[Federal Register Volume 90, Number 120 (Wednesday, June 25, 2025)]
[Rules and Regulations]
[Pages 27074-27224]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-11606]
[[Page 27073]]
Vol. 90
Wednesday,
No. 120
June 25, 2025
Part II
Department of Health and Human Services
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45 CFR Parts 147, 155 and 156
Patient Protection and Affordable Care Act; Marketplace Integrity and
Affordability; Final Rule
Federal Register / Vol. 90 , No. 120 / Wednesday, June 25, 2025 /
Rules and Regulations
[[Page 27074]]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
45 CFR Parts 147, 155, and 156
[CMS-9884-F]
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: Final rule.
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SUMMARY: This final rule revises standards relating to denial of
coverage for failure to pay past-due premium; excludes Deferred Action
for Childhood Arrivals recipients from the definition of ``lawfully
present;'' establishes the evidentiary standard HHS uses to assess an
agent's, broker's, or web-broker's potential noncompliance; revises the
Exchange automatic reenrollment hierarchy; revises standards related to
the annual open enrollment period and special enrollment periods;
revises standards relating to failure to file and reconcile, income
eligibility verifications for premium tax credits and cost-sharing
reductions, annual eligibility redeterminations, de minimis thresholds
for the actuarial value for plans subject to essential health benefits
(EHB) requirements, and income-based cost-sharing reduction plan
variations. This final rule also revises the premium adjustment
percentage methodology and prohibits issuers of coverage subject to EHB
requirements from providing coverage for specified sex-trait
modification procedures as an EHB.
DATES:
Effective Date: These regulations are effective on August 25, 2025.
Applicability Dates: See section III.D. of this final rule for
further information on the applicability dates.
FOR FURTHER INFORMATION CONTACT: Jeff Wu, (301) 492-4305, Rogelyn
McLean, (410) 786-1524, Grace Bristol, (410) 786-8437, for general
information.
SUPPLEMENTARY INFORMATION:
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 emergent
relief from rising improper enrollments and health care costs, we are
finalizing 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
that we proposed in the 2025 Patient Protection and Affordable Care
Act; Marketplace Integrity and Affordability proposed rule (90 FR
12942) (``2025 Marketplace Integrity and Affordability proposed rule''
or ``proposed rule''). We expect these actions will provide immediate
premium relief to families who do not qualify for Federal premium
subsidies and reduce the burden of improper ACA premium subsidy
expenditures to the Federal taxpayer.
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\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.
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Based on our review of enrollment data and our experience fielding
consumer complaints, the Department believes the temporary expansion of
ACA premium subsidies resulted in conditions that were exploited to
improperly gain access to fully-subsidized coverage. As we detailed in
the 2025 Marketplace Integrity and Affordability proposed rule and
reiterate in this final rule, the widespread availability of $0 premium
plans created the incentive and opportunity for fraudulent and improper
enrollments at scale, either by the enrollee's own doing or by a third
party without the enrollee's knowledge, including consumers who were
enticed to respond to misleading advertisements promising cash or gift
cards, and provided enough personal information for the agent, broker,
and web-broker to enroll the consumer in a qualified health plan (QHP).
Exchange eligibility verification policies in effect at the time
enhanced subsidies became available, as well as those adopted and
implemented since that time, were not sufficient to protect against
this consumer harm and fraud, waste, and abuse of Federal funds.
In particular, consumers are at risk for accumulating surprise tax
liabilities and substantial inconvenience from resolving these
liabilities, as well as other issues related to coverage changes and
access to care, due to improper enrollment. The substantial and
unprecedented 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, improper actions that violate agency rules and
agreements, or other improper processes that result in incorrect
determinations.\2\ Fraudulent enrollments involve enrollments obtained
through willful misrepresentations whereas improper enrollments involve
enrollments that result from or were affected by noncompliance with
agency rules and regulations, which can include fraud.\3\
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\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.
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The expanded subsidy regime that gave way to this environment of
fraudulent and improper enrollments is expiring at the end of this
year. Given the high and demonstrable levels of improper enrollment
creating long-term uncertainty and instability in the marketplaces,
this rule takes a carefully curated set of temporary actions to
immediately reduce the crisis-levels of improper enrollments over the
short-term as the market readjusts to the new subsidy environment in
which enhanced subsidies are no longer available. This final rule also
enacts permanent reforms to help the markets reset to the changing
subsidy environment to improve affordability and stability over the
long-term.
The temporary enactment of numerous policies within this rule
responds directly to concerns raised by commenters about potential
negative effects of making such policies permanent, while balancing the
need to address the current high levels of improper enrollments created
by the expanded subsidies and the holdover improper enrollments that
will remain in the immediate wake of the enhanced subsidy expiration.
The temporary reforms then sunset, as we share many commenter concerns.
We also considered comments that the causes of the improper enrollments
this rule aims to address are not known with certainty and that data
related to Exchange enrollments may be skewed or
[[Page 27075]]
misleading as marketplaces are still recovering from the COVID-19
public health emergency. The temporary codification of these policies
attempts to strike a balance between these commenter concerns and the
integrity of the Exchange program and the Federal funds that support
it. We believe the policies will reduce the improper enrollments that
can carry forward due to auto re-enrollment after the enhanced
subsidies expire. The absence of the enhanced subsidies, most notably
the absence of fully-subsidized plans, will substantially mitigate the
threat of future improper enrollments.
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 policies being finalized in this rule aim to
address these imminent program integrity problems while recognizing
these problems are an outgrowth of temporary policy in order to deliver
a streamlined enrollment and eligibility determination process for
individual market consumers.
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\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.
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Before summarizing these policies, 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 stated in
the 2025 Marketplace Integrity and Affordability proposed rule (90 FR
12943) that we believe the program integrity and premium relief
policies contained within these rules are necessary to respond to
present-day challenges in the individual health insurance market. As a
starting point, the ACA establishes American Health Benefit Exchanges,
or ``Exchanges,'' to facilitate the purchase of 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.
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\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''.
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The ACA's individual market rules require issuers to guarantee
coverage (with limited exceptions) 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.
Several policies included in the ACA attempt to address its adverse
selection bias. For example, the ACA permits issuers to limit
enrollment periods to certain times. In addition, adverse selection
between plans can occur when one plan enrolls a disproportionate number
of people with higher risk conditions. 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\ To avoid adverse selection between
plans sold on and off the Exchanges, the ACA also requires issuers to
keep all individual market plans that are subject to the law's main
coverage mandates in the same risk pool.
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\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/.
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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\ A well-functioning market also depends on there being `low
information asymmetry' where, for example, health insurance issuers,
health care providers, and consumers have comparable information,
instead of issuers and providers having more or better information than
consumers. Information asymmetry in insurance markets can lead to
imbalances in market predictions, inefficient operations, skewed
decisions, and adverse selection.\8\ Low information asymmetry
generally ensures that buyers (consumers) and sellers (issuers and
providers) are on a more equal footing, preventing one party from
taking advantage of another due to superior knowledge. In recent years,
HHS has taken steps to level the playing field between health insurance
issuers, health care providers, and consumers by adopting regulations
promoting transparency in health insurance coverage (85 FR 72158).
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\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
Febuary 23, 2025).
\8\ Akerlof, George A. (August 1970). ``The Market for `Lemons':
Quality Uncertainty and the Market Mechanism''. The Quarterly
Journal of Economics. 84 (3): 488-500. doi:10.2307/1879431. JSTOR
1879431.
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Despite the ACA's intent to create more competitive and efficient
markets, in practice, 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, such as grandfathered and short-term plans) nationwide in
2023.\9\ Further, price-linked subsidies like PTCs are directly tied to
the price of a QHP such that when QHP premiums go up, PTC allowed also
increases. Such price-linked subsidies generally distort markets and
weaken competition because the subsidized enrollee is no
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longer price sensitive to the full cost.\10\ In a market where everyone
is subsidized, prices would generally be much higher due to the
subsidized consumers' lower level of price sensitivity.\11\ 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.\12\ 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.
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\9\ 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/#.
\10\ 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.
\11\ 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.
\12\ 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.
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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.\13\ To improve the
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.
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\13\ 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.
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In 2021, Congress passed the American Rescue Plan of 2021
(ARP),\14\ which temporarily expanded the generosity of ACA premium
subsidies. In 2022, Congress extended the enhanced subsidies through
2025 under the Inflation Reduction Act of 2022 (IRA).\15\ These
subsidies compounded the problems associated with price-linked
subsidies like PTC, but they also created the incentive and opportunity
for unprecedented fraud and improper enrollments. Specifically, the
enhanced subsidies provide ``zero-dollar premium'' benchmark silver
plans for individuals with projected annual household income between
100 and 150 percent of the Federal Poverty Level (FPL). By fully
subsidizing the premium for these plans, individuals could be enrolled
into these plans once every month through a special enrollment period
(SEP) by predatory agents and brokers without the individual's
knowledge. Individuals for whom Federal law limits the amount of PTC
they must repay also have a strong incentive to sign up for such plans
improperly. There have been widespread reports of consumers in this
income cohort having their plan switched without their knowledge. As
displayed in Table 14 of this rule, there are millions of people
improperly enrolled in fully-subsidized QHPs. These imminent concerns
prompted our rapid rulemaking and informed our nuanced response in this
final rule that balances the need to urgently reduce the high level of
improper enrollments while understanding the subsidy environment that
largely created the incentive and opportunity for such improper
enrollment is coming to an end.
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\14\ Public Law 117-2.
\15\ Public Law 117-169.
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In the 2025 Marketplace Integrity and Affordability proposed rule
(90 FR 12944), we stated that we believe that after reviewing
individual market data and responding to a substantial increase in
consumer complaints, we needed to implement program integrity
protections to mitigate and reverse the substantial increase in
improper enrollments on the Exchanges caused by the availability of
enhanced premium subsidies. Some of those protections included
eligibility verifications related to qualifying for APTC and CSR
subsidies. Others focused on enrollment period policies by re-thinking
when and under what conditions a consumer can enroll. We also stated
that we believe the data and analysis presented in this preamble show
how these protections could lower premiums and costs for consumers and
taxpayers alike. Therefore, we proposed regulatory changes to improve
program integrity and protect against adverse selection. We proposed
this while also emphasizing the importance of keeping the enrollment
process streamlined and accessible, especially for low-income consumers
who utilize Exchanges for subsidized individual market coverage. These
considerations helped inform our thinking as we amended our proposals
into policies being finalized in this rule. Specifically, the finalized
policies balance the urgent need to reduce the high level of improper
and fraudulent enrollments with this desire to promote an efficient
enrollment process over a longer-term.
The 2025 Marketplace Integrity and Affordability proposed rule was
published in the Federal Register on March 19, 2025, with a comment
period that ended on April 11, 2025. We received over 26,000 comments
from State governments or entities, the National Association of
Insurance Commissioners (NAIC), the American Academy of Actuaries
(AAA), issuers or issuer groups, providers/provider groups/provider
associations, general advocacy groups, individuals, and others. The
vast majority of comments were from individuals.
In section III. of this final rule, we provide a summary of each
proposed provision, a summary of the public comments received and our
responses to them, and the policies we are finalizing. Below, we
summarize the policies being finalized.
We are finalizing revisions to Sec. 147.104(i) that reverse the
current policy prohibiting an issuer from denying coverage due to an
individual's or employer's failure to pay premiums owed for prior
coverage, including by attributing payment of premium for new coverage
to past-due premiums from prior coverage. The current policy, in
effect, prohibits issuers from establishing premium payment policies
that require enrollees to pay past-due
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premiums to effectuate new coverage. While we previously concluded that
this prohibition 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 enrollment in coverage to when they need health care services.
Under this final rule, issuers may, to the extent permitted by
applicable State law, add past-due premium amounts owed to the issuer
(or owed to another issuer in the same controlled group) to the initial
premium the applicant must pay to effectuate new coverage and not
effectuate new coverage if the past-due and initial premium amounts are
not paid in full. As this adverse selection issue was not created by
the expansion of APTCs and is not related to the levels of improper
enrollment brought on by them, we are finalizing this policy, which
will be applicable as of the effective date of this rule and beyond. We
believe this change will strengthen the risk pool and lower gross
premiums.
We are finalizing modifications to 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.\16\ The BHP regulations at 42 CFR 600.5 cross-
reference the definition of lawfully present at 45 CFR 155.20. This
change reflects the best view of the 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 PTC, APTC, and CSRs, and for a BHP in States that elect to operate
a BHP. We are finalizing this policy to be applicable upon the
effective date of this final rule and beyond.
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\16\ Currently, Minnesota and Oregon operate a BHP. See their
approved BHP Blueprints, available at: https://www.medicaid.gov/basic-health-program/index.html. New York had implemented a BHP
since April 1, 2015 and suspended its implementation on April 1,
2024.
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We are finalizing revisions to 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 are also finalizing
the addition of the definition for ``preponderance of the evidence'' at
Sec. 155.20. We believe this change will 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. This change is a consumer
protection unrelated to the subsidy levels set by Congress. We finalize
this standard to be applicable upon the effective date of this final
rule and beyond.
We are finalizing revisions to the failure to file and reconcile
(FTR) process at Sec. 155.305(f)(4) to reinstate the 1-year policy in
PY 2026 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 will 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 change will reduce the number of ineligible enrollees who continue
to receive APTC in 2026 as a result of lingering improper and
fraudulent enrollments resulting from the expansion of APTCs. As such,
this policy will sunset on December 31, 2026 after addressing the
imminent improper enrollment concerns and Exchanges would revert back
to the two-year policy where 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 beginning in
coverage year 2027. We believe this change will reduce the number of
ineligible enrollees who continue to receive APTC in 2026, which will
lower APTC expenditures and protect ineligible enrollees from
accumulating surprise tax liabilities while the market and enrollment
rolls readjust to the absence of the subsidy expansion. Finally, we are
also finalizing amendments to the notice requirement at Sec.
155.305(f)(4)(i) and removing the notice requirement at Sec.
155.305(f)(4)(ii) for 2026 to conform with the notice policy under the
previous FTR policy, while the noticing requirements will revert back
to align with the 2-year policy in 2027.
We are finalizing the removal of 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) will adjust APTC payments
to individuals who have failed to provide documentation verifying their
income attestation within 90 days and further protect them from
surprise tax liabilities if they are ineligible. We no longer believe
the automatic 60-day extension is allowed by statute and we are
therefore finalizing this change, which will be applicable as of the
effective date of this rule and beyond.
To further protect against consumers receiving APTC and CSR
subsidies when they do not meet eligibility requirements and root out
the improper and fraudulent enrollments holding over from the subsidy
expansion, we are finalizing temporary policies to address immediate
concerns with the verification process when there is an income
inconsistency with trusted data sources. We also are finalizing for the
remainder of plan year (PY) 2025 starting at the effective date of the
rule and PY 2026 revisions to Sec. 155.320(c)(3)(iii) to specify that
Exchanges on the Federal platform must generate annual household income
inconsistencies when a tax filer's attested projected annual household
income would qualify the taxpayer as an applicable taxpayer according
to 26 CFR 1.36B-2(b) and trusted data sources indicate that projected
household income is under 100 percent of the FPL. Finally, we are
finalizing, for the remainder of PY 2025 starting the effective date of
the rule and PY 2026, the pause of Sec. 155.320(c)(5), which pauses
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 will 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
strengthens program integrity by improving the accuracy of eligibility
determinations across all Exchanges. These policies directly address
program integrity issues brought on by the proliferation of fully-
subsidized, zero-premium benchmark plans and therefore we are
finalizing them until PY 2027.
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To prevent fully-subsidized enrollees from being automatically re-
enrolled without taking an action to confirm their eligibility
information, we are finalizing a temporary amendment to the annual
eligibility redetermination regulation. We are finalizing that, when an
enrollee does not submit an application for an updated eligibility
determination for the future coverage year (2026) by the last day to
select a plan for January 1, 2026 coverage, in accordance with the
effective dates specified in Sec. 155.410(f), and the enrollee's
portion of the premium for the entire policy is zero dollars after
application of APTC through the annual redetermination process,
Exchanges on the Federal platform 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 will 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
are finalizing that the Federally-facilitated Exchanges (FFEs) and the
State-based Exchanges on the Federal platform (SBE-FPs) must implement
this change with annual redeterminations for benefit year 2026. We
believe implementing these policies for 2026 will strengthen the
program integrity of the Exchanges and protect consumers by ensuring
that those fraudulently or improperly enrolled in fully-subsidized,
zero-premium plans are not unknowingly enrolled in those plans for an
additional year while the market readjusts to the expiration of the
expanded subsidies. In the 2025 Marketplace Integrity and Affordability
proposed rule, we also sought 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 sought
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 sought comment on removing the
option for Exchanges to auto-re-enroll individuals who qualify for
fully or partially subsidized plans, ensuring individuals affirmatively
choose their plan and verify their income during the Open Enrollment
Period (OEP), dramatically reducing the likelihood of improper payments
of the APTC.
We are finalizing amendments to 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 also clarify that State Exchanges may retain their
flexibility regarding their re-enrollment hierarchies at the discretion
of the Secretary of Health and Human Services (the Secretary) per Sec.
155.335(a)(2)(iii) and that Exchanges may seek approval from the
Secretary to conduct their own annual eligibility redetermination
process. We believe the consumer awareness problem the current policy
aimed to address is substantially less today than it was at the time we
adopted a re-enrollment hierarchy allowing Exchanges on the Federal
platform to switch a consumer's enrollment from a bronze to a silver
plan. As a result, consumer awareness concerns no longer outweigh the
negative consequences of not automatically re-enrolling consumers whose
current plan is still available for the upcoming plan year without
their active consent. These negative consequences include potential
consumer confusion, undermining of consumer choice, and unexpected tax
liabilities. We believe this policy is important to honor the decisions
of consumers, regardless of the subsidy environment. Given that we did
not find this policy as being substantially associated with fraudulent
and improper enrollments, we are finalizing this policy, which will be
effective for PY 2026 and beyond.
We are temporarily finalizing modifications to Sec. 155.400(g) to
pause paragraphs (2) and (3), which establish an option for issuers to
implement a fixed-dollar and/or gross percentage-based premium payment
threshold, with the following modification: the removal of the fixed-
dollar and gross-premium threshold flexibilities will sunset after the
completion of one new coverage year, PY 2026, on December 31, 2026.
Thereafter, the FFE and SBE-FP will, and State Exchanges may, offer
issuers the flexibility to implement the premium payment threshold
flexibilities that were finalized in the Patient Protection and
Affordable Care Act; HHS Notice of Benefit and Payment Parameters for
2026; and Basic Health Program final rule (2026 Payment Notice) (90 FR
4424). As previously stated, we have significant program integrity
concerns with the availability of fully-subsidized plans. Therefore, 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 have
allowed an enrollee to remain enrolled in coverage for extended periods
of time after payment of the binder. Because this problem is
effectively an outgrowth of the subsidy expansion, we are finalizing
these proposals only through PY 2026 to allow the market to readjust to
the non-expanded subsidy environment.
For benefit years starting January 1, 2027, and beyond, we are
finalizing a change to the annual OEP for coverage through all
individual market Exchanges. Rather than specifying November 1 through
December 15 as the OEP period as proposed, the final rule at Sec.
155.410(e) provides that the OEP must begin no later than November 1
and end no later than December 31 of the calendar year preceding the
benefit year of enrollment. Exchanges have flexibility to determine
their specific OEP dates within these guidelines as long as the OEP
length does not exceed 9 weeks per Sec. 155.410(e)(5)(ii) and all OEP
plan selections are effective on January 1 of the plan year per Sec.
155.410(f)(4). Beginning with benefit year 2027, the dates of the OEP
each year for Exchanges operating on the Federal platform will be
November 1 through December 15. Non-grandfathered individual health
insurance coverage offered outside of an Exchange must also align with
the OEP dates in the applicable State Exchange. The length of the open
enrollment period is fundamentally unrelated to subsidy levels and we
have not determined it to be a major source of improper and fraudulent
enrollments. Therefore, we are finalizing these
[[Page 27079]]
changes, which will be applicable for benefit year 2027 and beyond.
We are temporarily finalizing the removal of Sec. 155.420(d)(16)
and making conforming changes to pause 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 through PY 2026. This
policy is directly related to the availability of fully-subsidized
plans, as under the subsidy expansion individuals with projected annual
incomes between 100 and 150 percent of the FPL are eligible for fully-
subsidized plans and the SEP. Therefore, to fully ensure that improper
and fraudulent enrollments are fully exercised from this population, we
are pausing the SEP for PY 2026 as the market readjusts to the lack of
a subsidy expansion.
Further, based on recent evidence \17\ suggesting an increase in
the misuse and abuse of SEPs to gain coverage primarily in fully-
subsidized plans outside of the OEP, we are finalizing temporary
amendments to Sec. 155.420(g) to enable HHS to reinstate pre-
enrollment verification of eligibility of applicants for all categories
of individual market SEPs. We are further finalizing temporary
amendments to 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. Given the primary concern with fully-
subsidized plans, we are finalizing these proposals through PY 2026, to
give the market the opportunity to fully shed improper enrollments
resulting from the subsidy expansion.
---------------------------------------------------------------------------
\17\ 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 January 3, 2025.
---------------------------------------------------------------------------
We are finalizing amendments to Sec. 156.115(d) to provide that an
issuer of coverage subject to EHB requirements may not provide coverage
for specified sex-trait modification procedures as an EHB beginning
with PY 2026. In response to comments, we are also adding a definition
of ``specified sex-trait modification procedure'' at Sec. 156.400.
These changes are effective for PY 2026 and beyond, as they are a
furtherance of existing EHB requirements and are not associated with
subsidy levels or improper enrollments.
We are finalizing updates to the premium adjustment percentage
methodology to establish a premium growth measure that comprehensively
reflects premium growth in all affected markets for PY 2026 and beyond.
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 final policy re-adopts the premium growth measure that was in
place for PY 2020 and PY 2021 and applies it to the related parameters
starting with PY 2026. As such, we also are finalizing 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 premium adjustment percentage methodology
finalized in this rule.
Beginning in PY 2026, we are finalizing changes to the de minimis
thresholds for the Actuarial Value (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,\18\ for which we are
finalizing a de minimis range of +5/-4 percentage points, as well as
finalizing wider de minimis thresholds for income-based CSR plan
variations. These changes are effective for PY 2026 and beyond as they
are unrelated to the subsidy level set by Congress, but are rather
important measures to promote affordability and choice.
---------------------------------------------------------------------------
\18\ 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 2742 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),
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 to issue
regulations on the calculation of AV and its application to the levels
of coverage. Section 1302(d)(3) of the ACA directs
[[Page 27080]]
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 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 an alien 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 establishment and
operation of Exchanges.
Section 1331 of the ACA provides States the option to establish a
BHP and provides that only ``qualified individuals'', as defined in
section 1312 of the ACA, are eligible for BHP coverage. Section
1312(f)(3) of the ACA provides that if an individual is not, or is not
reasonably expected to be for the entire period for which enrollment is
sought, a citizen or national of the United States or an alien lawfully
present in the United States, the individual shall not be treated as a
qualified individual. Accordingly, persons who are not lawfully present
are not eligible for BHP enrollment.
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 of 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
[[Page 27081]]
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
``Program Integrity: Exchange, SHOP, and Eligibility Appeals Rule''
published in the August 30, 2013, Federal Register (78 FR 54069), and
the ``Program Integrity: Exchange, Premium Stabilization Programs, and
Market Standards; Amendments to the HHS Notice of Benefit and Payment
Parameters for 2014 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 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 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
[[Page 27082]]
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 v. Cochran, 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 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
[[Page 27083]]
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 (SEPs)
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). 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
[[Page 27084]]
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. Summary of the Proposed Provisions, Public Comments, and Responses
to Comments on the Proposed Rule
A. Part 147--Health Insurance Reform Requirements for the Group and
Individual Health Insurance Markets
1. Limited Open Enrollment Periods (OEPs) (Sec. 147.104(b)(2))
As further discussed in the 2025 Marketplace Integrity and
Affordability proposed rule (90 FR 12950) and section III.B.8. of this
final rule 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 proposed 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 OEP for coverage offered outside of an Exchange. We proposed to
remove Sec. 147.104(b)(2)(i)(G) to reflect the removal of the SEP at
Sec. 155.420(d)(16). We sought comment on this proposal.
After consideration of comments and for the reasons outlined in the
proposed rule and section III.B.8. of this final rule, including our
responses to comments, we are finalizing a pause of the SEP at Sec.
155.420(d)(16), and therefore are temporarily finalizing the proposed
conforming change to remove Sec. 147.104(b)(2)(i)(G). We summarize and
respond to public comments received on the proposed removal of the SEP
at Sec. 155.420(d)(16) in section III.B.8. of this final rule.
2. Coverage Denials for Failure To Pay Premiums for Prior Coverage
(Sec. 147.104(i))
In the 2025 Marketplace Integrity and Affordability proposed rule
(90 FR 12950 through 12953), we proposed to remove Sec. 147.104(i)
that prohibits an issuer from denying coverage due to failure of an
individual or employer to pay premiums owed under prior coverage,
including by attributing payment of premium for new coverage to past-
due premiums from prior coverage. Similar to the policy in the Market
Stabilization Rule (82 FR 18349 through 18353), we proposed to allow
issuers to attribute the initial premium the enrollee pays to
effectuate new coverage to past-due premium amounts owed for prior
coverage and then to not effectuate new coverage if the initial premium
and past-due amounts are not paid in full. Under the proposal,
consistent with the Market Stabilization Rule, an issuer would be
required to apply its past-due 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,\19\ and would be prohibited from
conditioning the effectuation of new coverage on payment of past-due
premiums by any individual other than the person contractually
responsible for the payment of premium.
---------------------------------------------------------------------------
\19\ 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 nondiscrimination
obligations under State law.
---------------------------------------------------------------------------
Unlike the policy in the Market Stabilization Rule (82 FR 18346),
the proposal would not limit the policy to past-due premium amounts
accruing over the prior 12 months or require the issuer to provide any
notice of the policy. States would remain free to apply additional
parameters governing issuers' premium payment policies, to the extent
permitted under Federal law.
We sought comments on the proposal and specifically on whether we
should leave other parameters to States or codify additional parameters
to establish a more uniform Federal regulatory approach. We also sought
comment on whether issuers should be required to establish terms of
coverage that attribute the initial premium an enrollee pays for
subsequent coverage to past-due premium amounts owed, and the
associated costs for issuers to implement such a requirement.
After consideration of comments and for the reasons outlined in the
proposed rule and this final rule, including our responses to comments,
we are finalizing this policy with a modification by removing the
regulatory text that prohibited this policy, and replacing it with
regulatory text that codifies the proposed policy. Under the finalized
policy, States may choose whether to allow issuers in their market and
State to attribute the initial premium paid to effectuate new coverage
to past-due premium amounts owed and to refuse to effectuate new
coverage if the past-due and initial premium amounts are not paid in
full. If an issuer does so, then under the final rule, it must apply
its past-due premium payment policy uniformly to all employers or
individuals in similar circumstances in the applicable market and State
regardless of health status, and consistent with applicable
nondiscrimination requirements, and are not permitted to condition the
effectuation of new coverage on payment of past-due premiums by any
individual other than the person contractually responsible for the
payment of premium. We are codifying this policy by revising Sec.
147.104(i) instead of removing Sec. 147.104(i) as proposed. As the
issue this provision is intended to resolve was not created by the
expansion of APTCs that are expiring after PY 2025, this policy will
not sunset. We are finalizing this policy to be applicable as of the
effective date of this rule and beyond.
We summarize and respond to public comments received on the
proposed policy below.
Comment: Several commenters supported the proposal, stating it
would incentivize enrollees to maintain 12 months of continuous
coverage, provide issuers with a tool to reduce adverse selection,
reduce opportunities for enrollees to game the system by circumventing
required premium payments, and allow issuers to more accurately price
products. One commenter stated that the proposal would reduce premium
inflation caused by gaming the rules, ultimately easing the burden on
taxpayers and ensuring that ACA subsidies are better targeted.
Response: We agree that finalization of the policy contained in the
proposal will help to promote continuous coverage, reduce gaming and
adverse selection, ensure that ACA subsidies are targeted to those who
are eligible, and allow issuers to more accurately predict costs and
price plans.
