 2025 value (7.28 percent) and an increase
of approximately 0.35 percentage points above the previously published
PY 2026 value \182\ (7.70 percent).
---------------------------------------------------------------------------
\182\ See CMS. (2024, Oct. 8). Premium Adjustment Percentage,
Maximum Annual Limitation on Cost Sharing, Reduced Maximum Annual
Limitation on Cost Sharing, and Required Contribution Percentage for
the 2026 Benefit Year. https://www.cms.gov/files/document/2026-papi-parameters-guidance-2024-10-08.pdf.
---------------------------------------------------------------------------
We note that these proposals do not alter the policy established in
the 2022 Payment Notice (86 FR 24237 through 24238) that we will
publish the premium adjustment percentage, along with the maximum
annual limitation on cost sharing, the reduced maximum annual
limitation on cost sharing, and the required contribution percentage,
in guidance by January of the year preceding the applicable plan year,
unless we are amending the methodology to calculate these parameters,
in which case we would amend the methodology and publish the parameters
through notice-and-comment rulemaking.
If finalized as proposed, the values for the PY 2026 premium
adjustment percentage, maximum annual limitation on cost sharing,
reduced maximum annual limitations on cost sharing and required
contribution percentage proposed in this rule would supersede the
values published in the October 2024 PAPI Guidance.\183\ We seek
comment on the proposal to revert to the premium adjustment percentage
methodology finalized in the 2020 Payment Notice (84 FR 17537 through
17541) using private health insurance premiums (excluding Medigap and
property and casualty insurance premiums) to estimate the growth in
premiums for PY 2026 and beyond. We also seek comment on the values for
the PY 2026 premium adjustment percentage, maximum annual limitation on
cost sharing, reduced maximum annual limitations on cost sharing and
required contribution percentage proposed in this rule.
---------------------------------------------------------------------------
\183\ Ibid.
---------------------------------------------------------------------------
3. Levels of Coverage (Actuarial Value) (Sec. Sec. 156.140, 156.200,
156.400)
We propose to change the de minimis ranges at Sec. 156.140(c)
beginning in PY 2026 to +2/-4 percentage points for all individual and
small group market plans subject to the AV requirements under the EHB
package, other than for expanded bronze plans, for which we propose a
de minimis range of +5/-4 percentage points. We also propose to revise
Sec. 156.200(b)(3) to remove from the conditions of QHP certification
the de minimis range of +2/0 percentage points for individual market
silver QHPs. We also propose to amend the
[[Page 12996]]
definition of ``de minimis variation for a silver plan variation'' in
Sec. 156.400 to specify a de minimis range of +1/-1 percentage points
for income-based silver CSR plan variations.
Section 2707(a) of the PHS Act and section 1302 of the ACA direct
issuers of non-grandfathered individual and small group health
insurance plans (including QHPs) to ensure that these plans adhere to
the levels of coverage specified in section 1302(d)(1) of the ACA.
Section 1302(d)(2) of the ACA provides that a level of coverage of a
plan, or its actuarial value (AV), is determined based on its coverage
of the EHB for a standard population. Sections 1302(d)(1)(A)-(D) of the
ACA require a bronze plan to have an AV of 60 percent, a silver plan to
have an AV of 70 percent, a gold plan to have an AV of 80 percent, and
a platinum plan to have an AV of 90 percent. Section 1302(d)(2) of the
ACA directs the Secretary to issue regulations on the calculation of AV
and its application to the levels of coverage. Section 1302(d)(3) of
the ACA authorizes the Secretary to develop guidelines to provide for a
de minimis variation in the AVs used in determining the level of
coverage of a plan to account for differences in actuarial estimates.
In the EHB Rule (78 FR 12834), we established at Sec. 156.140(c)
that the allowable de minimis variation in the AV of a health plan that
does not result in a material difference in the true dollar value of
the health plan was +2/-2 percentage points. In the 2018 Payment
Notice, we revised Sec. 156.140(c) to permit a de minimis variation of
+5/-2 percentage points for bronze plans that either cover and pay for
at least one major service other than preventive services before the
deductible or meet the requirements to be a high deductible health plan
within the meaning of section 223(c)(2) of the Code.
In the 2017 Market Stabilization Rule, effective beginning in PY
2018, we expanded the de minimis range for standard bronze, silver,
gold, and platinum plans to +2/-4 percentage points.\184\ In that final
rule (82 FR 18368), we stated that we believed that flexibility was
needed for the AV de minimis range for metal levels to help issuers
design new plans for future plan years, thereby promoting competition
in the market. In addition, we noted that changing the de minimis range
would allow more plans to keep their cost sharing the same as well as
provide additional flexibility for issuers to make adjustments to their
plans within the same metal level. We stated our view that a de minimis
range of +2/-4 percentage points provided the flexibility necessary for
issuers to design new plans while ensuring comparability of plans
within each metal level.
---------------------------------------------------------------------------
\184\ We did not in that rule modify the de minimis range for
the income-based silver CSR plan variations (the plans with an AV of
73, 87 and 94 percent) under Sec. Sec. 156.400 and 156.420. The de
minimis variation for an income-based silver CSR plan variation is a
single percentage point. In the Actuarial Value and Cost-Sharing
Reductions Bulletin (2012 Bulletin) issued on February 24, 2012, we
explained why we did not intend to require issuers to offer a silver
CSR plan variation with an AV of 70 percent; to align with this
change, we also modified the de minimis range for expanded bronze
plans from +5/-2 to +5/-4.
---------------------------------------------------------------------------
In the 2023 Payment Notice (87 FR 27306 through 27308), effective
beginning in PY 2023, we narrowed the de minimis range for standard
bronze, silver, gold, and platinum plans to +2/-2 percentage points,
narrowed the de minimis range for expanded bronze to +5/-2 percentage
points, and narrowed the de minimis range for income-based silver CSR
plan variations to +1/0 percentage points. We also established, as a
condition of QHP certification, that individual market silver QHPs must
have an AV of 70 percent with a de minimis allowable AV variation of
+2/0 percentage points. As discussed in the 2023 Payment Notice (87 FR
27307), we made these changes due to concerns that a wider de minimis
range jeopardized the meaningful comparison of plans between the silver
and bronze levels of coverage. In that rule (87 FR 27307), we also
narrowed the de minimis range for individual market silver QHPs in
order to maximize PTC and APTC for subsidized enrollees, noting that
narrowing the de minimis range of individual market silver QHPs would
influence the generosity of the SLCSP, the benchmark plan for
calculating PTC and APTC.
Since we finalized these de minimis ranges in the 2023 Payment
Notice, we have received considerable feedback from issuers that
indicates narrower de minimis ranges substantially reduce issuer
flexibility in establishing plan cost sharing. These issuers have
expressed that any benefit to consumers that result from improvements
to the comparability between the levels of coverage is outweighed by
the harm to consumers caused by reduced issuer flexibility in setting
non-standardized cost-sharing parameters, and as a result, harm to the
health of the overall risk pool. Due to these effects, issuers have
also voiced concern about their ability to continue to participate in
the market generally. Sustained, robust issuer participation in the
market is key to ensuring overall market stability and keeping costs
down.
Based on this feedback, we are proposing to change the de minimis
ranges at Sec. 156.140(c) beginning in PY 2026 to +2/-4 percentage
points for all individual and small group market plans subject to the
AV requirement, other than for expanded bronze plans,\185\ for which we
propose a de minimis range of +5/-4 percentage points. We believe that
reverting to the de minimis ranges in effect from PYs 2018 to 2022
offers the best balance between comparability between the levels of
coverage and issuer flexibility in establishing competitive cost-
sharing designs that appeal to wide segments of the population. With
this proposal, we note that an expansion of the universe of permissible
plan AVs would not preclude issuers from continuing to design plans
with an AV that is closer to the middle of the applicable de minimis
ranges instead of plans at the outer limits. To the extent that issuers
believe that plan designs that have a higher AV would attract
enrollment, they would remain free to do so under this proposal.
---------------------------------------------------------------------------
\185\ Expanded bronze plans are bronze plans currently
referenced in Sec. 156.140(c) that cover and pay for at least one
major service, other than preventive services, before the deductible
or meet the requirements to be a high deductible health plan within
the meaning of section 223(c)(2) of the Code.
---------------------------------------------------------------------------
We also propose, through the authority granted to HHS in sections
1311(c) and 1321(a) of the ACA to establish minimum requirements for
QHP certification, to revise Sec. 156.200(b)(3) to remove from the
conditions of QHP certification the de minimis range of +2/0 percentage
points for individual market silver QHPs. Under this proposal, we would
amend Sec. 156.200(b)(3) to revert to the original regulatory text
finalized in the 2012 Exchange Establishment rule (77 FR 18469), which
states that, as a condition of QHP certification, issuers must
``[e]nsure that each QHP complies with benefit design standards, as
defined in Sec. 156.20.'' We believe that the removal of this QHP
certification requirement is justified because we are no longer of the
view that this certification requirement, which was finalized in the
2023 Payment Notice, is in the best interests of the overall risk pool.
In that rule, we explained narrowing the de minimis range of
individual market silver QHPs would influence the generosity of the
SLCSP, the benchmark plan for calculating PTC and APTC for subsidized
consumers. While narrowing the de minimis range in this way has such an
effect on PTC and APTC to improve affordability for subsidized
consumers, it comes at the expense of
[[Page 12997]]
affordability for unsubsidized consumers. We believe attracting these
unsubsidized consumers to participate in the risk pool may help to
drive down overall costs by expanding the risk pool. In turn, we
believe premiums for all consumers in the risk pool may be lower.
Maximizing premium tax credits with a +2/0 percentage point de
minimis range for individual market silver QHPs created imbalance
between access and affordability for all consumers, particularly for
unsubsidized ones. We believe this certification requirement can have
the effect of damaging the overall health of the risk pool, which in
turn may make coverage less affordable overall than it could have been
as healthier, unsubsidized enrollees are priced out of the market.
While pushing for increased subsidies may make coverage more affordable
for certain consumers in the very short term, this is a short-sighted
approach to regulating the AV de minimis ranges. We believe that lower
AVs would lead to lower premiums, and in turn potentially improve the
risk pool as coverage becomes more affordable for generally healthy
people who currently may opt to forgo coverage altogether. Although
this may mean that those eligible for APTCs receive less money in tax
credits, we believe that in the long term there would be a sufficient
choice of affordable plans. We also believe reverting the de minimis
range of individual market silver QHPs back to +2/-4 percentage points
is the best method for balancing the affordability of health plans for
all segments of the population enrolled in non-grandfathered individual
and small group market plans with the long-term viability of the
overall risk pool.
Finally, we propose to revise the definition of ``de minimis
variation for a silver plan variation'' at Sec. 156.400 to change the
de minimis variation for individual market income-based silver CSR plan
variations from +1/0 percentage points to +1/-1 percentage points.
Similar to the removal of the de minimis certification requirement for
individual market silver QHPs, this proposal would deliver further
balance between affordability and market stabilization. We do not
propose edits to the minimum AV differential in Sec. 156.420(f) for
silver QHPs and 73 percent income-based plan variations, where the AVs
must differ by at least 2 percentage points. We would note for issuers
that, similar to the current de minimis ranges, standard silver QHPs
with plan AVs between 71 and 72 percent would require the corresponding
73 percent income-based plan variation AV to be at least 2 percentage
points above the standard plan's AV.
We seek comment on this proposal.
D. Applicability
Some proposals in this rule, if finalized, would become applicable
beginning on or after January 1, 2026. These proposal include the
proposed provisions requiring all Exchanges to conduct pre-enrollment
verification of eligibility for individual market SEPs and to verify at
least 75 percent of new enrollments through SEPs, as well as the
proposed prohibition on issuers of coverage subject to EHB requirements
covering sex trait modification as EHB, would be applicable for plan
years beginning on or after January 1, 2026. Also, if finalized, the
proposal to update the premium adjustment percentage methodology would
apply beginning with PY 2026 limits. If finalized, the proposal to
prevent enrollees from being automatically re-enrolled in coverage with
APTC that fully covers their premium without taking an action to
confirm their eligibility information would be applicable starting with
annual redeterminations for PY 2027. The proposal to prevent enrollees
from being automatically re-enrolled in coverage with APTC that fully
covers their premium without taking an action to confirm their
eligibility information would be applicable beginning with
redetermination for PY 2027. We believe this applicability date
provides issuers and Exchanges ample time to prepare for these changes.
However, we understand that different States and issuers face different
resource issues and implementation hurdles. We therefore seek comment
on whether regulated entities would require additional time to comply
with these proposals.
The remaining proposals in this rule, if finalized, would become
applicable upon the effective date of the final rule. These proposals
include, among others, the proposed provision to repeal the monthly SEP
for APTC-eligible qualified individuals with a projected annual
household income at or below 150 percent of the FPL. Our experience
with this SEP suggests it has substantially increased the level of
improper enrollments, as well as increased the risk for adverse
selection. The remaining proposals aim to increase the program
integrity of the Exchange and protect Federal tax dollars. We therefore
believe it is appropriate for these provisions to become applicable
immediately upon the effective date of the final rule. We seek comment
on any operational considerations or other issues that may impede
compliance by the proposed applicability date.
E. Severability
As demonstrated by the number of distinct programs addressed in
this rulemaking and the structure of this proposed rule in addressing
them independently, HHS generally intends the rule's provisions if
finalized to be severable from each other. For example, the proposed
rule refines the interpretation of ``lawfully present'' as applicable
for eligibility to enroll in a QHP offered on an Exchange or BHP
coverage in States that elect to operate a BHP. It also outlines the
proposed discontinuation of the SEP for individuals with an income less
than 150 percent of the FPL and makes a proposed change in the
calculation of the premium adjustment percentage. It also proposes an
update in the automatic re-enrollment hierarchy and makes a proposed
change in the process of income verification where tax return data is
unavailable. HHS believes that these provisions are generally capable
of functioning sensibly on an independent basis. It is HHS' intent that
if any provision of these proposed rules, if finalized, is held to be
invalid or unenforceable by its terms, or as applied to any person or
circumstance, the other provisions in the rule shall be construed so as
to continue to give maximum effect as permitted by law, unless the
holding shall be one of utter invalidity or unenforceability. In the
event a provision as finalized is found to be utterly invalid or
unenforceable, HHS intends that that provision to be severable. HHS
solicits comment on the severability of these provisions.
IV. 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.
[[Page 12998]]
Recommendations to minimize the information collection
burden on the affected public, including automated collection
techniques.
We solicit public comment on each of these issues for the following
sections of this document that contain information collection requests
(ICRs).
A. Wage Estimates
To derive wage estimates, we generally use data from the Bureau of
Labor Statistics to derive labor costs (including a 100 percent
increase for the cost of fringe benefits and overhead) for estimating
the burden associated with the ICRs.\186\ Table 9 presents the median
hourly wage, the cost of fringe benefits and overhead, and the adjusted
hourly wage.
---------------------------------------------------------------------------
\186\ See U.S. Bureau of Labor Statistics (2024, April 3).
Occupational Employment and Wage Statistics, May 2023 Occupation
Profiles. Dep't. of Labor. https://www.bls.gov/oes/current/oes_stru.htm.
---------------------------------------------------------------------------
As indicated, employee hourly wage estimates have been adjusted by
a factor of 100 percent. This is necessarily a rough adjustment, both
because fringe benefits and overhead costs vary significantly across
employers, and because methods of estimating these costs vary widely
across studies. Nonetheless, there is no practical alternative, and we
believe that doubling the hourly wage to estimate total cost is a
reasonably accurate estimation method.
[GRAPHIC] [TIFF OMITTED] TP19MR25.008
We adopt an hourly value of time based on after-tax wages to
quantify the opportunity cost of changes in time use for unpaid
activities. This approach matches the default assumptions for valuing
changes in time use for individuals undertaking administrative and
other tasks on their own time, which are outlined in an Assistant
Secretary for Planning and Evaluation (ASPE) report on ``Valuing Time
in U.S. Department of Health and Human Services Regulatory Impact
Analyses: Conceptual Framework and Best Practices.'' \187\ We started
with a measurement of the usual weekly earnings of wage and salary
workers of $1,185.\188\ We divided this weekly rate by 40 hours to
calculate an hourly pre-tax wage rate of approximately $29.63. We
adjusted this hourly rate downwards by an estimate of the effective tax
rate for median income households of about 17 percent, resulting in a
post-tax hourly wage rate of approximately $24.59. We adopt this as our
estimate of the hourly value of time for changes in time use for unpaid
activities and seek comment on these estimates and assumptions.
---------------------------------------------------------------------------
\187\ Office of the Assistant Secretary for Planning and
Evaluation. (2017, Sept. 17). Valuing Time in U.S. Department of
Health and Human Services Regulatory Impact Analyses: Conceptual
Framework and Best Practices. Dep't of HHS. https://aspe.hhs.gov/reports/valuing-time-us-department-health-human-services-regulatory-impact-analyses-conceptual-framework.
\188\ U.S. Bureau of Labor Statistics. Employed full time:
Median usual weekly nominal earnings (second quartile): Wage and
salary workers: 16 years and over [LEU0252881500A], retrieved from
FRED, Federal Reserve Bank of St. Louis. https://fred.stlouisfed.org/series/LES1252881500Q. Annual Estimate, 2024.
---------------------------------------------------------------------------
B. ICRs Regarding Deferred Action for Childhood Arrivals
1. Basic Health Program (42 CFR 600.5)
The following proposed changes will be submitted for review under
OMB Control Number 0938-1218 (CMS-10510).
The proposed changes to 42 CFR 600.5 would again exclude DACA
recipients from the definition of ``lawfully present'' used to
determine eligibility for a BHP in those States that elect to operate
the program, if otherwise eligible. The impact of this change would be
with regards to the two States that currently operate a BHP--Minnesota
and Oregon. We assume for the purposes of this estimate that both
States have completed the updates from the 2024 DACA Rule. We estimate
that it would take each State 100 hours to develop and code the changes
to its BHP eligibility and verification system to correctly evaluate
eligibility under the revised definition of ``lawfully present'' to
once again exclude DACA recipients as outlined in section III.B.1. of
this proposed rule. To be conservative in our estimates, we are
assuming 100 hours per State, but it is important to note that it may
take each State less than 100 hours given that the work required to
implement this rule for Minnesota's and Oregon's State Exchange systems
may also be able to be leveraged for its BHPs.
Of those 100 hours, we estimate it would take a database and
network administrator and architect 25 hours at $101.66 per hour and a
computer programmer 75 hours at $95.88 per hour.\189\ In the aggregate,
we estimate a one-time burden of 200 hours (2 States x 100 hours) at a
cost of $19,465 (2 States x [(25 hours x $101.66 per hour) + (75 hours
x $95.88 per hour)]) for completing the necessary updates to the
application for BHP coverage.
---------------------------------------------------------------------------
\189\ See U.S. Bureau of Labor Statistics (2024, April 3).
Occupational Employment and Wage Statistics, May 2023 Occupation
Profiles. Dep't. of Labor. https://www.bls.gov/oes/current/oes_stru.htm.
---------------------------------------------------------------------------
These proposed changes, if finalized, would reduce costs on States
related to the decrease in applications for individuals who would have
applied for coverage if not for this proposed change. Those impacts are
accounted for under OMB Control Number 0938-1191 (Data
[[Page 12999]]
Collection to Support Eligibility Determinations for Insurance
Affordability Programs and Enrollment through Health Insurance
Marketplaces, Medicaid and Children's Health Insurance Program Agencies
(CMS-10440)), discussed in section IV.B.3. of this proposed rule, which
pertains to the streamlined application.
2. Exchanges and Processing Streamlined Applications (Sec. 155.20)
The following proposed changes will be submitted for review under
OMB Control Number 0938-1191 (CMS-10440). As discussed previously, we
propose to modify the definition of ``lawfully present'' at Sec.
155.20 to exclude DACA recipients from the definition of ``lawfully
present'' that is used to determine eligibility to enroll in a QHP
through an Exchange, for PTC, APTC, and CSRs, and to enroll in a BHP in
States that elect to operate a BHP. This proposed change would apply to
the 20 State Exchanges, as well as Exchanges on the Federal platform.
On December 9, 2024, the United States District Court for the
District of North Dakota issued a preliminary injunction in Kansas v.
United States of America (Case No. 1:24-cv-00150). Per the district
court's ruling, the 2024 DACA Rule is enjoined in three States that
operate State Exchanges--Kentucky, Idaho, and Virginia. Even though
DACA recipients are not currently eligible for Exchange coverage in
these three States, we are still estimating that these State Exchanges
may still need to make eligibility system changes in order to correctly
implement this rule. This is because these State Exchanges may need to
make changes in order to correctly re-implement the clarifying and
technical changes to the definition of ``lawfully present'' that were
included in the 2024 DACA Rule, and that are not altered by this
proposed rule, but that are currently blocked in these three State
Exchanges due to the court's injunction. We estimate that it would take
the Federal Government and each of the State Exchanges 1,000 hours in
2025 to develop and code changes to their eligibility systems to
correctly evaluate and verify eligibility under the revised definition
of ``lawfully present,'' such that DACA recipients are no longer
considered lawfully present for purposes of enrolling in a QHP offered
through an Exchange, APTC, PTC, CSRs, or BHP coverage in States that
elect to operate a BHP, as outlined in section III.B.1. of this
proposed rule. This estimate is informed by the FFE's prior experience
implementing similar system changes. Of those 1,000 hours, we estimate
it would take a database and network administrator and architect 250
hours at $101.66 per hour and a computer programmer 750 hours at $95.88
per hour. In aggregate for the States, we estimate a one-time burden in
2025 of 20,000 hours (20 State Exchanges x 1,000 hours) at a cost of
$1,946,500 (20 States x [(250 hours x $101.66 per hour) + (750 hours x
$95.88 per hour)]) for completing the necessary updates to State
Exchange eligibility systems.\190\ For the Federal Government, we
estimate a one-time burden in 2025 of 1,000 hours at a cost of $97,325
((250 hours x $101.66 per hour) + (750 hours x $95.88 per hour)). In
total, the burden associated with all system updates would be 21,000
hours at a cost of $2,043,825.
---------------------------------------------------------------------------
\190\ On December 9, 2024, the United States District Court for
the District of North Dakota issued a preliminary injunction in
Kansas v. United States of America (Case No. 1:24-cv-00150). Per the
district court's ruling DACA recipients in three State Exchanges--
Kentucky, Idaho, and Virginia--are not eligible to enroll in
Exchange coverage. As a result, these three States may have already
incorporated the necessary changes to their eligibility system and
mailed any required notices to impacted consumers.