Comment: Several commenters agreed with the proposal to defer to
the States to determine whether issuers in their State are permitted to
attribute payments for new coverage to past-due premiums and to refuse
to effectuate new coverage unless both the past-due premium and the
initial payment for new coverage are paid. One commenter stated that
States, who maintain the closest interaction with their consumers and
issuers, are best positioned to regulate issuers' premium payment
policies. Another commenter acknowledged that issuers in some areas of
the country are facing high fraud rates and the proposal could reduce
gaming, adverse selection, and ultimately premiums by requiring payment
of past-due premiums. However, the
[[Page 27085]]
commenter stated that issuers in areas with little evidence of gaming
would likely not want to require payment of past-due premiums to
effectuate new coverage.
Response: We agree that States are in the best position to decide
whether it is appropriate to permit or prohibit this policy. For that
reason, we proposed, and are finalizing, the policy contained in the
proposal in such a way that States may choose whether to allow issuers
in their State to attribute the initial premium an enrollee pays to
effectuate new coverage to past-due premium amounts the issuers are
owed and to refuse to effectuate new coverage if the past-due and
initial premium amounts are not paid in full.
We solicited comment in the proposed rule about whether to make the
premium payment policy mandatory or optional. Comments in response to
that solicitation are discussed below.
Comment: Many commenters, some of whom supported and some of whom
opposed the proposal, stated that if the proposal is adopted, there
should be parameters around how issuers implement the policy. For
example, commenters suggested the final rule should prohibit issuers
that apply the past-due premium policy from collecting past-due
premiums for debts older than 12 months; provide advance notice of
their past-due premium policy; accept installment payments; take into
account the individual's payment history; prohibit charging interest;
set limits on amounts owed; allow enrollment after partial repayment;
create exemptions for low-income individuals, those experiencing
hardship, or those whose failure to pay was not their fault or whose
enrollment was due to fraud; prohibit an issuer from insisting on
payment of past-due premiums for other lines of insurance; and require
issuers to allow consumers to appeal the amount of past-due premiums
owed and to effectuate coverage pending appeal.
Response: Under this final rule, an issuer adopting the past-due
premium policy must apply it uniformly to all employers or individuals
in similar circumstances in the applicable market and State regardless
of health status, and consistent with applicable nondiscrimination
requirements, is not permitted to condition the effectuation of new
coverage on payment of past-due premiums by any individual other than
the person contractually responsible for the payment of premium, and
the amount required to be paid must be subject to any premium payment
threshold the issuer has adopted pursuant to 45 CFR 155.400(g). We are
codifying these minimum standards in the regulation and defer to States
on any additional parameters or standards that issuers must satisfy
when implementing the past-due premium policy, as States are best
positioned to set and oversee parameters of this nature. States that
permit issuers to adopt the past-due premium policy are encouraged to
require such issuers to provide advance notice of the policy to
applicants. We will consider addressing acceptable past-due premium
payment policies in future guidance.
Comment: One commenter noted that, based on the analysis of
Exchange data in the 2026 Payment Notice, over 10 percent of enrollees,
or about 180,000 consumers, were terminated for non-payments in which
the amount owed was less than or equal to $10 and stated that HHS
should carefully balance the goals of securing program integrity with
achieving operational efficiency.
Response: While the debt owed by some individuals might be
relatively small, all individuals who enroll for coverage, including
those who benefit from APTC, are required to pay their share of the
premium for every month of coverage. In addition, issuers of individual
or small group market coverage subject to section 2701 of the PHS Act
are not permitted to forgive debt owed for past-due premiums, and
allowing issuers to attribute payment for new coverage to past-due
premiums may create operational efficiencies for issuers in how they
collect payment for such debts. We note that States and issuers have
flexibility with regard to the past-due premium policy under this final
rule. This includes the flexibility to decide that the policy will not
apply with respect to de minimis amounts owed consistent with 45 CFR
155.400(g), as long as an issuer's past-due premium payment policy
applies uniformly to all employers or individuals in similar
circumstances in the applicable market and State regardless of health
status and consistent with applicable nondiscrimination requirements.
Comment: One commenter stated that the best way to address the
problem of people waiting to get sick before getting coverage is for
the individual shared responsibility payment to be a positive dollar
amount. According to the commenter, requiring individuals to make such
a payment if they do not have minimum essential coverage would provide
an incentive to pay premiums to maintain continuous coverage.
Response: In 2017, the Tax Cuts and Jobs Act \20\ set the amount of
the individual shared responsibility payment to zero dollars, effective
2019, for non-exempt individuals who do not maintain minimum essential
coverage. Statutory changes would be needed to change that amount.
---------------------------------------------------------------------------
\20\ Public Law 115-97.
---------------------------------------------------------------------------
Comment: One commenter asserted that once coverage is terminated,
the enrollee would be responsible for paying his or her own medical
bills. Therefore, according to the commenter, if enrollees are required
to pay for any outstanding premiums for any plan year, they are likely
paying for coverage from which they will not benefit. By contrast,
another commenter expressed concerns that individuals could owe a large
bill because they followed instructions to stop paying premiums in
order to terminate coverage. One commenter stated that if the proposal
is adopted, issuers should be required to effectuate new coverage
without requiring payment of past-due premiums if no claims were made
during the period of delinquency.
Response: For any period of time after coverage is terminated, no
premium would be due. Therefore, ``past-due premiums'' under this final
rule refers to premiums due but not paid for periods during which the
individual was covered, such as during a grace period. During such a
coverage period, individuals have the benefit of financial protection
from unforeseen medical expenses, even if they do not ultimately
receive covered benefits. However, the grace period rules function in a
manner that allows enrollees to avoid paying their premium while
maintaining that financial protection for a short period of time. The
policy finalized in this rule provides issuers with an additional tool
to collect payments owed for months of coverage, regardless of whether
the individual incurs medical expenses during the period for which they
owe premiums.
Because applying the past-due premium policy with regard to claims
history would discriminate based on health status, we do not adopt the
commenter's suggestion to require issuers that adopt the past-due
premium policy to create exceptions for instances in which no claims
are incurred during the period in which past-due premiums are owed.
These practices are not permitted under this final rule.
Comment: One commenter asked how the policy related to past-due
premiums would impact claims payment.
Response: If an individual pays past-due premiums for months during
which
[[Page 27086]]
the individual was covered, the issuer must pay any unpaid claims
incurred during such month. For example, if an individual seeks to
enroll in new coverage while in the 3-month grace period and pays past-
due premiums owed for prior coverage, any claims that a QHP issuer
pended for services rendered to the enrollee in the second and third
months of the grace period, as permitted under Sec. 156.270(d)(1),
must be paid in accordance with the terms of the coverage.\21\
---------------------------------------------------------------------------
\21\ 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.
---------------------------------------------------------------------------
Comment: One commenter asked how the policy would impact enrollment
in new coverage.
Response: Under the past-due premium policy in this final rule, an
issuer, to the extent permitted by applicable State law, may attribute
a payment for new coverage to past-due premiums for prior coverage. The
issuer then could lawfully refuse to effectuate new coverage unless the
individual or employer, as applicable, pays any past-due premium
amounts owed for prior coverage and the initial premium (also known as
a binder payment) for new coverage by the applicable payment deadline.
For example, if an individual applies for coverage during the
individual market open enrollment period and owes 1 month of premiums
in the amount of $10, and the individual fails to pay past-due premiums
of $10 and the binder payment for new coverage by the applicable
premium payment deadline, the issuer could refuse to effectuate the
individual's enrollment in coverage, subject to any premium payment
threshold the issuer has adopted pursuant to 45 CFR 155.400(g).
Following the open enrollment period, the individual could enroll in
coverage for that benefit year only through a special enrollment period
and may be required to satisfy any past-due premium obligations at that
time.
Comment: Many commenters, while acknowledging incentives for
individuals not to pay premiums and enroll in coverage only when
medical needs arise, asserted that the guardrails in place, such as
short grace periods and requirements to retroactively pay medical
expenses, limit these incentives.
Response: We believe that those who seek to circumvent paying
premiums have already weighed their personal health and financial risks
of doing so. Therefore, we believe that existing guardrails, such as
the prospect of having to pay medical expenses not covered by
insurance, are not sufficient to discourage individuals from taking
advantage of grace period and guaranteed availability rules.
Comment: One commenter asserted that those who are unable to
effectuate enrollment due to unpaid premiums may end up in other forms
of ``non-ACA compliant'' coverage, such as short-term, limited-duration
insurance, leading to market distortions and further driving up health
insurance premiums in the individual market risk pool. In addition,
since these types of plans do not have to cover essential health
benefits, the commenter observed that increased reliance on such plans
would lead to more uncompensated care, putting hospitals and emergency
departments at significant risk of financial instability.
Response: We agree that individuals with unpaid past-due premiums
might seek other types of coverage (for example, in markets where the
types of coverage described by the commenter are more prevalent).
However, in other markets, that might not be the case. This is why we
defer to the States, who know their markets best, to determine whether
issuers in their State are permitted to adopt the past-due payment
policy set forth in this final rule.
Comment: One commenter supporting the policy related to past-due
premiums stated that, in deferring to States on parameters for applying
the policy uniformly and consistently, HHS should ensure States are not
requiring issuers to apply the past-due premium policy, but rather
allowing for the option to do so, consistent with the intent of the
proposal. Some commenters commented on the applicability of the policy
for issuers offering coverage through State Exchanges. One commenter
asked that State Exchanges be permitted, but not required, to implement
the policy. One commenter said that some State Exchanges perform
premium collection, making the requirement administratively challenging
for issuers that do not have premium collection capabilities, and
another commenter noted that implementing a past-due premium policy
would require significant configuration of the Exchange's system.
Response: This final rule removes the Federal prohibition on
attributing payments for new coverage to past-due premiums owed for
prior coverage and leaves it to States to determine whether to permit
the practice, and if permitted, any restrictions on the practice.
States are permitted, but not required, to allow issuers participating
in their State Exchanges to implement a past-due premium policy. We
recognize that some Exchanges may not have the functionality in place
to allow QHP issuers to apply the past-due premium policy to coverage
purchased through that State's Exchange. States may take these and
other considerations into account in determining whether to allow the
past-due payment policy finalized in this rule.
Comment: One commenter was in favor of the proposal, so long as the
issuer is the party that must deal with outstanding balances, and not
the agent or broker. Other commenters were concerned that agents and
brokers will be forced to spend unpaid time navigating billing issues
instead of focusing on helping clients get covered.
Response: This final rule does not address which entity is
responsible for collecting premiums owed, including any past-due
premiums. To the extent an issuer adopts the past-due premium policy in
this final rule, the party that collects the past-due premium, for
example, the issuer, agent, or broker, would be determined by State law
or by agreement of those parties.
Comment: A few commenters expressed concern about the effects of
the proposal on the individual market risk pool, asserting that young
and healthy individuals are more price-sensitive and less likely to
enroll if they must pay past-due premiums. One commenter also observed
that these young and healthy enrollees are far more likely to have
fallen out of coverage in the first place for past non-payment of
premiums.
Response: We believe that, regardless of an individual's age or
health status, they potentially will be more inclined to remain in
their coverage if they have to pay past-due premiums in order to
effectuate new coverage. In addition, to the extent young and healthy
enrollees fell out of coverage due to non-payment of premium, the extra
effort to resume coverage suggests they may need coverage due to a
change in their health status. A policy that keeps them continuously
covered is better for them and the risk pool. Moreover, there are
minimum standards that must be met to enroll regardless of the impact
on the risk pool. Improving the risk pool is no
[[Page 27087]]
argument to excuse non-payment of premium.
We also note that, under the premium rating rules in section 2701
of the PHS Act, young peoples' premiums are lower in most States,
making it likely (particularly for unsubsidized individuals) that, to
the extent they have accrued past-due premiums, the amount owed would
be lower than it would be for older individuals.
Comment: Many commenters asserted that the proposal is inconsistent
with the guaranteed availability requirements in section 2702 of the
PHS Act. One commenter stated that the proposed policy is
unconstitutional.
Response: We continue to believe that allowing issuers to require
payment of past-due premiums is consistent with the guaranteed
availability requirements in section 2702 of the PHS Act. 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. We also note 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.
Accordingly, as noted in the proposed rule (90 FR 12953), although we
have established certain uniform standards for premium payment
deadlines, we ultimately defer to issuers, subject to State rules.
Thus, we conclude that refusing to effectuate coverage to an individual
or employer who does not pay past-due premiums is indeed permissible
under section 2702 of the PHS Act, though a State does not need to
allow for it.
Finally, with respect to the commenter raising constitutional
concerns, the commenter did not offer any rationale to explain why the
proposal would be unconstitutional, and we have not identified any
reason why it would be unconstitutional.
Comment: Many comments opposing the proposal asserted that the
proposal would disproportionately harm marginalized people, such as
individuals with lower economic status. One commenter asserted that the
proposed rule did not provide evidence to support the statement that
any past-due amounts would be ``quite small'' or ``would not impose a
substantial financial burden'' and that the proposed rule made no
attempt to quantify that amount in dollars, compare it to the incomes
of affected individuals, rebut the findings in the 2023 Payment Notice,
or address the potential for multiple years of lookback. One commenter
challenged our assertion in the proposed rule that enrollment loss from
the proposed changes would be ``minimal'' because a large proportion of
enrollees receive APTCs and therefore would not experience financial
hardship because of the proposed changes. According to the commenter,
this is not accurate, because people who receive APTCs have very low
incomes and lack the funds to pay multiple months of past-due premiums
while also paying the premium to effectuate coverage for a new year.
Response: We anticipate that enrollment loss from requiring payment
of past-due premiums would be minimal and not impose a substantial
financial burden. APTCs are paid on behalf of the vast majority of
individuals who enroll in coverage through the Exchanges. The APTC
lowers the amount of premium that they pay out of pocket, and therefore
also reduces the amount of past-due premium debt that can accrue. In
addition, rules regarding grace periods and termination of coverage for
individuals receiving APTC result in such individuals generally owing
no more than 1 to 3 months of past-due premium amounts per year.\22\
Therefore, we conclude that past-due premium amounts generally would
not impose a substantial financial burden to enroll in coverage. States
can also take additional steps to limit the potential for individuals
to owe significant amount of past-due premium by prohibiting the
policy, or limiting the lookback period, or capping the amount of past-
due premium due to effectuate coverage, based on factors including the
socioeconomic demographics of their populations.
---------------------------------------------------------------------------
\22\ Id.
---------------------------------------------------------------------------
Comment: Several commenters stated that this proposal would cause
the uninsured population to increase, causing more medical debt,
illness, and death. Some commenters also stated that the proposed rule
did not provide sufficient evidence for the assertion that the proposal
would cause the uninsured population to decrease and the assertion that
the similar policy implemented in the Market Stabilization Rule
encouraged individuals to continue to pay their premiums and stated
that HHS did not provide data to show that the proposal was needed.
Response: We acknowledge there is always some uncertainty regarding
the net effects of any new policy. Here, we cannot know with certainty
whether the coverage gains resulting from more moderate premium trends
and the promotion of continuous coverage will be higher than any
coverage losses resulting from issuers requiring payment of past-due
premiums to effectuate new coverage. However, given the importance of
health coverage and the fact that most consumers are accustomed to
paying in full for one contract before they are allowed to enter
another with the same contracting party, we anticipate that any
discouragement from enrollment will be minimal. When a similar 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 there could have been other
reasons for this substantial drop, it is reasonable to conclude the
policy was, at least in part, a driving factor by encouraging more
people to maintain continuous coverage.
Comment: One commenter observed that HHS had concluded in the 2023
Payment Notice that the past-due premium policy in the 2017 Market
Stabilization Rule ``had the unintended consequence of creating
barriers to health coverage that disproportionally affect low-income
individuals.'' The commenter explained that the proposal to reinstate
the past-due premium policy without the 12-month maximum lookback
period would create even more significant barriers for low-income
individuals and that HHS had not provided a reasoned explanation for
its conclusion that these individuals would not be significantly
impacted.
Response: In neither the proposed rule nor this final rule do we
deny that the past-due premium policy as finalized in this rule will
possibly have at least some negative impacts on low-income individuals.
Nor does the change in policy in this final rule rely on any belief or
assertion that low-income individuals will be less harmed by this
policy, as compared to the policy adopted in the 2017 Market
[[Page 27088]]
Stabilization Rule. Rather, the change in policy in this final rule is
supported by the fact that data suggest that more individuals,
including low-income individuals, might maintain coverage as a result
of the policy in this final rule, as compared to the current policy,
which prohibits the past-due premium policy. Continued enrollment
suggests that individuals, including those with lower incomes, will not
be harmed by the policy, as they will remain covered for any unexpected
health issues. Each State, however, including those with large numbers
of low-income individuals, are free to disagree, based on their
specific market dynamics, and not permit issuers to adopt the policy.
Comment: Several commenters observed that if the expanded premium
subsidies sunset at the end of 2025, coverage will become less
affordable for a large number of individuals, thereby exacerbating the
number of individuals who will not be able to pay their premiums and
making the payment of past-due premiums (plus the binder payment for
new coverage) that much more difficult.
Response: At the time of publication of this final rule, the
expanded subsidies will sunset on December 31, 2025, under current law.
States may take this sunset into account in determining whether to
permit issuers to apply the past-due premium policy finalized in this
rule.
Comment: In the preamble to the proposed rule (90 FR 12951 through
12952), we noted that Exchange enrollment data show a steady decline in
the percent of enrollees in Exchanges using the Federal platform that
had their coverage terminated for non-payment of premiums between 2017
and 2020. Based on these enrollment trends, we suggested that the past-
due premium policy in the Market Stabilization Rule (82 FR 18346) may
have successfully encouraged enrollees to continue paying premiums,
while acknowledging limitations on our ability to draw a causal
inference. One commenter took issue with this analysis, suggesting that
it failed to account for the fact that overall Exchange enrollment also
fell, and premiums rose significantly, during this time period--
suggesting that a combination of policies led to fewer healthy
enrollees retaining coverage, increasing the percentage of total
enrollees who might be at risk of health events remaining in coverage,
who are more likely to pay premiums throughout. The commenter stated
that the proposed rule failed to account for these negative effects on
this risk pool.
Response: In the preamble to the proposed rule, we stated that the
decline in the rate of enrollees who had their coverage terminated from
2017 to 2020 might have occurred in part because of the interpretation
of the guaranteed availability requirement in the Market Stabilization
Rule. We acknowledged that due to data limitations, we were unable to
directly attribute any changes in enrollment behavior in the Exchanges
using the Federal platform to that interpretation. We continue to
believe these data, though not conclusive, suggest that the past-due
payment policy in the Market Stabilization Rule may have contributed to
fewer individuals losing coverage due to non-payment of premiums.
However, to the extent States do not believe this would be the case in
their specific markets, they may refrain from allowing issuers in their
State to adopt the past-due premium policy.
Comment: Several commenters disputed that there are large numbers
of individuals who intentionally stop paying premiums in order to gain
1 month of free coverage through the coverage grace period when they
know they will submit medical claims for that month, go without
coverage for subsequent months when they are confident they will not
need it, and then purchase new coverage. Rather, commenters stated that
there are a number of legitimate reasons why individuals fail to pay
premiums, such as illness, unemployment or job loss, caregiving
responsibilities, a natural disaster, household changes that result in
higher premiums, and not realizing that they missed a payment or
payments. One commenter stated that some people intentionally stop
paying their premiums because their eligibility changes--for example,
they become eligible for Medicaid--without understanding the need to
terminate their Exchange plan or how to terminate it. Many commenters
stated that individuals often experience insurance churn with job loss
or access to new coverage. This churn can confuse what plans, coverage,
and support are available to them, and patients may not realize they
need to terminate coverage, especially if they are not using the
insurance.
Response: We acknowledge that many individuals cease paying
premiums for various reasons, such as those mentioned by the
commenters. In instances where an individual's household income
decreases during the policy year, due to illness, job loss, or other
circumstances, the individual has the opportunity to report their
changed income to the Exchange and might qualify for new or additional
APTC to help with their premiums. We also believe that in the
overwhelming majority of cases where individuals cannot pay their
premiums, the individual has the ability to contact their issuer and
terminate coverage before becoming delinquent, avoiding the need to pay
past-due premiums. We also note that, even where issuers adopt the
past-due premium policy under this final rule, individuals may purchase
coverage on a guaranteed issue basis from a different issuer (in all
cases, outside the controlled group of the issuer to whom past-due
premiums are owed), without having to pay past-due premiums.
Comment: A few commenters stated that denying individuals health
insurance, due to not paying past-due premiums or other reasons, would
be detrimental not only to those individuals, but to providers and
health care systems, with effects reaching well beyond Exchange
enrollees.
Response: As we stated in the proposed rule and reiterate in this
final rule, we generally believe the past-due premium policy will
result in more individuals retaining their coverage.
Comment: Under the proposed rule, an issuer could not condition the
effectuation of new coverage on payment of past-due premiums by any
individual other than the person contractually responsible for the
payment of premium. One commenter asked which individual is considered
the contractually responsible person for payment of premium with
respect to a child-only policy and with respect to a family covered by
an individual market policy.
Response: For purposes of the past-due premium policy in this final
rule, the person contractually responsible for payment of premium is
the policyholder. In the case of child-only coverage, the policyholder
would typically be the covered child's parent or legal guardian. In the
case of an individual market policy covering a family, the policyholder
would not be one of the covered dependents. In the case of coverage in
the group market, the policyholder is typically the employer or union,
not covered employees or their dependents. This means, for example,
that a dependent spouse on an individual market policy cannot be
required to pay past-due premiums if that dependent spouse wishes to
purchase coverage as a policyholder. Similarly, an employer's failure
to pay premiums for group health insurance coverage would not result in
an employee or dependent owing past-due premiums for coverage in the
individual market.
[[Page 27089]]
Comment: Several commenters raised concerns that consumers
enrolling in coverage with an issuer that applies a past-due premium
policy would not be fully informed or would not fully understand the
implications of such a policy, and noted potential consumer confusion,
as well as financial harm if consumers incorrectly believe they have
enrolled in coverage that was never effectuated.
Response: We encourage issuers to be transparent about the
application of any past-due premium policy to help ensure that
individuals understand how much they must pay to effectuate coverage as
well as the consequences of non-payment. Issuers, as a matter of
practice, instruct their agents and brokers on how to collect premiums
in order to effectuate new coverage, how to determine the amount due in
order to effectuate new coverage, and the payment due date. We
anticipate that issuers adopting the past-due premium policy would
continue to work with their agents and brokers to ensure that consumers
understand what payments must be made, thus minimizing potential
confusion.
Comment: One commenter asked whether the proposed rule would permit
application of past-due premiums when enrollees switch to a plan
offered by a different issuer.
Response: Under the proposed rule and this final rule, subject to
applicable State law, an issuer may require a consumer to pay past-due
premiums owed to that issuer, or owed to another issuer in the same
controlled group, plus the initial (binder) payment for new coverage,
before effectuating the new coverage. This reflects the fact that, to
the extent an applicant 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, the applicant has not made
sufficient payment for new coverage. There is no mechanism, however, by
which an issuer can credit amounts paid to premiums owed to an
unrelated issuer. Therefore, an issuer cannot deny coverage under
section 2702 of the PHS Act based on an individual's or employer's
failure to pay past-due premiums owed to any issuer other than that
same issuer or another issuer in the same controlled group.
Comment: Several commenters observed that the proposal to shorten
the length of the OEP would give applicants for new coverage less time
to figure out how to acquire the funds to pay past-due premiums.
Response: As explained in section III.B.7 of this final rule, the
changes to the OEP will take effect beginning with the OEP for PY 2027.
Because the proposal to shorten the OEP will not be implemented in PY
2026, enrollees and other interested parties will have sufficient time
to adjust to the changes to the OEP such that they understand and are
better prepared for the changes when the time period for active
enrollment during OEP is shortened for PY 2027.
Comment: Several commenters asserted it would be inappropriate for
an issuer to condition enrollment in new coverage on payment of past-
due premiums where the non-payment resulted from actions of the issuer
or third parties. The commenters gave examples in which non-payment of
premiums was due to actions, inactions, or delays on the part of
issuers, Exchanges, agents, and brokers, including cases of fraudulent
enrollment, or lag time between when an individual reports information
and when an Exchange processes and effectuates changes related to that
information.
Response: In instances where an issuer or an Exchange was
responsible for non-payment of premium, or incorrectly determined that
an individual did not pay premium, we expect the issuer or Exchange to
expediently work with the consumer to resolve the situation and enroll
them in new coverage without requiring payment of past-due premiums. If
there is a delay between when an individual reports changes to their
income or household size and when that change is processed, we expect
Exchanges to internally document that, so that there is evidence that
the individual should not have been charged a higher premium during the
lag time. We also note that in situations where an individual was
improperly enrolled in coverage, and coverage is rescinded (that is,
cancelled or discontinued retroactively to the date of enrollment), as
permitted under Sec. 147.128, the individual would not owe any past-
due premiums.
Comment: Several commenters raised concerns about the potential
impacts on coverage access, particularly in markets with limited
competition, where there may be a limited number of issuers servicing
that geographic area.
Response: We note that this policy provides States flexibility to
address adverse selection based on their specific market conditions and
allows for appropriate market-specific solutions that recognize the
differences between competitive and less competitive regions. We
believe this flexible approach strikes an appropriate balance between
preserving consumer access to coverage and accounting for varying
market conditions across regions.
Comment: Several commenters observed that there are other
mechanisms by which issuers can attempt to collect debt in form of
past-due premiums, other than by requiring past-due premiums be paid in
order to effectuate new coverage.
Response: Although issuers may have other methods to collect debt,
we note that other forms of debt collection, such as placing the debt
into collections, can be costly and time consuming. In addition,
although the past-due premium policy will facilitate issuer premium
collection efforts, it is principally intended to prevent the premium
debt in the first instance by ensuring that individuals pay premiums
for months in which they have coverage.
Comment: One commenter raised concerns about how the past-due
premium policy would interact with an individual coverage health
reimbursement arrangement (ICHRA) or a qualified small employer health
reimbursement arrangement (QSEHRA). Specifically, the commenter
observed that the past-due premium policy could complicate the
enrollment process and necessitate additional administrative procedures
and costs for employers if they are unable to make an ICHRA offer
because employees cannot enroll in individual health insurance
coverage. The commenter suggested this could subject the employer to a
possible tax penalty if the employer has no way to make another offer
of affordable health coverage to their employees. The commenter
recommended that employees offered an ICHRA should not be required to
pay past-due premiums.
Response: The commenter does not explain why allowing issuers to
attribute initial premium payments to past-due premiums would make it
so that employers cannot offer ICHRAs, and we do not see a reason why
that would be the case. Therefore, we do not believe it is necessary to
prohibit an issuer that chooses to apply the past-due premium policy
from applying the policy to individuals offered an ICHRA or have a
QSEHRA.\23\
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\23\ In the event an individual is initially enrolled in
individual health insurance coverage and subsequently fails to
timely pay premiums for the coverage, with the result that the
individual is in a grace period, the individual is considered to be
enrolled in individual health insurance coverage and the ICHRA must
reimburse qualified medical expenses incurred by the individual
during that time period to the extent the qualified medical expenses
are otherwise covered by the ICHRA.
---------------------------------------------------------------------------
ICHRAs must have reasonable procedures for covered participants and
beneficiaries to substantiate that they
[[Page 27090]]
are enrolled in individual health insurance coverage, or enrolled in
Medicare Parts A and B or Part C, for each month that they are covered
under the ICHRA. ICHRAs also must require participants to forfeit the
ICHRA if they are not enrolled in individual health insurance coverage
or Medicare.
However, nothing prevents an employer from offering an ICHRA to
employees who do not have individual health insurance coverage and
reimbursement from an ICHRA for the initial payment of premiums to
effectuate the coverage will often not be for the full amount
owed.24 25 In addition, an employer's liability for the
employer shared responsibility tax under section 4980H of the Code is
determined with respect to whether the employer offered a plan
(including an ICHRA) that meets certain requirements, not whether
employees enrolled or received benefits under the plan.\26\ We note
that QSEHRAs are similarly prohibited from providing tax-favored
reimbursements to employees for any month that the employee does not
have MEC and may only be offered by small employers that are not
subject to the employer shared responsibility tax.\27\
---------------------------------------------------------------------------
\24\ The Department of the Treasury and the IRS assisted with
the consideration and response to this comment. In general, the
Treasury and the IRS take the position that, in the case of an HRA,
sections 105 and 106 of the Code do not permit a payment to be
excluded from a taxpayer's gross income in one plan year if the
reimbursed expense was incurred in a different year. This is why the
IRS provided a special rule in Notice 2020-33, section IV, that
allows ICHRAs to pay premiums for individual health insurance
coverage prior to the beginning of the plan year (for example, the
plan can pay the initial premium due in December for coverage that
starts in January). However, if an issuer attributes an initial
premium payment to past-due premiums from the previous year, the
issuer is, in effect, applying a surcharge on the initial premium
needed to effectuate new coverage that is equivalent to the past-due
amount, so long as the individual was covered during the period for
when the premiums are past-due and there has not been a rescission.
Although the issuer might have pended some claims from the period
when premiums were not being paid and those claims would be freed up
as a result of the payment, that is secondary to the fact that the
payment is being made for the purpose of effectuating the new
coverage.
\25\ An ICHRA must provide that if any individual covered by the
HRA ceases to be covered by individual health insurance coverage,
the HRA will not reimburse medical care expenses that are incurred
by that individual after the individual health insurance coverage
ceases. In addition, if the participant and all dependents covered
by the participant's HRA cease to be covered by individual health
insurance coverage, the participant must forfeit the HRA.
Furthermore, ICHRAs are prohibited from reimbursing amounts for
expenses incurred after an individual's individual health insurance
coverage ceases.
\26\ 26 U.S.C. 4980H.
\27\ 26 U.S.C. 9831(d)(3)(B).
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Comment: Under the proposed rule, issuers would be permitted to
apply the past-due premium policy taking into account premium amounts
owed to an issuer in the same controlled group. One commenter replied
that this should be left to the States, while two commenters opposed
allowing issuers to demand past-due premiums from an issuer in the same
controlled group. One commenter recommended the final rule establish
the definition of a controlled group rather than leaving the definition
to the States.
Response: Consistent with the proposed rule, we are finalizing that
States adopting the proposal regarding past-due premiums may determine
whether to allow issuers to attribute payment for new coverage to past-
due premiums owed to an issuer in the same controlled group. This is
consistent with our broader objective to give States flexibility with
regard to the past-due premium policy, and we believe that permitting
issuers to collect past due premiums owed to other issuers in the same
controlled group would be reasonable approach for States to adopt, as
solvency is typically measured at the parent-company level, as opposed
to the licensed-entity level. The final rule refers to the definition
of controlled group in the guaranteed renewability regulations at Sec.
147.106(d)(4), which is 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. States have flexibility to adopt a narrower definition of a
controlled group.
Comment: We solicited comments on whether issuers should be
required to establish terms of coverage that attribute the premium the
enrollee initially pays for subsequent coverage to past-due premium
amounts owed to an issuer. One commenter suggested that States are
better situated to set and oversee parameters of this nature. One
commenter stated that requiring issuers to adopt the past-due premium
policy could result in more adverse selection than making the policy
optional. This is because, as the commenter explained, less healthy
individuals would be most likely to pay past-due premiums in order to
effectuate new coverage, while healthier individuals opt for
alternative coverage or no coverage. The commenter stated that the
impact could be larger in markets where individuals may lack both
alternative options for comprehensive coverage and the funds to repay
premiums. In contrast, in areas with greater competition, the commenter
stated that healthy individuals who have past-due premiums may have the
option to pursue coverage with other issuers, which could reduce the
overall level of anti-selection relative to regions with fewer coverage
options. In these regions, issuers that choose to collect past-due
premiums may benefit from lower premiums due to reduced anti-selection
and potentially a reduction in uncollectable premium amounts, which
could attract more enrollees into the market relative to less
competitive regions. As such, adverse selection is likely to be more
limited, particularly in competitive regions, where lookback periods
are shorter, or where recoupment is optional. Another commenter stated
that because every issuer does not have the necessary data or
technology to operationalize this change, it is important to keep this
provision optional for issuers, as proposed. The commenter emphasized
the importance of providing issuers and State Exchanges flexibility in
how they implement the proposed policy and to continue deferring to
issuers on payment and business decisions. Furthermore, according to
this commenter, due to the nominal amount many enrollees owe in past-
due premiums, for many issuers the implementation costs may outweigh
revenue from potential collections of past-due premiums. Another
commenter stated that issuers need the flexibility to set billing
policies based on unique factors in their environments. Another
commenter stated that States maintain the closest interaction with
their consumers and issuers and are best positioned to regulate
issuers' premium payment policies. One commenter stated that a
mandatory approach could create significant operational burdens on
issuers, particularly in managing delinquent accounts, enrollment files
and billing procedures. One commenter said that one particular State's
existing statutes and regulations, which include grace periods, notice,
and restatement of coverage requirements, aim to balance consumer
protection with a health insurance issuer's fiscal health. Therefore,
the commenter asserted that a uniform Federal regulatory approach is
not necessary. One commenter stated that the policy should be optional,
because issuers may not be able to identify enrollees whose coverage
was terminated for non-payment during the enrollment process. In
addition, many commenters asserted that States should be free to either
permit or prohibit the practice.
Response: We agree with commenters who stated that the final rule
should not require issuers to adopt the policy related to past-due
premiums. States are most familiar with their local insurance markets
and are therefore best
[[Page 27091]]
positioned to determine whether allowing issuers in their State and
market to adopt the past-due premium policy is appropriate. We also
recognize that some issuers' operations may not currently support such
practices. For these reasons, should the State in which an issuer
operates allow issuers to condition the effectuation of new coverage on
payment of past-due premiums, the final business decision will remain
at the discretion of individual issuers and what they determine is in
their best interest.
Comment: With respect to the applicability date of the past-due
premium policy, one commenter supported this provision applying on the
effective date as proposed, stating that consumers will continue to
have all the applicable protections of Federal and State law, including
protection from discrimination in the application of this policy and
Federal and State law grace periods. Several other commenters
recommended delaying implementation to PY 2027, stating that issuers
need time to make appropriate system and operational changes, and
arguing that applying the policy any earlier would effectively change
the terms of individuals' current coverage by affecting their ability
to purchase future coverage.
Response: The past-due premium policy finalized in this final rule
applies on the effective date of the final rule. We are not persuaded
that a later applicability date is necessary because the final rule
removes the current Federal regulatory prohibition and does not impose
any new burdens on States or issuers. Nothing in this final rule
requires States to permit, or issuers to implement, the past-due
premium policy. Nor does the final rule prevent States or issuers from
implementing the policy at a later date. We do not agree that allowing
issuers to start applying the past-due premium policy on the effective
date of the final rule changes the terms of an insured individual's
current coverage, as insurance policies commonly include contract
provisions addressing timely premium payment. Moreover, the past-due
premium policy relates to an individual's or employer's ability to
purchase a new contract of insurance rather than the existing contract.
Comment: One commenter urged HHS to actively monitor compliance
with the past-due premium policy, should we finalize it, to protect
both patients and providers.
Response: Under section 2723 of the PHS Act, States are the primary
enforcers of the requirements of title XXVII of the PHS Act, including
section 2702, with respect to health insurance issuers. We enforce
against issuers in a State only if we determine that the State has
failed to substantially enforce one or more of the requirements.
Therefore, States with primary enforcement authority for section 2702
of the PHS Act will enforce the past-due premium policy in this final
rule, to the extent they decide to permit it. We will enforce the
policy against issuers in States where HHS is responsible for
enforcement of the guaranteed availability requirements in section
2702.
B. Part 155--Exchange Establishment Standards and Other Related
Standards Under the Affordable Care Act
The Marketplace Integrity and Affordability proposed rule included
a number of proposed revisions to 45 CFR part 155 of title 45 of the
Code of Federal Regulations that were intended to improve the integrity
of the Exchanges, protect Federal funds, and protect consumers from the
ill-effects of unauthorized enrollments, including surprise tax
liability. We received a substantial number of comments weighing both
for and against these proposals. The Department has concluded, after
careful consideration of public comments, that while most of the
proposals should be finalized as proposed, some proposals should not be
finalized for State Exchanges, and other proposals will adopt a
temporary position under which we will finalize the policies to be
effective through the end of PY 2026. We address in this section
policies the Department is finalizing to address acute improper and
fraudulent enrollment concerns brought about by the expansion of APTC.
Given the expiration of the enhanced APTC, the Department has concluded
it would be reasonable to accept some risk of future improper
enrollments after these policies sunset, in favor of limiting overall
disruptions as the market adjusts and sheds holdover improper
enrollments. The Department will finalize the following policies
temporarily, requiring them to sunset at the end of PY 2026:
Failure to File Taxes and Reconcile APTC Process; Delay of
FTR Process until after 2 consecutive years of FTR removed (Sec.
155.305(f)(4));
Income Verification When Data Sources Indicate Income Less
Than 100 Percent of the FPL (Sec. 155.320(c)(3)(iii));
Income Verification When Tax Data is Unavailable (Sec.
155.320(c)(5));
Annual Eligibility Redetermination (Sec. 155.335)
Premium Payment Threshold (Sec. 155.400);
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); and
Pre-enrollment Verification for Special Enrollment Period
(Sec. 155.420(g)).
The Department is of the view that immediate action to codify these
proposed policies in this final rule represents the best policy to
swiftly stop the substantial fraud, waste, and abuse in connection with
expanded subsidies for Exchange coverage. However, based on the broad
range of feedback for and against these policies and the difficulty in
assigning with certainty the causes of improper enrollments, we believe
there could be more efficient long-term solutions to these immediate
problems. We expect that after the market has purged the massive
amounts of improper and fraudulent enrollments it is currently
experiencing that it would be reasonable to accept the risk that some
improper enrollments will come back after the policies sunset. As such,
we are finalizing these provisions only through PY 2026.
The expiration of enhanced subsidies creates a level of uncertainty
within the individual health insurance market regarding the expected
level of enrollment and morbidity of the risk pool for PY 2026 and
beyond. Moving into PY 2021, the individual market had experienced an
increasing level of stability. Since then, various policy decisions
introduced a high level of uncertainty by pulling back enforcement of
various regulatory requirements that had previously maintained more
predictable enrollment patterns. For instance, Medicaid periodic data
matching regulations have not been enforced since the fall of 2020.
This nonenforcement posture likely contributed to the substantial
increase in enrollment experienced over the past four years. Data
presented in this rule suggest this allowed millions of additional
people to enroll in the individual market risk pool with subsidized
coverage who are otherwise not eligible for premium subsidies. In
addition, as described throughout the rule, Federal law enacted in 2021
temporarily increased the level of premium tax credit subsidies which,
in particular, made fully-subsidized health plans available to people
with incomes between 100 percent and 150 percent of the Federal poverty
level. This law dramatically changed the market composition as improper
and fraudulent enrollments soared. This temporary policy is now set to
expire at the end of PY 2025 and, as such, we believe it is
[[Page 27092]]
imperative to take decisive action to address improper and fraudulent
enrollments to help the market shed the waste, fraud, and abuse
currently obscuring evaluation of the market. These actions will help
the market gradually reset in the context of a renewed subsidy
environment that should inherently reduce improper and fraudulent
enrollments through the lack of fully-subsidized benchmark plans.
Given these dynamics, coupled with extensive public feedback, the
Department has determined it would be reasonable to sunset certain
policies after PY 2026 and accept some risk that improper enrollments
will become more likely once the policies sunset. Regulatory sunsets
can be an especially useful strategy to adapt to uncertain
circumstances, like those created by the vast amount of improper and
fraudulent enrollments created by the subsidy expansion, which the
Department feels it must address as the subsidy expansion winds down to
prevent short-term consumer pain. Once those currently improperly or
fraudulently enrolled have been removed, the potential for consumer
harm is significantly lessened as fully-subsidized benchmark plans will
no longer exist. As such, while these policies are critical short-term
tools to allow the market to readjust to the expanded subsidy
expiration, it is not clear that the long-term burden associated with
these policies outweighs the program integrity benefits in the absence
of abuse-prone fully-subsidized plans. Accordingly, we follow the
example of other Federal agencies that have codified short-term,
temporary rules in response to urgent needs.\28\
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\28\ See, e.g., Home Mortgage Disclosure (Regulation C) Final
Rule, 82 FR 43088 (Sep. 13, 2017) (in response to comments that it
set a reporting threshold to low, the Consumer Financial Protection
Board finalized a new, temporary rule increasing the reporting
threshold for only two years to allow the agency to study the issue
and consider whether to initiate another rulemaking to address the
appropriate level for the reporting threshold). See also, Securities
and Exchange Commission Final Rule 202T, 69 FR 48008, 48012 (August
6, 2004) (adopting a temporary rule to facilitate the collection of
data sufficient to assess the effectiveness of certain regulations
concerning short sale prices on securities).
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We believe striking this balance will reduce improper and
fraudulent enrollments in the near-term without implicating longer-term
concerns over these policies, for which it is less clear that the
benefits would outweigh such concerns in the absence of the high level
of improper enrollments held over from the subsidy expansion. For these
reasons, we are finalizing these policies for PY 2026 only, with a
reversion to the previous policies for PY 2027 and beyond.
We address each of the policies we are finalizing to sunset after
PY 2026 in section III. of this final rule.
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.\29\ Section 36B of the Internal
Revenue Code, and sections 1412 and 1402 of the ACA provide that
PTC,\30\ APTC,\31\ and CSRs,\32\ respectively, are not allowed for
individuals who are not lawfully present. Section 1331 of the ACA
excludes individuals who are not ``lawfully present'' from eligibility
and enrollment in a BHP in States that elect to operate a BHP.\33\ 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 through an Exchange or for these
insurance affordability programs.\34\ 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. In the 2025
Marketplace Integrity and Affordability proposed rule (90 FR 12953
through 12955), we proposed to realign our policy with the longstanding
view of 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 through an Exchange,
eligibility for PTC, APTC, and CSRs, and for BHP coverage in States
that elect to operate a BHP.
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\29\ 42 U.S.C. 18032(f)(3).
\30\ 42 U.S.C. 18082(d); 26 U.S.C. 36B(e)(2).
\31\ 42 U.S.C. 18082(d).
\32\ 42 U.S.C. 18071(e).
\33\ 42 U.S.C. 18051(e).
\34\ See the definition of ``insurance affordability program''
at 45 CFR 155.300(a) and 42 CFR 435.4.
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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'').\35\ The DHS Memo established, for the first
time, the DACA policy, and 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.
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\35\ Napolitano, J. (2012). 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.
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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 [ACA] to these
individuals.'' For that reason, HHS explained that it did not intend to
``inadvertently expand the scope of the DACA process'' (77 FR 52615).
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'' its prior
interpretation from 2012. The DACA Rule, which became effective on
November 1, 2024, advanced several arguments for reversing the agency's
prior interpretation.\36\ Consistent with our statutory authority \37\
to define ``lawfully present'' for use in determining eligibility for
our programs, we are now reconsidering these arguments.
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\36\ 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 DACA Rule.
\37\ Sec. 1411 of the ACA, 42 U.S.C. 18081(a).
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In the DACA Rule (89 FR 39392 through 39395), HHS concluded that
because DHS had determined that a
[[Page 27093]]
DACA recipient is ``lawfully present'' for purposes of eligibility for
certain Social Security benefits under 8 U.S.C. 1611(b)(2), 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 considered deferred
action recipients to be ``lawfully present'' for purposes of certain
Social Security benefits since 1996.\38\ 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.
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\38\ 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).
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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.'' 39 40 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
and as stated in the proposed rule (90 FR 12954), we now believe HHS
should not have defined ``lawfully present'' under the ACA in a way
that departed from the longstanding understanding of that term with
respect to DACA recipients.
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\39\ Texas v. United States, 50 F.4th 498, 526 (5th Cir. 2022).
\40\ 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' 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.
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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, for PTC, APTC, CSRs to be allowed for their Exchange
coverage, and to enroll in a BHP in States that elect to operate a BHP.
In the proposed rule (90 FR 12954), we stated that 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, for PTC, APTC, CSRs to be allowed for their
Exchange coverage, and to be eligible to enroll in a BHP in States that
elect to operate a BHP. DHS' 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 departments and
agencies, such as HHS'' (87 FR 53211 through 53212). Therefore, in the
proposed rule (90 FR 12955), we stated that we believe it was improper
for HHS to have advanced a policy goal that was contrary to the ACA's
statutory limitations as they had been understood since the inception
of DACA. Furthermore, DHS' 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 and as stated in the proposed
rule (90 FR 12955), 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', and there is no requirement that HHS aligns its
definition of ``lawfully present'' with DHS'. 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' 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.'' Under section
42 U.S.C. 18032(f)(3), section 36B(e)(2) of the Code, 42 U.S.C.
18082(d), 42 U.S.C. 18071(e)(1)(A), and 42 U.S.C. 18051(e), enrollment
in a QHP offered on an Exchange, PTC, APTC, CSRs, and enrollment in a
BHP in States that elect to operate a BHP, respectively, is allowed
only for individuals who are ``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 sought comment on this proposal.
After consideration of comments and for the reasons outlined in the
proposed rule and this final rule, including our responses to comments,
we are finalizing this policy as proposed. This policy will be
applicable immediately upon the effective date of this rule as it
conforms regulatory policy to the best statutory reading of the ACA. We
summarize and respond to public comments received on the proposed
changes to the definition of ``lawfully present'' below.
[[Page 27094]]
General Support
Comment: We received several comments in support of the proposed
change to exclude DACA recipients from the definition of ``lawfully
present.'' Commenters noted that including DACA recipients in the
definition of ``lawfully present'' imposed additional costs on
taxpayers and that reverting the definition to exclude DACA recipients
would better protect taxpayers.
Response: We appreciate comments received in support of our
proposal to modify the regulatory definition of ``lawfully present'' at
Sec. 155.20 in alignment with the definition set forth in the August
30, 2012 Interim Final Rule (77 FR 52614 through 52616) to exclude DACA
recipients for purposes of eligibility to enroll in a QHP through an
Exchange, for PTC, APTC, CSRs to be allowed for their Exchange
coverage, and to be eligible to enroll in a BHP in States that elect to
operate a BHP. We agree that this proposal would result in less PTC
being paid out, given that DACA recipients would no longer be eligible
to enroll.
Comment: Many commenters supported that the proposed rule did not
propose to modify the technical and clarifying changes to the
definition of ``lawfully present'' at Sec. 155.20 that were made by
the 2024 DACA rule (89 FR 39392). Commenters noted that these changes
eliminated complexity in eligibility determinations and eased burden on
service providers and consumers.
Response: We appreciate comments received in support of our
proposal to retain these adjustments. We agree that these changes were
primarily technical and clarifying in nature and that these changes
simplify eligibility determinations.
General Opposition
We received several comments opposing the proposed change to the
definition of ``lawfully present'' in this rule. The following is a
summary of the comments we received and our responses.
Comment: The majority of commenters noted general opposition to
CMS' proposal to exclude DACA recipients from the definition of
``lawfully present.'' Many commenters noted that DACA recipients are
essential members of their community that contribute to the economy and
that excluding DACA recipients delegitimizes their status. Many
commenters stated that individuals undergo extensive vetting to obtain
and maintain their DACA status and are hence ``legally present.''
Commenters also noted that DACA recipients have work authorization and
pay taxes and therefore should have access to Exchange coverage. One
commenter noted that the opportunity to purchase Exchange coverage is
consistent with the goals of the DACA policy. Similarly, another
commenter noted that giving DACA recipients access to the Marketplace
does not change anything about their legal immigration status, and
hence DACA recipients should be allowed to buy insurance on the
Marketplace. One commenter noted that the ACA only states that the
Exchange is unavailable to individuals who are not ``lawfully present''
without explicitly referencing any categories of noncitizens, and that
the ACA instead ``defers to 45 CFR 155.20.''
Response: We note that individuals who are not ``lawfully present''
are ineligible for enrollment in a QHP through an Exchange and for
insurance affordability programs.\41\ As mentioned in the proposed rule
consistent with our statutory authority \42\ to define ``lawfully
present'' for use in determining eligibility for our programs, we are
reconsidering our prior interpretation from the 2024 DACA rule at 89 FR
39392. As noted in the 2012 DHS Memo, the DACA process was designed to
provide temporary relief from removal for certain individuals on a
case-by-case basis as a mechanism to preserve governmental resources
for high-priority removal cases. We note that the reasons for adopting
the DACA process did not pertain to health insurance affordability
programs, such as access to Exchange coverage. We believe that the
original interpretation of the term ``lawfully present'' better
reflects the appropriate intersection of DACA and the ACA.
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\41\ 42 U.S.C. 18032(f)(3), 42 U.S.C. 18032(f)(3), 42 U.S.C.
18082(d), 42 U.S.C. 18071(e)(1)(A), 42 U.S.C. 18051(e).
\42\ 42 U.S.C. 18081(a).
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Comment: Some commenters noted that HHS has maintained Exchange
eligibility for all other individuals with deferred action, and DACA
recipients should be allowed to enroll in Exchange coverage such that
eligibility standards are consistently applied to all recipients of
deferred action. One commenter noted that deferred action is a long-
standing administrative mechanism that predates the ACA, and that DACA
recipients are therefore not unique among deferred action recipients to
the extent that the policy under which they were granted deferred
action was not explicitly intended to extend access to Exchange
coverage. Another commenter noted that DACA recipients can be
considered as having ``quasi-legal'' status, which warrants access to
care. One commenter noted that HHS has no authority to independently
define ``lawfully present,'' and the Congress did not intend to confer
on HHS the authority to define lawful presence for immigrants.
Response: As noted in the proposed rule, DACA recipients, unlike
other deferred action-recipients, received deferred action under a
large-scale presidential initiative, the purpose of which did not
include extending ACA access to health insurance Exchanges. We note
that in prior rulemaking, the Department of Homeland Security (DHS)
acknowledged that DACA has ``never conferred lawful immigration status
on recipients,'' and further declined to label DACA as ``identical'' to
all other forms of deferred action (87 FR 53211 through 53212). We
reiterate that HHS maintains its separate and independent statutory
authority to codify a regulatory definition of ``lawfully present'''
for use in determining eligibility to enroll in a QHP through an
Exchange, in a BHP in States that elect to operate a BHP, and
eligibility for PTC, APTC, CSRs. We believe that the definition of
``lawfully present'' as set forth in the August 30, 2012 Interim Final
Rule (77 FR 52614 through 52616) best adheres to the statute and is
consistent with the benefits afforded by the DACA policy, which are
forbearance from removal from the United States and employment
authorization. We note that HHS retains separate statutory authority
and policy considerations to define the term ``lawfully present'' for
its programs. This authority does not compel HHS to align its
definition of ``lawfully present'' with DHS, especially since the
reasons DHS offered for adopting the DACA policy do not pertain to
eligibility for insurance affordability programs.\43\ We also note that
other definitions of ``lawfully present,'' such as those by DHS, should
not be used as a criterion to gauge eligibility for health insurance
coverage. Therefore, extending health insurance subsidies and cost-
sharing reductions to DACA recipients for Exchange coverage, or
coverage through a BHP in states that elect to operate a BHP, would
improperly expand the scope of the DACA process.
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\43\ As defined in 45 CFR 155.300(a); 42 CFR 435.4.
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Legal Concerns
We received several comments that highlighted legal concerns with
the proposed change to the definition of ``lawfully present'' in this
rule. The
[[Page 27095]]
following is a summary of the comments we received and our responses.
Comment: Some commenters opposed the modification of the definition
of ``lawfully present'' and stated that the change is inconsistent with
the intent and goals of the ACA. Specifically, one commenter noted that
the exclusion of DACA recipients may constitute discrimination based on
national origin, which is prohibited under section 1557 of the ACA.
Another commenter noted that the proposed rule did not address section
1554 of the ACA, which disallows HHS from promulgating regulations that
may constitute unreasonable barriers to care or impede timely access to
services. Several commenters highlighted that excluding DACA recipients
from the definition of ``lawfully present'' restricts their ability to
access medical care, which violates the Equal Protection Clause of the
Fourteenth Amendment of U.S. Constitution. Commenters also stated that
the proposed definition of ``lawfully present'' denies DACA recipients'
rights under title VI of the Civil Rights Act.
Response: The Department disagrees that excluding DACA recipients
from the definition of lawfully present violates sections 1554 or 1557
of the ACA, the Equal Protection Clause of the Fourteenth Amendment, or
title VI of the Civil Rights Act.
Section 1557 of the ACA (42 U.S.C. 18116) prohibits discrimination
on the basis of race, color, national origin, sex, age, or disability
in a health program or activity, any part of which is receiving Federal
financial assistance, including credits, subsidies, or contracts of
insurance, except where otherwise provided in title I of the ACA.
Section 1557 of the ACA also prohibits discrimination on the basis of
race, color, national origin, sex, age, or disability under any program
or activity that is administered by an executive agency, or any entity
established under title I of the ACA or its amendments. We disagree
that this rule's proposal to define ``lawfully present'' for purposes
of HHS programs constitutes discrimination on the basis of national
origin, as DACA status may be obtained by individuals who came to the
United States as children regardless of their national origin, if they
meet all other DHS eligibility criteria. Additionally, as outlined in
prior rulemaking (89 FR 37522), section 1557 of the ACA does not
include immigration status. Similarly, this proposal does not violate
section 1554 of the ACA. In California v. Azar, the Ninth Circuit held
that section 1554 of the ACA is intended to ensure that HHS does not
``improperly impose regulatory burdens on doctors and patients,'' not
to restrict HHS' ability to ``ensure government funds are not spent for
an unauthorized purpose.'' \44\
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\44\ California v. Azar, 950 F.3d 1067 (9th Cir. 2020).
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Furthermore, we do not agree that the proposed change to the
definition of ``lawfully present'' violates the Equal Protection Clause
of the Fourteenth Amendment or title VI of the Civil Rights Act. The
Equal Protection Clause prohibits States from denying anyone within
their jurisdiction the equal protection of the laws and thus is not
applicable here. Nevertheless, we note that HHS' action to modify the
definition of ``lawfully present'' is consistent with the Equal
Protection Clause as the Federal government has a rational basis to
distinguish between DACA recipients and other categories of ``lawfully
present'' noncitizens, as detailed in this section.\45\ Title VI of the
Civil Rights Act, 1964, likewise, is not relevant here. Title VI
provides that no person shall, on the ground of race, color, or
national origin, be excluded from participation in, be denied the
benefits of, or be subjected to discrimination under any program or
activity receiving Federal financial assistance and reaches only acts
of intentional discrimination.\46\ A rule providing that DACA
recipients do not qualify as lawfully present is consistent with the
premise of the DACA program under which DACA recipients have no lawful
immigration status, but enjoy deferred deportations given the low
priority the Federal government places on their deportations. Moreover,
the policy we finalize does not constitute discrimination based on any
protected ground, as it does not distinguish based on a DACA
recipient's particular race, color, or national origin. As we explain
earlier in this preamble, lawful presence is one of many critical
eligibility criteria required by the ACA. We reiterate that HHS has the
authority under the ACA to facilitate the operation of its programs,
including the issuance of regulations that define ``lawfully present,''
and we believe the exclusion of DACA recipients represents the best
interpretation of Congressional intent.
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\45\ Toro v. Sec'y, U.S. Dep't of Homeland Sec., 707 F.3d 1224,
1230 (11th Cir. 2013)
\46\ Alexander v. Sandoval, 532 U.S. 275, 280 (``Title VI itself
directly reach[es] only instances of intentional discrimination.'')
(internal citations and quotations omitted).
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Comment: A few commenters noted that there is ongoing litigation
regarding HHS' 2024 DACA rule and that the proposed change to the
definition of ``lawfully present'' is improper and attempts to prevent
a judicial decision.