---------------------------------------------------------------------------
Next, we estimate costs associated with termination operations to
end Exchange coverage for any DACA recipients who are already enrolled.
This work would need to be done by the Federal Government, which would
take steps to end coverage for DACA recipients enrolled in States with
FFEs and SBE-FPs and ensure that DACA recipients are not renewed for
future coverage years. Additionally, we anticipate that termination
operations would occur in the 17 States that operate State Exchanges
where the 2024 DACA Rule is not currently enjoined. We assume that in
the three States that operate State Exchanges where the 2024 DACA Rule
is enjoined, the State has already undertaken the work necessary to end
coverage for DACA recipients and therefore would not need to perform
additional work as a result of this rule.
We estimate that it would take the Federal Government and each of
the 17 State Exchanges 1,000 hours in 2025 to terminate Exchange
coverage for DACA recipients.191 192 This estimate is
informed by the FFE's prior experience implementing similar system
changes. Of those 1,000 hours, we estimate it would take a database and
network administrator and architect 250 hours at $101.66 per hour and a
computer programmer 750 hours at $95.88 per hour. In aggregate for the
States, we estimate a one-time burden in 2025 of 17,000 hours at a cost
of $1,654,525 (17 States x [(250 hours x $101.66 per hour) + (750 hours
x $95.88 per hour)]) in 2025 for all termination operations. For the
Federal Government, we estimate a one-time burden in 2025 of 1,000
hours at a cost of $97,325 ((250 hours x $101.66 per hour) + (750 hours
x $95.88 per hour)). Collectively, we estimate that it would take the
Federal Government and each of the State Exchanges 18,000 hours at an
associated cost of $1,751,850 to end coverage for DACA recipients. We
seek comments on these burden estimates, including regarding additional
costs and benefits anticipated as a result of this proposal.
---------------------------------------------------------------------------
\191\ Section 155.310(g).
\192\ On December 9, 2024, the United States District Court for
the District of North Dakota issued a preliminary injunction in
Kansas v. United States of America (Case No. 1:24-cv-00150). In
compliance with the Court's order, CMS terminated enrollments for PY
2025 for DACA recipients in 16 States that are served by the Federal
platform. All impacted consumers received notices regarding their
ineligibility for Exchange coverage. These States are Alabama,
Arkansas, Florida, Indiana, Iowa, Kansas, Missouri, Montana,
Nebraska, New Hampshire, North Dakota, Ohio, South Carolina, South
Dakota, Tennessee, and Texas.
---------------------------------------------------------------------------
``Data Collection to Support Eligibility Determinations for
Insurance Affordability Programs and Enrollment through Health Benefits
Exchanges, Medicaid and CHIP Agencies,'' OMB Control Number 0938-1191
(CMS-10440) accounts for burdens associated with the streamlined
application for enrollment in the programs impacted by this rule. As
such, the following information collection addresses the burden of
processing applications and assisting enrollees with BHP and Exchange
QHP enrollment, and those impacts are not reflected in the ICRs for
BHP, discussed in section IV.B.1. of this proposed rule.
For assisting eligible enrollees and processing their applications,
we estimate this would take a government programs eligibility
interviewer 10 minutes (0.17 hours) per application at a rate of $48.34
per hour, for a cost of approximately $8.22 per application. This
estimate is based on past experience with similar application changes.
As outlined further in section IV.B.3. of this final rule, we
anticipate that approximately 11,000 fewer individuals impacted by this
proposal would complete the application annually. Therefore, the total
application processing burden associated with this proposal would be
reduced by 1,870 hours (0.17 hours x 11,000 applications) for a total
cost savings of $90,396 (1,870 hours x $48.34 per hour). As discussed
further in this section, we anticipate an overall reduction in
application processing burden for States and the Federal Government. We
estimate these proportions as follows and seek
[[Page 13000]]
comment on these estimates and the methodology and assumptions used to
calculate them.
As outlined in section VI.C.1. of this proposed rule, we estimate
that as a result of this proposal, if finalized, 10,000 fewer
individuals would enroll in QHP coverage and 1,000 fewer individuals
would enroll in a BHP on average each year, including redeterminations
and re-enrollments.
The entire information collection savings associated with changes
to BHPs falls on the two States that currently operate a BHP--Minnesota
and Oregon.\193\ As such, we assume 100 percent of the BHP application
processing savings would fall on these two States. Using the per-
application processing burden of 10 minutes (0.17 hours) per
application at a rate of $48.34 per hour, and the estimate that 1,000
fewer individuals would apply for BHP, we anticipate a burden reduction
of 170 hours with an associated cost savings of $8,218, for States to
process BHP applications.
---------------------------------------------------------------------------
\193\ Minnesota's BHP began January 1, 2015. Oregon's BHP began
July 1, 2024. For more information, see CMS. (n.d.) Basic Health
Program. https://www.medicaid.gov/basic-health-program/index.html.
---------------------------------------------------------------------------
For the Exchanges, we use data from the 2024 Open Enrollment Period
to estimate the proportion of applications that are processed by States
compared to the Federal Government, and we determined that 49 percent
of Exchange applications were submitted to FFEs/SBE-FPs, and are
therefore processed by the Federal Government, while 51 percent were
submitted to and processed by the 20 State Exchanges.\194\ As such, we
anticipate that 49 percent of Exchange application processing savings
would be attributed to the Federal Government and 51 percent of
Exchange application processing savings would be attributed to States
using their own eligibility and enrollment platforms.
---------------------------------------------------------------------------
\194\ CMS. (2024, March 27). Health Insurance Markets 2024 Open
Enrollment Report. https://www.cms.gov/files/document/health-insurance-exchanges-2024-open-enrollment-report-final.pdf.
---------------------------------------------------------------------------
For the Exchanges, if we estimate 10,000 fewer applications would
be processed, 51 percent of those (5,100) would no longer be processed
by State Exchanges and 49 percent (4,900) would no longer be processed
by the Federal Government. Using the per-application processing burden
of 10 minutes (0.17 hours) per application at a rate of $48.34 per
hour, we anticipate cost savings of $41,911 or a reduction by 867 hours
for State Exchanges to process applications. Additionally, we estimate
cost savings of $40,267 or a reduction by 833 hours for the Federal
Government to process applications at a rate of $48.34 per hour.
Therefore, the total burden on State Exchanges to assist eligible
beneficiaries and process their applications would be reduced by 1,037
hours annually beginning in 2025 (170 hours for BHP + 867 hours for
State Exchanges) with a net cost reduction of $50,129. The total burden
on the Federal Government would be reduced by 833 hours annually
beginning in 2025 (entirely for Exchanges), with a net cost reduction
of $40,267.
In addition, Exchanges would have required individuals completing
the application to submit supporting documentation to confirm their
lawful presence if it was unable to be verified electronically through
a data match with DHS via the Hub using DHS' Systematic Alien
Verification for Entitlements (SAVE) system.\195\ An applicant's lawful
presence may not be able to be verified if, for example, the applicant
opts to not include information about their immigration documentation
such as their alien number or employment authorization document (EAD)
number when they fill out the application. Therefore, we anticipate
cost savings for Exchanges due to the reduction in lawful presence
inconsistencies for DACA recipients who were not able to have their
immigration status verified electronically during the application
process.
---------------------------------------------------------------------------
\195\ Section 155.315(f).
---------------------------------------------------------------------------
Of the 10,000 fewer DACA recipients who would apply for Exchange
coverage as a result of this rule, we estimate that 20 percent, or
2,000, would have generated an immigration status inconsistency.\196\
Of these 2,000 inconsistencies, we assume that 51 percent of those
(1,020) would no longer be processed by State Exchanges and 49 percent
(980) would no longer be processed by the Federal Government.\197\ To
adjudicate an inconsistency, we estimate that it would have taken an
eligibility support worker (BLS occupation code 43-4061) 12 minutes, or
0.2 hours, at an hourly rate of $48.34 to review submitted
documentation. Therefore, for State Exchanges, we anticipate a net
burden reduction of 204 hours (0.2 hours x 1,020 inconsistencies) with
an equivalent cost savings of $9,861 (204 hours x $48.34 per hour). For
the Federal Government, we anticipate a net burden reduction of 196
hours (0.2 hours x 980 inconsistencies), with an equivalent cost
savings of $9,475 (196 hours x $48.34 per hour). In sum, we expect a
burden reduction due to processing fewer immigration status
inconsistencies of 400 hours (204 hours + 196 hours), with cost savings
of $19,336 (400 hours x $48.34 per hour).
---------------------------------------------------------------------------
\196\ Estimates are based on internal CMS data comparing the
number of immigration DMIs generated to the number of noncitizen
enrollees during similar time periods during 2024, rounded to the
nearest 5 percent.
\197\ CMS. (2024, March 27). Health Insurance Markets 2024 Open
Enrollment Report. https://www.cms.gov/files/document/health-insurance-exchanges-2024-open-enrollment-report-final.pdf.
---------------------------------------------------------------------------
We seek comment on these estimates and the methodology and
assumptions used to calculate them.
3. Application Process for Applicants
The following proposed changes will be submitted for review under
OMB Control Number 0938-1191 (CMS-10440).
As required by the ACA, there is one application through which
individuals may apply for health coverage in a QHP through an Exchange
and for other insurance affordability programs like Medicaid, CHIP, and
a BHP in a State that chooses to operate a BHP.\198\ We note that this
proposed rule proposes no changes to the eligibility application for
Medicaid and CHIP. Hence, this section only includes data on the burden
associated with completing an application and submitting additional
information to verify lawful presence, if necessary, for health
coverage in a QHP through an Exchange and for BHP coverage.\199\
---------------------------------------------------------------------------
\198\ 42 U.S.C. 18083.
\199\ We assume that the burden of completing an application is
essentially the same regardless of whether the individual were to
apply directly with the State agency responsible for administering
the BHP or with an Exchange.
---------------------------------------------------------------------------
In the existing information collection request for this application
(OMB Control Number 0938-1191), we estimate that the application
process would take an average of 30 minutes (0.5 hours) to complete for
those applying for insurance affordability programs and 15 minutes
(0.25 hours) for those applying without consideration for insurance
affordability programs.\200\ Based on internal data from the previous
open enrollment period when DACA recipients were eligible to complete
the application, we estimate that approximately 11,000 such individuals
would have completed the application. We estimate that of the 11,000
fewer individuals who would have applied for QHP coverage through an
Exchange or for BHP coverage were it not for these proposed changes, 98
percent would have applied for
[[Page 13001]]
insurance affordability programs and 2 percent would have applied
without consideration of insurance affordability programs. Using the
hourly value of time for changes in time use for unpaid activities
discussed in section IV.A. of this proposed rule (at an hourly rate of
$24.59), the average opportunity cost to an individual for completing
this task is estimated to be approximately 0.495 hours [(0.5 hours x 98
percent) + (0.25 hours x 2 percent)] at a cost of $12.17. Therefore,
given the proposed changes to the definition of ``lawfully present''
and the impact on the 11,000 individuals who may have otherwise
completed the application, we anticipate net annual cost savings of
approximately $133,870, or a reduction of approximately 5,445 hours.
---------------------------------------------------------------------------
\200\ We note that this analysis includes estimates for
completing electronic applications only. Internal CMS data show that
less than 1 percent of applicants utilize the paper application.
---------------------------------------------------------------------------
As discussed above, based on recent internal data from the Federal
platform, we estimate that of the 11,000 individuals impacted by the
changes proposed to the definition of ``lawfully present'' in this
rule, approximately 80 percent (or 8,800) of applicants would have been
able to have their lawful presence electronically verified, and the
remaining 20 percent (or 2,200) of applicants would have been unable to
have their lawful presence electronically verified and would therefore
have had to submit supporting documentation to confirm their lawful
presence.\201\ We estimate that a consumer would have, on average,
spent approximately 1 hour gathering and submitting required
documentation. Using the hourly value of time for changes in time use
for unpaid activities discussed in section IV.A. of this proposed rule
(at an hourly rate of $24.59), the opportunity cost for an individual
to complete this task would have been approximately $24.59. Therefore,
we anticipate a net annual burden reduction of approximately 2,200
hours with an equivalent cost savings of approximately $54,098 for the
2,200 individuals who would have been unable to electronically verify
their lawful presence and therefore would have needed to submit
supporting documentation.
---------------------------------------------------------------------------
\201\ Estimates are based on internal CMS data comparing the
number of immigration data matching issues (DMIs) generated to the
number of noncitizen enrollees during similar time periods during
2024, rounded to the nearest 5 percent.
---------------------------------------------------------------------------
As previously stated, for the 11,000 individuals impacted by the
proposal regarding the definition of ``lawfully present'' this rule,
the annual additional burden of completing the application would be
0.495 hours per individual on average. Under this proposed rule, if
finalized, we anticipate a net reduction of 5,445 hours or cost savings
of $66,266. For the 2,200 individuals who would have been unable to
electronically verify their lawful presence, the total annual burden of
submitting documentation to verify their lawful presence would have
been 2,200 hours at a cost savings of $54,098. The average annual
burden per respondent would have been 0.695 hours ((0.495 hours x 80
percent of individuals) + (1.495 hours x 20 percent of individuals)).
Under this proposed rule, if finalized, we anticipate a net reduction
of annual burden equaling 7,645 hours (5,445 hours + 2,200 hours) with
an associated cost savings of $187,991 ($133,893 + $54,098).
We seek comment on these burden estimates.
C. ICRs Regarding Failure To File and Reconcile (Sec. 155.305(f)(4))
We are proposing to amend current regulation at Sec. 155.305(f)(4)
under which an Exchange may not find an enrollee eligible for APTC
where an enrollee or their tax filer has failed to file a Federal
income tax return reconciling their APTC for two-consecutive tax years
to increase the program integrity of the Exchange. We are proposing to
require Exchanges to find enrollees ineligible for APTC after they or
their tax filer has failed to file and reconcile their APTC for one tax
year. For Exchanges on the Federal platform, the FTR process would
otherwise be conducted similarly to the previous iterations of FTR
prior to the 2024 Payment Notice, except that those identified as being
in a one-tax year FTR status would be at risk for removal of APTC and
there would no longer be a two-tax year FTR status population. Minimal
changes to the language of the Exchange application questions would be
necessary to obtain relevant information; as such, we anticipate that
the proposed amendment would not impact the information collection
burden for consumers. We anticipate that there would no longer be a 2
year FTR population, and thus the notices sent to the FTR population
would be similar in inciting an urgency to act to the current two-tax
year FTR notices, but that all consumers with an FTR status would be in
a one-tax year FTR status. Due to this, we do not anticipate PRA
impacts related to noticing requirements.
We seek comment on these assumptions and any information collection
burdens not identified in this section.
D. ICRs Regarding Income Verification When Data Sources Indicate Income
Less Than 100 Percent of the FPL (Sec. 155.320(c)(3)(iii))
The following proposed changes will be submitted for review under
OMB Control Number 0938-1191 (CMS-10440). We seek comment on these
burden estimates.
We are proposing amendments to Sec. 155.320(c)(3)(iii) to specify
that all Exchanges must generate annual income inconsistencies when a
tax filer's attested projected annual income is greater than or equal
to 100 percent and not more than 400 percent of the FPL and trusted
data sources indicate that projected income is under 100 percent of the
FPL.
We anticipate that adding this income verification requirement
would result in approximately 1 hour time spent by consumers to
complete associated questions in the application or submit supporting
documentation. Based on historical data from the FFE, HHS estimates
that approximately 548,000 inconsistencies would be generated at the
household level across all Exchanges. Therefore, adding these
inconsistencies would increase burden on consumers by approximately
548,000 hours. Using the estimate of the hourly value of time for
changes in time use for unpaid activities calculated at $24.59 per hour
in section IV.A. of this preamble, we estimate that the annual increase
in cost for each consumer would be approximately $24.59, and the annual
cost increase for all consumers who would generate this income
inconsistency would be approximately $13,475,320.
Additionally, we estimate that adding this income verification
requirement would result in an increase in burden on all Exchanges.
Based on historical FFE data, we anticipate that approximately 340,000
inconsistencies would be generated at the household level for Exchanges
using the Federal platform, and 208,000 inconsistencies would be
generated at the household level for State Exchanges. Once households
have submitted the required verification documents, we estimate that it
would take approximately 1 hour and 12 minutes for an eligibility
support staff person (Eligibility Interviewers, Government Programs--
BLS occupation code 43-4061), at an hourly cost of $48.34, to receive,
review, and verify submitted verification documents as well as conduct
outreach and determine DMI outcomes. Therefore, adding these
inconsistencies would result in an increase in annual burden on the
Federal Government of 408,000 hours
[[Page 13002]]
(340,000 verifications x 1.2 hours per verification) at a cost of
$19,722,720 (408,000 hours x $48.34 per hour) and an increase in annual
burden on State Exchanges of 249,600 hours (208,000 verifications x 1.2
hours per verification) at a cost of $12,065,664 (249,600 hours x
$48.34 per hour).
Finally, we estimate that adding this income requirement would
require costs related to updating the technical systems, including the
eligibility system. We estimate that it would take the Federal Exchange
and each State Exchange 8,000 hours in 2025 to make these updates. Of
those 8,000 hours, we estimate it would take a database and network
administrator and architect 2,000 hours at $101.66 per hour and a
computer programmer 6,000 hours at $95.88 per hour. Given this, we
estimate that the Federal Exchange would incur a one-time burden of
$778,600 (2,000 x $101.66 + 6,000 x $95.88) to make these eligibility
system updates. State Exchanges would incur a one-time burden of
$14,793,400 ($778,600 x 19) total associated with a total of 123,500
(8,000 x 19) burden hours.
We seek comment on these burden estimates and assumptions.
E. ICRs Regarding Income Verification When Tax Data Is Unavailable
(Sec. 155.320(c)(5))
The following proposed changes will be submitted for review under
OMB Control Number 0938-1191 (CMS-10440). We seek comment on these
burden estimates.
We are proposing amendments to remove Sec. 155.320(c)(5) which
currently requires Exchanges to accept attestations, and not set an
Income DMI, when the Exchange requests tax return data from the IRS to
verify attested projected annual household income, but the IRS confirms
there is no such tax return data available.
Based on internal historical DMI data, we estimate that
approximately 1,313,000 inconsistencies would be generated at the
household level for Exchanges using the Federal platform, and 805,000
would be generated at the household level for State Exchanges if this
proposal were finalized. Once households have submitted the required
verification documents, we estimate that it would take approximately 1
hour and 12 minutes for an eligibility support staff person (BLS
occupation code 43-4061), at an hourly cost of $48.34, to receive,
review, and verify submitted verification documents as well as conduct
outreach and determine DMI outcomes. Therefore, the removal of Sec.
155.320(c)(5) would result in an increase in annual burden for the
Federal Government of 1,575,600 hours (1,313,000 verifications x 1.2
hours per verification) at a cost of $76,164,504 (1,575,600 hours x
$48.34 per hour) and an increase in annual burden on State Exchanges of
966,000 hours (805,000 verifications x 1.2 hours per verification) at a
cost of $46,696,440 (966,000 hours x $48.34 per hour).
In addition to the increased administrative burden on Exchanges, if
finalized, the change would increase the number of consumers who are
required to submit documentation to verify their income. We estimate
that consumers would each spend 1 hour to answer the associated
questions and submit documentation. Based on historical data from the
FFE, we estimate that approximately 2,118,000 inconsistencies would be
generated at the household level across all Exchanges. Using the
estimate of the hourly value of time for changes in time use for unpaid
activities calculated at $24.59 per hour in section IV.A. of this
preamble, we estimate that the annual increase in cost for each
consumer would be approximately $24.59 and that the proposed change
would increase burden on consumers by 2,118,000 hours per year at an
associated cost of $52,081,620 (2,118,000 hours x $24.59 per hour).
Finally, we estimate that removing the current process of verifying
income attestations when IRS returns no data would require costs
related to updating the eligibility system. We estimate that it would
take the Federal Exchange and each State Exchange 9,000 hours in 2025
to make these updates. Of those 9,000 hours, we estimate it would take
a database and network administrator and architect 2,250 hours at
$101.66 per hour and a computer programmer 6,750 hours at $95.88 per
hour. Given this, we estimate that the Federal Government would incur a
one-time burden of $875,925 (2,250 x $101.66 + 6,750 x $95.88) to make
these eligibility system updates. State Exchanges would incur a one-
time burden total of $16,642,575 ($875,925 x 19) associated with a
total of 171,000 (9,000 x 19) burden hours.
We seek comment on these estimates and assumptions.
F. ICRs Regarding Annual Eligibility Redetermination (Sec. 155.335)
Under Sec. 147.106(c) and (f), health insurance issuers that
discontinue or renew non-grandfathered coverage under a product in the
individual market (including coverage offered through the Exchanges)
(including a renewal with uniform modifications), or that non-renew or
terminate coverage under a product in the individual market (including
coverage offered through the Exchanges) based on movement of all
enrollees in a plan or policy outside the product's service area, are
required to provide written notices to enrollees, in a form and manner
specified by the Secretary.\202\ Under Sec. 156.1255, QHP issuers in
the individual market must include certain information in the
applicable renewal and discontinuation notices.\203\ To satisfy these
notice requirements, issuers in the individual market must use Federal
standard notices, unless a State develops and requires the use of a
different form consistent with CMS guidance.
---------------------------------------------------------------------------
\202\ The requirement to provide notices of renewal applies to
issuers in the individual or small group market. The requirement to
provide notices of product discontinuation and notices of non-
renewal or termination based on enrollees' movement outside the
service area applies to issuers in the individual or group market.
See section 2703 of the PHS Act and Sec. 147.106. These
requirements also apply with respect to grandfathered coverage
pursuant to sections 2712 (former) and 2742 of the PHS Act and
Sec. Sec. 146.152 and 148.122.
\203\ Section 156.1255(a) through (d).
---------------------------------------------------------------------------
This proposed rule proposes to amend the automatic re-enrollment
hierarchy by removing Sec. 155.335(j)(4), which currently allows
Exchanges to direct re-enrollment for enrollees who are eligible for
CSRs from a bronze QHP to a silver QHP in the same product if the
silver QHP has a lower or equivalent net premium after the application
of APTC, and if the silver QHP has the same provider network as the
bronze plan into which the enrollee would otherwise have been re-
enrolled. To align with this proposed change, we propose to remove
language related to the bronze to silver crosswalk from the Federal
standard notices.