Response: We note that there is ongoing litigation regarding the
2024 DACA rule. In August 2024, several plaintiff States filed a
lawsuit in the United States District Court for the District of North
Dakota in response to the agency's 2024 DACA rule that newly included
DACA recipients in the definition of ``lawfully present.'' \47\ On
December 9, 2024, the court issued a preliminary injunction applicable
to the plaintiff States, and as a result DACA recipients are ineligible
for Exchange coverage in the nineteen plaintiff States involved in the
lawsuit.\48\ On December 16, 2024, the preliminary injunction was
appealed to the Eighth Circuit Court of Appeals. Ultimately, this
rulemaking may render as moot the pending legal challenge to the DACA
Rule, and the appeals court granted the Government's motion to hold the
appeal in abeyance. At present, DACA recipients in all other States
continue to be eligible for Exchange coverage. We disagree that it is
improper to propose and finalize this change to the definition of
``lawfully present.'' We note that the resolution and timing of a final
disposition for this litigation is unknown and without this proposed
modification, the agency would fail to align with the better
interpretation of the term ``lawfully present'' and would continue to
incorrectly expend taxpayer dollars.
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\47\ Kansas v. United States of America (Case No. 1:24-cv-
00150).
\48\ These States are Alabama, Arkansas, Florida, Idaho,
Indiana, Iowa, Kansas, Kentucky, Missouri, Montana, Nebraska, New
Hampshire, North Dakota, Ohio, South Carolina, South Dakota,
Tennessee, Texas, and Virginia. All States are served by Federal
platform, except for Idaho, Kentucky, and Virginia, which are State
Exchanges that operate their own platforms.
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Impact on Health and Health Care Systems
We received many comments opposing the proposed change to the
definition of ``lawfully present'' in this rule out of concern for the
health and well-being of individuals, families, communities, and health
care organizations. Commenters expressed concerns regarding increased
costs associated with shifts from preventive care to emergency room
care, a weaker individual market risk pool, and increased tax burdens
on Americans with the removal of eligibility of DACA recipients under
the ACA. The following is a summary of the comments we received and our
responses.
Comment: Many commenters shared that increasing access to health
insurance coverage and health care has positive impacts on individual
and
[[Page 27096]]
population health, and, conversely, that decreasing access to coverage
harms individual and population health.\49\ Many commenters stated that
they expected the provision would result in decreased community public
health and decreased well-being for DACA recipients as these
individuals become uninsured, noting that leaving thousands of DACA
recipients without health coverage could lead to dire health
consequences in their communities.
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\49\ American Hospital Association. Report: The Importance of
Health Coverage. https://www.aha.org/guidesreports/report-
importance-health-
coverage#:~:text=Impact%20of%20Coverage&text=Studies%20confirm%20that
%20coverage%20improves,on%20individuals%2C%20families%20and%20communi
ties.
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Commenters noted that insured individuals are more likely to have a
regular source of care and to receive timely and appropriate preventive
care and are less likely to experience certain health complications
than uninsured individuals. Nonprofit medical and advocacy
organizations commented that having access to health insurance is
associated with increased utilization of preventive care, and that
early testing is critical to detect life threatening health conditions
like lung, blood, and breast cancer, HIV/AIDS, diabetes, chronic
conditions, and disabilities.\50\ Commenters also noted that access to
health insurance is associated with preventing maternal mortality in
immigrant women.
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\50\ ``Access to Primary Care.'' Office of Disease Prevention
and Health Promotion, 2020, www.odphp.health.gov/healthypeople/priority-areas/social-determinants-health/literature-summaries/access-primary-care.
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Commenters expressed concerns that without access to health
insurance, the cost to treat complex health conditions within the DACA
population would be higher than if DACA recipients remained eligible
for health insurance and received preventive care. Some commenters
noted the disproportionate rate of uninsurance among DACA recipients is
due to their prior exclusion from Exchange coverage and continued
exclusion from Medicaid. Some commenters noted that taking away
eligibility for DACA recipients undermines the goal of the ACA to
expand access to health care services.
Response: We appreciate commenters' feedback and acknowledge that
one of the broad goals of the ACA is to increase access to health
insurance coverage. We also acknowledge commenters' concerns regarding
the potential impacts of the changes proposed in this rule on the
ability of some DACA recipients to access health care services. We note
that, because DACA recipients generally have employment authorization,
they may have the option to access health insurance coverage through
their employer. Additionally, we note that DACA recipients remain
eligible for limited Medicaid coverage for the treatment of an
emergency medical condition, if they meet all other eligibility
requirements for Medicaid in the state (for example, income and state
residency), except for U.S. citizenship or satisfactory immigration
status.
We reiterate that the ACA's broad goal of increasing access to
health insurance exists within a specific statutory scheme that
requires that individuals be lawfully present in order to access
coverage. HHS is obligated to promulgate regulations that best
effectuate the statutory guardrails of the ACA, and as previously
stated, we believe that the definition of ``lawfully present''
finalized in this rule best achieves Congress's intent.
Comment: Commenters noted that decreased access to health insurance
coverage and preventive care would increase the burdens on hospitals,
Federally Qualified Health Centers (FQHCs), State and community
programs, safety-net providers, and emergency departments which would
provide more urgent and emergent care to uninsured individuals as a
result. Commenters stated that visits to hospitals and emergency rooms
are more costly than preventive care visits, and commenters argued that
an increase in emergency services would increase the overall cost of
health care.\51\ Some commenters stated that an increase in emergency
room visits would put undue strain on hospitals and emergency room
providers who already face overcrowding. Other commenters noted that
FQHCs see patients regardless of insurance status and that the removal
of DACA recipients from Exchange eligibility would require FQHCs to
make challenging decisions about the services they can provide.
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\51\ American Hospital Association. Report: The Importance of
Health Coverage. https://www.aha.org/guidesreports/report-
importance-health-
coverage#:~:text=Impact%20of%20Coverage&text=Studies%20confirm%20that
%20coverage%20improves,on%20individuals%2C%20families%20and%20communi
ties.
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Commenters cited that, on average, uninsured individuals generate
over $1,000 in uncompensated costs annually, which the rest of the
health care system absorbs.\52\ In addition to the potential burdens on
providers, commenters expressed concerns that DACA recipients would
face undue financial hardship when they finally seek care. Commenters
noted DACA recipients' fear of medical debt, which contributes to
skipping needed preventive medical and dental care and difficulty
finding resources to improve their mental health.\53\
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\52\ Kaiser Family Foundation. Key Facts About the Uninsured
Population (2023). https://www.kff.org/uninsured/issue-brief/key-facts-about-the-uninsured-population/.
\53\ Center for American Progress. The Demographic and Economic
Impacts of DACA Recipients: Fall 2021 Edition. (2022). https://www.americanprogress.org/article/the-demographic-and-economic-impacts-of-daca-recipients-fall-2021-edition/.
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Comments from providers expressed concerns about the possibility
that DACA recipients may lose coverage in the middle of a treatment
program or may return to the emergency room or other acute care
settings after their health has deteriorated. These providers commented
that these emergency services are much more expensive and less
effective than if treatment had continued in the patients' primary care
setting. One commenter, who is a provider, noted that epilepsy has a
higher cost associated with emergency care rather than preventive care
and has higher incidence in immigrant populations. Additionally, some
commenters noted that DACA recipients face unique stressors that impact
their acute mental health and can lead to increased vulnerability to
chronic medical conditions.\54\ These stressors include trauma from
violence, persecution, and poverty in addition to general fear and
anxiety compounded by the stress of the unknown future of the DACA
program and immigration status implications.
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\54\ Henderson, S.W., & Baily, C.D. Parental deportation,
families, and mental health. Journal of the American Academy of
Child & Adolescent Psychiatry (2013). 52(5), 451-453.
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Many commenters stated that an increase in the cost of health care,
due to increased emergency room use, would mean that American taxpayers
would pay even higher amounts to insurance companies to defray these
increased costs. Commenters also stated that removing eligibility of
DACA recipients would not deliver the economic relief needed for
American families and may instead increase the financial burden on
individual, American taxpayers. Other commenters noted that HHS did not
provide evidence of how this proposed change would generate cost
savings.
Response: We acknowledge commenters' feedback regarding the
potential impact of uninsurance on DACA recipients, and that some DACA
recipients may become uninsured as a result of the changes proposed in
this rule. Although we are unable to quantify potential costs related
to shifting care to
[[Page 27097]]
emergency settings, uncompensated care, or changes to the risk pool as
a result of this provision, we expect that this proposal will result in
savings in the form of reduced PTC expenditures. We refer to this
rule's Regulatory Impact Assessment for further information regarding
these estimates. Additionally, we believe that the concerns expressed
here, such as emergency room strain or changes in coverage during a
course of treatment, represent common, existing issues that healthcare
providers are generally well-equipped to address. Finally, we note that
these concerns do not overcome Congress's direction in the ACA that
only ``lawfully present'' individuals are eligible for Exchanges
coverage.
Comment: Many commenters cited concerns about how removing access
to Exchange coverage for DACA recipients would impact the 300,000 U.S.
citizen children who have at least one parent that is a DACA
recipient.\55\ These commenters noted that insurance coverage for
parents is also tied to the health of their children, where children
are more likely to access health insurance and health care services
when their parents are insured, a phenomenon known as the ``welcome
mat'' effect.\56\ They noted that barriers to health insurance access
for parents often increases the uninsured rate of their children who
are U.S. born and U.S. citizens, but that children who have access to
preventive care often have better health outcomes as adults. Commenters
also noted that access to health insurance is linked to the financial
stability of the family as insured parents are better equipped to
support their families.\57\
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\55\ Center for American Progress. The Demographic and Economic
Impacts of DACA Recipients: Fall 2021 Edition. (2022). https://www.americanprogress.org/article/the-demographic-and-economic-impacts-of-daca-recipients-fall-2021-edition/.
\56\ Hudson, Julie L., and Asako S. Moriya. ``Medicaid Expansion
for Adults Had Measurable ``Welcome Mat'' Effects on Their
Children.'' Health Affairs, vol. 36, no. 9, Sept. 2017, pp. 1643-
1651, https://doi.org/10.1377/hlthaff.2017.0347.
\57\ Wright Burak, Elisabeth. ``Parents' and Caregivers' Health
Insurance Supports Children's Healthy Development.'' Society for
Research in Child Development, June 2019, https://www.srcd.org/research/parents-and-caregivers-health-insurance-supports-childrens-healthy-development.
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Response: While we acknowledge these commenters' concerns, we note
that the U.S. citizen children of DACA recipients remain eligible for
QHPs through an Exchange, for PTC, APTC, and CSRs, as well as for
Medicaid, CHIP, and BHP in States that elect to operate a BHP, if they
meet all eligibility requirements in the state. This rule's provisions
do not impact their eligibility.
Comment: Many commenters stressed the important role that DACA
recipients hold in our communities and workforce, noting that during
the COVID-19 pandemic nearly 203,000 DACA recipients worked at the
frontlines in health care, education, and food distribution.\58\
Commenters also noted that DACA recipients contribute billions of
dollars in Federal and State taxes each year, paying into the ACA
Exchanges that they would not be eligible for if this rule was
finalized as proposed. Additionally, these commenters noted that if
DACA recipients were not eligible for health insurance through the ACA,
there could be a negative impact on the economy as sickness or the need
for emergency care rather than preventive care would impact these
frontline workers and frontline communities. Commenters also noted that
studies \59\ show DACA recipients may avoid seeking medical attention
out of fear that doing so would impact their immigration status, and
these commenters express concern that this will increase for DACA
recipients when they are no longer eligible for coverage under the ACA.
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\58\ Nicole Svajlenka, A Demographic Profile of DACA Recipients
on the Frontlines of the Coronavirus Response, Ctr. for Am. Progress
(Apr. 6, 2020), https://www.americanprogress.org/article/demographic-profile-daca-recipients-frontlines-coronavirus-response/.
\59\ National Immigration Law Center (2024, May 29). DACA
Recipients' Access to Health Care: 2024 Report. Retrieved April 8,
2025, from https://www.nilc.org/wpcontent/uploads/2024/05/NILC_DACA-Report_2024_06-27-24.pdf.
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Response: We disagree that these factors constitute a compelling
reason to maintain a regulatory definition of ``lawful presence'' that
we do not believe is consistent with the statute.
Comment: Many commenters stated that removing the eligibility of
DACA recipients from Exchange coverage would negatively impact the risk
pool. Commenters noted that DACA recipients are generally younger and
healthier, which would benefit the risk pool, citing studies of likely
eligible DACA recipient self-reporting excellent or very good
health.\60\ Commenters noted that the removal of DACA recipients from
the Exchange risk pool would increase the overall cost of the health
care system, including the cost of premiums and copays for other
consumers. One State Exchange also noted that the elimination of DACA
recipients from their Exchange would erode their merged market and
would result in premium increases for all market segments and
ultimately increasing costs for families and individuals in their
State. One commenter suggested that DACA recipients who are currently
enrolled in Exchange coverage should be ``grandfathered'' in to reduce
the impact of individuals' exclusion on the risk pool. The same
commenter noted that State Exchanges should be given the option to
allow DACA recipients in their Exchanges if doing so would benefit
their population.
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\60\ Key Facts on Deferred Action for Childhood Arrivals (DACA)
(2025), https://www.kff.org/racial-equity-and-health-policy/fact-sheet/key-facts-on-deferred-action-for-childhood-arrivals-daca/.
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Response: While we are unable to quantify the potential impacts of
this policy on Exchange risk pools, we note that HHS is obligated to
promulgate regulations that best effectuate the guardrails outlined in
the ACA. HHS believes the definition of ``lawfully present'' finalized
in this rule best achieves Congress' intent. Accordingly, granting
State Exchanges the flexibility to cover DACA recipients if they choose
is not appropriate.
Implementation Concerns and Effective Date
We received several comments that highlighted concerns with the
time within which all Exchanges would be required to exclude DACA
recipients from Exchange (or BHP) participation and the associated
operational concerns. The following is a summary of the comments we
received and our responses.
Comment: Many commenters expressed significant concerns that the
proposed modification to the definition of ``lawfully present'' would
be applicable upon the effective date of the rule, as a mid-year
eligibility change would negatively impact consumers. Many commenters
noted that due to rapid policy shifts, additional time is necessary to
identify and communicate with impacted consumers. Several State
Exchanges that do not use the Federal platform underscored the need for
additional lead time to implement changes, including information
technology (IT) system changes, modifications to business operations,
and retraining staff. Commenters noted that implementing changes
without additional lead time impacts system accuracy, market stability,
and overall member experience. Commenters also highlighted that two
State Exchanges indicated that IT system changes require lead time to
ensure alignment with other State agency partners to coordinate IT
release schedules. One State Exchange indicated that they utilize an
integrated eligibility system which requires additional time to
[[Page 27098]]
coordinate a planned technical release and testing. Several commenters
strongly urged HHS to delay the effective date of this provision until
January 1, 2026. One commenter also noted that a mid-year eligibility
change would affect assumptions that carriers make about their
enrollees in a plan year.
Several commenters noted that an effective date earlier than
January 1, 2026, would impact rate filing submissions by issuers. One
issuer noted that the proposed effective date does not provide
sufficient time for State Exchanges to accurately identify individuals,
share necessary documentation with issuers, and send termination
notices to consumers following termination. The same commenter noted
that insufficient time may result in delayed or erroneous terminations,
which may result in consumer harm and increased administrative burden
for Exchanges and issuers. Two issuer commenters noted that issuers do
not have information on the immigration status of enrollees and
requested additional clarification on how Exchanges will terminate DACA
recipients, including if the proposed change impacts current or future
enrollees. One commenter suggested that HHS consider grandfathering in
current DACA recipients for PY 2026 to promote continuity of care.
Another commenter requested flexibility in the timeline to terminate
and notify consumers for any current DACA recipient enrollees without
any penalty to the consumer.
Response: We acknowledge commenters' concerns about operational
challenges regarding the implementation of this provision, as well as
commenters' suggestions on alternative approaches. While we understand
that there are existing technical and operational constraints that
impact interested parties, including issuer concerns with rate filing
submissions for PY 2026, we reiterate that without the proposed
modification to the definition of ``lawfully present,'' the agency
would fail to align with the better interpretation of the term
``lawfully present'' and incorrectly expend taxpayer dollars. This
provision will continue to be applicable on the effective date of this
final rule and will apply to current and future enrollees who are DACA
recipients for 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. We acknowledge concerns regarding technical and
operational constraints that may hinder some State Exchanges that are
not on the Federal platform from implementing this provision. We intend
to provide technical assistance and educational materials targeted at
State Exchanges not on the Federal platform and state agencies that
operate BHPs in states that elect to operate BHPs (BHP agencies) to
assist in successful implementation of this rule. We intend to begin
providing such technical assistance after the publication date of this
rule and in advance of its effective date. Importantly, we note that
Exchanges and BHP agencies should continue to submit requests to verify
an applicant's immigration status through a data match with DHS via the
Hub using DHS' Systematic Alien Verification for Entitlements (SAVE)
system, which allows Exchanges and BHP agencies to correctly identify
enrollees who are DACA recipients. We anticipate that Exchanges and BHP
agencies will be responsible for terminating coverage for any DACA
recipients currently enrolled in coverage upon the effective date of
the rule. Pursuant to 45 CFR 156.270(b)(1), we note that issuers must
send termination notices to enrollees for all termination events, even
when a termination is initiated by an Exchange. We also acknowledge the
possibility of erroneous terminations as Exchanges implement this
provision. If Exchanges inadvertently and erroneously disenroll
eligible individuals during the course of implementing this provision,
Exchanges have broad authority to take steps to reinstate coverage
under 45 CFR 155.430(e)(3).
Out of Scope
Comment: Some commenters noted that DACA recipients pay taxes and
contribute positively to U.S. society and requested that the Federal
government create pathways for DACA recipients to obtain U.S.
citizenship.
Response: We note that this rule does not address the DACA policy
itself, only the eligibility of DACA recipients for coverage under an
Exchange (and related eligibility for insurance affordability programs)
or BHP in States that elect to operate a BHP. While these comments are
related to the DACA policy broadly, they do not seek to support or
change specific provisions set forth in the proposed rule, and no
response is required.
Comment: A few commenters stated that they opposed declaring DACA
recipients illegal and excluding DACA recipients from receiving
Medicare coverage.
Response: This rule does not address the DACA policy itself, and
DACA recipients are not eligible for Medicare under current law. While
these comments are related to the DACA policy broadly, these topics are
out of scope for this final rule, and no response is required.
After consideration of comments and for the reasons outlined in the
proposed rule and this final rule, including our responses to comments,
we are finalizing this policy as proposed to modify the definition of
``lawfully present'' at Sec. 155.20 used for the purpose of
determining whether a consumer is eligible 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, which excludes
DACA recipients from Exchange (and from eligibility for insurance
affordability programs) and BHP coverage. As previously discussed, this
policy will be applicable immediately upon the effective date of this
rule.
2. Standards for Termination of an Agent's, Broker's, or Web-Broker's
Exchange Agreements for Cause (Sec. 155.220(g)(2))
As discussed in the 2025 Marketplace Integrity and Affordability
proposed rule and this final rule, there have been 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 safeguarding consumer
personally identifiable information (PII), and HHS is committed to
holding noncompliant agents, brokers, and web-brokers accountable to
protect Exchanges and consumers. In the 2025 Marketplace Integrity and
Affordability proposed rule (90 FR 12955 and 12956), we proposed 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.\61\
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\61\ 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.
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[[Page 27099]]
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 45 CFR 155.220 implement this
statutory requirement.\62\ 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.
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\62\ See also Sec. Sec. 155.221 and 155.222.
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We proposed 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 proposed to add text to
Sec. 155.220(g)(2) stating 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. We proposed at Sec. 155.20 to capture a
new definition, similar to definitions adopted by other HHS agencies
and offices,\63\ 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.\64\
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\63\ 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.'').
\64\ 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).
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In proposing the preponderance of the evidence standard, we
considered the severity of the potential consequences involved in our
termination for cause framework in Sec. 155.220(g)(1) through (3),\65\
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.\66\ Between those two
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,'' \67\
and the ``substantial evidence'' standard, which means such relevant
evidence as a reasonable mind might accept as adequate to support a
conclusion.\68\
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\65\ HHS acknowledged in the proposed rule that there are
additional enforcement actions under 45 CFR 155.220(g) that are not
addressed by this proposal (90 FR 12955 through 12956). We noted in
the proposed rule that we are considering future rulemaking to
implement additional regulation changes to the frameworks for those
actions that may further strengthen our oversight and the integrity
of the program.
\66\ 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.
\67\ Ibid. (citing Colorado v. New Mexico, 467 U.S. 310 at 316
(1984)).
\68\ See Reed v. Sec. of Health and Human Serv., 804 F. Supp.
914 at 918 (E.D. Mich. 1992).
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As stated in the proposed rule (90 FR 12956), HHS is of the view
that the preponderance of the evidence standard is appropriate in our
termination for cause 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 stated in the proposed rule
that 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.\69\ 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.\70\ 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 sought comment not only on the 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 sought
comment on our proposed definition for this new ``preponderance of
evidence'' standard.
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\69\ See Sec. 155.220(g)(6).
\70\ See Sec. 155.220(g)(4) and (l).
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In addition, we stated in the proposed rule (90 FR 12956) that 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. In the proposed rule, we solicited comment on what should be
addressed in the Exchange agreements for PY 2026 and beyond, States'
oversight practices, guidance for obtaining and documenting consumer
consent, how to protect consumers from improper enrollments, and
oversight enhancement for agents, brokers, and web-brokers.
After consideration of comments and for the reasons outlined in the
proposed rule and in our responses to comments later in this section of
this final rule, we are finalizing this provision as proposed. These
provisions are important consumer protections that address longstanding
concerns with enforcement against noncompliant agents, brokers, and
web-brokers. As these concerns exist regardless of the subsidy levels
set by Congress, we are finalizing these provisions to be
[[Page 27100]]
applicable as of the effective date of this rule and beyond. We
summarize and respond to public comments received on the use of a
``preponderance of the evidence'' standard when taking enforcement
actions for agent, broker, and web-broker noncompliance under Sec.
155.220(g)(1) through (3) later in this section, as well as on our
proposed definition of ``preponderance of the evidence'' in Sec.
155.20.
Comment: Numerous commenters stated that adopting the
``preponderance of the evidence'' standard will create a fair, uniform,
and universal standard for assessing noncompliance by agents, brokers,
and web-brokers assisting consumers with enrollment through the FFEs
and SBE-FPs, while adding greater transparency to the enforcement
process under Sec. 155.220(g)(1) through (3).
Response: We appreciate commenters' support and agree that holding
all compliant agents, brokers, and web-brokers to this same evidentiary
standard supports fairness and uniformity in agent, broker, and web-
broker enforcement actions under Sec. 155.220(g)(1) through (3). We
also agree that, as we explained in the proposed rule (90 FR 12944,
12955), adoption of the ``preponderance of the evidence'' standard will
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.
Comment: We received several comments expressing that adopting the
``preponderance of the evidence'' standard will enhance agent, broker,
and web-broker accountability and build on past protections added in
previous years, leading, ultimately, to greater consumer protection.
Response: We agree with the commenters that utilizing the
``preponderance of the evidence'' standard in agent, broker, and web-
broker enforcement actions under Sec. 155.220(g)(1) through (3)
enhances agent, broker, and web-broker accountability and builds on
protections added in previous years, including our agent, broker, and
web-broker policies finalized in the 2026 Payment Notice (90 FR 4431
through 4432): to hold lead agents at insurance agencies responsible
for agency-level misconduct and noncompliance and expand our authority
to suspend an agent or broker's ability to transact information with
the FFEs and SBE-FPs if we discover circumstances that pose an
unacceptable risk to the accuracy of FFE or SBE-FP eligibility
determinations, operations, applicants, or enrollees under Sec.
155.220(k)(3). In particular, using this evidentiary standard will
ensure that when an agent, broker, or web-broker is subject to
enforcement action under Sec. 155.220(g)(3)(i), CMS will generally
terminate their Exchange agreements unless the evidence they submit to
resolve the matter to CMS' satisfaction consists of proof that,
compared with the evidence supporting CMS' determination of a specific
finding or pattern of noncompliance that is sufficiently severe, leads
to the conclusion that the agent, broker, or web-broker was more likely
than not compliant with applicable law, regulatory requirements, and
the terms and condition of their Exchange agreements. This will help
ensure that agents, brokers, and web-brokers are held accountable for
noncompliance with applicable law, regulatory requirements, and the
terms and condition of their Exchange agreements and will help
ultimately prevent agents, brokers, and web-brokers who are
noncompliant from assisting consumers with enrollment in coverage
through the FFEs and SBE-FPs.
Comment: We received several comments expressing that adopting the
``preponderance of the evidence'' standard is appropriate because it is
the standard used in civil cases at the Federal level.
Response: We agree with commenters and appreciate their support. As
we explained in the proposed rule (90 FR 12942) and previously in this
final rule, we have determined the preponderance of the evidence
standard is appropriate for use 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.
Comment: We received one comment in favor of the ``preponderance of
the evidence'' standard stating that compliant agents, brokers, and
web-brokers will benefit from our use of the standard and asking HHS to
also pair the new standard with continuous monitoring tools to further
target noncompliant agents, brokers, and web-brokers.
Response: We agree with the commenter that compliant agents,
brokers, and web-brokers will benefit from the ``preponderance of the
evidence'' standard, which clarifies the termination for cause process
for agents, brokers, and web-brokers under Sec. 155.220(g)(1) through
(3). We will continue to assess the need for additional agent, broker,
and web-broker continuous monitoring tools, particularly after we
develop experience implementing our agent, broker, and web-broker
policies finalized in the 2026 Payment Notice: to hold lead agents at
insurance agencies responsible for agency-level misconduct and
noncompliance and expand our authority to suspend an agent or broker's
ability to transact information with the FFEs and SBE-FPs if we
discover circumstances that pose an unacceptable risk to the accuracy
of FFE or SBE-FP eligibility determinations, operations, applicants, or
enrollees under Sec. 155.220(k)(3). We continue to believe that all of
these policies will enhance agent, broker, and web-broker
accountability and public trust in the FFEs and SBE-FPs and reduce the
risk of misconduct that puts consumers' healthcare coverage at risk.
Comment: We received several comments stating that the
``preponderance of the evidence'' standard is too demanding of an
evidentiary standard to use to assess potential noncompliance by
agents, brokers and web-brokers. In particular, commenters asserted
that adopting the ``preponderance of the evidence'' standard would make
it too easy for CMS to terminate agent, broker, and web-broker Exchange
agreements, punish agents, brokers, and web-brokers for ``minimal''
errors, eliminate agent, broker, and web brokers' due process rights,
and deprive agents, brokers, and web-brokers of their livelihoods.
Response: We disagree with comments asserting that the proposed
standard is inappropriate for use in our termination for cause
framework under Sec. 155.220(g)(1) through (3). As we explained
previously in this final rule and in the proposed rule, in proposing
the preponderance of the evidence standard, we considered how
evidentiary standards have traditionally been used in court cases and
the severity of the potential consequences involved in our termination
for cause standards framework in Sec. 155.220(g)(1) through (3),
including those consequences' impact on the ability of agents, brokers,
and web-brokers to assist consumers with enrollment in coverage through
the FFEs and SBE-FPs. 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. Between
those two 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,''
[[Page 27101]]
and the ``substantial evidence'' standard, which means such relevant
evidence as a reasonable mind might accept as adequate to support a
conclusion. In the proposed rule, we explained--and we continue to
believe--that the preponderance of the evidence standard is appropriate
in our termination for cause framework under Sec. 155.220(g)(1)-(3)
because it is the standard used in most Federal civil cases and
administrative proceedings.
In addition, using the preponderance of the evidence standard will
ensure that when an agent, broker, or web-broker is subject to
enforcement action under Sec. 155.220(g)(3)(i), CMS will generally
terminate their Exchange agreements unless the evidence they submit to
resolve the matter to CMS' satisfaction consists of proof that,
compared with the evidence supporting CMS' determination of a specific
finding or pattern of noncompliance that is sufficiently severe, leads
to the conclusion that the agent, broker, or web-broker was more likely
than not compliant with applicable law, regulatory requirements, and
the terms and condition of their Exchange agreements. This will help
ensure that agents, brokers, and web-brokers are held accountable for
noncompliance with applicable law, regulatory requirements, and the
terms and condition of their Exchange agreements, prevent agents,
brokers, and web-brokers who are noncompliant from assisting consumers
with enrollment in coverage through the FFEs and SBE-FPs, and support
consistent decision-making in our enforcement actions under Sec.