This proposed rule also proposes to require enrollees who would
otherwise be automatically re-enrolled in a QHP with a zero-dollar
premium after application of APTC (``fully subsidized'') to instead be
automatically re-enrolled with APTC applied to the policy reduced such
that the enrollee owes a five-dollar premium. We propose to update the
Federal standard notices to include language related to this proposed
requirement.
The burden to issuers related to sending the Federal standard
notices is currently approved under OMB Control Number 0938-1254 (CMS-
10527).\204\ CMS will revise the information collection to incorporate
the necessary language modifications in the Federal standard notices
due to the changes proposed in this proposed rule.
[[Page 13003]]
However, we do not anticipate any change in burden to issuers.
---------------------------------------------------------------------------
\204\ OMB Control Number 0938-1254 (CMS-10527, Annual
Eligibility Redetermination, Product Discontinuation and Renewal
Notices).
---------------------------------------------------------------------------
G. ICRs Regarding Pre-Enrollment Verification for Special Enrollment
Periods (Sec. 155.420)
The following proposed changes will be submitted for review under
OMB Control Number 0938-1191 (CMS-10440). We seek comment on these
burden estimates.
We are proposing to amend Sec. 155.420(g) to require all Exchanges
to conduct eligibility verification for SEPs. Specifically, we propose
to remove the limit on Exchanges on the Federal platform to conducting
pre-enrollment verifications for only the loss of minimum essential
coverage SEP. With this limitation removed, we propose to conduct pre-
enrollment verifications for most categories of SEPs for Exchanges on
the Federal platform in line with operations prior to the
implementation of the 2023 Payment Notice.
We also propose to require that Exchanges, including all State
Exchanges, conduct SEP verification for at least 75 percent of new
enrollments through SEPs for consumers not already enrolled in coverage
through the applicable Exchange. We propose that Exchanges must verify
at least 75 percent of such new enrollments based on the current
implementation of SEP verification by Exchanges.
We anticipate that adding this expansion of pre-enrollment
verification for SEPs would result in approximately 1 hour of time
spent by consumers to complete associated questions in the application
or submit supporting documentation. Based on historical data from the
FFE, we estimate that approximately 293,073 new SEP verification issues
would be generated at the household level on the Federal Exchange.
Therefore, adding these inconsistencies would increase burden on
consumers by approximately 293,073 hours. Using the estimate of the
hourly value of time for changes in time use for unpaid activities
calculated at $24.59 per hour in section IV.A. of this preamble, we
estimate that the annual increase in cost for each consumer would be
approximately $24.59, and the annual cost increase for all consumers
who would generate this income inconsistency would be approximately
$7,206,665.
Additionally, we estimate that expanding pre-enrollment
verification for SEPs would result in an increase in burden on
Exchanges using the Federal platform and State Exchanges. Based on
historical FFE data, we anticipate that approximately 293,073
inconsistencies would be generated at the household level for Exchanges
using the Federal platform, and 179,625 inconsistencies would be
generated at the household level for Exchanges not using the Federal
platform. Once households have submitted the required verification
documents, we estimate that it would take approximately 12 minutes for
an eligibility support staff person (BLS occupation code 43-4061), at
an hourly cost of $48.34, to review and verify submitted verification
documents. Therefore, expanding verification would result in an
increase in annual burden on Exchanges using the Federal platform of
58,615 hours (293,073 verifications x 0.2 hours per verification) at a
cost of $2,833,449 (58,615 hours x $48.34 per hour) and an increase in
annual burden on Exchanges not using the Federal platform of 35,925
hours (179,625 verifications x 0.2 hours per verification) at a cost of
$1,736,615 (35,925 hours x $48.34 per hour).
We seek comment on these burden estimates and assumptions.
H. Summary of Annual Burden Estimates for Finalized Requirements
[GRAPHIC] [TIFF OMITTED] TP19MR25.009
[[Page 13004]]
I. Submission of PRA-Related Comments
We have submitted a copy of this proposed rule to OMB for its
review of the rule's information collection and recordkeeping
requirements. These requirements are not effective until they have been
approved by the OMB.
To obtain copies of the supporting statement and any related forms
for the proposed collections discussed above, please visit CMS' website
at www.cms.hhs.gov/PaperworkReductionActof1995, or call the Reports
Clearance Office at 410-786-1326.
V. Response to Comments
Because of the large number of public comments we normally receive
on Federal Register documents, we are not able to acknowledge or
respond to them individually. We will consider all comments we receive
by the date and time specified in the DATES section of this preamble,
and, when we proceed with a subsequent document, we will respond to the
comments in the preamble to that document.
VI. Regulatory Impact Analysis
A. Statement of Need
We propose to exclude DACA recipients from the definitions of
``lawfully present'' that are used to determine eligibility to enroll
in a QHP through an Exchange, for PTC, APTC, and CSRs, and to enroll in
a BHP in States that elect to operate a BHP. This proposed rule also
proposes to reverse the policy restricting an issuer from attributing
payment of premium for new coverage to past-due premiums from prior
coverage. Additionally, we propose to revise the FTR process at Sec.
155.305(f)(4) to reinstate the policy that Exchanges must determine
enrollees ineligible for APTC when HHS notifies the Exchange that they
or their tax filer has failed to file a Federal income tax return and
reconcile their past APTC for a year for which their tax data would be
utilized to verify their eligibility. We also propose policies to
strengthen the verification process around annual household income. We
further propose to require enrollees who would otherwise be
automatically re-enrolled in a QHP with a zero-dollar premium after
application of APTC (``fully-subsidized'') to instead be automatically
re-enrolled with APTC applied to the policy reduced such that the
enrollees owe a five-dollar premium, if they do not submit an
application for an updated eligibility determination to an Exchange. We
also propose to amend the automatic reenrollment hierarchy by removing
Sec. 155.335(j)(4) which currently allows Exchanges to move an
enrollee from a bronze QHP to a silver QHP if the silver QHP has a
lower or equivalent net premium after the application of APTC, and if
the silver QHP is in the same product and has the same provider network
as the bronze plan into which the enrollee would otherwise have been
re-enrolled. We also propose to remove the fixed-dollar and gross
percentage-based premium payment thresholds at Sec. 155.400(g). We
further propose to change the annual OEP for coverage through all
individual market Exchanges from November 1 through January 15 to
November 1 through December 15 of the calendar year preceding the plan
year. Additionally, we propose to repeal Sec. 155.420(d)(16) and make
conforming changes to repeal the monthly SEP for qualified individuals
or enrollees, or the dependents of a qualified individual or enrollee,
who are eligible for APTC, and whose projected household income is at
or below 150 percent of the FPL. We also propose to amend Sec.
155.420(g) to enable HHS to reinstate (with modifications) pre-
enrollment verification of eligibility of applicants for all categories
of individual market SEPs and to require all State Exchanges to conduct
pre-enrollment verification of eligibility for at least 75 percent of
new enrollments through SEPs. Finally, we propose to update the premium
adjustment percentage methodology to establish a premium growth measure
that comprehensively reflects premium growth in all affected markets.
B. Overall Impact
We have examined the impacts of this rule as required by Executive
Order 12866, ``Regulatory Planning and Review''; Executive Order 13132,
``Federalism''; Executive Order 13563, ``Improving Regulation and
Regulatory Review''; Executive Order 14192, ``Unleashing Prosperity
Through Deregulation''; the Regulatory Flexibility Act (RFA) (Pub. L.
96-354); section 1102(b) of the Social Security Act; and section 202 of
the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4).
Executive Orders 12866 and 13563 direct agencies to assess all
costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select those regulatory approaches that
maximize net benefits (including potential economic, environmental,
public health and safety, and other advantages; distributive impacts;
and equity). Section 3(f) of Executive Order 12866 defines a
``significant regulatory action'' as any regulatory action that is
likely to result in a rule that may: (1) have an annual effect on the
economy of $100 million or more 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, 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 impact of entitlements, grants, user
fees, or loan programs or the rights and obligations of recipients
thereof; or (4) raise novel legal or policy issues arising out of legal
mandates, or the President's priorities.
A regulatory impact analysis (RIA) must be prepared for a
regulatory action that is significant under section 3(f)(1) of E.O.
12866. The Office of Management and Budget's (OMB) Office of
Information and Regulatory Affairs (OIRA) has determined that this
rulemaking is significant per section 3(f)(1). Accordingly, we have
prepared an RIA that to the best of our ability presents the costs and
benefits of the rulemaking. OMB has reviewed these proposed regulations
under E.O. 12866, and the Department has provided the following
assessment of their impact.
Executive Order 14192, titled ``Unleashing Prosperity Through
Deregulation,'' was issued on January 31, 2025. Section 3(a) of
Executive Order 14192 requires an agency, unless prohibited by law, to
identify at least ten existing regulations to be repealed when the
agency issues a new regulation. In furtherance of this requirement,
section 3(c) of Executive Order 14192 requires that the new incremental
costs associated with new regulations shall, to the extent permitted by
law, be offset by the elimination of existing costs associated with
prior regulations. A significant regulatory action (as defined in
section 3(f) of Executive Order 12866) that would impose total costs
greater than zero is considered an Executive Order 14192 regulatory
action. This proposed rule, if finalized as proposed, is, therefore,
expected to be an Executive Order 14192 regulatory action. Details on
the estimated costs appear in the preceding analysis.
C. Impact Estimates of the Proposed Individual Market Program Integrity
Provisions and Accounting Table
Consistent with OMB Circular A-4 (available at https://trumpwhitehouse.archives.gov/sites/whitehouse.gov/files/omb/circulars/A4/a-4.pdf), we have prepared an accounting statement in Table 11
showing the classification of
[[Page 13005]]
the impact associated with the provisions of this proposed rule. We
have included the undiscounted annual impacts in Table 12.
This proposed rule would implement standards for programs that
would have numerous effects, including supporting program integrity,
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 and monetize all the benefits and
costs of this proposed rule. The effects in Table 11 reflect
qualitative assessment of impacts and estimated direct monetary costs
and transfers resulting from the provisions of this proposed rule for
Exchanges, health insurance issuers, and consumers. The individual
effects of each provision in this proposed rule are presented
separately in Table 11 and collectively in Table 12, but we anticipate
these estimates may overlap, as some individuals could be impacted by
multiple provisions. Therefore, in section VI.C.18 of this RIA, we
present overall impact estimates of all provisions considered jointly.
[[Page 13006]]
[GRAPHIC] [TIFF OMITTED] TP19MR25.010
[[Page 13007]]
[GRAPHIC] [TIFF OMITTED] TP19MR25.011
[[Page 13008]]
[GRAPHIC] [TIFF OMITTED] TP19MR25.012
[[Page 13009]]
[GRAPHIC] [TIFF OMITTED] TP19MR25.013
[GRAPHIC] [TIFF OMITTED] TP19MR25.014
1. Guaranteed Availability of Coverage (Sec. 147.104(i))
This proposed rule would remove Sec. 147.104(i), which would
reverse the policy prohibiting an issuer from attributing payment of
premium for new coverage to past-due premiums from prior coverage. We
propose that an issuer may, to the extent permitted by applicable State
law, establish terms of coverage that add past-due premium amounts owed
to the issuer to the initial premium the enrollee must pay to
effectuate new coverage and to refuse to effectuate new coverage if the
initial and past-due premium amounts are not paid in full.
The proposed policy aims to promote continuous coverage while
providing issuers with an additional mechanism for past-due premium
collection. The proposed policy could help reduce outstanding premium
debt amount for enrollees, potentially benefiting their financial
standing over time and reduce the likelihood of any debt being placed
into collections. Additionally, the proposed rule could potentially
improve premium collection rates and reduce administrative costs
associated with repeated enrollment-termination cycles and other
collection methods.
Past-due premiums can influence both issuer operations and market
dynamics. This can occur if enrollees choose to move in and out of
coverage based on anticipated health care needs by exploiting or
utilizing loopholes in the insurance system, such as extended grace
periods and allowing coverage to lapse without addressing premium
obligations even when seeking to enroll in new coverage. By addressing
these circumstances, the proposed policy would encourage continuous
coverage and reduce the burden on issuers to collect past-due premiums
in other ways. The proposed policy would reduce the risk of gaming and
adverse selection by consumers.
The proposed policy could also increase enrollment by encouraging
enrollees to maintain continuous
[[Page 13010]]
coverage. These enrollment gains may be partially offset by people who
owe past-due premiums and who may be deterred from enrolling due to a
higher initial premium payment. Some enrollees, particularly those
facing financial constraints, might need to adjust their household
budgeting to maintain coverage or, if they are not able to, become
uninsured. Depending on the circumstances, these enrollees, if they
become uninsured, could face higher costs for care and medical debt if
care is needed. These costs could in turn be incurred by hospitals and
municipalities in the form of uncompensated care. The proposed policy
aims to encourage continuous coverage, reduce coverage gaps, and
promote consistent payment of premiums by reducing consumers' ability
to game the guaranteed availability requirement. However, others might
face additional barriers to regaining coverage due to owing past-due
premiums. The proposed policy seeks to balance market stability
considerations by maintaining appropriate access to coverage and
promoting continuity of coverage amongst enrollees. While some
consumers may face challenges paying past-due premiums and could become
or remain uninsured, the longer-term effects could include more stable
risk pools and potentially more moderate premium trends. We seek
comment on these impacts and assumptions.
There is some uncertainty regarding whether the coverage gains from
moderate premium trends and promoting continuous coverage would be
higher than coverage losses due to the proposed policy that would allow
issuers to require payment of past-due premiums. We anticipate any
discouragement from enrolling would be minimal. As discussed earlier in
this preamble, when this proposed policy was previously in place, the
percentage of enrollees in Exchanges using the Federal platform who had
their coverage terminated for non-payment of premiums dropped
substantially. While the data analysis did not indicate any specific
reason for this reduction, it is possible that the policy may have
successfully encouraged more people to maintain continuous coverage.
This likely reduced the number of people with past-due premium debt and
lowered cost to issuers related to collection of past-due premiums. We
expect this proposed policy would result in similar benefits. While we
lack data to quantify these effects, we believe that these effects
could collectively contribute to more stable market conditions over
time. We seek comment on these impacts and assumptions.
This proposed policy aims to encourage continuous coverage.
Therefore, we do not anticipate any significant impact on PTCs. We seek
comment on this impact estimate and assumptions.
The projected impacts of this proposed policy reflect current
understanding of market dynamics while acknowledging the uncertainty
inherent in predicting response to the proposed policy.
2. Deferred Action for Childhood Arrivals (Sec. 155.20)
We propose to modify the definition of ``lawfully present''
currently articulated at Sec. 155.20 and used for the purpose of
determining whether a consumer is eligible to enroll in a QHP through
an Exchange and to enroll in a BHP in States that elect to operate a
BHP. This change would exclude DACA recipients from the definition of
``lawfully present'' that is used to determine eligibility to enroll in
a QHP through an Exchange, for PTC, APTC, and CSRs, and for BHP
coverage. We anticipate excluding DACA recipients from the definition
of ``lawfully present'' would reduce annual QHP enrollment through the
Exchanges by 10,000 and annual BHP enrollment by 1,000 beginning in
2025. We project this decline in enrollment in QHP enrollment through
the Exchanges would reduce annual APTC expenditures by $34.0 million
and the decline in enrollment in BHP would reduce annual BHP
expenditures by $3.2 million beginning in 2026.
While initial estimates under the ACA expansion to DACA recipients
estimated 100,000 DACA recipients would receive coverage, actual
exchange enrollment of DACA recipients has been much lower. Comparing
CMS internal data for participating FFE States to the count of active
DACA recipients from U.S. Citizenship and Immigration Services \205\
showed an enrollment rate of 2 percent among DACA recipients; however,
1.3 percent of enrollment was in States that received an injunction
preventing enrollment in coverage. With this new information, we have
updated our DACA enrollee assumptions to 10,000 Exchange enrollees and
1,000 BHP enrollees. With the average age of DACA recipients being
30.6, we assume an APTC amount of $283 per month, leading to an
expected approximately $34 million reduction in APTC expenditures
through the Exchange (10,000 x $283 x 12 months = $33,960,000).
Similarly, we expect approximately $3.2 million in lower BHP
expenditures (1,000 x $283 x 0.95 x 12 months = $3,226,200) in States
that choose to operate BHPs.
---------------------------------------------------------------------------
\205\ U.S. Citizenship and Immigration Services. (n.d.)
Immigration and Citizenship Data. Dep't of Homeland Security.
https://www.uscis.gov/tools/reports-and-studies/immigration-and-citizenship-data?topic_id%5B%5D=33602&ddt_mon=12&ddt_yr=2024&query=approximate+active+daca&items_per_page=10.
---------------------------------------------------------------------------
Because DACA recipients are young,\206\ they generally tend to be
healthier. We therefore anticipate that excluding DACA recipients from
individual market QHP coverage offered through the Exchanges would have
a small negative impact on the individual market risk pool. Some DACA
recipients who lose Exchange or BHP coverage may be able to enroll in
non-Exchange coverage. However, we anticipate the majority who lose
Exchange or BHP coverage would become uninsured. This may result in
costs to the Federal Government and to States to provide limited
Medicaid coverage for the treatment of an emergency medical condition
to DACA recipients who have a qualifying medical emergency and who
become uninsured as a result of this rule.
---------------------------------------------------------------------------
\206\ Per USCIS data, the average age of DACA recipients is 30
years old. Count of Active DACA Recipients by Month of Current DACA
Expiration as of September 30, 2024. U.S. Citizenship and
Immigration Services. (2024, Sept. 30). Count of Active DACA
Recipients by Month of Current DACA Expiration as of September 30,
2024. Dep't of Homeland Security. https://www.uscis.gov/sites/default/files/document/data/active_daca_recipients_fy2024_q4.xlsx.
---------------------------------------------------------------------------
We also anticipate that this proposed change would result in costs
to State Exchanges and the Federal Government to update eligibility
systems in accordance with this proposal. As discussed further in
section IV.B. of this proposed rule, in aggregate for the States, we
estimate a one-time cost in 2025 of $1,965,965 total ($1,946,500 for
State Exchanges + $19,465 for BHPs) total and $97,325 for the Federal
Government. We also estimate a one-time cost in 2025 for termination
operations of $1,654,525 total for State Exchanges and $97,325 for the
Federal Government, as discussed further in section IV.B.2. of this
proposed rule. In addition, we estimate cost savings annually beginning
in 2025 for State Exchanges and States that operate BHPs of $50,129
total and for the Federal Government of $40,267 associated with
assisting fewer eligible beneficiaries and processing their
applications as a result of this proposal. We also estimate cost
savings annually beginning in 2025 for State Exchanges of $9,861 total
and for the Federal Government of $9,745 associated with processing
fewer
[[Page 13011]]
immigration status inconsistencies. Finally, we anticipate a net
reduction in costs to individuals to complete the application of
$187,991 annually, as discussed further in section IV.B.3. of this
proposed rule. We seek comment on these impact estimates and
assumptions, the details of which may be found in section IV.B. of this
proposed rule.
3. Standards for Termination for Cause From the FFE (Sec.
155.220(g)(2))
As discussed in the preamble to this proposal, we propose to
improve transparency in the process for holding agents, brokers, and
web-brokers accountable for noncompliance with applicable law,
regulatory requirements, and the terms and conditions of their Exchange
agreements. Specifically, we propose to add text to Sec. 155.220(g)(2)
that clearly sets forth that HHS would apply a ``preponderance of the
evidence'' standard of proof to assess potential noncompliance under
Sec. 155.220(g)(1) and make a determination there was a specific
finding or pattern of noncompliance that is sufficiently severe. Our
proposed regulatory change would put all agents, brokers, and web-
brokers assisting consumers with enrollment on the FFEs and SBE-FPs on
notice of the evidentiary standard we would use in leveraging our
enforcement authority under Sec. 155.220(g)(1) through (3). We believe
this proposed update would make the regulations easier to follow and
more clearly articulate our enforcement process improving transparency
for agents, brokers, and web-brokers, consumers, and other interested
parties.
We believe our proposed change would have positive impacts on
agents, brokers, and web-brokers. Codifying the evidentiary standard
would provide agents, brokers, and web-brokers under investigation for
noncompliant behavior more transparency into HHS' evidentiary
expectations. We anticipate agents, brokers, and web-brokers would
react positively to knowing more about our enforcement processes and
how we determine regulatory compliance.
We do not anticipate any impact or burdens on agents, brokers, or
web-brokers stemming from our proposals as we are not proposing to
expand the bases under which HHS may find them noncompliance under
Sec. 155.220(g)(1) through (3) or otherwise require more from agents
and brokers as part of this enforcement framework; rather, we are
proposing to clarify an evidentiary standard that is not explicit at
present.
We seek comment on these impact estimates and assumptions.
4. Failure To File and Reconcile (Sec. 155.305(f)(4))
We are proposing to amend the FTR process at Sec. 155.305(f)(4) to
require Exchanges to determine a tax filer ineligible for APTC if HHS
notifies the Exchange that the tax filer failed to file a Federal
income tax return and reconcile APTC for any year for which tax data
would be used to verify APTC eligibility. This proposal would remove
the current flexibility that gives tax filers two-consecutive tax years
to file and reconcile before removing APTC. To conform with this
proposal, we further propose to amend the notice requirement at Sec.
155.305(f)(4)(i) aimed at addressing the gap in notice from giving tax
filers a second consecutive tax year to comply with the requirement to
file Federal income taxes and reconcile APTC received under the current
policy and remove the notice requirement at Sec. 155.305(f)(4)(ii)
that requires notification for enrollees and tax filers that are found
to be in a two-tax year FTR status.
Previously, we estimated the cost of giving enrollees two-
consecutive tax years to meet the requirement to file and reconcile
would increase APTC expenditures by approximately $373 million per year
beginning in PY 2025 for those enrollees who have not filed and
reconciled for only one tax year and retain their APTC eligibility.