155.220(g)(1) through (3).
With respect to commenters' points that this evidentiary standard
will punish agents, brokers, and web-brokers for ``minimal'' errors and
deprive them of their livelihoods, we remind commenters that CMS only
takes enforcement action under Sec. 155.220(g)(3)(i) when, in its
determination, an agent, broker, or web-broker's conduct reflects a
specific finding of noncompliance or pattern of noncompliance that is
sufficiently severe, and an agent, broker, or web-broker may be
determined noncompliant only if CMS finds that they violated applicable
law, regulatory requirements, or the terms and condition of their
Exchange agreements.\71\
---------------------------------------------------------------------------
\71\ See Sec. 155.220(g)(1) and (2).
---------------------------------------------------------------------------
As to commenters' claim that this evidentiary standard eliminates
agents, brokers, and web-brokers' due process rights, we remind
commenters that this policy only finalizes an evidentiary standard used
in enforcement actions under Sec. 155.220(g)(1) through (3). When an
agent, broker, or web-broker is subject to enforcement action under
Sec. 155.220(g)(3)(i), CMS will notify the agent, broker, or web-
broker of the specific finding of noncompliance or pattern of
noncompliance made under paragraph (g)(1) of this section, and the
agent, broker, or web-broker has 30 days from the date of the notice to
resolve the matter to CMS' satisfaction. If the agent, broker, or web-
broker does not submit rebuttal evidence resolving the matter to CMS'
satisfaction and CMS terminates their Exchange agreements under Sec.
155.220(g)(3)(i), the agent, broker, or web-broker has the right to
submit a request for reconsideration to the CMS Administrator within 30
calendar days of the written notice from CMS.\72\ The CMS Administrator
will provide the agent, broker, or web-broker with a written notice of
the reconsideration decision within 60 calendar days of the date the
CMS Administrator receives the request for reconsideration, and this
decision will constitute the agency's final determination.\73\ Use of
the ``preponderance of the evidence'' standard to determine whether an
agent, broker, or web-broker violated applicable law, regulatory
requirements, or the terms and condition of their Exchange Agreement(s)
does not alter this existing rebuttal and appeal framework.\74\
---------------------------------------------------------------------------
\72\ See Sec. 155.220(h)(1) and (2).
\73\ See Sec. 155.220(h)(3).
\74\ See Sec. 155.220(g)(2).
---------------------------------------------------------------------------
Comment: We received several comments stating that the
preponderance of the evidence standard is too lenient of an evidentiary
standard for CMS to use in assessing potential noncompliance by agents,
brokers, and web-brokers under Sec. 155.220(g)(1) through (3). Some
commenters claimed that lowering evidentiary standards helps agents,
brokers, and web-brokers exploit consumers by reducing the number of
noncompliant agents, brokers, and web-brokers whose Exchange Agreements
are suspended and/or terminated. Further, some commenters asserted that
this standard weakens accountability and makes it more difficult to
prevent noncompliant agents, brokers, and web-brokers from assisting
consumers with enrollment through the FFEs and SBE-FPs. Some commenters
suggested that HHS should use a ``beyond a reasonable doubt'' or other
stricter standard. One commenter asserted that the proposed evidentiary
standard lacks strength because it relies on what a ``prudent'' person
would do.
Response: We disagree with comments asserting that the proposed
standard is too lenient, risks endangering consumers, or weakens agent,
broker, and web-broker accountability. We refer commenters to previous
responses to comments in this section of this final rule for detailed
discussions on these issues, including our explanation of why we
continue to believe the ``preponderance of the evidence'' standard is
appropriate for us to use to assess potential noncompliance by agents,
brokers, and web-brokers under Sec. 155.220(g)(1) through (3).
Comment: A few commenters stated applying a ``preponderance of the
evidence'' standard will increase agent, broker, and web-broker
scrutiny, leading to a reduction in the number of agents, brokers, and
web-brokers who will be willing to assist consumers with enrollment
through the SBE-FPs and FFEs in the future.
Response: We believe that adoption of the ``preponderance of the
evidence'' standard is unlikely to increase agent, broker, and web-
broker scrutiny in a manner that will reduce the number of agents,
brokers, and web-brokers willing to assist consumers with enrollment
through the SBE-FPs and FFEs in the future. As we explained previously
in this final rule, in proposing the preponderance of the evidence
standard, we considered how evidentiary standards have traditionally
been used in court cases and the severity of the potential consequences
involved in our termination for cause standards framework in Sec.
155.220(g)(1) through (3), including those consequences' impact on the
ability of agents, brokers, and web-brokers to assist consumers with
enrollment in coverage through the FFEs and SBE-FPs. We considered but
declined to adopt several evidentiary standards that demanded that
agents, brokers, and web-brokers subject to enforcement action under
Sec. 155.220(g)(1) through (3) meet a higher evidentiary bar, and we
decided that the preponderance of the evidence standard is appropriate
in our termination for cause framework under Sec. 155.220(g)(1)
through (3) because it is the standard used in most Federal civil cases
and administrative proceedings.
In addition, as we explained previously in this final rule, our
adoption of the ``preponderance of the evidence'' standard will enhance
transparency for agents, brokers, and web-brokers and enhance public
trust in the FFEs and SBE-FPs, which in turn may spur consumers to
enroll in coverage through the FFEs and SBE-FPs with the assistance of
agents, brokers,
[[Page 27102]]
and web-brokers. We believe that this increased transparency for
agents, brokers, and web-brokers and improved public trust are likely
to encourage agents, brokers, and web-brokers to continue assisting
consumers with enrollment through the FFEs and SBE-FPs.
Comments: Some commenters suggested that applying a ``preponderance
of the evidence'' standard will increase the cost of healthcare, limit
availability for vulnerable populations, and increase discrimination
against consumers. Commenters also suggested that States should have
sole jurisdiction to agent, broker, and web-broker oversight.
Response: We disagree with comments asserting that applying a
preponderance of the evidence standard in the context of enforcement
actions under Sec. 155.220(g)(1) through (3) will increase the cost of
healthcare, limit availability for vulnerable consumers, or increase
discrimination. The proposed ``preponderance of the evidence'' standard
will have no direct effect on the pricing or availability of health
insurance available to consumers in FFE and SBE-FP States.\75\ If
commenters intended to suggest that use of the ``preponderance of the
evidence'' standard will deter agents, brokers, and web-brokers from
assisting consumers with enrollment through the FFEs and SBE-FPs and
thereby reduce healthcare accessibility and affordability and increase
discrimination, we refer commenters to previous discussion in this
section of this final rule explaining our belief that adopting the
``preponderance of the evidence'' standard in enforcement actions under
Sec. 155.220(g)(1) through (3) is likely to encourage agents, brokers,
and web-brokers to continue assisting consumers with enrollment through
the FFEs and SBE-FPs.
---------------------------------------------------------------------------
\75\ See Sec. 156.255(b).
---------------------------------------------------------------------------
We remind commenters that section 1312(e) of the ACA states the
Secretary shall establish procedures under which a State may allow
agents or brokers (1) 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 (2) to assist individuals in
applying for premium tax credits and cost-sharing reductions for plans
sold through an Exchange. Section 1321(a)(1) of the ACA authorizes the
Secretary to promulgate regulations for meeting the requirements of
Title I of the ACA (which includes section 1312 of the ACA) with
respect to the establishment and operation of Exchanges, the offering
of QHPs through such Exchanges, and such other requirements as the
Secretary determines appropriate. Finally, Section 1313(a)(5)(A) of the
ACA directs the Secretary to provide for the efficient and non-
discriminatory administration of Exchange activities and implement any
measure or procedure the Secretary determines is appropriate to reduce
fraud and abuse in the administration of Title I of the ACA.
After consideration of comments received, we are finalizing as
proposed our proposal to permanently revise Sec. 155.220(g)(2) 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) through (3), and our
proposal to add a definition of ``preponderance of the evidence'' to
Sec. 155.20.
3. Annual Eligibility Redetermination (Sec. 155.335)
In the 2025 Marketplace Integrity and Affordability proposed rule
(90 FR 12969 through 12973), we proposed 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
proposed 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 dollar 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 proposed 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 proposed at new Sec. 155.335(n)(2) that the
State Exchanges must implement it starting with annual redeterminations
for benefit year 2027. We are finalizing this proposal with
modifications.
In the proposed rule (90 FR 12969), we stated that we recognize
that $5 may not provide a meaningful enough incentive for individuals
to re-confirm their income and plan and, as such, sought comment on
other options available to us to ensure program integrity in re-
enrollments. As discussed in the proposed rule and this preamble, we
stated that 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 sought
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 sought 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
sought 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 the proposed rule and this final rule, we discussed
the dramatic increase in the number of improper enrollments in QHPs
with APTC through the FFEs and SBE-FPs.
[[Page 27103]]
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
present 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 PTC for certain consumers,\76\ 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.
---------------------------------------------------------------------------
\76\ Section 1401 of the ACA; Sec. 36B(f)(2)(B) of the Code.
---------------------------------------------------------------------------
The expansion of tax credits under the ARP \77\ and IRA,\78\
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,
as demonstrated in Table 14, there are millions of people improperly
enrolled in fully-subsidized QHPs, and therefore temporary action to
ensure these individuals are properly enrolled in a QHP that they are
eligible for is a necessary consumer protection.
---------------------------------------------------------------------------
\77\ Public Law 117-2.
\78\ Public Law 117-169.
---------------------------------------------------------------------------
That said, the expiration of the enhanced premium tax credits will
dramatically reduce the number of individuals eligible for fully-
subsidized plans and anyone being automatically re-enrolled into a
silver plan will almost assuredly be required to pay a premium once the
enhanced tax credits expire. While one-time action to ensure fully-
subsidized automatic re-enrollees update or confirm their application
information or else pay a $5 monthly premium is necessary to shed
improper and fraudulent enrollments, we do not believe the ongoing
burden associated with this policy is justified by its benefits if
fully-subsidized benchmark plans are not widely available. Therefore,
we are finalizing this policy for Exchanges on the Federal platform for
PY 2026 only.
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 dollar 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
enhanced APTCs, fully-subsidized plans, and automatic re-enrollments,
as previously outlined in the proposed rule (90 FR 12970), we sought
comment on these proposals once again. We also stated that we would
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 OEP are extensive and
already successfully prompt over half of re-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 stated in the
proposed rule that 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 sought comment on
this idea.
Instead, we stated in the proposed rule (90 FR 12970) that 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
[[Page 27104]]
premium payment or re-confirming their plan choice altogether. We
stated that 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 the proposed rule, we proposed 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 stated in the proposed rule that we believe that
this approach would create undue financial hardship for these enrollees
and act as a significant barrier to accessing health coverage. We also
stated that we 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 sought 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
proposed an amount of $5, which we stated in the proposed rule (90 FR
12970) that 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 stated in the proposed rule (90 FR 12970) that 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. We stated that 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 stated in the proposed rule (90 FR 12970) that 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.
We sought comment on this proposal. Specifically, we sought comment
on whether an amount other than $5 would better address the program
integrity concerns we have described. In addition, we sought 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. Researchers regularly
track and study the ``Medicaid undercount'' which represents the
difference in actual Medicaid enrollments to what people report on
Census surveys.\79\ 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 1 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 the FPL who likely qualify for
CSRs. The undercount for these consumers grew from 33 percent in 2021
to 57 percent in 2024.
---------------------------------------------------------------------------
\79\ 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.
Table 1--CPS Undercount of CSR and APTC Subsidized Coverage
--------------------------------------------------------------------------------------------------------------------------------------------------------
CPS current subsidized exchange CMS effectuated enrollment CSR and APTC undercount
coverage (March supplement) (February) ---------------------------
--------------------------------------------------------------------
Subsidized <250% Subsidized CSR (%) APTC (%)
of the FPL total Feb CSR Feb APTC
--------------------------------------------------------------------------------------------------------------------------------------------------------
2019.................................................... 3,750,261 7,055,972 5,468,004 9,250,243 -31 -24
2020.................................................... 2,896,282 6,292,926 5,348,201 9,232,225 -46 -32
2021.................................................... 3,663,155 7,335,480 5,449,070 9,722,533 -33 -25
[[Page 27105]]
2022.................................................... 3,693,063 7,652,083 6,788,231 12,483,707 -46 -39
2023.................................................... 3,799,900 7,789,723 7,566,232 14,295,339 -50 -46
2024.................................................... 4,441,847 9,562,392 10,395,544 19,306,162 -57 -50
--------------------------------------------------------------------------------------------------------------------------------------------------------
Methodology: This table reports subsidized Exchange enrollment estimates from the U.S. Census CPS, including coverage estimates for people with incomes
less than 250 percent of the FPL who are more likely to be eligible for CSR subsidies. The CPS is generally completed in March which provides a point
in time estimate of insurance coverage. The final two columns report the CPS undercount of the actual CSR and APTC enrollment which equals the CPS
estimate minus effectuated enrollment divided by effectuated enrollment.
Sources: CMS, Effectuated Enrollment; and U.S. Census, Current Population Survey Annual Social and Economic Supplement.
Table 2 draws a similar comparison between the reported level of
Exchange coverage on the National Health Interview Survey (NHIS) \80\
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.
---------------------------------------------------------------------------
\80\ OMB Control Number 0920-0214.
Table 2--NHIS Coverage Undercount
[In millions]
----------------------------------------------------------------------------------------------------------------
People reporting Average monthly
QHP coverage at effectuated Undercount (%)
time of interview enrollment
----------------------------------------------------------------------------------------------------------------
2019..................................................... 10 9.8 2.0
2020..................................................... 10.1 10.3 -1.9
2021..................................................... 11.6 11.7 -0.9
2022..................................................... 11.6 13.5 -14.1
2023..................................................... 13 16.1 -19.3
2024 (1st Qtr)........................................... 16.6 * 20.8 -20.2
----------------------------------------------------------------------------------------------------------------
* February effectuated enrollment.
Sources: CMS, Effectuated Enrollment; and Centers for Disease Control and Prevention, National Health Interview
Survey.
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.\81\ Some of these people may have confused
their Medicaid coverage for Medicare or Exchange coverage. But these
findings suggest that 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.
---------------------------------------------------------------------------
\81\ 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 \82\ had
multiple types of coverage, up from 27.7 million people in 2022 \83\
and 18 million in 2021.\84\ 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--as a result of the enhanced premium tax credits--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,\85\ employed,\86\ at
higher income levels overlapping with APTC income
[[Page 27106]]
eligibility levels,\87\ and qualify for automatic re-enrollment.\88\
The fully-subsidized nature of this group, under the enhanced premium
tax credits, furthers these comparisons. 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.\89\ 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.\90\ Similar to the Medicaid
continuous coverage condition, Federal policy regarding subsidized QHP
coverage changed in response to the COVID-19 PHE in a manner that
increased the risk of people remaining enrolled in fully-subsidized QHP
without their knowledge. The expansion of eligibility to a fully-
subsidized QHP in combination with the current Exchange annual
eligibility redetermination process substantially increased the number
of people with a fully-subsidized QHP able to remain continuously
enrolled in a QHP from year to year without taking any action.\91\ The
2022 OEP was the first year where people with fully--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 stated in the
proposed rule (90 FR 12971) that we believe the ARP's expansion of
fully-subsidized QHP coverage in combination with the existing annual
eligibility redetermination process that does not require the
enrollees' acknowledgement or active participation, increases the risk
that ineligible consumers without knowledge of their enrollments will
remain enrolled, improperly increases Federal APTC expenditures.
---------------------------------------------------------------------------
\82\ Congressional Budget Office, (2024, 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.
\83\ 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.
\84\ 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.
\85\ 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/.
\86\ 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/.
\87\ 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/; 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/.
\88\ 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.
\89\ Public Law 117-2.
\90\ 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.
\91\ 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).
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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 we
stated in the proposed rule (90 FR 12971) is clearly a program
integrity issue. To address this issue, we stated that 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 sought comment on this proposal.
After consideration of comments and for the reasons outlined in the
proposed rule and this final rule, including our responses to comments,
we are finalizing this policy for Exchanges on the Federal platform for
PY 2026. We think this policy represents an important program integrity
measure to help the Exchanges on the Federal platform shed improper and
fraudulent enrollments in the currently fully-subsidized QHP cohort of
enrollees, which is highly concentrated in Exchanges on the Federal
platform. Given the appreciably smaller estimates of improper
enrollments on State Exchanges, coupled with our belief that this
policy will help Exchanges shed holdover improper and fraudulent
enrollments associated with fully-subsidized QHPs, we are not
finalizing a parallel requirement for State Exchanges. After further
evaluation and considering public comments on this proposal discussed
later in this section, the Department has determined the burden this
policy would have imposed on State Exchanges would not be worth it
given that State Exchanges could not implement the policy before PY
2027, long after the expiration of the enhanced premium tax credits.
For these reasons, we are finalizing this policy for PY 2026 only for
Exchanges on the Federal platform, with a reversion to the previous
policy for PY 2027 and beyond.
We also clarify this policy applies when an applicable enrollee
does not submit an application for an updated eligibility determination
specifically for the immediately forthcoming coverage year by the
deadline to select a plan for January 1, 2026, coverage specified only
at Sec. 155.410(f) (and not at Sec. 155.420(b) as proposed).
Therefore, we are finalizing the following: When an enrollee does not
submit an application for an updated eligibility determination for the
immediately forthcoming coverage year (2026) by the last day to select
a plan for January 1, 2026, coverage, and the enrollee's portion of the
premium for the entire policy would be zero dollars after application
of APTC, Exchanges on the Federal platform 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 until the enrollee confirms or
updates the information relevant to their annual redetermination of
eligibility. Consistent with 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 application at any point to
confirm information relevant to their annual redetermination for APTC
and confirm their plan to reinstate the full amount of APTC for which
they are eligible on a prospective basis.
We sought comment on whether the $5 amount would provide enough
incentive for fully-subsidized individuals to confirm their information
and whether fully-subsidized individuals should be re-enrolled without
any APTC. We sought comment on other options available to us to ensure
program integrity in re-enrollments. We sought comment on whether
program integrity concerns outweigh the benefit of permitting Exchanges
to automatically re-enroll consumers at all.
We summarize and respond to public comments received on this
proposed annual redetermination policy below.
Comment: Some commenters generally supported this proposal. Many
[[Page 27107]]
of these commenters stated that this proposal would require fully-
subsidized enrollees to confirm their information, which would
incentivize these enrollees to actively enroll, receive updated
eligibility determinations, and discourage improper and fraudulent
enrollments that undermine program integrity. Some commenters stated
that this proposal would help protect consumers from APTC repayment by
requiring their confirmation or updated eligibility information.
However, several of these commenters proposed additional
recommendations: delay the effective date to PY 2027 to ensure
Exchanges and issuers have sufficient time to educate enrollees and
develop, test, and implement necessary changes; and preserve an OEP
from November 1 to January 15 so that individuals impacted by this
proposal have sufficient time to actively re-enroll.
Response: We appreciate these comments in support of the proposal
and acknowledge commenters' concerns regarding the proposed change. We
note that an effective date in PY 2026 provides sufficient time for
Exchanges on the Federal platform to educate enrollees through updated
notices (for example, Marketplace Open Enrollment Notice and
Marketplace Automatic Enrollment Confirmation Message),\92\ which are
sent before and during Open Enrollment. Exchanges on the Federal
platform will also provide robust training and technical assistance to
interested parties, including agents, brokers, assisters, navigators,
and issuers, so they can assist enrollees in understanding the proposed
change.
---------------------------------------------------------------------------
\92\ Samples of PY 2025 notices can be found here https://www.cms.gov/marketplace/in-person-assisters/applications-forms-notices/notices. CMs will revise this page with updated samples for
PY 2026.
---------------------------------------------------------------------------
For reasons stated in this final rule, the proposal to shorten the
OEP at III.B.7. is finalized with modifications. The changes to the OEP
will take effect beginning with the OEP for PY 2027 and the rule will
provide flexibility for Exchanges within set parameters. Because the
proposal to shorten the OEP will not be implemented in PY 2026, and
this policy at 45 CFR 155.335 (a)(3) and (n) will only be effective for
PY 2026, enrollees and other interested parties will have sufficient
time to take the required action to avoid the $5 monthly premium.
Comment: Most commenters opposed the proposal. Many of these
commenters stated the proposal is likely to cause a decrease in
enrollment as some low-income enrollees will be terminated due to non-
payment of the $5 premium. Generally, commenters believed the proposal
would compromise the Exchange risk pool because younger and healthier
individuals are most likely to lose coverage, which will ultimately
discourage carrier participation and lead to higher premiums. Some
cited data showing that a nominal monthly payment causes coverage
losses specifically for younger enrollees.93 94 A few
commenters cited research on Massachusetts' pre-ACA exchange, which
found that consumers who were passively enrolled into fully-subsidized
plans were younger and healthier (44 percent lower medical spending per
month).95 96 A few commenters opposed the proposal because
they do not believe it achieves the stated objective of reducing
improper enrollments. These commenters stated that an agent or broker
could update the application by the applicable deadlines to continue an
improper fully-subsidized premium enrollment. Many commenters cited
other program integrity measures that they believe are sufficient to
safeguard against errors in Federal spending without undue risk of
coverage losses, such as the 1-year FTR policy in the proposed rule,
income verification, periodic data matching, and APTC reconciliation.
Some of these commenters believe HHS should directly address agent and
broker fraud in the Exchanges on the Federal platform rather than
imposing this requirement on consumers.
---------------------------------------------------------------------------
\93\ The Effects of Premiums and Cost Sharing on Low-Income
Populations: Updated Review of Research Findings. Samantha Artiga,
Petry Ubri, and Julia Zur. Kaiser Family Foundation. https://www.kff.org/medicaid/issue-brief/the-effects-of-premiums-and-cost-sharing-on-low-income-populations-updated-review-of-research-findings/view/footnotes/#footnote-220856-94?.
\94\ McIntyre A, Shepard M, Layton TJ. Small Marketplace
Premiums Pose Financial and Administrative Burdens: Evidence from
Massachusetts, 2016-17. Health Affairs. Published online January 8,
2024.
\95\ Automatic Insurance Policies--Important Tools for
Preventing Coverage Loss, Adrianna McIntyre, Ph.D., M.P.H., M.P.P.,
and Mark Shepard, Ph.D. https://www.nejm.org/doi/full/10.1056/NEJMp2114189.
\96\ Do Ordeals Work for Selection Markets? Evidence from Health
Insurance Auto-Enrollment by Mark Shepard and Myles Wagner, June 7,
2024. https://scholar.harvard.edu/files/mshepard/files/shepard_wagner_autoenrollment.pdf.
---------------------------------------------------------------------------
Response: We acknowledge these comments in opposition to the
proposal. While other program integrity measures also safeguard against
errors in Federal spending, we maintain that this policy change is
necessary in 2026 to ensure the fully-subsidized population confirms or
updates their information, which will help lower the currently high
level of improper enrollments and dual enrollment in the Exchanges on
the Federal platform with financial assistance and other minimum
essential coverage, such as Medicaid or employer sponsored coverage,
that persist through the annual redetermination and re-enrollment
specifically. After considering these comments, we believe that an
ongoing requirement is likely unnecessary as once the level of improper
enrollments is reduced and the amount of fully-subsidized plans has
decreased, the incentive and opportunity for ongoing improper and
fraudulent enrollments is substantially lower, and the burdens
associated with this policy are not justified by its benefits.
Therefore, we are finalizing this policy for PY 2026 only.
With respect to the amount, we believe $5 is a nominal amount that
sufficiently balances requiring action by the enrollee without the risk
of undue financial hardship that a greater amount could cause. These
enrollees will be incentivized to return to an Exchange, evaluate
available coverage options and premiums, and make an active enrollment
decision. We therefore anticipate that this policy will lead to better
matches between consumers' coverage preferences and available coverage
offerings in the individual market.
We do not anticipate the Exchange risk pool will be compromised as
this policy retains automatic re-enrollment while introducing a nominal
premium amount to encourage active consumer engagement for the fully-
subsidized population. We believe $5 does not risk undue financial
hardship and that fully-subsidized enrollees will be incentivized to
actively enroll or make a refundable $5 payment, rather than be dropped
from Marketplace coverage, due to this policy.
Exchanges on the Federal platform will educate enrollees through
updated notices (for example, Marketplace Open Enrollment Notice and
Marketplace Automatic Enrollment Confirmation Message),\97\ and issuers
can update their discontinuation and renewal notices with information
about this change. Exchanges on the Federal platform will also provide
robust training and technical assistance to interested parties,
including agents, brokers, assisters, navigators, and issuers, so they
can assist enrollees in understanding the proposed change and continue
coverage as needed.
---------------------------------------------------------------------------
\97\ Samples of PY 2025 notices can be found here https://www.cms.gov/marketplace/in-person-assisters/applications-forms-notices/notices. CMS will revise this page with updated samples for
PY 2026.
---------------------------------------------------------------------------
We note that Sec. 155.220(j)(2)(iii) and (l) require agents,
brokers, and web-brokers who are assisting with consumer
[[Page 27108]]
enrollments through the Exchanges on the Federal platform to obtain and
document consumer consent before making an application or enrollment
update on behalf of the consumer, a measure intended to ensure that
consumer information is accurate. We also established procedures under
Sec. 155.220(g) for HHS to suspend or terminate an agent's, broker's,
or web-broker's Exchange agreement(s) in circumstances that involve
certain fraudulent or abusive conduct or where there are sufficiently
severe findings of non-compliance. We also established other standards
of conduct under Sec. 155.220(j) for agents, brokers, and web-brokers
that assist consumers with enrolling in coverage through the FFEs to,
protect consumers and ensure the proper administration of the FFEs, and
under Sec. 155.220(l) we extended this standard to agents, brokers,
and web-brokers who assist consumers with enrollment through the SBE-
FPs. CMS will continue to monitor and take enforcement action in
response to any agent, broker, or web-broker activity that is deemed to
be non-compliant under Sec. 155.220(g)(2).
Comment: Several commenters opposed the proposal because they
believe the $5 amount would be insufficient to incentivize individuals
to confirm their eligibility information and that agents would pay the
$5 premium on behalf of the enrollee or offer inducements to the
enrollee such that the enrollee pays the $5. One commenter also opposed
the proposal because they believe that fraud is not limited to fully-
subsidized plans.
Response: Data supports the conclusion that lower income enrollees
who may be eligible for zero-dollar premium plans after application of
APTC are price sensitive.\98\ We cannot be certain that $5 is the best
amount to produce the desired outcome. However, after consideration of
higher and lower amounts, we concluded $5 was a reasonable amount to
encourage most low-income enrollees to act without being cost
prohibitive such that it prevents their action. In other words, low-
income enrollees who are price sensitive may interpret an invoice with
a larger premium payment as insurmountable and choose not to take
action to update their information to see if they can lower the bill
nor pay the bill because they can't afford it. Therefore, we finalize
this $5 amount to prompt enrollees to act while also balancing debt
consideration for low-income enrollees if they don't act. We are
finalizing this provision for Exchanges on the Federal platform for PY
2026 only.
---------------------------------------------------------------------------
\98\ See, e.g., The Effects of Premiums and Cost Sharing on Low-
Income Populations: Updated Review of Research Findings. Samantha
Artiga, Petry Ubri, and Julia Zur. Kaiser Family Foundation. https://www.kff.org/medicaid/issue-brief/the-effects-of-premiums-and-cost-sharing-on-low-income-populations-updated-review-of-research-findings/view/footnotes/#footnote-220856-94?. McIntyre A, Shepard M,
Layton TJ. Small Marketplace Premiums Pose Financial and
Administrative Burdens: Evidence from Massachusetts, 2016-17. Health
Affairs. Published online January 8, 2024. Automatic Insurance
Policies--Important Tools for Preventing Coverage Loss, Adrianna
McIntyre, Ph.D., M.P.H., M.P.P., and Mark Shepard, Ph.D. https://www.nejm.org/doi/full/10.1056/NEJMp2114189. Do Ordeals Work for
Selection Markets? Evidence from Health Insurance Auto-Enrollment by
Mark Shepard and Myles Wagner, June 7, 2024. https://scholar.harvard.edu/files/mshepard/files/shepard_wagner_autoenrollment.pdf.