Since making that estimate, the number of improper enrollments has
increased dramatically, and we believe a lack of enforcement under the
current FTR policy has contributed to this increase. In 2024, HHS
implemented various system and logic changes to decrease and/or prevent
certain agent, broker, and web-broker noncompliant conduct in an effort
to mitigate unauthorized enrollments, and we have observed some
improvements. Due to these recent safeguards, as well as the FTR
notices that were provided in the Fall 2024, it is likely that the FTR
population identified prior to OEP 2025 represents a peak in the FTR
population. In addition, it is likely that if enhanced subsidies are
not extended, the total Exchange population would most likely drop,
thereby also decreasing the FTR population. Due to these competing
influences, it is difficult to determine the overall impact that this
proposal would have on APTC expenditures. While the current two-tax
year FTR process may inadvertently shield some unauthorized enrollments
during PY 2025 for consumers who may have enrolled in Exchange coverage
in PY 2023 (as most Exchange activity to mitigate unauthorized
enrollments was implemented in PY 2024), the two-tax year FTR process
would catch those consumers for PY 2026, as would this proposed change
to the FTR process. Therefore, it is likely that the APTC savings
resulting from this proposed policy change would not be derived from
the decrease in unauthorized enrollments, but rather from the
proportion of consumers who are not eligible for APTC for income
eligibility related reasons. Taking all of these considerations into
account, we still anticipate that APTC expenditures would decrease by
more than what we previously estimated due to the increase in the
overall Exchange population. While we initially sent out almost 1.8
million FTR notices prior to OEP 2025, our initial run of FTR Recheck
in January 2025, has already reduced this number to approximately
690,000 households.
It is difficult to draw historically similar comparisons for
multiple reasons: FTR had been inactive for three consecutive filing
seasons prior to this point due to the COVID-19 PHE, the increase in
improper enrollments, and the newly implemented two-tax year FTR
process. However, historically, between removal of APTC at auto-
reenrollment and the FTR Recheck process, the overall population of
enrollees that has ended up losing APTC compared to the initially
identified population prior to OEP has ranged from 18 percent to 43
percent from 2016 to 2020. On average, 30 percent of enrollees lost
their APTC due to FTR. Reasonable expectations of the proportion of
one-tax year FTR enrollees as a percentage of our currently identified
FTR population could range from 50 percent of the 690,000 to
approximately 80 percent of the 690,000 remaining FTR enrollees.
Historically, approximately 55 percent of those identified at FTR
Recheck go on to lose their APTC for FTR reasons. Therefore, based on
our current knowledge of this year's FTR population, the range of one-
tax year FTR consumers who would lose APTC under this proposed policy
could be approximately 189,000 to 303,000 households. The average APTC
received per consumer per month for 2024 among those receiving APTC is
$548, and the average household has 1.4 consumers. Removing APTC after
FTR Recheck can save up to 8 months of APTC. Therefore, the average
Federal APTC savings could range from $1.16 billion to $1.86 billion
annually; however, these impacts likely overstate the possible savings
available in the future due to the competing impact of implementing the
program integrity
[[Page 13012]]
measures in the Exchange, the resumption of FTR noticing for PY 2025,
as well as the other impacts of this proposed rule that would impact a
similar population as the FTR population.
This proposal would support compliance with the filing and
reconciling requirement under 36B(f) of the Code and its implementing
regulations at 26 CFR 1.36B-4(a)(1)(i) and (a)(1)(ii)(A). By supporting
greater compliance, this proposal would also minimize the potential for
APTC recipients to incur large tax liabilities.
Using the proposed notice policy that is similar to our prior
notice procedure before FTR was paused, we anticipate eligible
enrollees would respond and take appropriate action to file and
reconcile to maintain continuous coverage. To the extent enrollees are
not aware of or confused by the requirement to file and reconcile,
enrollees would receive an indirect notice that protects FTI prior to
Open Enrollment as well as a notice at the time of FTR Recheck. The tax
filer (and enrollee if they are the same person) would also receive a
direct notice prior to Open Enrollment as well as a direct notice at
the time of FTR Recheck. Enrollees whose APTC is terminated as a result
of the FTR process would receive an updated eligibility determination
notice that contains a full explanation of appeal rights. Enrollees who
appeal may request to continue receiving financial assistance during
the appeal, consistent with Sec. 155.525. We believe the notices and
appeal rights protect continuity of coverage for eligible enrollees
and, therefore, anticipate the proposal would continue to avoid
situations where eligible enrollees become uninsured when their APTC is
terminated. Because the proposal would discontinue APTC for a larger
number of enrollees, we anticipate a portion of those enrollees would
drop coverage and become uninsured. This may result in costs to State
governments and private hospitals in the form of charity care for
individuals who become uninsured because of this rule and have medical
emergencies.
Currently, Exchanges must send separate notices to people with one-
tax year FTR status and two-consecutive tax years of FTR status. This
proposal streamlines the notice process by eliminating the separate
notice for enrollees in their second year of FTR status. Therefore, we
anticipate this proposal would also reduce the burden of providing
notice to enrollees with an FTR status. In the 2026 Payment Notice (90
FR 4524), we estimated that sending two-year notices would cost the
Federal Government approximately $292,000 and cost State Exchanges
approximately $92,400 (cost of $0.84 per notice for FY 2025 which is
based on the cost for the Exchanges on the Federal platform to send an
average notice x 110,000 FTR notices) annually through 2029. With
respect to costs to the Federal Government, HHS is not publishing
specific future contract estimates in this rule because publishing
those contract estimates could undermine future contract procurements.
For example, if we 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 we anticipate such a future contract being worth. We noted
that this estimate could decrease specifically depending on the overall
population size of the Exchange in response to whether increased
subsidies are continued or not. By removing the additional year of APTC
eligibility for FTR consumers, we would remove at least some of the
associated noticing requirements and corresponding two-tax year FTR
population so this cost savings would provide a benefit to the Federal
Government and State Exchanges.
We estimate that it would take the Federal Government and each
State Exchange approximately 10,000 hours in 2025 to develop and code
changes to the eligibility systems to evaluate and verify FTR status
under the revised FTR process, such that enrollees are found to be FTR
after one tax year of failing to file and reconcile their APTC. Of
those approximately 10,000 hours, we estimate it would take a database
and network administrator and architect 2,500 hours at $101.66 per hour
and a computer programmer 7,500 hours at $95.88 per hour based on our
prior experience with system changes. In aggregate for the State
Exchanges, we estimate a one-time burden in 2025 of 200,000 hours (20
State Exchanges x 10,000 hours) at a cost of $19,465,000 (20 States x
[(50,000 hours x $101.66 per hour) + (150,000 hours x $95.88 per
hour)]) for completing the necessary updates to State Exchange
eligibility systems.\207\ For the Federal Government, we estimate a
one-time burden in 2025 of 10,000 hours at a cost of $973,250 ((2,500
hours x $101.66 per hour) + (7,500 hours x $95.88 per hour)). In total,
the burden associated with all system updates would be 210,000 hours at
a cost of $20,438,250. We recognize the burden this proposal may place
on State Exchanges, if finalized, and seek comment on the impact of
this burden and potential less burdensome alternatives that would still
further the program integrity goals of this proposal.
---------------------------------------------------------------------------
\207\ On December 9, 2024, the United States District Court for
the District of North Dakota issued a preliminary injunction in
Kansas v. United States of America (Case No. 1:24-cv-00150). Per the
district court's ruling DACA recipients in three State Exchanges--
Kentucky, Idaho, and Virginia--are not eligible to enroll in
Exchange coverage. As a result, these three States may have already
incorporated the necessary changes to their eligibility system and
mailed any required notices to impacted consumers.
---------------------------------------------------------------------------
We seek comment on these impact estimates and assumptions.
5. 60-Day Extension To Resolve Income Inconsistency (Sec.
155.315(f)(7))
We propose to remove Sec. 155.315(f)(7) which requires that
applicants must receive an automatic 60-day extension in addition to
the 90 days currently provided by Sec. 155.315(f)(2)(ii) to allow
applicants sufficient time to provide documentation to verify any DMI,
including income inconsistencies. Using previous costs associated with
implementing this policy and similar policies, we anticipate that
taking out this extension would result in a one-time cost of
approximately $500,000 to Exchanges. For the 19 State Exchanges, we
anticipate this would be a total cost of approximately $9,500,000
($500,000 x 19). We recognize the burden this proposal may place on
State Exchanges, if finalized, and seek comment on the impact of this
burden and potential less burdensome alternatives that would still
further the program integrity goals of this proposal.
By reducing the period to provide documentation to verify income
from 150 days to 90 days, we anticipate households using the Exchanges
on the Federal platform to experience a reduction in the number of
months they receive APTC, and that, using our internal analysis of
historical enrollment and DMI data, approximately 140,000 enrollees
will lose APTC eligibility. For State Exchanges, we also anticipate
households may experience a reduction in the number of months they
receive APTC, resulting in approximately 86,000 enrollees losing APTC
eligibility. In total, using the average monthly APTC amount of $588.07
and 2 months reduced APTC, this would result in $266 million (140,000 x
$588.07 x 2 + 86,000 x $588.07 x 2) less APTC expenditures annually
across all Exchanges. We accept comments on whether this number may be
slightly less because of potential decreased enrollment if the enhanced
premium tax credits are no longer in effect.
[[Page 13013]]
We seek comment on these impact estimates and assumptions.
6. Income Verification When Data Sources Indicate Income Less Than 100
Percent of the FPL (Sec. 155.320(c)(3)(iii))
This proposed rule would amend Sec. 155.320(c)(3)(iii) to create
annual income DMIs when applicants attest to income above 100 percent
of the FPL, but trusted data sources show income below 100 percent of
the FPL. As discussed further in section IV.D. of this proposed rule,
we also estimate an approximate increase in annual burden costs of
$19.7 million for the Federal Government and $12.1 million total for
State Exchanges to receive, review, and verify submitted verification
documents as well as conduct outreach and determine DMI outcomes for
applicants below 100 percent of the FPL, as well as approximate one-
time costs to update the eligibility systems and perform other
technical updates for this change of $778,600 for the Federal
Government and approximately $14.8 million total for State Exchanges.
Finally, as also discussed further in section IV.D. of this preamble,
we estimate an increase in annual burden of $13,475,320 for consumers
to submit documentation to fulfill income verification requirements. We
recognize the burden this proposal may place on State Exchanges, if
finalized, and seek comment on the impact of this burden and potential
less burdensome alternatives that would still further the program
integrity goals of this proposal.
By reducing the number of applicants who inflate income to qualify
for APTC and the opportunities for improper enrollments, we anticipate
this proposal would substantially reduce Federal APTC expenditures.
Based on our analysis of enrollment data from DMI generation numbers
from when this DMI was previously in place, we estimate creating DMIs
that require additional verification would reduce the number of people
who receive APTC by 50,000 for Exchanges on the Federal platform, and
by 31,000 for State Exchanges. Using an estimated average four months
reduced APTC and an average monthly APTC rate of $588.07 per person, we
estimate total APTC expenditures would be reduced by approximately $189
million annually (50,000 x $588.07 x 4 + 31,000 x $588.07 x 4 months).
We also anticipate that stronger income verification standards
would increase Federal and State Medicaid expenditures by enrolling
more people in Medicaid who would otherwise have enrolled in APTC
subsidized coverage. We do not have the data necessary to provide
specific estimates on the increase in Medicaid expenditures and seek
comment on data sources we could use to further this analysis.
We anticipate the stronger income verification standards would have
only a minimal impact on the number of eligible tax filers who enroll
in APTC subsidized coverage. Although we acknowledge that income
verification can be more challenging for lower-income tax filers due to
less consistent employment, our experience with income verifications
suggests the process does not impose a substantial burden. Moreover,
the generosity of the subsidy for lower-income households creates a
strong incentive for applicants to follow through and meet the
verification requirements. We seek comment on these impact estimates
and assumptions.
7. Income Verification When Tax Data Is Unavailable (Sec.
155.320(c)(5))
We propose to remove Sec. 155.320(c)(5) which requires Exchanges
to accept an applicant's income attestation without further
verification when tax return data is unavailable. As further discussed
in section IV.E. of this proposed rule, we estimate an increase in
annual burden costs of approximately $76.2 million for the Federal
Government and approximately $46.7 million total for State Exchanges to
receive, review, and verify submitted verification documents as well as
conduct outreach and determine DMI outcomes for applicants whose tax
return data is unavailable, as well as approximate one-time costs to
update the eligibility systems and perform other technical updates for
this change of approximately $876,000 for the Federal Government and
approximately $16.6 million total for State Exchanges. As also further
discussed in section IV.E. of this proposed rule, we also estimate an
increase in annual burden of $52,081,620 for consumers to submit
documentation to fulfill income verification requirements associated
with this proposal. We recognize the burden this proposal may place on
State Exchanges, if finalized, and seek comment on the impact of this
burden and potential less burdensome alternatives that would still
further the program integrity goals of this proposal.
The prior alternative verification process for applicants without
tax return data in place from 2013 to 2023 provided a basic, frontline
protection against improper APTC payments. Based on our analysis of
enrollment data from DMI generation numbers from when this DMI was
previously in place, as well as historical enrollment data, we estimate
creating DMIs that require additional verification would result in a
decrease in APTC, potentially to nothing, by 252,000 enrollees for
Exchanges on the Federal platform, and by 155,000 enrollees for State
Exchanges. Using an estimated average four months reduced APTC and with
an average monthly APTC rate of $588.07 per person, we anticipate that
this proposed change could result in a reduction of $956 million
(252,000 x $588.07 x 4 + 155,000 x $588.07 x 4) in annual APTC
expenditures. We accept comments on whether this number may be slightly
less because of potential decreased enrollment if the enhanced premium
tax credits are no longer in effect.
Although reintroducing income verification for applicants with no
tax return data would increase the burden on some applicants, we do not
anticipate this burden would deter many eligible people from enrolling.
We seek comment on these impact estimates and assumptions.
8. Annual Eligibility Redetermination (Sec. 155.335)
We propose an amendment to the annual eligibility redetermination
regulation to prevent enrollees from being automatically re-enrolled in
coverage with APTC that fully covers their premium without taking an
action to confirm their eligibility information. Specifically, when an
enrollee does not submit an application for an updated eligibility
determination on or before the last day to select a plan for January 1
coverage, in accordance with the effective dates specified in Sec.
155.410(f) and 155.420(b), as applicable, and the enrollee's portion of
the premium for the entire policy would be zero dollars after
application of APTC through the Exchange's annual redetermination
process, we propose to require all Exchanges to decrease the amount of
the APTC applied to the policy such that the remaining monthly premium
owed by the enrollee for the entire policy equals $5 for the first
month and for every following month that the enrollee does not confirm
their eligibility for APTC. Consistent with Sec. Sec. 155.310(c) and
(f), enrollees automatically re-enrolled with a $5 monthly premium
after APTC under this policy would be able to update their Exchange
application and re-confirm their plan at any point to confirm
eligibility for APTC that covers the entire monthly premium, and re-
confirm their plan to thereby reinstate the full amount of APTC for
which the enrollee is eligible on a prospective basis. We propose that
the FFEs and the SBE-FPs must implement this change starting with
[[Page 13014]]
annual redeterminations for benefit year 2026. We propose that the
State Exchanges must implement it starting with annual redeterminations
for benefit year 2027.
For Exchanges on the Federal platform, we estimate that 2.68
million enrollees were automatically re-enrolled in a QHP for benefit
year 2025 with APTC that fully covered their premium. Given that the
expanded PTC structure under the ARP and IRA expires at the end of 2025
and the number of Exchange enrollees, as well as the number of Exchange
enrollees with APTC that fully covers their premium, is expected to
decrease as a result,\208\ we view this figure to be an upper-bound
estimate of the number of enrollees with coverage through Exchanges on
the Federal platform who could be affected by this proposed provision.
Due to a lack of data, we are unable to estimate the number of fully
subsidized, automatically re-enrolled enrollees on State Exchanges, and
request comment on this figure.
---------------------------------------------------------------------------
\208\ Baseline enrollment projections are presented in Table 11
in section VI.C.18 of this preamble. Enrollment among those with
APTC that fully covers their premium was not projected separately
but is expected to decline following the expiration of the expanded
PTC structure.
---------------------------------------------------------------------------
Regarding the benefits associated with this proposed provision, we
believe this proposed change would lead to increased price sensitivity
to premiums and premium changes among enrollees whose premiums are
fully subsidized and who would be automatically re-enrolled in their
current policies. This is because these enrollees would pay $5 more in
net premiums per month if they do not submit an application for an
updated eligibility determination from an Exchange. Enrollees would
therefore be incentivized to return to an Exchange, evaluate available
coverage options and premiums, and make an active enrollment decision.
We therefore anticipate that this proposed provision would lead to
better matches between consumers' coverage preferences and available
coverage offerings in the individual market.
As noted in the preamble, we are aware that some consumers have
been improperly enrolled in a fully subsidized QHP without their
knowledge or consent and other consumers have remained enrolled in a
fully subsidized QHP after obtaining other coverage. This proposed
policy would contribute to reducing the financial stress that
ineligible enrollees may experience by protecting them from
accumulating surprise tax liabilities.\209\ Additionally, we anticipate
that this proposed provision would reduce the number of improper
enrollments of fully subsidized enrollees by agents, brokers, and web-
brokers.
---------------------------------------------------------------------------
\209\ Currently, the Exchanges on the Federal platform
collaborate with the IRS to prevent surprise tax liabilities when
Exchanges on the Federal platform receive reports from consumers who
have been improperly enrolled.
---------------------------------------------------------------------------
Regarding the potential costs associated with this proposed
provision, if some enrollees with fully subsidized premiums are unaware
of the APTC adjustments that would be made and the premium amounts that
would be due because they have not submitted an application for an
updated eligibility determination or decide not to pay the $5 per month
premium amount, this proposed provision could lead some enrollees to
have their coverage terminated due to non-payment of premiums. This, in
turn, could lead to adverse health outcomes for those enrollees who
experience a coverage gap. However, we expect the number of fully
subsidized enrollees who ultimately have their coverage terminated due
to non-payment of premiums would be low given the nominal expense
associated with the proposed APTC adjustments and the expected
reduction in enrollment associated with the expiration of the PTC
eligibility expansions under the IRA. We request comment on this
assumption.
Enrollees who otherwise would not have obtained an updated
eligibility determination would also incur time costs associated with
the need to submit an application to an Exchange to obtain an updated
determination notice in order to obtain a zero-dollar premium, if they
are still eligible for one.
Exchanges would incur costs to comply with this proposed provision.
Specifically, Exchanges would need to make changes to their IT systems
to be able to identify enrollees who would be automatically re-enrolled
with a zero-dollar premium after annual redetermination procedures and
decrease the amount of APTC applied to the policy such that the
remaining premium owed by the enrollee equals $5, if the enrollee does
submit an application for an updated eligibility determination to the
Exchange. We estimate that it would take the Federal Government and
each of the State Exchanges not on the Federal platform 10,000 hours to
develop and code the changes to their IT systems. We do not expect
States operating SBE-FPs to incur any implementation costs. These
estimates are based on past experience with similar system changes.
Of those 10,000 hours, we estimate it would take a database and
network administrator and architect 2,500 hours at $101.66 per hour and
a computer programmer 7,500 hours at $95.88 per hour. In aggregate for
the State Exchanges not on the Federal platform, we estimate a one-time
burden in 2025 or 2026 of 200,000 hours (20 State Exchanges x 10,000
hours) at a cost of $19,465,000 (20 States x [(2,500 hours x $101.66
per hour) + (7,500 hours x $95.88 per hour)]) for completing the
necessary updates to State Exchange systems. For the Federal
Government, we estimate a one-time burden in 2025 of 10,000 hours at a
cost of $973,250 ((2,500 hours x $101.66 per hour) + (7,500 hours x
$95.88 per hour)). In total, the burden associated with all system
updates would be 210,000 hours at a cost of $20,438,250. We recognize
the burden this proposal may place on State Exchanges, if finalized,
and seek comment on the impact of this burden and potential less
burdensome alternatives that would still further the program integrity
goals of this proposal.
Exchanges would also likely incur costs associated with responding
to customer service requests related to this change. Exchanges could
also incur costs associated with outreach and enrollee, agent/broker/
web-broker and Navigator, and issuer education regarding this proposed
provision.
Regarding the potential transfers associated with this proposed
provision, this proposed provision is expected to reduce net Federal
PTC spending if an enrollee's policy is terminated because the enrollee
does not pay their portion of the premium. The need for fully
subsidized enrollees to actively re-enroll in their current policies to
continue with fully subsidized coverage could also reduce improper
enrollments that are not reported to CMS by consumers and reduce the
likelihood that an enrollee who obtained other coverage errantly
retains their current fully subsidized QHP, which would also reduce net
Federal PTC spending. Lastly, this proposed provision would reduce
commission payments from issuers to agents, brokers, and web-brokers
due to the expected reduction in improper enrollments of fully
subsidized enrollees by agents, brokers, and web-brokers.
Due to a lack of data, we are unable to quantify all anticipated
benefits, costs, and transfers associated with this proposed provision,
and request comment and data on the potential impacts.
[[Page 13015]]
9. Annual Eligibility Redetermination (Sec. 155.335(j)(4))
We propose to amend the automatic reenrollment hierarchy by
removing Sec. 155.335(j)(4) which currently allows Exchanges to move a
CSR-eligible enrollee from a bronze QHP and re-enroll them into a
silver QHP for an upcoming plan year, if a silver QHP is available in
the same product, with the same provider network, and with a lower or
equivalent net premium after the application of APTC as the bronze plan
into which the enrollee would otherwise have been re-enrolled. These
amendments would leave in place the policy to require Exchanges to take
into account network similarity to current year plan when re-enrolling
enrollees whose current year plans are no longer available, but revert
to the prior re-enrollment hierarchy standards in place before the 2024
OEP that were structured to limit the differences between the
consumer's current plan and new plan in situations where the renewal
process places a consumer in a different plan (88 FR 25822). We believe
this proposed change would improve the consumer experience by retaining
consumer choice, reducing consumer confusion, and removing the risk of
accumulating tax liabilities created by the policy. We believe the
removal of the bronze to silver crosswalk criteria in the Federal
hierarchy for re-enrollment would result in some burden for Exchanges
that have already implemented this policy, including for CMS as the
operator of Exchanges on the Federal platform, because it would require
operational and system changes to reverse the policy including related
consumer outreach. We do not anticipate that these changes would result
in significant burden to issuers, because, as discussed in the 2024
Payment Notice (88 FR 25822), Exchanges were primarily responsible for
the policy's implementation, though we solicit comment on that
assumption.
By retaining consumer choice, we anticipate this proposal would
lead to fewer low-income bronze enrollees being switched to silver
QHPs. Because these silver QHPs have higher premiums than bronze QHPs
and indirectly fund CSR subsidies, they require higher APTC subsidies.