---------------------------------------------------------------------------
Additionally, our experience investigating improper enrollments by
agents, brokers, and web-brokers does not suggest that these entities
commonly enroll consumers in non-zero plans by paying premiums on their
behalf. Doing so would reduce the profit available to the agent,
broker, or web-broker from commissions, as well as increase the risk of
being discovered as engaging in unauthorized activity (for example,
because an issuer could identify if payment was made using a check or
credit card belonging to the agent, broker, or web-broker). Rather,
improper enrollments typically involve agents, brokers, or web-brokers
enrolling consumers in fully-subsidized plans without their knowledge
or consent. Therefore, we believe it is appropriate to target this
proposal to fully-subsidized enrollments, where we know unauthorized
activity by agents, brokers, and web-brokers is most likely.
Comment: Many commenters requested that State Exchanges be excluded
from this proposal because State Exchanges are less likely to have
fraudulent and improper enrollment compared to Exchanges on the Federal
platform and because they believe States are best positioned to
evaluate whether updates to the redetermination process are necessary
for their Exchange. Many of these commenters stated that State
Exchanges have sufficient verification safeguards in place due to
State-specific data for eligibility verification and closer oversight,
and a few commenters stated that State Exchanges have more robust
system controls to prevent fraudulent activity than the Exchanges on
the Federal platform, all of which they stated contributes to low
instances of fraud and improper enrollment. Commenters requested that
States retain flexibility to implement alternative policies and
procedures to improve consumer awareness of their options for renewal.
Commenters stated that State Exchange operations related to this
proposal would be costly and some could not implement the proposal
based on the proposed timeline. One State Exchange commented that all
of the enrollees in their State already have a non-zero premium after
their full APTC amount is applied. We received three comments from
State Exchanges noting the numerous program integrity safeguards they
currently have in place as part of their annual redetermination and re-
enrollment processes that minimize their risks for unauthorized
enrollments, such as their use of approved state-based data sources,
which supplement the required Federal data sources to verify consumer
eligibility, and the timing and specificity of their redetermination
and re-enrollment notices.
Response: We appreciate these comments. As described above, we are
not finalizing these requirements for State Exchanges. Much of the
concerning improper and fraudulent enrollment is concentrated on
Exchanges on the Federal platform. Given the temporary nature of the
policy and burdens this requirement would put on State Exchanges, we
are exempting them from the requirement.
Comment: Many commenters requested that HHS delay implementation to
PY 2027 or later to evaluate whether the policy is necessary after
implementing other program integrity measures in this rule and after
expiration of the enhanced PTC. Some commenters stated this proposal is
not worth the cost to implement if the enhanced PTCs expire because
relatively few enrollees will qualify for a zero-dollar premium. One
commenter asked HHS to collaborate with issuers to design an
implementation that avoids administrative costs and minimizes consumer
confusion.
Response: We appreciate these comments and are only finalizing this
requirement for PY 2026 for Exchanges on the Federal platform. We
understand there will be fewer consumers eligible for fully-subsidized
QHPs after the expiration of the enhanced PTCs than are eligible for
fully-subsidized QHPs now and, as such, do not believe that the ongoing
burden associated with this policy is justified by its benefits once
the Exchanges shed the improper enrollments associated with fully-
subsidized QHPs.
Comment: Many commenters questioned the statutory authority
Exchanges have to reduce the amount of APTC used toward an enrollee's
coverage. These commenters believe the ACA does not provide any
construct for Exchanges to take independent action to
[[Page 27109]]
adjust the tax credit based on policy preferences and expressed concern
that Exchanges may arbitrarily interfere with qualified individuals'
access to the full amount of the APTC. Many of these commenters stated
that the Exchange must permit a qualified individual to use their tax
credit in advance and must act as a facilitator of the tax credit once
the qualified individual is determined eligible based on statutory
criteria. Commenters believed that section 36B of the Code defines the
criteria for APTC and HHS did not consider necessary modifications to
that part of the law.
Some commenters believed that after an individual is determined as
qualifying for APTC under section 1411 of the ACA, section 1412 compels
the Federal government to pay APTC using the calculation of PTC rules
in section 36B of the Code. They argued this means it is mandatory to
pay the full amount of APTC for which the individual qualifies.
A few commenters believed that section 1411(f)(1)(B) of the ACA
does not give HHS the authority to withhold APTC it is legally
obligated to pay on behalf of every individual who is automatically re-
enrolled without a redetermination finding that they are not entitled
to the full APTC amount. The commenters believed that withholding
payment is not a procedure to redetermine eligibility, and therefore,
this proposal exceeds statutory authority.
One commenter stated that the proposal conditioning re-enrollment
on the $5 enrollee premium contravenes guaranteed availability
established by Vermont State law.
Another commenter stated this policy will be subject to litigation
and will result in wasteful government spending that could be avoided
by not finalizing the policy.
Response: We believe we have authority under the ACA to implement
this provision. Section 1411(f)(1)(B) directs the Secretary to
establish procedures by which it ``redetermines eligibility on a
periodic basis in appropriate circumstances.'' We believe that recent
history of improper enrollments in unsubsidized plans is an appropriate
circumstance to temporarily require that the amount of PTC paid in
advanced to be reduced by $5, unless and until an enrollee verifies
their eligibility for a fully-subsidized premium. We emphasize that 45
CFR 155.335(n) would not independently reduce the amount of PTC an
enrollee is eligible for under section 36B of the Code, but rather
would reduce the amount of PTC paid in advance.
Comment: A few commenters shared that this proposal would result in
additional administrative steps for agents and brokers, resulting in
slower transaction times by agents and brokers and increased demand for
their services in a condensed period of time if the OEP is shortened to
November 1 through December 15.
Response: We acknowledge commenters' feedback. As stated above, we
are finalizing this policy for Exchanges on the Federal platform for PY
2026 only, and the changes to the OEP at III.B.7. do not take effect
until PY 2027. Therefore, agents and brokers will have sufficient time
to help enrollees take the required action to avoid the $5 monthly
premium.
Comment: A few commenters stated that consumer outreach is
essential and that they would like more information from HHS about how
enrollees will be informed of their individual responsibility amount.
Response: We agree with the commenters and will provide more
information about consumer outreach through existing interested party
forums, which include assister, agent and broker, navigator and issuer
trainings.
Comment: Commenters offered the following operational suggestions
if this policy is finalized as proposed: simplify the annual renewal
process by allowing enrollees to confirm their eligibility information
without having to recomplete the entire application; permit EDE
partners to offer new features to support the active renewal process;
provide information about re-enrollees to EDE partners so EDE partners
and their agent and broker users can assist in outreach to enrollees
who have a new financial obligation as a result of this proposal; and
ensure income updates are effective on the first of the following month
to limit the financial impact for enrollees subject to this proposal.
Response: We appreciate these suggestions and will consider them as
we develop IT changes for this policy. We note that some EDE partners
already simplify the annual renewal process by allowing agents and
brokers to confirm an enrollee's eligibility information without having
to click through the entire application. EDE partners may be approved
by CMS to offer new features to support the active renewal process; EDE
partners already have information about how to submit proposed features
for CMS review and approval. We will evaluate whether more information
about re-enrollment can be provided to EDE partners and their agent and
broker users for their outreach purposes. We will ensure interested
parties understand applicable effective dates for changes submitted by
consumers.
Comment: A commenter recommended that HHS encourage State Exchanges
to implement EDE. EDE is predominantly a pathway to service agents and
brokers who assist consumers with Exchange enrollment, so this
commenter is recommending HHS encourage State Exchanges to implement
EDE, thereby increasing their agent and broker service capabilities to
meet increased consumer support needs resulting from this policy.
Response: State Exchanges presently have the option to implement
EDE (see 45 CFR 155.221(j)) and may make the decision to do so based on
the needs of consumers in their State. HHS currently provides technical
assistance to State Exchanges interested in the EDE model. State
Exchanges are exempt from the requirement being finalized at 45 CFR
155.335(a)(3) and (n).
Comment: Commenters recommended HHS finalize different premium
amounts other than the proposed $5. A few commenters suggested that if
HHS moves forward with the proposal, it should be less than $5, such as
$1. A few commenters suggested that if HHS moves forward with the
proposal, it should be more than $5 but did not specify an amount. One
commenter believed the amount should be similar to issuers' commission
payments to agents and brokers--such as $25 for the first plan member
and $20 for each additional plan member--to remove the incentive for
third parties to pay the premium amount for the enrollee. However, this
commenter recommended ending APTC altogether for the fully-subsidized
population or for all enrollees who qualify for any amount of APTC
because they believed those proposals would do the most to ensure the
Federal government does not pay excess APTC, and they believed
automatic re-enrollment is detrimental to the quality and price of
health insurance.
Response: As described earlier, our experience investigating
improper enrollments by agents, brokers, and web-brokers does not
suggest that they commonly pay premiums on behalf of enrollees to
secure enrollment. For the reasons described above, we believe $5
sufficiently balances requiring action by the enrollee without the risk
of undue financial hardship a greater amount could cause while the
market adapts to the changing subsidy environment.
Comment: Almost all commenters strongly opposed other ideas we
solicited comments on, such as ending APTC during automatic re-
enrollment
[[Page 27110]]
for enrollees who would otherwise be fully subsidized, and they
robustly supported continuing to permit Exchanges to automatically re-
enroll consumers altogether. These commenters believed automatic re-
enrollment is critical to supporting a strong risk pool and preventing
premium increases. Many commenters believed alternatives such as
removing all APTC or not renewing their coverage at all for individuals
who do not verify their eligibility for full-subsidized coverage would
cause widespread loss of legitimate enrollments that support a healthy
risk pool. Many commenters believed automatic re-enrollment promotes
continuity of coverage and removes unnecessary burden for enrollees who
are satisfied with their health coverage and note it is a standard
practice in the industry. As described above, a few commenters cited
research on Massachusetts' pre-ACA exchange, which found that consumers
who were passively enrolled into fully-subsidized plans were younger
and healthier (44 percent lower medical spending per month) and that
eliminating auto-enrollment for health insurance reduced enrollment by
33 percent and differentially excluded young, healthy, and economically
disadvantaged people.
Response: We appreciate these comments. We are not finalizing the
alternative proposals 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, or to prohibit Exchanges from
automatically re-enrolling consumers. Similar to the commenters, we
believe that these proposals present too great a risk of widespread
coverage loss to legitimate enrollments. To minimize the risk of
disruption while taking a necessary step to shed excess improper
enrollments, we are finalizing this policy for PY 2026 for Exchanges on
the Federal platform only.
4. Annual Eligibility Redetermination (Sec. 155.335(j))
In the 2025 Marketplace Integrity and Affordability proposed rule
(90 FR 12973 through 12974), we proposed 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 policy at Sec. 155.335(j)(4) that 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 sought comment on this proposal, and after consideration of
comments, we are finalizing this policy as proposed. Based on certain
public comments as further discussed below, we also clarify the
flexibility that State Exchanges have regarding the re-enrollment
hierarchy at the discretion of the Secretary per Sec.
155.335(a)(2)(iii). As the re-enrollment hierarchy policy is an
important policy to honor consumer choice, and is not addressing
enhanced-subsidy related improper enrollment, we are finalizing this
policy to be effective for PY 2026 and beyond. We summarize and respond
to public comments below.
Comment: Some commenters supported the proposal and agreed that
removing the option at Sec. 155.335(j)(4) for Exchanges to re-enroll
CSR eligible bronze enrollees into a silver QHP when certain conditions
are met would help preserve consumer choice. Some of these commenters
further stated that consumers select plans for a variety of reasons,
such as affordability, provider network, or health savings account
(HSA) eligibility, and that it is not appropriate to re-enroll them
into a different plan when their current plan remains available in the
coming year, even if the different plan provides higher actuarial value
and the plan change would not result in a change to the consumer's
product or provider network. Several of these commenters also agreed
that removing Sec. 155.335(j)(4) would reduce the risk of unexpected
tax liabilities for bronze enrollees who appear, based on their most
recent household income attestation, to be CSR eligible.\99\ Several
commenters who supported the proposal stated that removing Sec.
155.335(j)(4) would help reduce consumer confusion. A few of these
cited past experiences of consumers' mistaken belief that their health
insurance agent changed their coverage when, in fact, the change was
due to a re-enrollment pursuant to the reenrollment hierarchy at Sec.
155.335(j). Based on these experiences, these commenters believed that
allowing enrollees to stay in the same plan if it continues to be
available unless they actively choose a different option would
significantly reduce complaints and improve transparency. One commenter
who supported the proposal asked that HHS consider delaying this change
to PY 2027 to allow for issuers to incorporate this change into their
product planning and filings.
---------------------------------------------------------------------------
\99\ See discussion in the 2024 Payment Notice (88 FR 25823),
regarding this potential risk in cases where APTC amount is
determined based on inaccurate household income for the future year.
---------------------------------------------------------------------------
Response: We agree with commenters that amending the re-enrollment
hierarchy to remove the option for Exchanges to auto re-enroll bronze
enrollees into a silver plan even when their same bronze plan remains
available helps preserve consumer choice. We also agree with the
commenter who emphasized the role that this final policy will play in
helping reduce consumer confusion, as it aligns with an approach of
preserving consumer choice whenever possible. We strongly agree with
commenters who stated that removing this policy would reduce the risk
of unexpected tax liabilities for bronze enrollees who appear, based on
their most recent household income attestation, to be CSR eligible, and
with those who cited HSA eligibility as a potential factor in bronze
plan selection. Finally, we will not delay this change because, as
noted in the proposed rule (90 FR 13015), we do not anticipate that it
would result in significant burden to issuers, given that, as discussed
in the 2024 Payment Notice (88 FR 25822), Exchanges were primarily
responsible for the policy's implementation.
Comment: Several commenters who supported the proposal also
emphasized the importance of decision support tools to help consumers
select the best plan for themselves and their family's needs. These
commenters stated that enhancing consumer decision support tools could
help consumers understand all aspects of cost-sharing, including
premiums, deductibles, out-of-pocket costs, and become more familiar
with how health insurance coverage works in
[[Page 27111]]
general. Commenters recommended developing more personalized tools to
illustrate individuals' expected health care utilization or
prescription drug needs and to help them use that information to choose
a plan that is best suited to their needs. They also noted that focused
training for navigators, agents, and brokers could boost take-up of
silver plans among those eligible for CSRs.
Response: We agree with honoring and supporting consumer choice
instead of re-directing enrollment on behalf of consumers when their
current plan remains available in the following coverage year.
Providing consumers with the information they need to make informed
choices, and then honoring consumer choices, is a matter of trust. As
we stated in the proposed rule (90 FR 12974), we believe the policy at
Sec. 155.335(j)(4) unnecessarily risked 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. We
agree with commenters who advocated for more robust decision support
tools, and over the past several years we have made enhancements to the
HealthCare.gov application and plan selection platforms to help income-
based CSR eligible consumers understand the financial benefits of
selecting a silver plan. For example, when they begin their plan
selection process, these CSR eligible consumers view language
explaining that they qualify for extra savings on out-of-pocket costs
with a silver plan, and are offered the option to see silver plans
only. Silver plans have ``Extra Savings'' tags, and consumers who
qualify for CSRs of 94 percent or 87 percent and select a non-silver
plan see a pop-up that encourages them to choose a silver plan instead.
We believe that these changes, implemented over the past 5 years, have
made a meaningful difference in these consumers' ability to make an
informed choice about their coverage, though we will continue exploring
ways to best provide consumers with information they need.
Comment: Many commenters opposed the proposal to remove Sec.
155.335(j)(4) from the auto re-enrollment hierarchy based on their
belief that the policy improved access to higher actuarial value
coverage for enrollees who did not previously realize that such
coverage was available to them. These commenters cited concerns that
consumers are largely confused about their health insurance plan
options and how to choose the plan that meets their health care and
financial needs, and provided studies and other references to support
this concern. These commenters cited factors including the high volume
of plans to choose from in certain areas, resulting in choice overload;
cuts to HHS Navigator grantee funding that decreases the in-person
assistance available to potential enrollees; and the lack of data or
other evidence to support the assertion that confusion had decreased.
One commenter who stated the policy led to better outcomes for
enrollees said that consumers should not be required to have a robust
understanding of actuarial values, cost-sharing, co-payments, and
deductibles. Multiple commenters stated that this policy would result
in a family with a household income up to two times the FPL being re-
enrolled in a plan with a $21,200 maximum out-of-pocket limit rather
than a plan with a $7,000 out-of-pocket limit. One commenter who
opposed the proposal asked that we wait until 2027 to consider this
policy based on whether Congress would renew the enhanced PTC. Another
commenter said that given this policy has only been in place for two
plan years, it is not yet possible to determine whether it has been
successful.
Response: We disagree that many consumers remain confused or
unaware about their health insurance plan options and available cost
savings and strongly disagree that consumers should not need to
understand how generous a plan is in terms of the percentage of benefit
costs that enrollees generally must pay (i.e., actuarial value) and
other aspects of health insurance coverage in order to make their own
decisions regarding their health insurance coverage. When we proposed
this policy in 2024 Payment Notice proposed rule (87 FR 78259), we
highlighted that some CSR eligible bronze enrollees may have been
initially enrolled before the more generous APTC became available with
the passage of the ARP as extended by the IRA,\100\ 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 Navigator who did
not adequately explain the benefits of silver enrollment for CSR-
eligible enrollees.
---------------------------------------------------------------------------
\100\ With the passage of the IRA, these enhanced subsidies were
extended for an additional 3 years (through 2025).
---------------------------------------------------------------------------
In contrast, as of the start of the OEP for 2026 Exchange health
insurance coverage, these enhanced subsidies will have been available
to Exchange enrollees for a full five years. During this time,
potential Exchange enrollees have had the chance to benefit from
outreach and education services provided in part by tens of millions of
dollars in Federal funding for HHS Navigator grantees, and enrollment
increased significantly. Additionally, as discussed earlier, over the
past five years we have made a number of enhancements to the
HealthCare.gov application and plan selection platforms to help income-
based CSR eligible consumers understand the financial benefits of
selecting a silver plan. Therefore, as we stated in the proposed rule
(90 FR 12974), we believe consumers and the agents, brokers, web-
brokers, and Navigators who help them are largely aware of the more
generous subsidies.\101\ Further, we disagree that it makes sense to
delay this policy until PY 2027 because, regardless of whether Congress
continues the enhanced subsidies under the IRA, these investments and
resulting increase in consumer awareness will persist. Finally, we also
disagree that the removal of the policy at Sec. 155.335(j)(4) will
definitively result in auto re-enrollment of CSR eligible individuals
and families into a particular bronze plan, because during the OEP,
such individuals can actively choose to enroll in a silver plan.
---------------------------------------------------------------------------
\101\ 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/.
---------------------------------------------------------------------------
Comment: A number of commenters who opposed the proposal asked if
State Exchanges would continue to have flexibility to design their re-
enrollment hierarchies.
A few commenters cited examples of State Exchanges' success in
reducing inadvertent forfeiture of CSRs and ensuring better access to
health care for those with access to a plan with a higher actuarial
value with the same or similar benefit design and provider network as
the lower actuarial value plan that they had actively selected. For
example, a commenter described Covered California's practice since 2022
of re-enrolling CSR eligible enrollees into silver coverage, targeting
individuals with incomes below 250 percent of the FPL with access to
the same benefits and providers with equal or better value at the same
or lower premium. This commenter emphasized that the Exchange informs
these enrollees of the change and provides sufficient time to opt out
of the change. The commenter also described other auto re-enrollment
policies Covered California adopted that
[[Page 27112]]
reportedly had strong approval ratings, did not cause consumer
confusion, and led to 34,000 consumers enrolled in a higher-value plan
at a lower cost for PY 2024, and noted that platinum and gold
crosswalks to silver plans could result in lower PTC expenditures for
the Federal Government in cases where the applicable silver plan is the
lowest cost silver plan. The commenter strongly recommended that CMS
continue to allow States the freedom to adopt these innovative policies
that make it easier for consumers to obtain the best coverage, value,
and affordability for them. A few commenters raised concerns about the
time and cost associated with requiring State Exchanges to implement
changes to their systems, including to their re-enrollment processes.
Response: For reasons discussed earlier in this preamble, we are
finalizing this policy as proposed. While we appreciate that some State
Exchanges have had success with modifying their approaches to auto re-
enrollment and have not received consumer complaints, based on our
experience operating the Federal Exchange and Exchanges on the Federal
platform, we believe that the potential consumer harm related to this
policy outweighs these potential benefits. In particular, we discussed
several comments earlier in this preamble that described confusion
consumers in Exchanges on the Federal platform have experienced related
to this policy, including a few that cited examples of consumers who
assumed that their health insurance agent had re-enrolled them in a
different plan against their wishes. In the 2024 Covered California
Member survey, the sample size of over 2,000 auto re-enrolled people
drops to under 500 when restricted to those who reported being ``Aware
that their Plan Changed,'' \102\ suggesting many enrollees did not
understand the Exchange's change to their plan. Additionally,
commenters did not address the risk that switching enrollees to a
higher actuarial value plan without their knowledge could increase
these enrollees' risk of tax liability.\103\ We believe that this
potential negative impact, combined with consumer confusion, presents
sufficient risk to outweigh the potential benefits that these
commenters cite. Even bronze enrollees who are aware that they have
been auto re-enrolled into a silver plan and who voiced support for
this change according to Covered California's 2024 Member Survey might
not be aware of potential implications to their tax liability, and
those who are not aware of the change are even more at risk for
incurring tax liability without realizing it.
---------------------------------------------------------------------------
\102\ NORC at the University of Chicago and Covered California.
(2024, Nov. 21). Covered California's 2024 Member Survey. https://hbex.coveredca.com/dataresearch/library/Member_Survey_2024_Public_Report.pdf.
\103\ See discussion in the 2024 Payment Notice (88 FR 25823)
regarding this potential risk in cases where APTC amount is
determined based on inaccurate household income for the future year.
---------------------------------------------------------------------------
Finally, in response to requests for clarification on flexibility
for State Exchanges in this area, we clarify that Exchanges can request
flexibility regarding the annual redetermination processes described in
Sec. 155.335(b) through (m), which include the auto re-enrollment
hierarchy, per Sec. 155.335(a)(2)(iii). That is, Sec. 155.335(a)(2)
provides Exchanges with three options to conduct annual
redeterminations: under Sec. 155.335(a)(2)(i), an Exchange can apply
the procedures described in paragraphs (b) through (m) of this section,
and under (a)(2)(ii), an Exchange can apply alternative procedures
specified by the Secretary for the applicable benefit year. Section
155.335(a)(2)(iii) allows Exchanges to apply alternative procedures
approved by the Secretary based on certain criteria. In the 2025
Payment Notice (89 FR 26313), we explained that State Exchanges that
cannot implement or choose not to implement the re-enrollment hierarchy
at Sec. 155.335(j) may seek approval from the Secretary to conduct
their own annual eligibility redetermination process as described in
Sec. 155.335(a)(2)(iii). We already approve State Exchanges' requests
for flexibility in this area on an annual basis, as part of their
submission of their eligibility re-determination and re-enrollment
plans, both in order to mitigate burden and to permit innovation that
allows Exchanges to best serve their enrollees.
Specifically, regulations at Sec. Sec. 155.1200 and 155.1210
outline HHS's authority to oversee the Exchanges after their
establishment. In 2014, HHS developed the State Marketplace Annual
Reporting Tool (SMART) to facilitate State Exchanges' reporting to HHS
on how they are meeting Federal program and operational requirements,
including compliance with Federal eligibility and enrollment program
requirements under 45 CFR part 155.\104\ On an annual basis, HHS
gathers information about State Exchanges' Open Enrollment readiness
and practices. Alongside this process, HHS also collects information on
State Exchange plans for auto re-enrollment implementation, and
conducts follow up discussion of any related questions or concerns
prior to providing approval. During years where there have been
regulatory changes that impact the Exchange functions this review
covers, we provide technical assistance and targeted support for State
Exchanges that have questions, and as needed, conduct further follow-up
during Open Enrollment to ensure their operations were successful.
---------------------------------------------------------------------------
\104\ The SMART is currently approved under OMB control number:
0938-1244 (CMS-10507).
---------------------------------------------------------------------------
5. 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. In the 2025
Marketplace Integrity and Affordability proposed rule (90 FR 12956
through 12968), we proposed several changes to the processes
specifically related to verifying income eligibility for APTC and CSR
subsidies.
Under the statutory framework, HHS is responsible for verifying and
determining income eligibility. 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
[[Page 27113]]
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, 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. 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.
There is a critical balance HHS must achieve between assuring
responsible stewardship of taxpayer dollars with protecting access to
Federal program for those who qualify for them. In circumstances
presenting higher-than-normal risks, it is appropriate for the agency
to take greater-than-normal precautions against waste, fraud, and abuse
while balancing access to Federal benefits over the long-term.
With that as background, we proposed 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
In the 2025 Marketplace Integrity and Affordability proposed rule
(90 FR 12958 through 12961), we proposed 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 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 2 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.
When we adopted this 2-tax year FTR process, we acknowledged it
could place consumers at 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
1-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, as we previously stated
in the proposed rule (90 FR 12959), we believe the 2-year FTR process
places a substantially higher number of tax filers at a greater risk of
accumulating increased tax liabilities.\105\ We also stated that 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 2 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.\106\
---------------------------------------------------------------------------
\105\ 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.
\106\ Ibid.
---------------------------------------------------------------------------
Considering new evidence regarding unauthorized enrollments, it
became apparent that the 2-year FTR process established under the 2024
Payment Notice could impede Exchange efforts to mitigate unauthorized
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 Federal
Taxpayer Information (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 1-tax year,
while the current 1-tax year FTR direct notice for PY 2025 provides
notice for tax filers identified as having a 1-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 1-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 1-tax year FTR
direct notice. Indirect notices for tax filers in both the 1-tax year
and 2-tax year FTR status cannot directly tell an enrollee that they
need to file their Federal
[[Page 27114]]
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
that Exchanges on the Federal platform currently have a substantially
higher than normal number of enrollees who have not filed and
reconciled as compared to the previous 1-year FTR process. We also
stated that we 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
2-tax year FTR status and approximately 1,500,000 potential
reenrollments entered OEP 2025 with either a 1-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 2-year policy for PY 2025,
enrollees with a 2-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 1-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, internal analysis of agency data has shown that, under
the 1-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 did not have information on the number of
consumers who were identified as having a 2-tax year FTR status before
the OEP and who have filed and reconciled in order to remain eligible
for APTC. We stated in the proposed rule that it is probable that due
to the increase in enrollment under the 2-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 (90 FR 12960). Since
publishing the proposed rule, we are updating our initial data
projections as we initiated FTR Recheck operations in March 2025. Of
the approximate 1,500,000 potential re-enrollments who entered OEP 2025
with either a 1-tax year FTR status, a valid tax filing extension from
IRS, or had filed their Federal income taxes but had not attached IRS
Form 8962 to reconcile their APTC (non-reconcilers), approximately
400,000 enrollees with either a 1-tax year FTR status or a non-
reconciler status were identified during FTR Recheck. This represents a
drop of 73 percent of the initially identified FTR population,
suggesting that the 1-year notices sent during the OEP were relatively
effective and also followed historical trends observed by HHS. The 2-
year FTR status population decreased from 356,000 to approximately
270,000, a decrease of 24 percent. This suggests that the 2-year
population is less responsive to notices than the 1-year population.
Furthermore, in the proposed rule (90 FR 12960), we stated that we
believe the proposed 1-tax year FTR process can serve as a backstop to
improper enrollments. The Paragon Health Institute provided evidence
that lead generation companies associated with noncompliant agents,
brokers, and web-brokers are misleading enrollees with the promise of
free coverage and other enticements.\107\ 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.\108\ These schemes tend to target
low-income people, many of whom likely have a projected annual
household income of less than 100 percent of the FPL. 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. Improvements have been made to the Unauthorized Enrollment (UE)
casework process to reduce consumer burden; in addition, CMS and IRS
have several resources about what a consumer should do if they believe
they were enrolled in a UE and they need a voided Form 1095-A.\109\ In
the proposed rule we stated that 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 are likely to have
an income too low to meet the APTC eligibility threshold.