Therefore, we anticipate the reduction in people being switched to
silver QHPs would reduce APTC expenditures. We are not able to quantify
the reduction in APTC expenditures because, we do not expect the
current policy would lead to a substantial number of people switching
from a bronze QHP to a silver QHP during the 2026 OEP. Therefore, we
anticipate only a small reduction in APTC expenditures.
We seek comment on these impact estimates and assumptions.
10. Premium Payment Threshold (Sec. 155.400(g))
We propose to modify Sec. 155.400(g) to remove paragraphs (2) and
(3), which establish an option for issuers to implement a fixed dollar
and/or gross percentage-based premium payment threshold, (if the issuer
has not also adopted a net percentage-based premium threshold) and
modify 155.400(g) to reflect the removal of paragraphs (2) and (3).
Removing the options for issuers to implement either a fixed dollar
and/or gross percentage would help address concerns about program
integrity by ensuring that enrollees cannot remain enrolled in coverage
for extended periods of time without paying any premium. We anticipate
that there would be some costs for issuers who had already implemented
a fixed-dollar or gross premium percentage-based threshold and would
have to remove those policies or replace them with the remaining net
premium percentage-based thresholds.
Since these threshold policies are optional, we do not know how
many issuers adopted them. In the 2026 Payment Notice, we estimated
that based on a fixed-dollar threshold of $10 or less, utilizing PY
2023 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), that
would at most result in $817,571,843 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 it) that issuers would retain, rather than being returned to the
Federal Government. We now estimate that this cost would not be
incurred with the removal of the fixed dollar and gross premium
percentage-based thresholds.
We seek comment on these impact estimates and assumptions.
11. Annual Open Enrollment Period (Sec. 155.410(e))
We propose to amend Sec. 155.410(e) to change the annual OEP for
the benefit years starting January 1, 2026 and beyond to begin on
November 1 and end on December 15 of the calendar year preceding the
benefit year. This is expected to have a positive impact on the risk
pool by reducing the risk of adverse selection. Although we cannot
quantify Federal savings, by reducing adverse selection, we expect
premiums would decline and, in turn, reduce the cost of PTC to the
Federal Government. Lower premiums may also increase enrollment among
unsubsidized consumers and help lower the uninsured rate. In addition,
we expect a higher proportion of Exchange enrollees to be covered
continuously for the full year beginning in January.
We estimate that it would take the Federal Government and each of
the State Exchanges 4,000 hours to develop and code the changes to
their IT systems. Of those 4,000 hours, we estimate it would take a
database and network administrator and architect 1,000 hours at $101.66
per hour and a computer programmer 3,000 hours at $95.88 per hour. We
do not expect States operating SBE-FPs to incur any implementation
costs. These estimates are based on past experience with similar system
changes. For the Federal Government, we estimate a one-time burden in
2025 of 4,000 hours at a cost of $389,300 (1,000 hours x $101.66 per
hour) + (3,000 hours x $95.88 per hour). In aggregate, for State
Exchanges, we estimate a one-time burden in 2025 of 80,000 hours (20
State Exchanges x 4,000) at a cost of $7,786,000 (20 States x [(1,000
hours x $101.66 per hour) + (3,000 hours x $95.88 per hour)]). In
total, the burden associated with all system updates would be 84,000
hours at a cost of $8,175,300. We recognize the burden this proposal
may place on State Exchanges, if finalized, and seek comment on the
impact of this burden and potential less burdensome alternatives that
would still further the program integrity goals of this proposal.
We do not anticipate that the proposed change to the OEP end date
to December 15 would have a negative impact on enrollment or the
consumer experience due to the maturity of the enrollment systems. This
proposed change is expected to simplify operational processes for
issuers and the Exchanges by eliminating the burden of supporting an
extra month of open enrollment and addressing consumer confusion
related to administering two enrollment deadlines. Lower administrative
costs may also contribute to lower premiums, but we note that there
also may be administrative costs for issuers and Exchanges associated
with an increase in SEP casework. Consumers would benefit from clearer
enrollment rules that would encourage all annual enrollment activities
to be complete by December 15 and therefore ensure coverage for the
month of January. The Federal Government, State Exchanges, and issuers
may incur costs
[[Page 13016]]
if additional consumer outreach is needed to educate people on the new
policy. However, this should be temporary and largely offset by the
elimination of the ongoing outreach necessary to educate people on the
second January 15 deadline.
We seek comment on these impact estimates and assumptions.
12. Monthly SEP for APTC-Eligible Qualified Individuals with a
Projected Annual Household Income at or Below 150 Percent of the
Federal Poverty Level (Sec. 155.420(d)(16))
We are proposing to remove Sec. 155.420(d)(16) and repeal the 150
percent FPL SEP. This includes making conforming changes to regulations
established to support this SEP, including removing Sec. Sec.
147.104(b)(2)(i)(G), 155.420(a)(4)(ii)(D), and 155.420(b)(2)(vii), as
well as amending Sec. 155.420(a)(4)(iii) introductory text.
As discussed in the preamble of this proposed rule, the expanded
availability of fully subsidized plans combined with easier access to
these fully-subsidized plans through the 150 percent FPL SEP (which
allows people to enroll in fully subsidized plans at any time during
the year) opened substantial opportunities for improper enrollments. As
discussed earlier in preamble, recent litigation from April 2024,
Conswallo Turner et al. v. Enhance Health, et al, higher numbers of
consumer complaints, and a sharp increase in enrollment relative to the
eligible population with household income under 150 percent of the FPL
in PY 2024 all suggest a substantial increase in improper enrollments
among consumers reporting incomes between 100 and 150 percent of the
FPL on their application. We are working hard to reduce the level of
improper enrollments, but we believe improper enrollments would
continue to be a problem so long as access to fully subsidized plans is
made easier through the 150 percent FPL SEP. It is hard to predict the
level of improper enrollments in the years ahead as we are still in the
process of taking enforcement actions to reduce the initial spike in
improper enrollments that occurred after we established the 150 percent
FPL SEP.
We also believe repealing the 150 percent FPL SEP would reduce
adverse selection and, as a result, reduce premiums. Previous
rulemaking projected the 150 percent FPL SEP would increase premiums by
0.5 to 2 percent with enhanced premium subsidies in place and projected
the SEP would increase premiums from 3 to 4 percent if the enhanced
premium subsidies expire. Based on our analysis of recent enrollment
data, we believe these previous estimates underestimated the premium
impact and overestimated the enrollment impact of the 150 percent FPL
SEP. As discussed in the preamble, we believe that the 150 FPL SEP has
substantially increased the level of improper enrollments, as well as
increased the risk for adverse selection as this SEP incentivizes
consumers to wait until they are sick to enroll in Exchange coverage.
Unknown factors continue to make these impacts difficult to estimate,
including the utilization of this SEP by healthy and unhealthy
enrollees and the impact to the average duration of coverage for
enrollees. However, we estimate repealing this SEP could decrease
premiums by 3 to 4 percent compared to baseline premiums if this rule
is finalized, and therefore annual APTC outlays would decrease by
approximately $3.4 billion in 2026, $3.6 billion in 2027, $3.8 billion
in 2028, and $4.0 billion in 2029. We seek comment on how this policy
would impact premiums and APTC/PTC outlays.
Quantifying the impact of the 150 percent FPL SEP on enrollment
also remains difficult to estimate. Although we can quantify the number
of people who enroll through this SEP, the enrollment impact is likely
less than the number of people who use the SEP. Some people may use
this SEP as an alternative to an SEP they would have otherwise used.
Without this SEP, consumers may have otherwise enrolled through the
OEP. The substantial level of improper enrollments associated with
fully subsidized plans also obscures the number of eligible individuals
who used the SEP. Our analysis of the SEPs suggests that the 150
percent FPL SEP did offset the use of other SEPs, which suggests it may
have less enrollment impact than previously expected.
To repeal the monthly 150 percent FPL SEP, we estimate a one-time
cost of approximately $390,000 to remove functionality to grant the 150
percent FPL SEP and make any necessary updates to eligibility logic
systems for Exchanges on the Federal platform. Here, we are assuming
that 25 percent of the hours needed to end the 150 percent FPL SEP are
being performed by a database and network administrator (hourly wage of
$101.66) and 75 percent of the work is being performed by a computer
programmer (hourly wage of $95.88). This allocation of work between a
network administrator and computer programmer was informed by our
experience with past system changes.
We also estimate a similar one-time cost for any State Exchanges
that operate their own eligibility and enrollment systems and currently
offer the 150 percent FPL SEP. However, as of February 2025, we do not
believe that any State Exchange has offered the 150 percent FPL SEP as
this SEP was optional for all Exchanges.
We seek comment on these impact estimates and assumptions.
13. Pre-Enrollment Verification for Special Enrollment Periods (Sec.
155.420)
We are proposing to amend Sec. 155.420(g) to require all Exchanges
to conduct pre-enrollment eligibility verification for SEPs.
Specifically, we propose to remove the limit on Exchanges on the
Federal platform to conducting pre-enrollment verifications for only
the loss of minimum essential coverage SEP. With this limitation
removed, we propose to conduct pre-enrollment verifications for most
categories of SEPs for Exchanges on the Federal platform in line with
operations prior to the implementation of the 2023 Payment Notice.
We also propose to require that Exchanges, including all State
Exchanges, conduct pre-enrollment SEP verification for at least 75
percent of new enrollments through SEPs for consumers not already
enrolled in coverage through the applicable Exchange. We are proposing
that Exchanges must verify at least 75 percent of such new enrollments
based on the current implementation of SEP verification by Exchanges.
We anticipate that revisions to Sec. 155.420 would have a positive
impact on program integrity by verifying eligibility for SEPs.
Increasing program integrity through this proposal would reduce
improper subsidy payments and could contribute to keeping premiums low
and therefore, further protecting taxpayer dollars. However, the
premium impact would likely be minimal for State Exchanges that already
conduct SEP verification largely in accordance with this proposal. This
proposal may deter enrollments among younger people at higher rates,
which could worsen the risk pool and increase premiums. However, we
expect any such deterrence would impact a very small number of young
people and, therefore, have only a minimal impact on the risk pool and
premiums. We estimate that the net effect of pre-enrollment
verification would reduce premiums by approximately 0.5-1.0 percent for
PY 2026 and 1.0-2.0 percent for PY 2027 and beyond, and would
[[Page 13017]]
reduce APTC spending by approximately $105.4 million.\210\
---------------------------------------------------------------------------
\210\ The reduction in APTC was calculated by multiplying the
estimated new SVIs by the previous SVI expiration rate (293,073 x
.137 = 40,151) and then multiplying that number by the estimated
annual APTC amount per SEP consumer (40,151 x $2,625 =
$105,396,375).
---------------------------------------------------------------------------
We anticipate this proposal would moderately increase the
regulatory burden on Exchanges using the Federal platform and on
existing State Exchanges that conduct the additional pre-enrollment
verifications. Based on information included in State Exchange SMART
tools, a majority of State Exchanges had conducted SEP verification for
the same SEP types for which the FFEs had conduct SEP verifications
before the limit on verifying only the loss of minimum essential
coverage SEP was put in place for PY 2023. Therefore, we expect most
Exchanges continue to have the infrastructure in place to conduct
verifications. Of the 15 State Exchanges that currently attest to
verifying at least one SEP, seven State Exchanges attested to verifying
loss of minimum essential coverage.\211\
---------------------------------------------------------------------------
\211\ This information was provided to CMS through SMART
attestations encompassing PY2023.
---------------------------------------------------------------------------
As of PY 2025, only one State Exchange conducts SEP verifications
for only one type of SEP. The five State Exchanges established since
2021 vary in how they conduct SEP verification with four State
Exchanges verifying at least one type of SEP (three of those four State
Exchanges verify loss of minimum essential coverage). State Exchanges
bear the full cost of the SEP verification activities they conduct.
Eleven State Exchanges that conduct verifications for SEPs are
verifying at least 75 percent or more of their respective SEP
enrollments. \212\ For five State Exchanges that conduct SEP
verifications for at least one type of SEP, a single SEP type
consistently represents over 60 percent of all SEP enrollments. An
additional three State Exchanges reach the same consistent 60 percent
threshold when accounting for their top two SEP types.\213\
---------------------------------------------------------------------------
\212\ SMART attestations encompassing PY2023; Operational
Readiness Assessment performed by Georgia in preparation for their
transition to an SBE-FP.
\213\ This is based on internal enrollment metrics data provided
from State Exchanges to CMS and reflects SEP enrollment from 1/1/23-
6/30/23. S
---------------------------------------------------------------------------
Based on the implementation of pre-enrollment SEP verification in
the Exchanges using the Federal platform, we estimate that the overall
one-time cost of implementing pre-enrollment SEP verification by an
Exchange would be approximately $12 million. Therefore, we estimate
that the total cost to comply with this requirement for the five State
Exchanges that did not previously conduct SEP verification for at least
75 percent of enrollments for newly enrolling consumers enrolling
through SEPs would be $60 million for PY 2026.
Based on past experience, we estimate that the expansion in pre-
enrollment verification to most individuals seeking to enroll in
coverage through all applicable SEPs offered through Exchanges on the
Federal platform would result in an additional 293,073 individuals
having their enrollment delayed or ``pended'' annually until
eligibility verification is completed, although for the vast majority
of individuals the delays would be less than 1-3 days. As discussed
further in section IV.G. of this preamble, we anticipate that the
expansion of SEP verification would result in increased income
inconsistencies, with an associated annual cost increase for consumers
of approximately $7,206,665. There would also be an increase in ongoing
costs for Exchanges on the Federal platform and State Exchanges due to
an increase in the number of SEP enrollments for which they must
conduct verification. We estimate that the total increase in ongoing
processing costs to comply with this requirement for the FFE would be
approximately $46.7 million for PY 2026 to PY 2029. Furthermore, as
discussed in section IV.G. of this preamble, we anticipate that
expanding verification would result in an increase in annual burden in
labor costs on Exchanges using the Federal platform at a cost of
$2,833,449 and an increase in annual burden on State Exchanges at a
cost of $ 1,736,615 total. We recognize the burden this proposal may
place on State Exchanges, if finalized, and seek comment on the impact
of this burden and potential less burdensome alternatives that would
still further the program integrity goals of this proposal.
Additionally, we anticipate that the expansion of SEP verification
would have a one-time development cost for Exchanges using the Federal
Platform of $1,849,270 (19,000 hours x $97.33). This assumes that 25
percent of the hours needed to expand SEP verification are being
performed by a database and network administrator (hourly wage $101.66)
and 75 percent of the work is being performed by a computer programmer
(hourly wage $95.88). This allocation of work between network
administrator and computer programmer was informed by our experience
with past system changes. We do not anticipate this proposal would
increase regulatory burden or costs on issuers. We seek comment on
these impact estimates and assumptions.
14. Prohibition on Sex-Trait Modification as an EHB (Sec. Sec. 156.50
and 156.115(d))
We propose to amend Sec. 156.115(d) to provide that an issuer of a
plan offering EHB may not provide sex-trait modification as an EHB. If
finalized as proposed, this proposal would mean that individuals
currently seeking or considering seeking sex-trait modification could
not access such care as EHB. The EHB are subject to various protections
under the ACA, including the prohibition on annual and lifetime dollar
limits and the requirement to accrue enrollee cost sharing towards the
annual limitation on cost sharing. If this proposed policy is finalized
as proposed, these provisions would not apply to sex-trait modification
to the extent such care is included in health plans, including in large
group market and self-insured group health plans. This includes a
prohibition of sex-trait modification in the five States that include
sex-trait modification in their EHB-benchmark plans, as well as in
States that do not have such coverage expressly mentioned in the
State's EHB-benchmark plan document.\214\
---------------------------------------------------------------------------
\214\ California, Colorado, New Mexico, Vermont, and Washington
EHB-benchmark plans specifically include coverage of some sex-trait
modification. Six other States do not expressly include or exclude
coverage of sex-trait modification in EHB-benchmark plans. Forty
States include language that excludes coverage of sex-trait
modification in EHB-benchmark plans.
---------------------------------------------------------------------------
Utilization of sex-trait modification is low; therefore, the impact
of this proposal would be limited. Approximately 0.11 percent of
enrollees in the EDGE data set gathered from issuers as part of the
HHS-operated risk adjustment program utilized sex-trait modification
between PYs 2022 and 2023. In the aggregate, the total allowed cost of
sex-trait modification amounts to 0.08 to 0.09 percent of all claims in
the EDGE data set for these years. Although EDGE does not distinguish
between whether a benefit is EHB or not, we believe that a substantial
majority of such claims are being covered as EHB by issuers submitting
claims data to the EDGE server.
Given that a QHP's percentage of premium attributable to the EHB is
used to determine the amount of available tax credits under the ACA, we
would expect an impact to the amount of PTC. Plans that stop coverage
of sex-trait modification would see premiums and PTC decrease as the
generosity of plan benefit coverage decreases. Plans that
[[Page 13018]]
decide to cover sex-trait modification as non-EHB would see premiums
rise or stay the same to account for this benefit generosity, but would
see any existing PTC decrease as the benefits would no longer be EHB.
States that choose to mandate such coverage as a benefit in addition to
the EHB would be required to defray its cost pursuant to Sec. 155.170;
in this circumstance, we would expect premiums and tax credits to
decrease to account for the State's defrayal obligations. We seek
comment on these impact estimates and assumptions.
15. Premium Adjustment Percentage Index (Sec. 156.130(e))
We propose a premium adjustment percentage of 1.6726771319 for PY
2026 based on our proposed change to the premium measure for
calculating the premium adjustment percentage. Under Sec. 156.130(e),
we propose to use average per enrollee private health insurance
premiums (excluding Medigap and property and casualty insurance),
instead of ESI premiums, which were used in the calculation since PY
2022, for purposes of calculating the premium adjustment percentage for
PY 2026 and beyond. The annual premium adjustment percentage sets the
rate of change for several parameters detailed in the ACA, including
the annual limitation on cost sharing (defined at Sec. 156.130(a));
the reduced annual limitations on cost sharing; the required
contribution percentage used to determine eligibility for certain
exemptions under section 5000A of the Code (defined at Sec.
155.605(d)(2)); and the employer shared responsibility payments under
sections 4980H(a) and 4980H(b) of the Code.
As explained earlier in the preamble, our proposal to use private
health insurance premiums (excluding Medigap and property and casualty
insurance) in the premium adjustment percentage calculation would
result in a higher overall premium growth rate measure than if we
continued to use employer-sponsored insurance premiums as was used for
prior plan years and in the October 2024 PAPI Guidance.\215\ To further
elaborate on the potential impacts of this proposed policy change, in
Sec. 155.605(d)(2), we propose a required contribution of 8.05 percent
for PY 2026 using the proposed premium adjustment percentage in Sec.
156.130 to supersede the required contribution of 7.70 percent for PY
2026 calculated from employer-sponsored insurance premiums previously
published in the October 2024 PAPI Guidance.\216\ In Sec.
156.130(a)(2), we propose a maximum annual limitation on cost sharing
of $10,600 for self-only coverage for PY 2026 to supersede the maximum
annual limitation on cost sharing of $10,150 for self-only coverage for
PY 2026 calculated from employer-sponsored insurance premiums
previously published in the October 2024 PAPI Guidance.\217\ The CMS
Office of the Actuary estimates that the proposed change in methodology
for the calculation of the premium adjustment percentage may have the
following impacts between 2026 and 2030:\218\
---------------------------------------------------------------------------
\215\ CMS. (2024, Oct. 8). Premium Adjustment Percentage,
Maximum Annual Limitation on Cost Sharing, Reduced Maximum Annual
Limitation on Cost Sharing, and Required Contribution Percentage for
the 2026 Benefit Year. https://www.cms.gov/files/document/2026-papi-parameters-guidance-2024-10-08.pdf.
\216\ Ibid.
\217\ Ibid.
\218\ CMS Office of the Actuary's estimates are based on their
health reform model, which is an amalgam of various estimation
approaches involving Federal programs, employer-sponsored insurance,
and individual insurance choice models that ensure consistent
estimates of coverage and spending in considering legislative
changes to current law.
[GRAPHIC] [TIFF OMITTED] TP19MR25.015
As noted in Table 13, we expect that the proposed change in measure
of premium growth used to calculate the premium adjustment percentage
for PY 2026 may result in:
Net premium increases of approximately $530 million per
year for PY 2026 through PY 2030, which is approximately 2 percent of
PY 2024 net premiums. Net premiums are calculated for Exchange
enrollees as premium charged by issuers minus APTC.
A decrease in Federal PTC spending of between $1.27
billion and $1.55 billion annually from 2026 to 2030, due to an
increase in the PTC applicable percentage and a decline in Exchange
enrollment of approximately 80,000 individuals in PY 2026, based on an
assumption that the Department of the Treasury and the IRS would adopt
the use of the same premium measure proposed for the calculation of the
premium adjustment percentage in this rule for purposes of calculating
the indexing of the PTC applicable percentage and the required
contribution percentage under section 36B of the Code. We anticipate
that enrollment may decline by 80,000 individuals in PY 2026, and
enrollment would remain lower by 80,000
[[Page 13019]]
individuals in each year between 2026 and 2030 than it would if there
were no proposed change in premium measure for the premium adjustment
percentage for PY 2026 and beyond.
Increased Employer Shared Responsibility Payments of $3 to
$20 million each year between 2028 and 2030.
The small increase in net premiums would reduce the number of
people who qualify for fully subsidized plans through the Exchanges.
Therefore, by reducing the number of people who qualify for fully
subsidized plans, we anticipate this proposed premium measure would
reduce enrollments in APTC coverage and, in turn, reduce APTC
expenditures.
Some of the 80,000 individuals estimated to not enroll in Exchange
coverage as a result of the proposed change in the measure of premium
growth used to calculate the premium adjustment percentage may purchase
short-term, limited-duration insurance, catastrophic coverage, or join
a spouse's health plan, though some would become uninsured. Any of
these transitions may result in greater exposure to health care costs,
which previous research suggests reduces utilization of health care
services, including unnecessary or counterproductive services.\219\
However, some individuals who transition into short-term plans,
catastrophic health plans, or who join their spouses' coverage may also
experience an increase in health utilization because the provider
networks for such plans tend to be more expansive than plans on the
individual market.220 221 This means that such individuals
may be able to better access providers who can address their specific
health needs. However, the increased number of uninsured may increase
Federal and State uncompensated care costs and may contribute to
negative public health outcomes.\222\ We seek feedback from interested
parties about these impacts and the magnitude of these changes.