---------------------------------------------------------------------------
\107\ 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/.
\108\ Ibid.
\109\ Resource on reporting UE to Marketplace Call Center:
https://www.cms.gov/files/document/agent-broker-infographic-2024-final.pdf.
---------------------------------------------------------------------------
We established the current 2-tax year FTR process at the end of the
COVID-19 Public Health Emergency (PHE). At that time, we had paused the
removal of APTC under the FTR process because the pandemic severely
impacted the IRS's ability to process tax returns for the 2019, 2020,
and 2021 tax years.\110\ Continuing the FTR process during that time
would have removed APTC from substantial number of eligible enrollees
who timely filed tax returns but had not had their tax returns
processed yet.
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\110\ CMS. (2022, July 18). Failure to File and Reconcile (FTR)
Operations Flexibilities for PY 2023. https://www.cms.gov/cciio/resources/regulations-and-guidance/ftr-flexibilities-2023.pdf.
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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 stated in the proposed rule (90 FR 12960) that we
believe that reverting back to the pre-existing 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 stated that 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 1-tax year FTR process should
[[Page 27115]]
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 1-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 2-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 1-tax
year and 2-tax year FTR status.\111\ Enrollees with a 1-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.
---------------------------------------------------------------------------
\111\ Direct notices contain Federal tax information (FTI) and
are sent to tax filers, while indirect notices do not contain FTI
and can be sent to enrollees who may not be their tax household's
tax filer.
---------------------------------------------------------------------------
After reviewing the tax filing data, we stated in the proposed rule
(90 FR 12960) that 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 for the 2016, 2017, 2018, and 2019 tax
years.\112\ 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.\113\ 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 stated
in the proposed rule (90 FR 12961) that we no longer believe this
provides reasonable protection against accumulating tax liabilities.
---------------------------------------------------------------------------
\112\ 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.
\113\ https://www.irs.gov/pub/irs-pdf/p4801.pdf.
---------------------------------------------------------------------------
Furthermore, in the current environment, as Exchanges on the
Federal platform attempt to ensure that unauthorized enrollments are
removed from QHP coverage and have APTC ended, we believe that there
are still a large number of ineligible enrollees, which is increasing
the burden on taxpayers because, due to repayment limitations discussed
previously, not all ineligible enrollees who receive APTC are required
to fully repay any APTC improperly received. 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. In the proposed rule
(90 FR 12961), we stated that we estimate up to 18.5 percent \114\ 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 of the FPL threshold.
However, we stated in the proposed rule that this population would also
be impacted by numerous other proposals in the 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 policy.
---------------------------------------------------------------------------
\114\ Figure derived from CCIIO analysis of internal agency
data.
---------------------------------------------------------------------------
Overall, we stated in the proposed rule (90 FR 12961) that 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
stated our view in the proposed rule that the ACA 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 proposed 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 proposed to implement the proposed 1-year FTR process beginning
with OEP 2026 in the fall of 2025. This would allow enrollees currently
in a 1-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 sought comment on this proposal.
After consideration of comments and for the reasons outlined in the
proposed rule and this final rule, including our responses to comments,
we are finalizing a modified policy under which all Exchanges will be
required to deny APTC once an applicant has failed to file and
reconcile APTC for 1 year, but only through the end of PY 2026.
Thereafter, the 2-year FTR policy in effect today that allows an
Exchange to deny APTC only once an applicant has failed to file and
reconcile APTC for 2 consecutive years, will spring back into effect.
While the 1-year FTR policy is needed right now to reduce the number of
improper APTC payments in Exchanges on the Federal platform, its
utility is less apparent in the context of the expiration of the
expanded subsidies and fully-subsidized benchmark plans, which removes
much of the incentive for unscrupulous agents and brokers to
fraudulently enroll consumers into Exchange coverage who then may not
know they need to file Federal income taxes and reconcile APTC.
Commenters also expressed concern that the 1-year FTR may result in
coverage losses because the tax filing process is complex, and many
consumers are not fully aware of the requirements to file and
reconcile. Commenters suggested that this could especially be true for
young persons, which might result in a less healthy risk pool.
Commenters also expressed concern that low-income consumers would be
negatively affected by proposals requiring household income
verification because persons in this group have a much more difficult
time predicting and verifying income
[[Page 27116]]
due to unpredictable nature of their income.
Therefore, to balance competing concerns, this policy will sunset
automatically after the completion of one new coverage year, PY 2026,
on December 31, 2026. The two-year FTR policy will be in effect for PY
2027 and beyond, beginning with Open Enrollment for PY 2027. As such,
we are adding a new special rule at Sec. 155.305(f)(4)(iii), which
states that for PY 2026, Exchanges must follow the 1-year FTR policy
and 1-year FTR notice requirements.
Comment: Many commenters opposed the proposed policy change to
revert to the 1-year FTR policy stating that the two-year policy
strikes a better balance between ensuring that enrollees file their
Federal income taxes and reconcile APTC, while also allowing for the
fact that the IRS data is often delayed due to long processing times,
especially for paper filers and amended income tax returns.
Response: While we agree that long IRS processing times of Federal
income tax returns, especially for those filing paper and amended tax
returns, may impact an Exchange's FTR operations, we believe this is
unlikely a sufficient reason to maintain the current two-year FTR
process for 1 year while addressing the imminent program integrity
concerns. Further, we attempt to mitigate the long IRS processing times
with the FTR Recheck process, which allows for enrollees who have filed
by the October 15 extended filing date to attest to doing so, while
maintaining eligibility for APTC for the following coverage year. FTR
status is rechecked early in the coverage year to compare attestations
with more recently updated FTR data. If a consumer is still showing as
FTR after FTR Recheck, then the consumer receives a notification before
a final check of FTR status before the Exchange terminates eligibility
for APTC. Consumers who believe they have erroneously been found
ineligible for APTC should contact the Marketplace Appeals Center.\115\
---------------------------------------------------------------------------
\115\ The Marketplace Appeals Center can be contacted at 1-855-
231-1751.
---------------------------------------------------------------------------
Comment: Many commenters expressed concern over the short time
frame for implementing the 1-year FTR policy and asked to extend the
implementation date until OEP 2027. They noted that many of their plans
for OEP 2026 are already being finalized, and their time and State
budgets have already been committed to different projects, which will
prevent State Exchanges from completing the necessary IT infrastructure
and eligibility logic changes to revert to a 1-year FTR policy.
Response: We understand these concerns, however, we believe that
implementing this policy as soon as practicable and implementing the 1-
year FTR policy during PY 2026 is most appropriate to address imminent
improper enrollment concerns associated with fully-subsidized plans and
the expanded subsidies generally. As we explain earlier in this
section, under the 1-year FTR policy, consumers are more likely to
discover their improper enrollments after 1 year, instead of 2 years,
lessening their risk of increased tax liability due to premium
subsidies paid on their behalf. That said, we understand that once the
excess improper enrollments have been shed and the expanded subsidies
are no longer shielding enrollees from all costs associated with
coverage, the efficiency of maintaining the 1-year FTR policy is less
clear. Thus, we are finalizing this policy as proposed, but with a
modification that Exchanges will be required to implement the 1-year
FTR policy through the conclusion of PY 2026 on December 31, 2026.
Comment: Many commenters expressed concern that the proposed 1-year
policy would increase coverage loss, especially among those who are
lower-income individuals and homeless as they would no longer be able
to afford their monthly Exchange premium after APTC is terminated, as
well as having a negative impact on the risk pool. Relatedly, many
commenters expressed concern about the potential increase in IRS delays
and the impact that delayed data could have on the 1-year process.
Response: We thank these commenters for their concern. We share
commenters' concerns about the risk of coverage losses among lower-
income individuals. However, we believe that imminent program integrity
concerns merit the need for a temporary policy. As the Department is
concerned with potentially unwarranted coverage loss, we are finalizing
this policy for PY 2026 only, with a reversion to the previous 2-year
policy for PY 2027 and beyond. This approach allows us to balance
ensuring that consumers who have not filed their Federal income taxes
and reconciled APTC due to improper enrollment, do not retain unwanted
or unneeded coverage as well as preventing the loss of coverage by
enrollees who have complied with tax filing requirements over the long-
term. We also note that, if an enrollee believes that they lost APTC
erroneously due to FTR, they can file an appeal with the Marketplace
Appeals Center.
Comment: A few commenters stated that the change in the FTR policy
does not meet the Administrative Procedure Act (APA) requirements for
reasoned decision-making because they believe that HHS has failed to
provide the public with adequate data to adequately comment on the
proposed rule.
Response: In the proposed rule (90 FR 12959 through 12961), we
provided historical data for the 1-tax year FTR process as well as data
estimates provided in the 2024 Payment Notice for the 2-tax year FTR
process to represent the FTR population prior to the publishing of the
proposed rule. This data showed that more consumers would have an FTR
status (either 1 year or 2 year) as compared to the prior 1-tax year
process, which would increase Federal expenditures. In addition, we
provided tax filing status data that supported the current 2-year FTR
process placing a substantially higher number of consumers at risk of
accumulating increased tax liabilities than compared to a 1-year FTR
process. We believe that this data supports the need for and the
reasonableness of the FTR policy change while providing adequate notice
to the public to comment on this policy change.
As we explained in the proposed rule (90 FR 12959), the Initial FTR
Recheck data from the 2-year policy was not available at the time of
publishing the proposed rule. We have provided updated data in preamble
of this final rule about the FTR population following the FTR Recheck
process and is current as of April 2025. We believe this data further
supports the need for this near-term policy change after which we can
closely monitor its impacts. HHS is of the view that the best way
forward is to act now to guard against improper payments of APTC and
the potential for increased tax liability by finalizing the 1-year
policy for all Exchanges effective for the 2026 coverage year.
We also note that some commenters may believe that we have
additional data regarding the FTR population. We reiterate that due to
FTI privacy concerns, we have a limited set of data regarding the FTR
population and to protect FTI, the data generally, does not trace how
an enrollee moves through the FTR process in order to protect FTI.
Instead, we examined the overall population level data that shows how
the FTR population decreases as tax filers either file and reconcile or
lose eligibility for APTC or QHP coverage for other, non-FTR related
reasons.
Comment: Commenters expressed concern that the change could
increase coverage loss, as well as negatively impact the risk pool
because healthy
[[Page 27117]]
individuals are less likely to jump through administrative hurdles to
keep their coverage. They also expressed concern that many people will
forgo their health coverage, thereby leading to lower levels of
community health and increased incidence of communicable disease,
potentially even increasing diseases such as HIV/AIDS if they are not
well controlled due to lack of insurance and ability to purchase
medications.
Response: We appreciate and share commenter concerns about the
potential for increased coverage loss and potential negative impacts on
the risk pools. For this reason and others outlined in section III.B of
this final rule, we think it is prudent to closely monitor the effects
of the implementation of this policy for a year to measure the impacts
of the change in the FTR policy on the number of enrollees who lose
coverage due to FTR. Finally, as mentioned above, consumers may submit
an appeal to the Marketplace Appeals Center if they believe that they
lost APTC erroneously due to FTR.
Comment: Many commenters expressed concern that the tax filing
process is complex, and many consumers are not fully aware of the
requirements to file and reconcile, especially for the population that
is more transient, as well as those not as financially or
technologically literate. They noted that many of these consumers are
simply unaware of how the tax system works, and consumers are not
trying to purposefully game it and potentially incur criminal penalties
from not filing Federal income taxes. They recommended States partner
with providers who serve those who are experiencing homelessness to
ensure consumers are aware of the need to file and reconcile.
Response: We appreciate these concerns, but also note that HHS does
not have authority over the Federal income tax rules in the Internal
Revenue Code. We note that the IRS's Volunteer Income Tax Assistance
(VITA) curriculum includes information on the requirement to file and
reconcile and that through VITA, IRS-certified volunteers are available
to help individuals who need assistance in preparing their own tax
returns, including people who make $67,000 or less, persons with
disabilities, and limited English-speaking taxpayers. We will continue
to educate consumers about the requirement to file and reconcile using
notices throughout the FTR process and also encourage State Exchanges
to work with homeless service providers in their States to ensure
consumers are aware of the need to file and reconcile.
Comment: A few commenters expressed support for the 1-year FTR
policy and noted that the proposed changes would save taxpayer money by
reducing APTC payments on behalf of ineligible enrollees or consumers
who were unaware of their enrollment. One commenter agreed with HHS'
concern for preventing accumulating balances of back taxes on behalf of
consumers.
Response: We agree with the commenters and note that reverting back
to a 1-year FTR policy will help mitigate the risk of improper
enrollment in the Exchanges, while also protecting consumers from
incurring large tax liabilities due to failing to file and reconcile
APTC. Finalizing this policy for 2026 allows us to balance these
imminent concerns with longer-term desires to streamline enrollment
processes.
Comment: A State Exchange noted that only 1 percent of their
enrollees failed to file a tax return for 2 consecutive tax years when
they ran FTR Recheck this year.
Response: Due to IRS data constraints, if State Exchanges used the
Hub service to call IRS for their consumers' FTR statuses between
December 8, 2024 and March 29, 2025, it is highly likely that a
consumer with a 2-year FTR status would return a 1-year FTR response
from the IRS. Unfortunately, this error was not discovered until
Exchanges on the Federal platform started FTR Recheck operations in
January 2025. While we understand that many State Exchanges' FTR
populations do not mirror the Exchanges on the Federal platform for a
variety of reasons, it seems likely that the State Exchanges that had
such low 2-year FTR rates may have called the IRS Hub service while the
IRS's data was not being correctly reported. We understand that many
State Exchanges did not perform FTR Recheck operations until later in
the coverage year.
Comment: Many State Exchanges recommended that they should retain
flexibility regarding their notices because they need to meet both
Federal and State requirements and forced alignment with requirements
for Exchanges on the Federal platform could open States to burdensome
requirements and possible litigation. Other State Exchanges noted that
they only provide enrollment options through their Exchange website and
their Navigators work with their enrollees to help project their income
and educate them on the need to file and reconcile.
Response: We acknowledge State Exchanges' request to retain
flexibility in their notice requirements. HHS has retained the current
flexibility regarding FTR notices allowed to State Exchanges in the
finalized rule and these flexibilities would remain in place whether
Exchanges are required to use a 1-year or 2-year FTR policy.
Comment: A few commenters stated that HHS should fully repeal FTR
processes because there is no statutory authority for it.
Response: We disagree with commenters that there is no statutory
authority for Exchanges to conduct FTR. Consumers who receive APTC are
required to file income taxes pursuant to section 6011(a) of the Code
and regulations prescribed by the Secretary of Treasury. Section 36B(f)
of the Code requires taxpayers to reconcile their APTC under section
1412 of the ACA with their PTC allowed under section 36B of the Code.
FTR regulations, implemented pursuant to the Secretary of HHS' general
rulemaking authority under section 1321(a) of the ACA, facilitate
compliance with those requirements and were implemented as part of the
original Exchange Establishment Rule.
ii. Conforming Change to Notice Requirements
To conform with this proposed FTR process, in the 2025 Marketplace
Integrity and Affordability proposed rule (90 FR 12961 through 12962),
we proposed 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 2 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 2 consecutive tax years.
Accordingly, for both an enrollee's first and second year with an FTR
status, all Exchanges must have either (1) notified the tax filer
directly of their FTR status and educate them of the need to file and
reconcile or risk being determined ineligible for
[[Page 27118]]
APTC if they fail to file and reconcile for a second consecutive year,
or (2) sent 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 proposed 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 2 consecutive tax years, the current notice
requirement aimed at tax filers in a 2-tax year FTR status would no
longer apply. Therefore, we proposed to revise the notice requirement
at Sec. 155.305(f)(4)(i) and remove the notice requirement at Sec.
155.305(f)(4)(ii). We invited 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 proposed to reinstate the notice
procedures that existed before we established the current FTR process
for Exchanges on the Federal platform. See Table 3 for summary of
notices sent.
Table 3--FTR Recheck Notices and Timing
------------------------------------------------------------------------
Notices Timing
------------------------------------------------------------------------
Enrollees with FTR status receive Marketplace Fall (prior to OEP
Open Enrollment Notice (MOEN) with FTR language beginning).
& tax filers receive OE FTR direct notice.
Tax filers receive FTR Recheck direct notice and Early winter (shortly
enrollees receive FTR Recheck Indirect Notice after OEP ends).
upon completion of FTR Recheck.
Upon final recheck, enrollees losing APTC Spring.
receive updated Eligibility Determination
Notice (EDN) and tax filers receive Stop APTC
direct notice.
------------------------------------------------------------------------
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 stated in the proposed rule (90 FR
12962) that 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 also stated that 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 sought further comment on whether State Exchanges should be
required to align with Exchanges on the Federal platform on this
consumer noticing and recheck process.
After consideration of comments and for the reasons outlined in the
proposed rule, final rule, and our responses to comments, including the
reasons outlined in Section III.B of this final rule, we are finalizing
the addition of Sec. 155.305(f)(4)(iii) for all Exchanges. Once these
policies sunset at the end of PY 2026, the 2-year FTR policy will apply
to all Exchanges, as well as the requirements to send FTR notices under
the currently effective versions of Sec. Sec. 155.305(f)(4)(i)(B) and
(f)(4)(ii). We summarize and respond to public comments received on the
proposed FTR notice policy below.
Comment: Several commenters were concerned with ensuring that
enrollees receive adequate notice of appeal and extension rights if
there is a mistake in the FTR process.
Response: We agree with commenters that enrollees should receive
adequate notice about the requirement to file their Federal income
taxes and reconcile APTC, which is why the Exchanges on the Federal
platform exceed the requirements of this rule in notifying tax filers
and/or their enrollees. Exchanges on the Federal platform provide a
direct notification to the tax filer and an indirect notification that
does not disclose FTI to the enrollee before the OEP, at the time of
FTR Recheck, as well as when an enrollee's APTC is terminated. HHS
includes instructions in both the APTC termination notice to the tax
filer after removal of APTC as well as the enrollee's updated
Eligibility Determination Notice on how to contact the Marketplace
Appeals Center to appeal their FTR status if a consumer believes they
have filed and reconciled.\116\ We recommend that State Exchanges also
include this information in their notices to enrollees and/or tax
filers.
---------------------------------------------------------------------------
\116\ https://www.cms.gov/marketplace/in-person-assisters/applications-forms-notices/notices.
---------------------------------------------------------------------------
Comment: Many commenters expressed concern that the 1-year FTR
process would not provide sufficient notice and would be insufficient
to meet due process requirements because the notices are spread out
over a year, and because the indirect notice does not explain in
sufficient detail why the individual is losing APTC or what they could
do to remediate the issue and be successful in appeal. They believed
the current 2-year process, including the associated notices, should
remain in place.
Response: While we appreciate the commenters' concern, we believe
the 1-year FTR process would provide sufficient notice. A consumer
would receive their first FTR notice approximately six months before
losing their eligibility for APTC for failing to file their income
taxes and reconcile their APTC. While an indirect notice may not
specifically state that a consumer has been identified as failing to
file their Federal income tax returns and reconcile, it should say that
a consumer needs to file their Federal income tax return and reconcile
APTC to remain eligible for APTC. We note that the notice policies that
we finalize in this rule describe the minimum requirements for these
notices, and States are free to provide a direct notice to the tax
filer as well. We have provided guidance to State Exchanges to ensure
the notice content is adequate.\117\
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\117\ OMB Control No. 0938-1207.
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b. 60-Day Extension To Resolve Income Inconsistency (Sec. 155.315)
In the 2025 Marketplace Integrity and Affordability proposed rule
(90 FR 12962 through 12963), we proposed 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 additional 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
[[Page 27119]]
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 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 stated in the proposed
rule (90 FR 12963) that 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 stated that 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.
We stated in the proposed rule (90 FR 12963), that 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, we
stated in the proposed rule (90 FR 12963) that 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 stated that we find the change
weakened program integrity.
As we stated in the proposed rule (90 FR 12963), 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. We stated that between 2018 and 2021, over one third of
consumers who resolved their DMIs on the Exchange did so in more than
90 days.
We further stated in the proposed rule (90 FR 12963) that 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 represented 55 percent
of the total income DMIs. We also found that the percent of all
applicants with an income DMI who used an extension represented 60
percent of total income DMIs. We noted that 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 sought comment on this topic and suggestions to alleviate this
concern.
As we discussed in other aspects of the 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.
In the proposed rule (90 FR 12963), we stated that 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 stated
that we believe the cost to taxpayers and decline in program integrity
outweigh any possible benefit to the risk pool.
We stated in the proposed rule (90 FR 12963) that 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 stated that we believe the cost of the
extension outweighs the benefits.
As stated previously and in the proposed rule, we now believe that
the automatic 60-day extension falls outside of our authority and
therefore statutory language compels us to make this change. As such,
we must make this change permanent.
We sought comment on this proposal.
After consideration of comments and for the reasons outlined in the
proposed rule and this final rule, including our
[[Page 27120]]
responses to comments, we are finalizing, as proposed, the removal of
155.315(f)(7). This amendment will be applicable as of the effective
date of this rule. We summarize and respond below to public comments
received on the proposed removal of the 60-day extension for households
to resolve income DMIs.
Comment: Some commenters supported the proposal, most of whom were
advocacy groups or large issuers who supported the proposal's focus on
addressing fraud. One supportive commenter referenced surprise tax
bills as an additional benefit of updated verification requirements.
Response: We acknowledge and appreciate the commenters' support for
this proposal, which we believe will reduce fraud in Exchanges.
Comment: Many commenters expressed concern that the proposed policy
would disproportionately impact some consumer groups and present
barriers to enrollment. Specific groups referenced included, among
others, low-income people, rural individuals, persons with
disabilities, people of color, Tribal communities, and seniors.
Response: We acknowledge commenters' concern. While we do not
believe the 60-day automatic extension is consistent with our statutory
authority under the ACA, as discussed in the proposed rule (90 FR 12962
through 12963), consumers with difficulties resolving their data
matching issues remain eligible for the extension outlined in Sec.
155.315(f)(3). We will continue to evaluate program performance to
identify inconsistency resolution trends among all groups and the
impact of these operational changes on identified groups.
Comment: Many commenters expressed concerns that proposed policy
would adversely affect consumers who are employed in the gig economy or
seasonal work.
Response: We recognize that consumers with multiple streams of
income information experience more complex income DMI verification
processes and may encounter increased administrative burden in
providing the documentation to resolve their DMIs. We believe that the
policy we are finalizing in this rule still provides sufficient time
for consumers to provide documentation for verification because a
review of income inconsistency resolution data before and after the
implementation of the extension did not demonstrate a significant
increase in resolution with the additional 90 days, indicating under
most conditions consumers across all income data matching issue
scenarios, including gig workers, can verify their data matching issues
in the provided timeframe. Furthermore, we want to emphasize that this
change does not prevent consumers from receiving an extension as
outlined in Sec. 155.315(f)(3) should they meet the applicable
criteria.
Comment: Some State Exchanges noted that the payment integrity data
CMS proposed is inconsistent with their data and requested additional
flexibilities in extensions for their distinct populations. The
particulars of the inconsistencies noted by these State Exchanges
varied by State, however, the Massachusetts Commonwealth Health
Insurance Connector Authority provided an example, stating ``the Health
Connector does not experience those challenges that CMS describes as
occurring within the FFM.'' Specific concerns raised by States
included, among others, a lack of analysis of Medicaid expansion vs
non-expansion States and the lack of analysis in the proposed rule of
which States utilize third party agents and brokers.
Response: We acknowledge that State Exchanges have nuances in their
demographics and payment integrity data, however, we believe that this
change is necessary given that the requirement to automatically provide
a 60-day extension at Sec. 155.315(f)(7) is inconsistent with our
statutory authority. Because this is a statute-driven change, we
believe that this change must be implemented across all Exchanges,
regardless of the data matching dynamics in the particular context of
implementation. Furthermore, we believe that consumers should have
sufficient time to submit documentation to verify their projected
household income within the inconsistency period without the automatic
60-day extension given that the income inconsistency resolution data
before and after the 60-day extension as referenced in the proposed
rule (90 FR 12963), indicating that this change is not anticipated to
unreasonably adversely impact consumers in State Exchanges. Finally, we
note that Sec. 155.315(f)(3) already allows State Exchanges to extend
the 90-day period in Sec. 155.315(f)(2)(ii) when an applicant
demonstrates that a good faith effort has been made to obtain the
required documentation during the period. This finalized change removes
the requirement for all Exchanges to provide an automatic, general 60-
day extension, but it does not restrict a State Exchange's flexibility
on exercising its extension authority on a case-by-case basis.
Comment: Some commenters, particularly individual advocacy groups,
stated that CMS should evaluate the inclusion of other data sources
into income verification processes rather than removing the 60-day
extension in order to support program efficiency and integrity.
Response: We may continue to evaluate data sources which may be
more appropriate for income verification procedures, however, we are
making this change to fulfill our responsibility to align policy with
statutory authority which is independent of considerations for
additional verification methods. We believe that additional data
sources could complement the changes we are finalizing to the automatic
extension, however, their inclusion would not substitute for the
necessity of making this change. We take the position that ultimately
this change will improve program integrity, and believe that consumers
should still have sufficient time to submit documentation to verify
their projected household income within their inconsistency period with
or without additional changes to the utilization of trusted data
sources.
Comment: Commenters expressed concern with the data referenced in
the proposed rule to support this proposal, reporting that they were
not satisfied that the reported metrics sufficiently demonstrated
evidence of widespread fraudulent behavior. Specifically, some
commenters questioned the data findings referenced in the proposed
rule, including the data limitations and exclusions, and the limited
data regarding enrollment trends changing around the COVID-19 PHE.
Others noted that the data referenced was not representative of State
Exchange data dynamics.
Response: We acknowledge the need to collect and report on high
quality metrics to evaluate and monitor program integrity across the
Exchange. While this change is determined to be necessary on the
grounds of statutory alignment and thus is independent of the
identified data concerns, we will continue to evaluate data on income
verification operations on an ongoing basis to assess the impact of
this operational change and continue to evaluate opportunities to
strengthen program integrity and efficiency.
Comment: Many commenters opposed this proposal, citing concerns
that these administrative changes would create consumer and
bureaucratic burden which could in turn destabilize the risk pool.
Response: We acknowledge commenters' concerns around administrative
burden. However, as discussed in the proposed rule (90 FR
[[Page 27121]]
12963), this change is necessary given that the current 60-day
extension is inconsistent with the statute, necessitating
implementation of this change across the Exchanges. Ultimately, after
an analysis of program data, we believe that the positive impact to
program integrity will outweigh any negative impacts to the risk pool.
c. Income Verification When Data Sources Indicate Income Less Than 100
Percent of the FPL (Sec. 155.320(c)(3)(iii))
In the 2025 Marketplace Integrity and Affordability proposed rule
(90 FR 12963 through 12967), we proposed 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 amounts returned by the IRS, the SSA, and current income
data sources is less than 100 percent of the FPL. This change would re-
codify a provision the Department finalized in the 2019 Payment Notice
(83 FR 16985), that was later vacated by the United States District
Court for the District of Maryland in City of Columbus v. Cochran, 523
F. Supp. 3d 731 (D. Md. 2021), finding there was insufficient evidence
of prevalent fraudulent behavior justifying the administrative burden
and corresponding coverage impacts. In the proposed rule, we stated
that though we believe we had a clear legal basis for finalizing the
provisions in the 2019 Payment Notice, we also believe circumstances
have changed substantially since the court vacated the prior
rulemaking. The Department, in the proposed rule and this final rule,
has provided a reasoned justification to reinstate the policy,
supported by data and related estimates documenting the consumer harm
and significant losses of taxpayer dollars illustrating the reasons
this income DMI is necessary. 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, there is now 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.\118\ Additionally, while concerns were raised in City of
Columbus 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 stated that we
believe enough consumers--and the agents, brokers, and web-brokers
helping them apply--are intentionally inflating their incomes to
qualify for fully-subsidized plans that justifies the creation of this
income DMI type, as data shows below.