---------------------------------------------------------------------------
\219\ Manning, W.G., Newhouse, J.P., Duan, N., Keeler, E.B., &
Leibowitz, A. (1987). Health insurance and the demand for medical
care: evidence from a randomized experiment. The American economic
review, 251-277; Keeler, E.B., & Rolph, J.E. (1988). The demand for
episodes of treatment in the health insurance experiment. Journal of
health economics, 7(4), 337-367; Buntin, M.B., Haviland, A.,
McDevitt, R. & Stood, N. (2011). Healthcare Spending and Preventive
Care in High-Deductible and Consumer-Directed Health Plans. The
American Journal of Managed Care, 17(3), 222-230; Finkelstein, A.,
et al. (2012). The Oregon health insurance experiment: evidence from
the first year. The Quarterly journal of economics, 127(3), 1057-
1106; Brot-Goldberg, Z.C., Chandra, A., Handel, B.R., & Kolstad,
J.T. (2017). What does a Deductible Do? The Impact of Cost-Sharing
on Health Care Prices, Quantities, and Spending Dynamics. The
Quarterly Journal of Economics, 132(3). 1261-1318.
\220\ Burns, A. et. al. (2019, Jan.) How CBO and JCT Analyzed
Coverage Effects of New Rules for Association Health Plans and
Short-Term Plans. Congressional Budget Office. p. 6. https://www.cbo.gov/system/files/2019-01/54915-New_Rules_for_AHPs_STPs.pdf.
\221\ Cruz, D; Fann, G. (2024, Sept.). It's Not Just the Prices:
ACA Plans Have Declined in Quality Over the Past Decade. Paragon
Health Institute. https://paragoninstitute.org/private-health/its-not-just-the-prices-aca-plans-have-declined-in-quality-over-the-past-decade/.
\222\ See, for example, Goldin, J., Lurie, I.Z., & McCubbin, J.
(2021). Health Insurance and Mortality: Experimental Evidence from
Taxpayer Outreach. The Quarterly Journal of Economics, 136(1), 1-49.
---------------------------------------------------------------------------
As noted previously in this proposed rule, the premium adjustment
percentage is the measure of premium growth that is used to set the
rate of increase for the maximum annual limitation on cost sharing,
defined at Sec. 156.130(a). In Sec. 156.130(a)(2), we propose a
maximum annual limitation on cost sharing of $10,600 for self-only
coverage for PY 2026. Additionally, we propose reductions in the
maximum annual limitation on cost sharing for silver plan variations
(Table 8 in section III.C.2.b. of this proposed rule). Consistent with
our analyses in previous Payment Notices, we developed three test
silver level QHPs and analyzed the impact on their AVs of the
reductions described in the ACA to the proposed PY 2026 maximum annual
limitation on cost sharing for self-only coverage. Beyond the impacts
to APTC highlighted above, which overlap with impacts related to the
increased reduced limitations on cost sharing applicable to silver plan
variations \223\ applicable to plans offered on Exchange in the
individual market, we do not believe the proposed changes to the
maximum annual limitation on cost sharing would result in a significant
economic impact as the plans required to comply with the maximum annual
limitation on cost sharing are generally required to comply with AV (or
with minimum value), constraining the range of cost-sharing parameter
values that issuers can offer for those plans. However, we seek comment
on these impact estimates and assumptions related to the proposed
change to the premium measure for calculating the premium adjustment
percentage.
---------------------------------------------------------------------------
\223\ On October 12, 2017, the Attorney General issued a legal
opinion that HHS did not have a Congressional appropriation with
which to make CSR payments. Sessions III, J. (2017, Oct. 11). Legal
Opinion Re: Payments to Issuers for Cost-Sharing Reductions (CSRs).
Office of Attorney General. https://www.hhs.gov/sites/default/files/csr-payment-memo.pdf.
---------------------------------------------------------------------------
16. Levels of Coverage (Actuarial Value) (Sec. 156.140, 156.200,
156.400)
We are proposing to change the de minimis ranges at Sec.
156.140(c) beginning in PY 2026 to +2/-4 percentage points for all
individual and small group market plans subject to the AV requirements
under the EHB package, other than for expanded bronze plans,\224\ for
which we propose a de minimis range of +5/-4 percentage points. We also
propose to revise Sec. 156.200(b)(3) to remove from the conditions of
QHP certification the de minimis range of +2/0 percentage points for
individual market silver QHPs. We also propose to amend the definition
of ``de minimis variation for a silver plan variation'' in Sec.
156.400 to specify a de minimis range of +1/-1 percentage points for
income-based silver CSR plan variations.
---------------------------------------------------------------------------
\224\ Expanded bronze plans are bronze plans currently
referenced in Sec. 156.140(c) that cover and pay for at least one
major service, other than preventive services, before the deductible
or meet the requirements to be a high deductible health plan within
the meaning of section 223(c)(2) of the Code.
---------------------------------------------------------------------------
We believe that changing the de minimis ranges for standard metal
level plans (except for individual market silver QHPs) would not
generate a transfer of costs for consumers overall. Wider de minimis
ranges would allow issuers to design plans with a lower AV than is
possible currently, which would reduce the generosity in health plan
coverage for out-of-pocket costs. However, we expect that issuers
would, in turn, lower overall premiums. We estimate the premiums could
decrease approximately 1.0 percent on average because of benefit
changes issuers would make with a wider de minimis range. Lower overall
premiums would have positive effects for consumers over the longer term
as issuer participation increases and coverage options improved, which
would attract more young and healthy enrollees into health plans,
improving the overall risk pool and reducing overall costs that could
mitigate any increase in consumer out-of-pocket costs.
As shown in Table 14 below, the proposal to widen the de minimis
range for individual market silver QHPs to +2/-4 percentage points
would generate a transfer of costs in the short-term from consumers to
the government and issuers in the form of decreased APTC, because
widening the de minimis range for silver plans can affect the
generosity of the SLCSP. The SLCSP is the benchmark plan used to
determine an individual's PTC. A subsidized enrollee in any county that
has a SLCSP that is currently at or above 70 percent AV
[[Page 13020]]
would see the generosity of their current SLCSP decrease, resulting in
a decrease in PTC.
[GRAPHIC] [TIFF OMITTED] TP19MR25.016
This proposal, by itself, would not invalidate the cost-sharing
design of any health plan an issuer currently plans to offer in PY
2026. As explained above, this proposal only expands the universe of
permissible plan AVs and would not preclude issuers from continuing to
design plans with an AV that is closer to the middle of the applicable
de minimis ranges instead of plans at the outer limits. To the extent
that issuers believe that plan designs that have a particular AV would
attract more enrollment, they would remain free to do so under this
proposal.
In addition, changing the de minimis range for standard silver
plans would impact Individual Coverage Health Reimbursement
Arrangements (ICHRAs), which use the Lowest Cost Silver Plan (LCSP) as
the benchmark to determine whether an ICHRA is considered affordable to
an employee. Under this proposal, as premiums decrease, an employer
would have to contribute less to an ICHRA to have it be considered
affordable. This could encourage large employer use of ICHRAs because
large employers need to offer affordable coverage to satisfy the
employer shared responsibility provisions.
We seek comment on these impact estimates and assumptions, as well
as any timing considerations with its proposed implementation.
17. Regulatory Review Cost Estimation
If regulations impose administrative costs on private entities,
such as the time needed to read and interpret this proposed 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 13,800) will include the actual number of
reviewers of this proposed rule. We therefore use an average number of
approximately 7,000 reviewers of this proposed rule. We acknowledge
that this assumption may understate or overstate the costs of reviewing
this proposed rule. It is possible that not all commenters reviewed the
2026 Payment Notice proposed rule in detail, and it is also possible
that some page viewers will not actually read this proposed rule. For
these reasons, we believe that the approximate average of the number of
commenters and number of page viewers on the 2026 Payment Notice
proposed rule will be a fair estimate of the number of reviewers of
this final rule. We seek comments on the approach in estimating the
number of entities which will review this proposed rule.
We also recognize that different types of entities are in many
cases affected by mutually exclusive sections of this proposed 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 seek comments on
this assumption.
Using the wage information from the BLS for medical and health
service managers (Code 11-9111), we estimate that the cost of reviewing
this final rule is $106.42 per hour, including overhead and fringe
benefits.\225\ Assuming an average reading speed of 250 words per
minute, we estimate that it will take approximately 3.4 hours for the
staff to review 55 percent of this proposed rule. For each entity that
reviews the rule, the estimated cost is $361.83 (3.4 hours x $106.42
per hour). Therefore, we estimate that the total cost of reviewing this
regulation is approximately $2,532,810 ($351.19 per reviewer x 7,000
reviewers).
---------------------------------------------------------------------------
\225\ U.S. Bureau of Labor Statistics. (2024, April 9).
Occupational Employment and Wage Statistics. Dep't. of Labor.
https://www.bls.gov/oes/current/oes_nat.htm.
---------------------------------------------------------------------------
18. Overall Impact of the Proposed Individual Market Program Integrity
Provisions
In the regulatory impact analysis of this proposed rule, we include
impact analyses and estimates for each proposal separately, as we
intend for each provision to be severable from the rest. Please see
section III.E. for a more detailed discussion on the severability of
the provisions of this rule. However, we anticipate that the provisions
of this proposed rule, while severable, may work in concert with each
other and affect many of the same individuals seeking coverage through
the individual health insurance market. Therefore, the overall impact
of this proposed rule would likely be less than the simple accumulation
of the individual provisions' impact analyses. To the best of our
ability, we provide overall impact estimates of these provisions with
respect to enrollment, premiums, and APTC, that minimize the overlap of
individuals affected. These estimates use a baseline of current law
such that a reduction in enrollment attributable to the expiration of
enhanced PTCs in the IRA on December 31, 2025, is accounted for
separately from these estimates, as such a reduction would not be due
to the provisions in this proposed rule, if finalized. These estimates
consider the enrollment, premium, and APTC impact solely due to the
provisions in this proposed rule, if finalized, compared to what would
occur if these proposals were not finalized.
The estimates we present were calculated as follows. CMS
Marketplace Open Enrollment Period (OEP) Public Use Files (PUFs)
contain data on individual Marketplace activity, including the
demographic characteristics of consumers who made a plan selection. The
Integrated Public Use Microdata Series (IPUMS) USA data provides access
to samples of the American population drawn from sixteen Federal
censuses, including the U.S. Census Bureau's American Community Survey
(ACS). A 2024 study published in the American Journal of
[[Page 13021]]
Health Economics (AJHE) estimated and analyzed the take-up rate of
Marketplace insurance in the 39 States that used Healthcare.gov by
comparing confidential microdata on all FFE enrollees who selected a
plan during an open or special enrollment period and effectuated their
enrollment between 2015 and 2017 with the ACS five-year public-use
microdata sample for 2013-2017.\226\ This methodology was adapted in a
2024 paper by the Paragon Health Institute to calculate erroneous and
improper enrollments for 2024 by comparing CMS Marketplace OEP PUF data
with ACS 1-year microdata.\227\ Both of these approaches use ACS data
to identify the non-elderly adult population that is potentially
eligible for Exchange coverage and exclude individuals who are enrolled
in Medicare or Medicaid. The AJHE study additionally excludes
individuals receiving health insurance through an employer or TRICARE.
There are also methodological differences between the two studies in
how income eligibility for subsidized Exchange coverage is determined
with the AJHE study estimating and imputing modified adjusted gross
income (MAGI) for ACS survey respondents. HHS has carefully considered
both of these sources and used the Paragon Health Institute methodology
in the following analysis as a way to quantify erroneous and improper
enrollments using CMS Marketplace OEP PUFs data and IPUMS USA data
using the best available data.
---------------------------------------------------------------------------
\226\ Hopkins, B. et al. (2024). How Did Take-Up of Marketplace
Plans Vary with Price, Income, and Gender? American Journal of
Health Economics, 11(1 winter 2025). Retrieved from https://doi.org/10.1086/727785.
\227\ Blase, B. & Gonshorowski, D. (n.d.). The Great Obamacare
Enrollment Fraud. Retrieved from https://paragoninstitute.org/private-health/the-great-obamacare-enrollment-fraud/.
---------------------------------------------------------------------------
The analysis in Table 15 below compares sign-ups during the OEP for
people with expected income between 100-150 percent of the FPL by State
to the number of State residents in this income range who are eligible
for Exchange coverage for the years 2019, 2023, and 2024. The number of
plan selections on the Exchanges among people with expected incomes
between 100-150 percent FPL are from the CMS Marketplace OEP PUFs
data.\228\ This information is based on the consumer's attestation of
income for those who actively submitted an application for coverage for
the specified plan year. For the 2023 and 2024 plan years, it reflects
verified data on the prior year's income for those consumers who were
auto re-enrolled without actively submitting an application for the
current plan year.\229\ The number of State residents in the 100-150
percent FPL income range who are potentially eligible for Exchange
coverage in each year is estimated using the 2019 and 2023 1-year ACS
files from IPUMS USA.\230\ State residents ages 19-64 with household
incomes between 100-150 percent FPL who are not enrolled in Medicaid or
Medicare are considered potentially eligible for Exchange coverage.
This follows a methodology used in prior research and excludes children
age 18 and under who are eligible for Medicaid or the Children's Health
Insurance Program (CHIP) if their incomes are in this range,\231\ as
well as adults ages 65 and older who are likely eligible for
Medicare.\232\ Because the 2024 ACS microdata is not yet available, the
number of individuals potentially eligible for Exchange coverage in
this income range for each State during 2024 was estimated by applying
State-level estimates of population change from 2023 to 2024 from the
United States Census Bureau to the 2023 ACS estimates.\233\ This
adjustment assumes that changes in population within the 100-150
percent FPL range are similar to those within the State and ignores any
potential distributional changes. Minnesota, New York, and Oregon were
excluded from the analysis due the presence of a BHP for low-income
residents during at least part of the analysis period.\234\ The
District of Columbia was excluded from the analysis due to insufficient
income information available in the OEP PUF. In addition, a 2019
estimate for Idaho is not reported due to unavailable income
information in the OEP PUF for this year.\235\
---------------------------------------------------------------------------
\228\ Marketplace Products. (n.d.). Retrieved from https://www.cms.gov/data-research/statistics-trends-and-reports/marketplace-products.
\229\ Public Use Files: Definitions. (2024). Retrieved from
https://www.cms.gov/files/document/2024-public-use-files-definitions.pdf; https://www.cms.gov/files/document/2023-public-use-files-definitions.pdf.
\230\ Ruggles, S., et al. (2023). IPUMS USA: Version 15.0
[dataset]. Retrieved from https://www.ipums.org/projects/ipums-usa/d010.V15.0.
\231\ Medicaid/CHIP Upper Income Eligibility Limits for
Children, 2000-2024. (n.d.). Retrieved from https://www.kff.org/medicaid/state-indicator/medicaidchip-upper-income-eligibility-limits-for-children/.
\232\ Blase, B. & Gonshorowski, D. (n.d.). The Great Obamacare
Enrollment Fraud. Retrieved from https://paragoninstitute.org/private-health/the-great-obamacare-enrollment-fraud/.
\233\ State Population Totals and Components of Change: 2023-
2024[Vintage 2024]. https://www.census.gov/data/tables/time-series/demo/popest/2020s-state-total.html#v2024.
\234\ Basic Health Program. (n.d.). Retrieved from https://www.medicaid.gov/basic-health-program/index.html.
\235\ Public Use Files: Definitions. Retrieved from https://www.cms.gov/research-statistics-data-and-systems/statistics-trends-and-reports/marketplace-products/downloads/2019publicusefilesdefinitions-.pdf; https://www.cms.gov/data-research/statistics-trends-and-reports/marketplace-products/2019-marketplace-open-enrollment-period-public-use-files.
---------------------------------------------------------------------------
The comparisons presented in Table 15 include columns that
calculate the take-up of Exchange coverage by dividing Exchange
enrollment for each State by the corresponding estimate of eligible
State residents from the ACS and multiplying by 100. While these
estimates are useful for understanding trends in Exchange enrollment
over time and different patterns of enrollment across States, they
should not be interpreted as precise measures of take-up of Exchange
coverage for several reasons. First, this methodology relies on 1-year
samples of the ACS to estimate eligible State populations, which
provides a current portrait of residents meeting the 100-150 percent
FPL criteria in each year but leads to less precise estimates than the
use of multi-year ACS samples with larger sample sizes.\236\ Second, it
uses the Census definition of poverty to identify residents with family
incomes between 100-150 percent FPL, which differs from the MAGI
relative to poverty measure that is used to determine eligibility for
premium tax credits on the Exchanges and reported in the OEP PUFs.\237\
There are differences in both the sources of income that are included
in the definition of income, as well as which household members are
included in the calculation.\238\ In addition, the ACS is fielded
throughout the calendar year and asks about income during the previous
12 months,\239\ meaning that this survey measure does not align with
income during the calendar/plan year. Third, there is a tendency for
income to be underreported in survey data, including in the ACS.\240\
Fourth, the
[[Page 13022]]
eligible population estimated using the ACS includes certain
individuals who would not be eligible for subsidized Exchange coverage,
including those with access to affordable employer-based coverage,\241\
those with Medicaid coverage that they did not report on the
survey,\242\ immigrants who are not lawfully present,\243\ and people
enrolled in Department of Veteran Affairs (VA) health care. Finally,
the eligible population estimated using the ACS does not include
certain individuals who are eligible for Exchange coverage and are
included in the enrollment counts in the OEP PUFs, such as people aged
65 or older who do not qualify for premium-free Medicare.\244\ We
acknowledge these limitations and seek comment on ways to improve these
analyses in final rulemaking. For instance, possible revisions to this
analysis could include the use of multi-year ACS samples or the
refinement of the measures of income and family unit used in the ACS to
more closely align with Exchange premium tax credit eligibility
determination.
---------------------------------------------------------------------------
\236\ Using 1-Year or 5-Year American Community Survey Data.
(2020). Retrieved from https://www.census.gov/programs-surveys/acs/guidance/estimates.html.
\237\ What's Included as Income. (n.d.). Retrieved from
www.healthcare.gov/income-and-household-information/income/.
\238\ State Health Access Data Assistance Center. (2023).
Defining Family for Studies of Health Insurance Coverage. Retrieved
from https://shadac-pdf-files.s3.us-east-2.amazonaws.com/s3fs-public/publications/2023%20Defining%20families%20brief.pdf.
\239\ Rothbaum, J. L. (2015). Comparing Income Aggregates: How
do the CPS and ACS Match the National Income and Product Accounts,
2007-2012. Retrieved from https://www.census.gov/content/dam/Census/library/working-papers/2015/demo/SEHSD-WP2015-01.pdf.
\240\ About Income. (n.d.). Retrieved from https://www.census.gov/topics/income-poverty/income/about.html https://www.census.gov/content/dam/Census/library/working-papers/2015/demo/SEHSD-WP2015-01.pdf.
\241\ People with coverage through a job. (n.d.) Retrieved from
https://www.healthcare.gov/have-job-based-coverage/options/.
\242\ O'Hara, Brett. (2009). Is there an undercount of Medicaid
participants in the ACS Content Test? Retrieved from https://www.census.gov/content/dam/Census/library/working-papers/2009/adrm/medicaid-participants-acs-content-test.pdf.
\243\ Coverage for lawfully present immigrants. (n.d.).
Retrieved from https://www.healthcare.gov/immigrants/lawfully-present-immigrants/.
\244\ FAQs: Health Insurance Marketplace and the ACA. I am
turning 65 years old next month, but I am not entitled to Medicare
without having to pay a premium for Part A because I have not worked
long enough to qualify. Can I sign up for a Marketplace plan?
(n.d.). Retrieved from https://www.kff.org/faqs/faqs-health-insurance-marketplace-and-the-aca/i-am-turning-65-years-old-next-month-but-i-am-not-entitled-to-medicare-without-having-to-pay-a-premium-for-part-a-because-i-have-not-worked-long-enough-to-qualify-can-i-sign-up-for-a-marketplace-pla/.
---------------------------------------------------------------------------
Table 15 below shows there is large variation in the take-up of
Exchange coverage among potential enrollees across States. It also
indicates that there has been a substantial increase in take-up from
the estimated 43.8 percent of potential enrollees in this set of States
who enrolled in Exchange coverage for plan year 2019. The estimates for
2023 and 2024 are 94.2 percent and 143.9 percent, respectively. These
overall take-up estimates by year exclude Idaho given the lack of
income information available for this State in 2019.
Nine States have take-up rates that exceed 100 percent for plan
year 2024, indicating that there are a larger number of Exchange
enrollees reporting incomes of between 100-150 percent FPL than
residents reporting incomes in this range on the ACS. While estimates
slightly above 100 percent could potentially be attributed to
imprecision in population estimates or differences in the measurement
of income as described above, these explanations seem less likely for
take-up estimates that greatly exceed 100 percent, such as the 438
percent observed for Florida in 2024. Other possible explanations for
such a high take-up rate include people misestimating their income for
the plan year at the time of open enrollment, as sign-ups typically
occurring in the fall prior to the plan year and individuals may earn
more or less than they expected, or people not updating their income
information if auto re-enrolled with the prior year's income data in
2023 and 2024. These would constitute errors. To the extent that people
with incomes below 100 percent FPL intentionally overstate their income
in order to qualify for subsidized Exchange coverage or are counseled
to do so by an agent, broker, or web-broker, or if people outside this
income range are unknowingly enrolled by an agent, broker, or web-
broker who claim their income at 100-150 percent FPL, these types of
improper enrollments would also contribute to a take-up rate that
exceeds 100 percent. Of note, 7 of the 9 States with take-up rates
above 100 percent in 2024 are States that have not implemented ACA
Medicaid expansions.\245\ Medicaid eligibility for non-elderly and non-
disabled adults in these States is limited to parents who meet a median
income eligibility threshold of 27 percent FPL.\246\ Previous research
presents evidence suggesting that many people with incomes that exceed
the Medicaid eligibility limit in non-ACA Medicaid expansion States,
especially in Florida, obtain subsidized Exchange coverage by reporting
income just above the FPL at enrollment.\247\
---------------------------------------------------------------------------
\245\ Status of State Medicaid Expansion Decisions. (2025,
February 12). Retrieved from https://www.kff.org/status-of-state-medicaid-expansion-decisions/.
\246\ Medicaid Income Eligibility Limits for Adults as a Percent
of the Federal Poverty Level. (2024, 1 May). Retrieved from https://www.kff.org/affordable-care-act/state-indicator/medicaid-income-eligibility-limits-for-adults-as-a-percent-of-the-federal-poverty-level/?currentTimeframe=0&sortModel=%7B%22colId%22:%22Location%22,%22sort%22:%22asc%22%7D Parental income eligibility limits for parents in a
family of three as of May 1, 2024 for each of the 7 States are 18%
FPL in Alabama, 27% FPL in Florida, 30% FPL in Georgia, 27% FPL in
Mississippi, 67% FPL in South Carolina, 105% FPL in Tennessee, and
15% FPL in Texas. Other adults are not eligible.
\247\ Hopkins, B. et al. (2024). How Did Take-Up of Marketplace
Plans Vary with Price, Income, and Gender? American Journal of
Health Economics, 11(1 winter 2025). Retrieved from https://doi.org/10.1086/727785.
---------------------------------------------------------------------------
One approach to estimate the possible reduction in erroneous and
improper enrollments under the proposed changes in this rule is to sum
the total number of enrollments in 2024 that exceed 100 percent of
potential enrollees in Table 15. This calculation suggests that there
are as many as 4.4 million erroneous or improper enrollments. In
several respects, this is expected to be an upper bound estimate of the
scale of erroneous and improper enrollments. First, 2024 plan year
Exchange enrollments occurred prior to recent HHS actions to improve
program integrity (for example, from June 2024 through October 2024,
CMS suspended 850 agents and brokers' Marketplace Agreements for
reasonable suspicion of fraudulent or abusive conduct related to
unauthorized enrollments or unauthorized plan switches).\248\ Such
changes were expected to reduce the number of improper and erroneous
enrollments prior to the implementation of the provisions in this
proposed rule. Additionally, this estimate fully attributes excess
enrollments to error and improper enrollments and does not adjust for
the presence of general uncertainty around expected income among
enrollees, which is not expected to change as a result of the proposed
provisions, nor does it take into account the imprecision inherent in
the use of survey data to identify and measure the population eligible
for Exchange coverage. The excess enrollment estimate, however, does
also ignore the potential presence of erroneous and improper
enrollments in States with take-up rates below 100 percent and, in this
way, could underestimate the potential impact of the proposed
provisions. For all of these reasons, there is uncertainty present
regarding the estimate derived from this analysis. We acknowledge this
uncertainty and seek comment on how we may improve this estimate in
final rulemaking.
---------------------------------------------------------------------------
\248\ CMS Update on Actions to Prevent Unauthorized Agent and
Broker Marketplace Activity. (2024, October 17). Retrieved from
https://www.cms.gov/newsroom/press-releases/cms-update-actions-prevent-unauthorized-agent-and-broker-marketplace-activity.
---------------------------------------------------------------------------
[[Page 13023]]
[GRAPHIC] [TIFF OMITTED] TP19MR25.017
[[Page 13024]]
[GRAPHIC] [TIFF OMITTED] TP19MR25.018
Furthermore, we anticipate that IRA subsidies expiring after PY
2025 will reduce the availability of fully-subsidized plans and,
therefore, is expected to also reduce the occurrence of improper
enrollments. That reduction in improper enrollments is not attributable
to the proposals in this rule, if finalized as proposed, but rather by
current law causing IRA subsidies to expire after PY 2025. However,
there is uncertainty regarding how many improper enrollments would be
reduced by the expiration of IRA subsidies compared to the proposals in
this rule, if finalized. We believe the majority of improper
enrollments would disenroll from coverage as a result of the enhanced
subsidies, therefore, we assume a range of approximately 750,000 to
2,000,000 fewer individuals would enroll in QHP coverage in 2026 as a
result of the proposals in this rule, if finalized jointly and as
proposed. We seek comment on this estimate and assumptions.
Starting with internal CMS data of enrollment by month, premiums,
and APTCs, we summarize the data using average monthly amounts. These
monthly averages are projected throughout the year using historical
monthly patterns during a similar environment. For future years, the
enrollment is trended by the projected growth in the under age 65
population. Spending amounts are trended using projected growth in NHEA
less Medicare. With the expiration of enhanced subsidies, we assume
approximately 42 percent of recent enrollment growth will discontinue
coverage. We believe the discontinuing enrollees are likely to be
healthier than those remaining in the risk pool, leading to higher
overall premiums on a per member per month (PMPM) basis ($614.44 PMPM
in 2025 increasing to $662.13 PMPM in 2026). Based on the analysis
presented thus far in this section, we expect average enrollment for
2026 to decrease by approximately 750,000 to 2,000,000 enrollees
compared to baseline estimates. Some enrollees dropping coverage would
likely be healthier than those remaining in the risk pool, while other
enrollees losing coverage due to improper enrollments could potentially
be less healthy, so we estimated the claims impact to the risk pool to
potentially range from -0.5 percent to +4 percent. The claims changes
were then combined with the estimated 3.4 percent decrease for the
expected impact of removing the monthly 150 percent FPL SEP, a 0.5
percent decrease for SEP verification, and 1 percent decrease for the
de minimis AV change. The 2026 baseline claims per member was decreased
by 5.4 percent for the 750,000 reduced enrollment scenario and 0.9
percent for the 2,000,000 reduced enrollment scenario. The revised
premium was calculated assuming issuers would price to an average 84
percent loss ratio, yielding a revised PMPM of $626.37 for the 750,000
reduced enrollment scenario and $656.17 for the 2,000,000 reduced
enrollment scenario for 2026 if the proposals in this rule are
finalized jointly and as proposed. Estimated APTCs were assumed to be
88.8 percent of the premium PMPM ($626.37 x 0.888 = $556.22 and $656.17
x 0.888 = $582.68), and APTC enrollment was estimated to be 90.6
percent of total enrollment for 2026. For future years under this rule,
we assume premium growth of 3.9 percent for 2027 and 2028 and 1.9
percent for 2029. Enrollment growth is estimated at 1.1 percent for
2027, 1.5 percent for 2028, and 3 percent for 2029.
Using the methodology described in the preceding paragraphs, we
anticipate the provisions in this proposed rule, when considered
jointly and if finalized as proposed, could reduce enrollment,
premiums, and APTC each year beginning in 2026. We provide lower bound
estimates in Table 16 and upper bound estimates in Table 17.
[[Page 13025]]
[GRAPHIC] [TIFF OMITTED] TP19MR25.019
[GRAPHIC] [TIFF OMITTED] TP19MR25.020
Taken together, the provisions of this rule are expected to address
errors and improper enrollments, which means that as presented in the
preceding paragraphs, we would expect approximately 750,000 to
2,000,000 individuals to lose coverage as a result of this rule, if all
provisions are finalized as proposed. This range may overestimate the
actual number of individuals impacted, as we believe that this range
includes many individuals improperly enrolled by agents, brokers, and
web-brokers without their knowledge or consent, as well enrollees with
multiple forms of coverage. Likewise, this range may underestimate the
actual number of individuals impacted, as eligible enrollees may lose
coverage as a result of the administrative burdens imposed by the
provisions of this rule. Finally, we note that coverage losses are
expected to be concentrated in nine States where erroneous and improper
enrollment is most noticeable (that is, Alabama, Florida, Georgia,
Mississippi, North Carolina, South Carolina, Tennessee, Texas, and
Utah), although we also expect minor coverage losses across all States
as the administrative burdens associated with this rule would be
applied uniformly across the country.
An individual who loses coverage may be required to incur
additional expense to obtain coverage or may go uninsured. An increase
in the rate of uninsurance may impose greater burdens on the health
care system through strain on emergency departments, additional costs
to the Federal Government and to States to provide limited Medicaid
coverage for the treatment of an emergency medical condition, and cause
an overall reduction to labor productivity.
In contrast, if individuals who do not maintain coverage following
the finalizing of this rule would otherwise be subsidized QHP
enrollees, as we anticipate, there would be a savings to the Federal
Government in the form of reduced APTC payments, thereby saving
taxpayer dollars. As we believe many of the individuals who would lose
coverage as a result of the proposals in this rule, if finalized
jointly and as proposed, may represent improper enrollments, this would
be a benefit.
We note that variables impacting enrollment, premiums, and APTC
have changed over time and may continue to fluctuate. When considering
the overall
[[Page 13026]]
impact of this proposed rule, if all provisions are finalized as
proposed, we also recognize that the degree of impact from the
individual provisions working in concert with each other may vary more
than what we estimate due to the inherent uncertainty in predicting
enrollment trends. Therefore, it is possible that the overall impact of
this proposed rule could be outside of the estimates provided in this
section. We seek comment on these impact estimates and assumptions.
D. Regulatory Alternatives Considered
We considered taking no action regarding our proposal to remove
Sec. 147.104(i), which currently prohibits an issuer from attributing
payment of premium for new coverage to past-due premiums owed for prior
coverage. Leaving this policy in place would provide the broadest
enrollment rights for consumers. However, due to concerns about gaming
and adverse selection, HHS believes that it is reasonable to allow
issuers, to the extent permitted by applicable State law, to condition
the sale of new coverage on payment of past-due premiums owed to the
issuer. This proposal would improve the risk pool by promoting
continuous coverage without imposing a significant financial burden for
most people who owe past-due premiums.
At Sec. 155.20, we are proposing to adjust the definition of
``lawfully present'' used for purposes of determining eligibility to
enroll in a QHP offered through the Exchange or a BHP in States that
elected to operate a BHP to exclude DACA recipients. We alternatively
considered proposing to fully revert to the definition of ``lawfully
present'' that was in place prior to the 2024 Final Rule ``Clarifying
the Eligibility of Deferred Action for Childhood Arrivals (DACA)
Recipients and Certain Other Noncitizens for a Qualified Health Plan
through an Exchange, Advance Payments of the Premium Tax Credit, Cost-
Sharing Reductions, and a Basic Health Program'' (89 FR 39392).
However, proposing to fully reinstate the previous definition would
have undone several technical and clarifying changes to the definition
of ``lawfully present'' that were finalized in the 2024 rule (89 FR
39407).
We evaluated these technical and clarifying changes and found that
some had no impact on who is considered ``lawfully present'' for
purposes of enrolling in QHP coverage offered through the Exchange and
BHP coverage.\249\ Other changes corrected unintentional errors in the
prior definition.\250\ Finally, some changes resulted in very small
populations being newly considered ``lawfully present.'' Unlike DACA
recipients, the small number of individuals in these discrete
categories generally would have entered the United States with
inspection and would generally be able to adjust status to lawful
permanent resident on the basis of their status.\251\ Because these
changes were primarily technical and clarifying in nature, and because
the small groups of noncitizens newly considered ``lawfully present''
as a result of these changes are different from DACA recipients in
important ways, we are not proposing to revert or amend these
provisions at this time.
---------------------------------------------------------------------------
\249\ For example, technical changes to Sec. 155.20(4) and
155.20(5) to adjust the language we use to refer to temporary
resident status and Temporary Protected Status (TPS), as described
in the 2024 final rule at 89 FR 39408.
\250\ For example, technical changes to Sec. 155.20(13) to
refer to individuals with an approved petition for Special Immigrant
Juvenile (SIJ) status, rather than only individuals with
applications for such status, as described in the 2024 Final Rule at
89 FR 39411.
\251\ For example, changes to Sec. 155.20(6) to newly include
individuals in the process of transitioning from certain employment-
based immigrant visa petitions to lawful permanent resident (LPR)
status, as described in the 2024 final rule at 89 FR 39408.
---------------------------------------------------------------------------
We considered taking no action regarding our proposal to modify
Sec. 155.305(f)(4), which currently allows Exchanges to remove APTC
after an enrollee or their tax filer has been found as failing to file
their income tax return and reconcile their APTC for two-consecutive
tax years. However, due to concerns about improper enrollment as well
as concerns related to the potential for increased tax liability for
tax filers, HHS is proposing allowing Exchanges to remove APTC after an
enrollee or their tax filer has been identified as failing to file and
reconcile for one tax year. We believe that FTR serves as an important
check on improper enrollments and would help protect low-income
consumers from larger than expected tax liabilities.
We considered taking no action regarding our policy to add
amendments to Sec. 155.320(c)(3)(iii) to specify that all Exchanges
must generate annual income inconsistencies when a tax filer's attested
projected annual income is greater than or equal to 100 percent and not
more than 400 percent of the FPL and trusted data sources indicate that
projected income is under 100 percent of the FPL. However, due to
concerns of applicants inflating their incomes or having applications
submitted on their behalf with inflated incomes, as outlined in this
proposed rule, we believe it would be reasonable, prudent, and even
necessary to carry out the alternative income verification process in
this scenario. HHS also believes that this may help limit tax filers'
potential liability at tax reconciliation to repay excess APTC.
We considered taking no action regarding our policy to remove Sec.
155.320(c)(5) which currently requires Exchanges to accept
attestations, and not set an Income DMI, when the Exchange requests tax
return data from the IRS to verify attested projected annual household
income, but the IRS confirms there is no such tax return data
available. However, HHS believes that removing Sec. 155.320(c)(5) is
crucial for program integrity and that the benefit more than offsets
the administrative burden of requiring an income DMI in this scenario.
We considered taking no action regarding our policy to remove Sec.
155.315(f)(7) which requires that applicants must receive an automatic
60-day extension in addition to the 90 days currently provided by Sec.
155.315(f)(2)(ii) to allow applicants sufficient time to provide
documentation to verify household income. However, we believe it is
important we remove it to align with the 90-day statutory period.
Additionally, we believe the cost to taxpayers caused by continued APTC
beyond the 90-day period and decline in program integrity outweighs any
possible benefits to the risk pool that were identified the 2024
Payment Notice.
We propose adding Sec. 155.335(a)(3) and (n) to require that when
an enrollee does not submit an application for an updated eligibility
determination on or before the last day to select a plan for January 1
coverage and the enrollee's portion of the premium for the entire
policy would be zero dollars after application of APTC through the
Exchange's annual redetermination process, all Exchanges decrease the
amount of the APTC applied to the policy such that the remaining
monthly premium owed by the enrollee for the policy equals $5 for the
first month and for every following month that the enrollee does not
confirm or update the eligibility determination.
We alternatively considered whether other methods, such as
outreach, could sufficiently prompt fully subsidized enrollees to
update or confirm their eligibility information and actively re-enroll
in coverage, but most enrollees on the FFEs and the SBE-FPs actively
re-enroll by the applicable deadlines for January 1 coverage. As
discussed previously in this preamble, however, we do not believe
additional or different notifications would prompt action from
[[Page 13027]]
enrollees who choose not to submit an application for an updated
eligibility determination and actively re-enroll.
In addition, we considered taking no action regarding our policy at
Sec. 155.335; however, we believe that it is important to address the
significant increase in the number of enrollees who are automatically
re-enrolled in a fully subsidized QHP and change is critical to reduce
the financial impact of improper enrollments in QHPs with APTC through
the FFEs. The current annual redetermination process puts fully
subsidized enrollees at risk of accumulating surprise tax liabilities
and increases the cost of PTC to the Federal Government as Federal law
limits repayments, and there is no provision to recoup overpayments
from issuers when they follow the eligibility determinations made by
the Exchanges. As discussed previously in this preamble, we also
considered whether other methods--such as outreach--could sufficiently
prompt fully subsidized enrollees to update or confirm their
eligibility information. However, based on our experience operating the
Exchanges on the Federal platform, the majority of enrollees update
their information each year due to extensive outreach efforts, and we
don't believe additional or different notifications would prompt
enrollees to do so.
We also considered modifying the Exchange's annual redetermination
process to require that when an enrollee does not submit an application
to obtain an updated eligibility determination on or before the last
day to select a plan for January 1 coverage and the enrollee's portion
of the premium for the entire policy would be zero dollars after
application of APTC through the Exchange's annual redetermination
process, the enrollee would be automatically re-enrolled without any
APTC. This would ensure that enrollees in this situation need to return
to the Exchange and obtain an updated eligibility determination prior
to having any APTC paid on their behalf for the upcoming year.
Ultimately, however, we determined that this approach would create
undue financial hardship for these enrollees and act as a significant
barrier to accessing health care coverage. The loss of lower-risk
enrollees, who are least likely to actively re-enroll, due to an
inability to pay could destabilize the market risk pool and increase
premiums and the uninsured rate. Based on comments received on this
approach in the 2021 Payment Notice proposed rule, we believe that our
proposed amendment, which decreases the amount of the APTC applied to
the policy such that the remaining premium owed by the enrollee for the
policy equals $5, strikes an appropriate balance between encouraging
active enrollment decision making and ensuring market stability.
The 2024 Payment Notice updated Sec. 155.335(j) to allow Exchanges
to move a CSR-eligible enrollee from a bronze QHP and re-enroll them
into a silver QHP for an upcoming plan year, if a silver QHP is
available in the same product, with the same provider network, and with
a lower or equivalent net premium after the application of APTC as the
bronze plan into which the enrollee would otherwise have been re-
enrolled. We considered taking no action and leaving this policy in
place; however, for reasons further discussed in Section III.B.5. of
this preamble, we believe that consumers, and the agents, brokers, web-
brokers, and Navigators who help them, are largely aware of the more
generous subsidies. Therefore, we believe that the consumer awareness
problem the bronze to silver crosswalk policy aimed to address is
substantially less today, and therefore the possible benefits of this
policy no longer outweigh its potential to confuse consumers, undermine
consumer choice, and create unexpected tax liability.
We considered taking no action regarding modifications to Sec.
155.400(g) to remove flexibilities that would allow issuers to adopt a
fixed-dollar premium payment threshold or a gross premium-based
percentage payment threshold. We also considered removing just the
fixed-dollar threshold policy and allowing issuers the option to
utilize the gross premium-percentage based premium threshold. However,
given the continued and increased numbers of improper enrollments and
plan switches and other improper enrollment trends, both the fixed-
dollar and gross-premium percentage-based thresholds present program
integrity risks that may allow consumers (and Medicaid beneficiaries
who are victims of dual improper enrollment into a QHP) to remain in
coverage for a much longer or indefinite amount of time, after payment
of the binder. Consumers who never wanted, or no longer need, QHP
coverage could remain enrolled for longer than the 3-month grace
period, accruing premium debt and potentially facing complications when
they file their taxes. Issuers will still have the option to implement
the existing net premium percentage-based policy to allow consumers who
pay the majority of their premium to avoid being put into a grace
period.
We considered maintaining the length of the OEP, and we considered
providing flexibility to State Exchanges on the length of their OEPs.
Ultimately, however, we find that reducing the potential for adverse
selection is more important than providing additional time for plan
changes or additional flexibility for States. We believe that efforts
to reduce premium growth are more valuable for Exchange stability than
additional enrollment time. Lower adverse selection should translate to
lower premiums for QHPs. Additionally, we considered moving the OEP to
a later date in the calendar year--beginning March 1 and running to
April 15--as a measure to both minimize adverse selection and maximize
consumer choice (by moving the OEP to a season in which financial
stress is generally lessened), but we recognize that such a dramatic
shift in the OEP would cause considerable disruption to the market.
Therefore, we propose that the OEP for all Exchanges ends on December
15.
We considered not repealing the monthly 150 percent FPL SEP under
Sec. 155.420 but decided that it was important to fully repeal this
SEP to ensure a stable risk pool for the Exchange and to mitigate risks
for improper enrollments. Specifically, we found that the existence of
fully subsidized plans creates an opportunity for some agents, brokers,
and web-brokers to capture a commission by improperly enrolling people
without their knowledge or consent. We find that these improper
enrollments can go unnoticed until an enrollee tries to use their
health plan or when they eventually must reconcile surprise APTC on
their taxes. Even if we were able to sufficiently reduce the problem of
some agents, brokers, and web-brokers improperly enrolling consumers,
there remain substantial issues with consumers taking advantage of the
150 percent FPL SEP by falsely representing their income to take
advantage of the fully subsidized plans. Additionally, we find that the
consumers at or below the 150 percent of the FPL wait to enroll until
they need health care services which also destabilizes the risk pool
and increases premiums. Ultimately, we do not believe the benefits of
increased access to coverage for low-income consumers outweighs the
higher premiums and risks of harming program integrity because of
improper enrollments.
We are proposing to amend Sec. 155.420(g) to require all Exchanges
to conduct eligibility verification for SEPs. Specifically, we propose
to remove the limit on Exchanges on the Federal
[[Page 13028]]
platform to conducting pre-enrollment verifications for only the loss
of minimum essential coverage SEP. With this limitation removed, we
propose to conduct pre-enrollment verifications for most categories of
SEPs for Exchanges on the Federal platform in line with operations
prior to the implementation of the 2023 Payment Notice.
We considered leaving the limitation of SEP verification to loss of
minimum essential coverage for Exchanges on the Federal platform in
place. We determined that the risks associated with the potential
enrollment of ineligible individuals was greater than the potential
benefit of reducing administrative burden on consumers by only
verifying loss of minimum essential coverage. We also determined that
consumers would benefit from increased verification due to its
potential to limit improper enrollments occurring without their
awareness and to bring down risk in the Federal Exchange by ensuring
that only qualified individuals are enrolling through SEPs throughout
the year.
We are also proposing to require that Exchanges, including all
State Exchanges, conduct pre-enrollment SEP verification for at least
75 percent of new enrollments through SEPs for consumers not already
enrolled in coverage through the applicable Exchange. We are proposing
that Exchanges must verify at least 75 percent of such new enrollments
based on the current implementation of SEP verification by State
Exchanges.
We considered leaving the current regulation that allows pre-
enrollment SEP verification to be at the option of each State Exchange
in place. However, we believe that having a standard of SEP
verification across all Exchanges will be beneficial for all States
regarding risk reduction in their Exchanges and protecting consumers
from improper enrollments. We believe that the 75 percent threshold
still leaves State Exchanges a great deal of flexibility as to which
SEPs they implement pre-enrollment verification for as we know it is
not cost effective for each State Exchange to verify all types.
However, we are seeking comment on whether or not to require SEP
verification for most SEP types in line with what we are proposing in
this Rule for Exchanges on the Federal platform.
In proposing the change to the premium measure used in the premium
adjustment percentage calculation under Sec. 156.130, we considered
continuing to use the current premium measure based on NHEA's estimates
and projections of average per enrollee employer-sponsored insurance
premiums for purposes of calculating the premium adjustment percentage
for PY 2026. We are proposing a change to this measure to instead use a
private health insurance premium measure (excluding Medigap and
property and casualty insurance), so that the premium growth measure
more closely reflects premium trends in the private health insurance
market since 2013. Alternatively, we considered using NHEA estimates
and projections of average per enrollee private health insurance
premiums. NHEA's private health insurance premium measure includes
premiums for employer-sponsored insurance, direct purchase insurance
(which includes Medigap insurance), and property and casualty
insurance. However, we propose to include only those premiums for
expenditures associated with the acquisition of one's primary health
insurance coverage purchased through their employer or purchased
directly from a health insurance issuer. We believe it is inappropriate
to include Medigap premiums in the measure as this type of coverage is
not considered primary coverage for those enrollees who supplement
their Medicare coverage with these plans. Moreover, although total
spending for private health insurance in the NHEAs includes the medical
portion of accident insurance (property and casualty insurance), we do
not believe it would be appropriate to include those expenditures for
this purpose as they are associated with policies that do not serve as
a primary source of health insurance coverage.
Accordingly, in Sec. 156.130 we propose using a measure that
includes only premiums for employer-sponsored insurance and direct
purchase insurance, but not premiums for property and casualty, or
Medigap insurance. We seek comment on the source of premium data we use
in the premium adjustment percentage calculation, and specifically the
proposal to use average per enrollee private health insurance premiums
(excluding Medigap and property and casualty insurance) or whether we
continue to use employer-sponsored insurance premiums for purposes of
calculating the premium adjustment percentage for PY 2026.
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. The RFA generally defines a ``small entity''
as (1) a proprietary firm meeting the size standards of the Small
Business Administration (SBA), (2) a not-for-profit organization that
is not dominant in its field, or (3) a small government jurisdiction
with a population of less than 50,000. States and individuals are not
included in the definition of ``small entity.'' The data and
conclusions presented in this section, along with the rest of the RIA,
amount to our initial regulatory flexibility analysis under the RFA.
For purposes of the RFA, we believe that health insurance issuers
would 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 this NAICS code. 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.\252\ 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) would fall below these size
thresholds. Based on data from MLR annual report submissions for the
2023 MLR reporting year, approximately 84 out of 479 issuers of health
insurance coverage nationwide had total premium revenue of $47 million
or less.\253\ We estimate that approximately 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
result in their revenues exceeding $47 million. We seek comment on
these estimates.
---------------------------------------------------------------------------
\252\ SBA. (n.d.). Table of size standards. https://www.sba.gov/document/support--table-size-standards.
\253\ CMS. (n.d.). Medical Loss Ratio Data and System Resources.
https://www.cms.gov/CCIIO/Resources/Data-Resources/mlr.html.
---------------------------------------------------------------------------
We anticipate that small issuers could be impacted by the
provisions in this proposed rule. We are unable to quantify the impact
of these proposed changes on small issuers due to uncertainty regarding
their market share, market participation, membership in larger holding
groups, enrollment and risk mix, and APTC receipts. However, we
anticipate that there would not be a significant change in revenue for
issuers since a reduction in APTC payments would mean consumers would
be responsible for the balance of the premium not covered by APTC. We
also anticipate that due to the small reduction in enrollment
anticipated to result from the proposals in this rule, if finalized,
issuers may experience a reduction in premium revenue.
[[Page 13029]]
However, we anticipate this could be balanced by a reduction in claims
experience, and we are unable to quantify this impact on small issuers
due to uncertainty and a lack of data. We seek comment on these
estimates and assumptions.
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 603 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. Although this proposed
rule is not subject to section 1102 of the Act, we have determined that
this proposed rule would not affect 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 2025, that
threshold is approximately $187 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 proposed 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. 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, although this proposed 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, State Exchanges and States operating
a BHP would be required to update their eligibility systems in order to
no longer consider DACA recipients ``lawfully present'' for purposes of
such programs. However, these Federalism implications may be balanced
by the fact that we do not anticipate that these proposals would impose
substantial direct costs on the affected States, which in any event
have chosen to operate their own Exchanges and eligibility and
enrollment platforms, or the optional BHP. Additionally, the proposed
rule would start the Open Enrollment Period for Exchanges on November 1
and end it on December 15 of the year preceding the benefit year,
including for State Exchanges. For the 2025 annual open enrollment
period, 19 of 20 State Exchanges ended their open enrollment period on
or after January 15 of benefit year and one began before November 1 of
the benefit year. This has Federalism implications because it would
curtail flexibility in place to continue doing so. However, these
implications may be balanced by limiting overall costs and burdens to
State Exchanges on the basis of a truncated timeframe to hold open
enrollment while maintaining flexibility to administer certain SEPs to
support qualifying consumers. We intend that, if finalized, these rules
would preempt State law only to the extent such State law would prevent
the application of these rules.\254\
---------------------------------------------------------------------------
\254\ See ACA Sec. 1321(d).
---------------------------------------------------------------------------
Stephanie Carlton, Acting Administrator of the Centers for Medicare
& Medicaid Services, approved this document on March 10, 2025.
List of Subjects
45 CFR Part 147
Aged, Citizenship and naturalization, Civil rights, Health care,
Health insurance, Individuals with disabilities, Intergovernmental
relations, Reporting and record keeping requirements, Sex
discrimination.
45 CFR Part 155
Administrative practice and procedure, Advertising, Aged, Brokers,
Citizenship and naturalization, Civil rights, Conflict of interests,
Consumer protection, Grant programs--health, Grants administration,
Health care, Health insurance, Health maintenance organizations (HMO),
Health records, Hospitals, Indians, Individuals with disabilities,
Intergovernmental relations, Loan programs--health, Medicaid,
Organization and functions (Government agencies), Public assistance
programs, Reporting and recordkeeping requirements, Sex discrimination,
State and local governments, Taxes, Technical assistance, Women, Youth.
45 CFR Part 156
Administrative practice and procedure, Advertising, Advisory
committees, Brokers, Conflict of interests, Consumer protection, Grant
programs--health, Grants administration, Health care, Health insurance,
Health maintenance organization (HMO), Health records, Hospitals,
Indians, Individuals with disabilities, Loan programs--health,
Medicaid, Organization and functions (Government agencies), Public
assistance programs, Reporting and recordkeeping requirements, State
and local governments, Sunshine Act, Technical assistance, Women, and
Youth.
For the reasons set forth in the preamble, under the authority at 5
U.S.C. 301, the Department of Health and Human Services proposes to
amend 45 CFR subtitle A, subchapter B as set forth below.
[[Page 13030]]
PART 147--HEALTH INSURANCE REFORM REQUIREMENTS FOR THE GROUP AND
INDIVIDUAL HEALTH INSURANCE MARKETS
0
1. The authority citation for part 147 continues to read as follows:
Authority: 42 U.S.C. 300gg through 300gg-63, 300gg-91, 300gg-
92, and 300gg-111 through 300gg-139, as amended, and section 3203,
Pub. L. 116-136, 134 Stat. 281.
0
2. Section 147.104 is amended by--
0
a. Revising paragraphs (b)(2)(i)(E) and (F);
0
b. Removing paragraphs (b)(2)(i)(G) and (i); and
0
c. Redesignating paragraph (j) as paragraph (i).
The revisions read as follows:
Sec. 147.104 Guaranteed availability of coverage.
* * * * *
(b) * * *
(2) * * *
(i) * * *
(E) Section 155.420(d)(12) of this subchapter (concerning plan and
benefit display errors); and
(F) Section 155.420(d)(13) of this subchapter (concerning
eligibility for insurance affordability programs or enrollment in the
Exchange).
* * * * *
PART 155--EXCHANGE ESTABLISHMENT STANDARDS AND OTHER RELATED
STANDARDS UNDER THE AFFORDABLE CARE ACT
0
3. 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
4. Section 155.20 is amended by--
0
a. In the definition of ``Lawfully present'' revising paragraph (9) and
adding paragraph (14); and
0
b. Adding a definition of ``Preponderance of the evidence'' in
alphabetical order.
The revision and addition read as follows:
Sec. 155.20 Definitions.
* * * * *
Lawfully present * * *
(9) Is granted deferred action;
* * * * *
(14) An individual with deferred action under the Department of
Homeland Security's Deferred Action for Childhood Arrivals process, as
described at 8 CFR 236.22, shall not be considered to be lawfully
present as described in any of the above categories in paragraphs (1)
through (13) of this definition.
* * * * *
Preponderance of the evidence means proof by evidence that,
compared with evidence opposing it, leads to the conclusion that the
fact at issue is more likely true than not.
* * * * *
0
5. Section 155.220 is amended by revising paragraph (g)(2) introductory
text to read as follows:
Sec. 155.220 Ability of States to permit agents and brokers and web-
brokers to assist qualified individuals, qualified employers, or
qualified employees enrolling in QHPs.
* * * * *
(g) * * *
(2) An agent, broker, or web-broker may be determined noncompliant
under paragraph (g)(1) of this section if HHS finds by a preponderance
of the evidence that the agent, broker, or web-broker violated--
* * * * *
0
6. Section 155.305 is amended by--
0
a. Revising paragraph (f)(4) introductory text and paragraph (f)(4)(i);
and
0
b. Removing and reserving paragraph (f)(4)(ii).
The revisions read as follows:
Sec. 155.305 Eligibility standards.
* * * * *
(f) * * *
(4) Compliance with filing requirement. The Exchange may not
determine a tax filer eligible for APTC if HHS notifies the Exchange as
part of the process described in Sec. 155.320(c)(3) that APTC were
made on behalf of the tax filer or either spouse if the tax filer is a
married couple for a year for which tax data would be utilized for
verification of household income and family size in accordance with
Sec. 155.320(c)(1)(i), and the tax filer or the tax filer's spouse did
not comply with the requirement to file an income tax return for that
year as required by 26 U.S.C. 6011, 6012 and implementing regulations,
and reconcile the advance payments of the premium tax credit for that
period.
(i) If HHS notifies the Exchange as part of the process described
in Sec. 155.320(c)(3) that APTC payments were made on behalf of either
the tax filer or spouse, if the tax filer is a married couple, for a
year for which tax data would be utilized for verification of household
income and family size in accordance with Sec. 155.320(c)(1)(i), and
the tax filer or the tax filer's spouse did not comply with the
requirement to file an income tax return for that year as required by
26 U.S.C. 6011, 6012, and their implementing regulations and reconcile
APTC for that period (``file and reconcile''), the Exchange must:
(A) Send a notification to the tax filer, consistent with the
standards applicable to the protection of Federal Tax Information, that
directly informs the tax filer that the Exchange has determined that
the tax filer or the tax filer's spouse, if the tax filer is married,
has failed to file and reconcile, and educate the tax filer of the need
to file and reconcile or risk being determined ineligible for APTC if
they fail to file and reconcile immediately upon receipt of notice; or
(B) Send a notification to either the tax filer or their enrollee,
that informs the tax filer or enrollee that they may be at risk of
being determined ineligible for APTC for the applicable coverage year.
These notices must educate tax filers or their enrollees on the
requirement to file and reconcile, while not directly stating that the
IRS indicates the tax filer or the tax filer's spouse, if the tax filer
is married, has failed to file and reconcile.
* * * * *
Sec. 155.315 [Amended]
0
7. Section 155.315 is amended by removing paragraph (f)(7).
0
8. Section 155.320 is amended by--
0
a. Revising paragraphs (c)(3)(iii)(A) and (D);
0
b. Adding paragraph (c)(3)(vi)(C)(2); and
0
c. Removing paragraph (c)(5).
The revisions and addition read as follows:
Sec. 155.320 Verification process related to eligibility for
insurance affordability programs.
* * * * *
(c) * * *
(3) * * *
(iii) * * *
(A) Except as specified in paragraphs (c)(3)(iii)(B), (C), and (D)
of this section, if an applicant's attestation, in accordance with
paragraph (c)(3)(ii)(B) of this section, indicates that a tax filer's
annual household income has increased or is reasonably expected to
increase from the data described in paragraph (c)(3)(ii)(A) of this
section for the plan year for which the applicant(s) in the tax filer's
family are requesting coverage and the Exchange has not verified the
applicant's MAGI-based income through the process specified in
paragraph (c)(2)(ii) of this section to be within the applicable
Medicaid or CHIP MAGI-based income standard, the Exchange must accept
the applicant's attestation regarding a tax filer's annual household
income without further verification.
* * * * *
(D) If an applicant's attestation to projected annual household
income, as described in paragraph (c)(3)(ii)(B) of
[[Page 13031]]
this section, is greater than or equal to 100 percent but not more than
400 percent of the FPL for the plan year for which coverage is
requested and is more than a reasonable threshold above the annual
household income computed in accordance with paragraph (c)(3)(ii)(A) of
this section, the data described in paragraph (c)(3)(ii)(A) of this
section indicates that projected annual household income is under 100
percent FPL, and the Exchange has not verified the applicant's MAGI-
based income through the process specified in paragraph (c)(2)(ii) of
this section to be within the applicable Medicaid or CHIP MAGI-based
income standard, the Exchange must proceed in accordance with Sec.
155.315(f)(1) through (4). However, this paragraph does not apply if
the applicant is a non-citizen who is lawfully present and ineligible
for Medicaid by reason of immigration status through the process
specified in Sec. 155.305(f)(2). For the purposes of this paragraph, a
reasonable threshold is established by the Exchange in guidance and
approved by HHS, but must not be less than 10 percent, and can also
include a threshold dollar amount.
* * * * *
(vi) * * *
(C) * * *
(2) The data described in paragraph (c)(3)(vi)(A) of this section
indicates that projected annual household income is under 100 percent
FPL and the applicant's attestation to projected household income, as
described in paragraph (c)(3)(ii)(B) of this section, is greater than
or equal to 100 percent but not more than 400 percent of the FPL for
the plan year for which coverage is requested and is more than a
reasonable threshold above the annual household income as computed
using data sources described in paragraph (c)(3)(vi)(A) of this
section, in which case the Exchange must follow the procedures
specified in Sec. 155.315(f)(1) through (4). The reasonable threshold
used under this paragraph must be equal to the reasonable threshold
established in accordance with paragraph (c)(3)(iii)(D) of this
section.
* * * * *
0
9. Section 155.335 is amended by--
0
a. Adding paragraph (a)(3);
0
b. Revising paragraphs (j)(1) introductory text and (j)(2) introductory
text;
0
c. Removing paragraph (j)(4) and redesignating paragraph (j)(5) as
paragraph (j)(4); and
0
d. Adding paragraph (n).
The revisions and additions read as follows:
Sec. 155.335 Annual eligibility redetermination.
(a) * * *
(3) The annual redeterminations described in paragraph (a)(2) of
this section are subject to the requirements in paragraph (n) of this
section:
* * * * *
(j) * * *
(1) The product under which the QHP in which the enrollee is
enrolled remains available through the Exchange for renewal, consistent
with Sec. 147.106 of this subchapter, the Exchange will renew the
enrollee in a QHP under that product, unless the enrollee terminates
coverage, including termination of coverage in connection with
voluntarily selecting a different QHP, in accordance with Sec.
155.430, or unless otherwise provided in paragraph (j)(1)(iii)(A) of
this section, as follows:
* * * * *
(2) No plans under the product under which the QHP in which the
enrollee is enrolled are available through the Exchange for renewal,
consistent with Sec. 147.106 of this subchapter, the Exchange will
enroll the enrollee in a QHP under a different product offered by the
same QHP issuer, to the extent permitted by applicable State law,
unless the enrollee terminates coverage, including termination of
coverage in connection with voluntarily selecting a different QHP, in
accordance with Sec. 155.430, as follows:
* * * * *
(n) Additional consumer protections. Subject to paragraphs (n)(1)
and (2) of this section, if an enrollee does not submit an application
for an updated eligibility determination on or before the last day on
which a plan selection must be made for coverage effective January 1 in
accordance with the effective dates specified in Sec. Sec. 155.410(f)
and 155.420(b), as applicable, and the enrollee's portion of the
premium for a policy after the application of advance payments of the
premium tax credit through the Exchange's annual redetermination
process would be zero dollars, the Exchange must decrease the amount of
the advance payment applied to the policy such that the remaining
monthly premium owed for the policy equals $5.
(1) A Federally facilitated Exchange or a State-based Exchange on
the Federal platform must adhere to paragraph (n) of this section for
annual redeterminations for benefit years on and after 2026.
(2) A State-based Exchange must adhere to paragraph (n) of this
section for annual redeterminations for benefit years on and after
2027.
0
10. Section 155.400 is amended by--
0
a. Revising paragraph (g) introductory text;
0
b. Removing and reserving paragraph (g)(2); and
0
c. Removing paragraph (g)(3).
The revision reads as follows:
Sec. 155.400 Enrollment of qualified individuals into QHPs.
* * * * *
(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 the net premium after
application of advance payments of the premium tax credit, provided
that the threshold policy is applied in a uniform manner to all
applicants and enrollees.
* * * * *
0
11. Section 155.410 is amended by--
0
a. Revising paragraph (e)(4) introductory text;
0
b. Adding paragraphs (e)(5);
0
c. Revising paragraph (f)(3) introductory text; and
0
d. Adding paragraph (f)(4).
The revisions and additions read as follows:
Sec. 155.410 Initial and annual open enrollment periods.
* * * * *
(e) * * *
(4) For benefit years beginning on January 1, 2022 through January
1, 2025--
* * * * *
(5) For the benefit years beginning on or after January 1, 2026,
the annual open enrollment period begins on November 1 and extends
through December 15 of the calendar year preceding the benefit year.
(f) * * *
(3) For benefit years beginning on January 1, 2022 through January
1, 2025, the Exchange must ensure that coverage is effective--
* * * * *
(4) For benefit years beginning on or after January 1, 2026, the
Exchange must ensure that coverage is effective--
(i) January 1, for QHP selections received by the Exchange on or
before December 15 of the calendar year preceding the benefit year.
(ii) [Reserved]
* * * * *
0
12. Section 155.420 is amended by--
0
a. Revising paragraphs (a)(4)(ii)(B) and (C);
0
b. Removing paragraph (a)(4)(ii)(D);
0
c. Revising paragraph (a)(4)(iii) introductory text;
[[Page 13032]]
0
d. Removing paragraphs (b)(2)(vii) and (d)(16); and
0
e. Revising paragraph (g).
The revisions read as follows:
Sec. 155.420 Special enrollment periods.
(a) * * *
(4) * * *
(ii) * * *
(B) Beginning January 2022, if an enrollee or their dependents
become newly ineligible for cost-sharing reductions in accordance with
paragraph (d)(6)(i) or (ii) of this section and the enrollee or his or
her dependents are enrolled in a silver-level QHP, the Exchange must
allow the enrollee and their dependents to change to a QHP one metal
level higher or lower if they elect to change their QHP enrollment; or
(C) No later than January 1, 2024, if an enrollee or his or her
dependents become newly ineligible for advance payments of the premium
tax credit in accordance with paragraph (d)(6)(i) or (ii) of this
section, the Exchange must allow the enrollee and his or her dependents
to change to a QHP of any metal level, if they elect to change their
QHP enrollment.
(iii) For the other triggering events specified in paragraph (d) of
this section, except for paragraphs (d)(2)(i), (d)(4), and (d)(6)(i)
and (ii) of this section for becoming newly eligible or ineligible for
CSRs and paragraphs (d)(8), (9), (10), (12), and (14) of this section:
* * * * *
(g) Special enrollment period verification. Unless a request for
modification is granted in accordance with Sec. 155.315(h), an
Exchange must conduct pre-enrollment verification of applicants'
eligibility for special enrollment periods under this section. An
Exchange meets this requirement if it verifies eligibility for the
number of individuals newly enrolling in Exchange coverage through
special enrollment periods that equals at least 75 percent of all
special enrollments. If the Exchange is unable to verify eligibility
for individuals newly enrolling in Exchange coverage through a special
enrollment period for which the Exchange requires verification, then
the individuals are not eligible for enrollment through the Exchange.
In accordance with Sec. 155.505(b)(1)(iii), individuals have the right
to appeal the eligibility determination.
PART 156--HEALTH INSURANCE ISSUER STANDARDS UNDER THE AFFORDABLE
CARE ACT, INCLUDING STANDARDS RELATED TO EXCHANGES
0
13. 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
14. Section 156.115 is amended by revising paragraph (d) to read as
follows:
Sec. 156.115 Provision of EHB.
* * * * *
(d) For plan years beginning before January 1, 2026, an issuer of a
plan offering EHB may not include routine non-pediatric dental
services, routine non-pediatric eye exam services, long-term/custodial
nursing home care benefits, or non-medically necessary orthodontia as
EHB. For plan years beginning on any day in calendar year 2026, an
issuer of a plan offering EHB may not include routine non-pediatric
dental services, routine non-pediatric eye exam services, long-term/
custodial nursing home care benefits, non-medically necessary
orthodontia, or sex-trait modification as EHB. For plan years beginning
on or after January 1, 2027, an issuer of a plan offering EHB may not
include routine non-pediatric eye exam services, long-term/custodial
nursing home care benefits, non-medically necessary orthodontia, or
sex-trait modification as EHB.
0
16. Section 156.140 is amended by revising paragraph (c) to read as
follows:
Sec. 156.140 Levels of coverage.
* * * * *
(c) De minimis variation. (1) The allowable variation in the AV of
a health plan that does not result in a material difference in the true
dollar value of the health plan is -4 percentage points and +2
percentage points, except if a health plan under paragraph (b)(1) of
this section (a bronze health plan) either covers and pays for at least
one major service, other than preventive services, before the
deductible or meets the requirements to be a high deductible health
plan within the meaning of section 223(c)(2) of the Internal Revenue
Code, in which case the allowable variation in AV for such plan is -4
percentage points and +5 percentage points.
(2) [Reserved.]
0
17. Section Sec. 156.200 is amended by revising paragraph (b)(3) to
read as follows:
Sec. 156.200 QHP issuer participation standards.
* * * * *
(b) * * *
(3) Ensure that each QHP complies with benefit design standards, as
defined in Sec. 156.20;
* * * * *
0
18. Section Sec. 156.400 is amended by revising the definition of ``De
minimis variation for a silver plan variation'' to read as follows:
Sec. 156.400 Definitions.
* * * * *
De minimis variation for a silver plan variation means a -1-
percentage point and +1-percentage point allowable AV variation.
* * * * *
Robert F. Kennedy, Jr.,
Secretary, Department of Health and Human Services.
[FR Doc. 2025-04083 Filed 3-12-25; 4:15 pm]
BILLING CODE 4120-01-P