---------------------------------------------------------------------------
\118\ See 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. Additionally, consumers who have attested
household income higher than 100 percent of the FPL, but data sources
show income below 100 percent of the FPL, may be motivated to
overestimate their income to gain eligibility for APTC where they would
not be eligible otherwise, especially in non-Medicaid expansion States.
In contrast, consumers who have higher attested annual household income
than trusted data sources reflect, but where both the attested and
income from data sources is above 100 percent of the FPL, are not
motivated to overestimate their income as they would simply receive
less APTC. Still today, the risk of APTC overpayments under these
circumstances is true 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.\119\ Barring other changes in circumstance, these tax
filers will not have to repay any APTC. That taxpayers are not required
to repay APTC in this situation 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.
---------------------------------------------------------------------------
\119\ 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.\120\ 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.'' \121\
---------------------------------------------------------------------------
\120\ 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.
\121\ 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.\122\ After
citing these GAO findings and recommendations, we concluded in the 2019
Payment Notice (83 FR 16986) that, particularly to the extent funds
[[Page 27122]]
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.
---------------------------------------------------------------------------
\122\ 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 v. Cochran stated that HHS ``failed to
point to any actual or anecdotal evidence indicating fraud in the
record.'' \123\ 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.''
With this final rule, we believe we have addressed concerns raised in
this case through new data illustrating the findings raised in the GAO
study.
---------------------------------------------------------------------------
\123\ 523 F. Supp. 3d 731, 762 (D. Md. 2021).
---------------------------------------------------------------------------
After the court vacated HHS' income verification requirements, we
reviewed data from a recent study analyzing the time period before the
original income verification requirement was implemented and found data
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.\124\ 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 stated in the proposed rule (90 FR 12964) that 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.
---------------------------------------------------------------------------
\124\ 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.\125\ 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. In the proposed rule (90 FR 12964
through 12965), we stated that this led us to believe that while some
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.\126\
---------------------------------------------------------------------------
\125\ Ibid.
\126\ 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.\127\
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.\128\
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.\129\
These individuals are then often being enrolled in fully-subsidized
QHPs. We stated in the proposed rule (90 FR 12965) that 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.\130\ 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.\131\ Therefore, to
strengthen program integrity and reduce the burden of APTC expenditures
on taxpayers, we proposed 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.
---------------------------------------------------------------------------
\127\ Blase, B.; Gonshorowski, D. (2024, June). The Great
Obamacare Enrollment Fraud. Paragon Health Institute. https://paragoninstitute.org/private-health/the-great-obamacare-enrollment-fraud.
\128\ Ibid.
\129\ We note that in the proposed rule (90 FR 12965), we
included a table which showed a substantial increase in the percent
of returns with APTC that report excess APTC at lower household
income levels between 2019 and 2022. We concluded 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, which, in turn, provides further evidence that
applicants with household incomes below the APTC income eligibility
threshold are strategically inflating their household incomes to
qualify for APTC. After reviewing comments and a closer examination
of what is driving the increase in the percent of returns reporting
excess APTC at lower income levels, we no longer believe these data
provide additional evidence that people are strategically inflating
their income. While the evidence presented in this final rule
continues to strongly support the conclusion that people are
inflating their incomes to qualify for APTC after access to fully-
subsidized QHPs expanded, we now understand this expanded access to
fully-subsidized plans in 2021 led to the increase in the percent of
returns with excess APTC at lower income levels for a different
reason. The reason stems from a discrepancy in how Exchanges on the
Federal platform report the premium for the benchmark plan used to
determine the APTC. The premium for the benchmark plan is generally
reported as the full amount in dollars and cents while the APTC is
rounded to the nearest dollar amount. This reporting discrepancy was
generally not an issue before 2021 because everyone was subject to a
required contribution percentage greater than zero. Where a required
contribution percentage is set at zero, APTC that is rounded up
creates excess APTC.
\130\ See Ibid.
\131\ 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' Exchange 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.
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[[Page 27123]]
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 stated in the proposed rule (90 FR 12966) that 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 stated that 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.
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
makes sense 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 deny
eligibility for APTC and CSR subsidies based on the inconsistency with
IRS data. 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 must also weigh the
administrative and other costs of a data matching program against 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 stated in the proposed rule (90 FR 12966) that
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 requested comments on whether adding these
additional data matching issue requirements will outweigh its expected
gains as described above.
Accordingly, we proposed to modify Sec. 155.320(c)(3)(iii)(D) and
(c)(3)(vi)(C)(2) to specify that Exchanges on the Federal platform
would follow the procedures in Sec. 155.315(f)(1) through (4) to
create an annual income DMI for consumers if: (1) The consumer attested
to projected annual household income that is greater than or equal to
100 percent but not more than 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 proposed that a reasonable threshold
must not be less than 10 percent and can also include a threshold
dollar amount.\132\ We sought 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, we
stated that 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, we stated
that 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). We further stated that the adjustment and
notification process would work like other inconsistency adjustments
laid out in Sec. 155.320(c)(3)(vi)(F). We also proposed to modify
Sec. 155.320(c)(3)(iii)(A) to add a cross-reference to paragraph Sec.
155.320(c)(3)(iii)(D).
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\132\ 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.
---------------------------------------------------------------------------
Finally, in the proposed rule (90 FR 12966), we stated that we
estimate that answering verification questions and submitting
supporting documents would take consumers approximately 1 hour. We
stated that 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 stated that we believe that the 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 as described in 45 CFR 155.315(f)(3).
We sought comment on this proposal.
After consideration of comments and for the reasons outlined in the
proposed rule and this final rule, including our responses to comments,
we are finalizing this policy as of the effective date of this final
rule, but with a modification under which the policy and related
requirements will sunset for all Exchanges at the end of PY 2026 with a
reversion to the previous policy in PY 2027. Like other policies within
this rule, we believe it is critical to addressing imminent concerns
with improper enrollments related to fully-subsidized plans. As
discussed, there is ample evidence of strategic behavior whereby
predatory agents, brokers, and web brokers are enrolling people, often
without their knowledge, into fully-subsidized plans and, because these
individuals often are shielded from ever repaying subsidies, the
taxpayer is on
[[Page 27124]]
the hook for 100% of improperly paid APTCs on their behalf.
We respect the fraught history of this specific policy, however,
and understand the importance of targeting it appropriately towards
clear and demonstrable fraud concerns. We understand with the
expiration of the enhanced subsidies the same concerns may not exist.
Thus, we believe this policy should run through the remainder of PY
2025 after the rule is effective and all of PY 2026 to help the
Exchanges shed excess improper enrollments and, once the market has
readjusted to the changing subsidy environment in PY 2027, the policy
will no longer be effective as concerns about holdover improper
enrollments from fully-subsidized plans will likely have abetted. This
means that, beginning in PY 2027, Exchanges will instead be required to
consider an annual household income attestation verified if IRS returns
tax data indicating that the household's annual income is less than the
application's attestation of annual household income, even if that IRS
data is below 100 percent of the FPL in scenarios where the attested
projected annual household income would qualify the tax payer as an
applicable taxpayer per 26 CFR 1.36B-2(b). As we explain in this
section and in section III.B of this final rule, HHS is of the view
that implementing this income verification policy in instances where a
consumer is attesting to annual household income above 100 percent of
the FPL, but IRS data shows income below 100 percent of the FPL, is a
reasonable and necessary step to ensure accurate eligibility
determinations based on projected household income during this time of
clearly high levels of improper enrollments. However, in consideration
of comments, we are finalizing this policy to be applicable only
temporarily through the end of PY 2026. Additionally, while in the
proposed rule we connected this to the statutory framework, and while
it is clear this is allowed by statute, we recognize the statute
includes in 1411(c)(4)(B) the provision to weigh the administrative and
other costs of a data matching program against its expected gains in
accuracy, efficiency, and program participation.
Additionally, independent of comments, we are including a minor
modification to remove the reference to 400 percent of the FPL as the
maximum to account for possibilities of subsidy eligibility beyond
those at 400 percent of the FPL or below. Instead, we are stating that
this income DMI is generated in circumstances where the attested
projected annual household income would qualify the taxpayer as an
applicable taxpayer per 26 CFR 1.36B-2(b). This change also better
aligns with existing regulatory text. We summarize and respond to
public comments received on the proposed policy to require Exchanges to
generate annual household income inconsistencies 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 below
but income from the IRS shows annual household income below under 100
FPL.
Comment: Some commenters supported the proposal, stating it would
improve program integrity, especially as incorrect income estimations
threaten program integrity. One commenter stated that the proposal will
help address the increase in improper and fraudulent enrollments.
Multiple commenters mentioned this will help stop the ``backdoor'' of
getting ineligible people coverage in non-Medicaid expansion States.
Response: We agree that this policy will improve program integrity
in response to urgent concerns. Given the large amount of improper
behavior cited in the proposed rule and in this final rule, we agree
that this policy may help limit associated improper enrollments largely
resulting from fully-subsidized plans. We acknowledge that this is
particularly impactful in non-Medicaid expansion States.
Comment: Some commenters expressed support for how the proposal
could help the income verification process and the resulting positive
effects of that. Multiple commenters believe that this proposal's
improved income verification process could help with correct APTC
determinations, with one commenter stating they believe these changes
would help result in a more stable and affordable marketplace.
Response: We agree that this policy will help with the income
verification process by ensuring income verification occurs when
consumers may have an incentive to overestimate their income.
Implementing this policy may help ensure accurate income amounts and
corresponding APTC determinations and we believe that the improvement
to the income verification process outweighs any temporary disruptions
as the temporary policy assists Exchanges in reducing the current high
levels of improper enrollment.
Comment: Some commenters supported our proposal but believed that
CMS needs to take further actions to address program integrity issues
such as eliminating or limiting the ``safe harbor'' provision in 26 CFR
1.36B-2(b)(6)(1) or making enrollment pending during the income DMI
process rather than allowing for preliminary eligibility.
Response: We appreciate the concerns for program integrity from
commenters. We note that HHS does not have regulatory authority over 26
CFR 1.36B-2(b)(6)(1) as this is an IRS regulation. We believe, however,
that this policy is the best way to address the specific concern around
overestimation of income for these individuals while balancing long-
term need to ensure enrollment processes are as efficient as possible.
It is not permissible under 1411(e)(4)(B) of the Affordable Care Act to
prevent consumers from using their coverage until they submit documents
to resolve their income DMIs. Additionally, we maintain that it is
important to balance program integrity with ensuring access to coverage
and believe this temporary policy maintains that balance.
Comment: Many commenters expressed concerns that this proposal
would negatively impact consumers' ability to enroll in affordable
coverage and recommended CMS not finalize the proposal. Specifically,
commenters mentioned that the policy would result in a decrease of
enrollment and would be a barrier to enrolling in the first place, in
part due to the administrative burden of submitting documents to
resolve their income inconsistency. Additionally, commenters mentioned
expiration of an annual income DMI would typically lead to a loss of
APTC, which means consumers would be forced to either drop coverage or
pay unaffordable premiums, including if they are in process of
appealing their DMI expiration. One commenter mentioned how many sick
consumers end up having to take on debt or skip essential bills to pay
for coverage after losing their financial assistance.
Response: We understand that some consumers may temporarily end up
having their financial assistance reduced or removed, resulting in
coverage loss and financial burden. However, the income DMI process
allows 90 days \133\ to submit documentation, including submitting new
documents if their previously submitted documents were deemed
insufficient to resolve, and we previously estimated that submitting
documentation will only take 1 hour, so we believe that the
administrative burden of submitting documents is
[[Page 27125]]
minimal. Additionally, if consumers need more time to resolve their
income inconsistency, they are able to request an extension to the 90-
day period on a case-by-case basis. We also emphasize that it is
important that consumers receive accurate APTC eligibility to help
protect taxpayer spending on APTC, which is why we believe it is
important to have this income DMI in place even if some consumers are
unintentionally harmed through loss of APTC. We acknowledge the concern
on how the continued loss of APTC occurs even during the appeals
process but emphasize that it is important for consumers to resolve
their income DMI before it expires to maintain continuous financial
assistance and not end up having to go through an appeal. It is
important to note that these are temporary measures enacted in response
to unprecedented concerns over improper enrollments.
---------------------------------------------------------------------------
\133\ In section III.A.3.b of this final rule, Sec.
155.315(f)(7) is being removed. This regulation currently requires
Exchanges to give an automatic 60-day extension to the 90-day income
DMI period if the income DMI has not yet resolved after those 90
days.
---------------------------------------------------------------------------
Comment: Many commenters stated that loss of coverage and financial
barriers would result in poor health outcomes for many consumers, such
as relying more on emergency services and threatening the ability of
consumers to make timely, informed, and autonomous decisions about
their health, in particular related to pregnancy. Many of these
commenters stated these negative health outcomes would be compounded
for those who are already experiencing difficulties in accessing health
care. Additionally, nearly all community health centers that commented
on this proposal stated that this would disproportionally affect
consumers who use their services, resulting in negative health outcomes
for them. Given this, these commenters did not recommend we finalize
this proposal.
Response: While we understand the concerns of the commenters, we
want to emphasize that many of these annual household income
attestations are inaccurate and are made by agents, brokers, and web-
brokers without consumers' knowledge as a part of other potentially
inappropriate activity such as unauthorized enrollments, which can lead
to consumers experiencing hardship when they go to use health coverage
and find out they are enrolled in a plan they were unaware of. These
are largely functions of the incentives and opportunities created by
the existence of fully-subsidized plans and these outcomes in
themselves represent consumer harms that we also must attempt to
mitigate. By making this policy temporary to address these imminent
concerns while Exchanges shed excess improper enrollment, we believe we
strike the right balance of program integrity with long-term enrollment
policy efficiencies.
Comment: Many commenters stated they are concerned that low-income
consumers who would be more affected by this proposed policy have a
much more difficult time than other consumers in predicting and
verifying income due to unpredictable income. They stated this is
compounded by the fact that Exchange eligibility is based on future
income, rather than previous years' income, and therefore tax data is
typically not able to accurately predict and verify their expected
future annual household income. Additionally, some commenters pointed
out that these lower income consumers typically are not required to
file taxes, so they are more likely to not have tax data available to
verify their income. Many commenters also listed reasons why a consumer
may have unpredictable income--such as starting a new job or losing a
job, pay raises, plans to work more in the future--and stated that
consumers should not be penalized for these changes by losing APTC
eligibility after DMI expiration.
Response: We acknowledge that consumers with more unpredictable
income may have a more difficult time estimating their income. We have
made improvements over the years to account for this concern, including
creating an income calculator tool that we recommend consumers use if
they are having difficulty estimating their income.\134\ Additionally,
we understand that income can change throughout the year and highly
recommend that consumers update their Marketplace application when
their household income changes to ensure they are receiving the most
accurate eligibility determination. We also emphasize that in scenarios
where new consumers to the Exchange may not have tax data available
because they were not previously required to file tax returns, they
would not receive the type of income DMI described in this policy, as
this policy specifically generates an income DMI in scenarios where IRS
returns data under 100 percent of the FPL but consumers attest to
annual household income above 100 percent of the FPL. Without having
filed taxes, they would not have IRS data returned for them and would
therefore not generate the type of income DMI described in this policy,
though they may be impacted by other income verification policies in
this rule such as the one described in section III.B.3.d. Finally, even
if a consumer would normally not be required to file a tax return due
to their income, notifications include language to remind consumers
that once they have received APTC, they are required to file a tax
return to reconcile their APTC. As these policies are temporary, we
believe they strike the right balance between urgent program integrity
concerns and long-term enrollment efficiencies.
---------------------------------------------------------------------------
\134\ https://www.healthcare.gov/income-calculator/.
---------------------------------------------------------------------------
Comment: Many commenters stated how it is more difficult for low-
income consumers to submit documents to resolve their DMIs.
Specifically, they stated it can be more challenging to find documents
that show their predicted annual household income because common
documents such as tax documents and paystubs are either inaccurate or
not available. One commenter requested that we add to this final rule
what documentation CMS would accept for this new income DMI to prove
anticipated income.
Response: We provide a robust list of acceptable documents that
households can submit to resolve their income DMIs, many of which
clearly can convey future year income and including potential documents
self-employed consumers can submit, and include this list in multiple
consumer notices and on CMS' website.\135\ We recommend that consumers
who cannot obtain tax forms or paystubs that reflect their projected
household income submit other suggested income documents that may be
more available and accurate.
---------------------------------------------------------------------------
\135\ https://www.healthcare.gov/help/how-do-i-resolve-an-inconsistency/#household-income.
---------------------------------------------------------------------------
Comment: Many commenters specifically noted the challenges that gig
workers would face with this proposal. Commenters mentioned how this
type of work has grown substantially since the ACA was passed, and
recommended that CMS reconsider how this proposal and general
verification processes account for the realities of the gig economy.
One commenter stated that nearly a third of all gig workers are
uninsured, and that 48 percent believe their work status has made it
more difficult to access health insurance. One commenter suggested that
CMS needs to do additional research around economic and employment
trends since the ACA passed, with a particular focus on gig workers,
and consider flexible updates related to that.
Response: We appreciate the concern for gig workers. We are aware
of how gig workers may have a more difficult time verifying their
income and we have made operational changes over the past few years to
improve how our systems and processes better account for the
[[Page 27126]]
types of documents gig workers may use to verify their income.
Regarding what documents gig workers should submit to verify their
annual household income, we recommend they submit a self-employment
ledger that outlines whose income it includes, where the income is
from, the start date of the income, either the frequency (such as
biweekly) of the income or the end date, and the specific income
amounts. This can include documents from employers that employ gig
workers or from online services that outline this information. We are
open to additional changes and improvements to better assist consumers
working in the gig economy on getting and staying in coverage. However,
we do not believe that this policy is especially burdensome for
consumers with legitimate income attestations and will help prevent
fraudulent attestations from continuing to receive improper financial
assistance. That said, by making this policy temporary, we believe we
strike the right balance of program integrity with long-term enrollment
efficiencies.
Comment: Many commenters expressed concerns about how this policy
would impact the risk pool. Specifically, commenters stated that
younger consumers, who are also typically healthier, tend to have lower
and less predictable streams of income. Commenters also mentioned that
healthier consumers are less motivated to get insurance, particularly
when they encounter administrative burdens such as additional required
paperwork, while sick consumers are often more motivated to overcome
administrative barriers to coverage. Commenters stated that all of this
results in fewer young and healthy consumers entering the risk pool,
which would result in increased premiums for everyone, leading to a
decrease in enrollment and increased health care costs for everyone.
Response: We disagree that requiring additional documents is a
large administrative burden that will result in young, healthier, less
motivated consumers not getting insurance. The 90 days Congress
provided under the statute gives consumers sufficient time to identify
documents and resolve their income DMI, and we estimate that
identifying and submitting documentation for an income DMI typically
takes consumers only 1 hour. The Department is of the view that younger
individuals generally are accustomed to requirements to prove their
eligibility for a variety of benefits and activities, including proving
their identities and incomes, such that dedicating a single hour to
verification activities is unlikely to lead to significant numbers of
young persons abandoning their insurance applications once the process
is started. Additionally, we are finalizing this policy temporarily to
help the Exchange address urgently high levels of improper enrollments
while balancing long-term enrollment efficiencies. This limited period
of effectiveness will mitigate any adverse impacts on the risk pool
that might result if this policy dissuades younger, healthier persons
to abandon their applications for insurance.
Comment: Many commenters expressed concerns about the costs and
burdens for this proposal on Exchanges. Commenters mentioned that they
believe the proposal would increase administrative costs and be
operationally challenging for Exchanges to implement, and that Federal
funds would be better spent elsewhere. Many also said that State
Exchanges do not currently have appropriated funds or other financial
resources to implement this change by the applicability date of 60 days
after this rule's finalization, with one State Exchange unsure if they
can implement it at all due to their State's limits on how they can use
Federal tax information. Finally, one commenter stated it was unclear
that money would be saved through unspent APTC.
Response: We acknowledge the costs associated with implementing
this proposal. We are confident that the Exchanges on the Federal
platform can implement this proposal by the rule's effective date and
are not concerned with implementation operations. Additionally, we
believe that the costs associated with implementing and operating this
policy are justified, as this is a critical program integrity measure
to ensure consumers who may not be eligible for APTC are not
erroneously receiving APTC throughout the entire plan year. Because of
that, while we understand State Exchanges are concerned about the
implementation and ongoing costs, we believe that the program integrity
gains outweigh the potential costs to State Exchanges. Additionally, by
requiring Exchanges to sunset this proposal starting in PY 2027,
operational costs for Exchanges will only occur for the remainder of PY
2025 after this rule's effective date and all of PY 2026, resulting in
lower costs to Exchanges for operations over time. As illustrated later
in the regulatory impact analysis section of this rule, we estimate
that APTC savings will be greater than operational costs.
Comment: Some commenters expressed concerns about potential
administrative and cost burdens to other interested parties such as
issuers and health care professionals who help consumers enroll.
Commenters mentioned how historical data has illustrated that
administrative complexity and uncertainty result in an increase in
operational and administrative costs for issuers, particularly for
smaller issuers and those serving in rural communities, which typically
results in those costs being passed on to consumers.
Response: As outlined in the regulatory impact analysis section of
this rule, the administrative and cost burden is minimal in comparison
to the APTC savings. We will ensure that information on this policy,
how it affects consumers and other interested parties, and best steps
to address and easily resolve income DMIs are readily available to
issuers and other interested parties. We will make sure this is made
available on HHS' public-facing website within 60 days of the effective
date of this rule to help all interested parties be prepared to address
this policy with their clients and, therefore, minimize potential
burden. Additionally, we believe benefits on program integrity likely
outweigh potential minimum administrative or cost burdens on issuers,
especially due to the temporary nature of the provisions to address
program integrity while Exchanges adapt to the changing subsidy
environment, as the primary concern is related to fully-subsidized
plans, which are due to dramatically decrease in PY 2026 prior to the
provisions sunsetting in PY 2027. We reiterate our commitment to
helping interested parties understand and account for changes in this
rule.
Comment: Many commenters did not agree with the assertion that
numerous consumers are intentionally overestimating their income. These
commenters did not believe we provided enough evidence of such behavior
being widespread. Additionally, many commenters stated that these
discrepancies between attestation and final annual household income are
due to consumers honestly projecting their annual household income to
be above 100 percent of the FPL but instead finishing the year with
their actual annual household income below it, such as due to working
less than anticipated or because of the difficulty of estimating future
year income. A few commenters also pointed towards the enhanced
subsidies causing more people to enroll in the Exchange and as a
result, simply having more discrepancies. As a conclusion, many
commenters believed that this proposal would not improve program
integrity, with many stating that nothing has
[[Page 27127]]
changed since this DMI type was vacated by the court in City of
Columbus v. Cochran, and therefore recommended against finalizing the
policy as proposed.
Response: We acknowledge that many consumers may be estimating
their household income accurately based on the best information
available to them at the time. However, we have also identified data
suggesting that consumers--or agents, brokers, or web-brokers assisting
them--may be intentionally misestimating income. As laid out in the
proposed rule, one study illustrated that many consumers attested to
very precise annual household income amounts, suggesting that they knew
the exact income thresholds to gain eligibility for APTC.\136\ For
people who attested to those precise thresholds, this same study found
that enrollment in corresponding plans was 136 percent higher than the
total population of potential enrollments. These numbers, combined with
other data sources that are cited and discussed earlier in this section
III.A.3.c of the preamble, show clear indications of some consumers
intentionally attesting to annual household income just above 100
percent of the FPL to gain APTC eligibility they may not have been
eligible for with a more accurate annual household income attestation.
---------------------------------------------------------------------------
\136\ Blase, B.; Gonshorowski, D. (2024, June). The Great
Obamacare Enrollment Fraud. Paragon Health Institute. https://paragoninstitute.org/private-health/the-great-obamacare-enrollment-fraud.
---------------------------------------------------------------------------
While we believe this was also the case during the time that the
2019 Payment Notice originally implemented this proposal, we did not
have clear data available to outline in the 2019 Payment Notice
illustrating this, something that is mentioned in Columbus v. Cochran
as a reason why this policy was originally struck down. However, given
the data we now have now as set forth in the proposed rule, higher
enrollment data illustrates that this problem is much more prevalent
than it was prior to 2021. We respect the concerns many have with this
proposal and, as such, are finalizing a temporary policy targeted at
the most demonstrable program integrity concern--fully-subsidized plans
and the holdover improper enrollment that data suggests will persist
temporarily following the expiration of the expanded subsidies. After
allowing this policy to work to right-size enrollment to ensure those
receiving subsidies are eligible for such subsidies, this policy will
sunset as the reduction in fully-subsidized plans reduces the urgency
of its program integrity features.
Comment: Some commenters, while they agreed with the widespread
problem of improper payment of APTC caused by overinflating incomes
above 100 percent of the FPL, did not believe that this proposal is the
best way to address it. Most of these commenters believed that CMS
should focus on improving agent, broker, and web-broker enforcement
rules, as many commenters believed they primarily are driving this
fraudulent behavior. Some commenters also expressed concerns with the
Exchanges on the Federal platform's usage of Enhanced Direct Enrollment
(EDE) platforms, claiming that having third parties host the
eligibility and enrollment platform allowed agents, brokers, and web-
brokers to more easily engage in fraud or improper behavior.
Response: We acknowledge commenters' concerns that some agents,
brokers, and web-brokers are fraudulently attesting to household income
on behalf of consumers, oftentimes without their knowledge, and that
this is often done through direct enrollment pathways. Both States and
the Federal Government are taking steps to address agents, brokers, and
web-brokers participating in actions or schemes that result in improper
enrollments. We have increased program integrity measures aimed at non-
compliant agents, brokers, and web-brokers, including, for example,
requiring agents, brokers, and web-brokers to perform a three-way call
with their client and the HealthCare.gov call center to effect certain
changes to some consumers' applications or coverage. We also work
closely with EDE partners on program integrity issues. Improving
program integrity may require multiple approaches, and we believe this
policy will work well in partnership with agent, broker, and web-broker
enforcement actions to help prevent this type of improper behavior.
Comment: Many commenters expressed concerns with the data and
studies the proposed rule cited as proof of program integrity concerns.
These commenters cited concerns related to studies' methodology and
analytical approach, limitations and usage of data, inconsistent income
definitions, and that they did not account for other factors at the
same time such as the COVID-19 PHE and Medicaid disenrollment. Many
commenters stated that the estimation of 4-5 million fraudulently
enrolled consumers is inaccurate and an overestimation. One commenter
also stated that CMS should gather more data to see how program
integrity changes made in 2024 have affected this fraudulent behavior
and wait to implement this proposal until that is available to show the
impact of those policies.
Response: We disagree with the commenters' concerns on the validity
of data sources utilized in the proposed rule to support the proposal.
We believe the various data sources cited suggest that households are
fraudulently attesting to income directly above the FPL.
Notwithstanding, in light of commenters' concerns and as explained in
section V.C.18 of this final rule, we are finalizing this policy so
that it will be applicable only for PY 2026, providing further
opportunities to monitor this policy's effects instead of codifying it
to be applicable indefinitely. We clarify that consumers will have the
opportunity in the DMI process to show through documents that their
attestation of estimated household income is accurate. We will continue
to monitor and collect data regarding DMIs and how changes, such as
those made in 2024 and this final rule, have impacted enrollment.
Comment: A handful of commenters mentioned that CMS should address
better how Medicaid and CHIP eligibility intersects with the population
of consumers who may overestimate their income for Exchange coverage.
They state that some consumers may be eligible for Medicaid or CHIP one
month but not the next, meaning that it is possible they could be
eligible for Exchange coverage in those months they are not Medicaid/
CHIP eligible. Some commenters pointed out how many State Exchanges
have more robust integration with Medicaid and CHIP eligibility
systems, resulting in more accurate and timely eligibility
determinations. One commenter also sought clarification on why the
Exchanges on the Federal platform would fail to determine if someone is
Medicaid or CHIP eligible.
Response: We acknowledge commenters' concerns regarding the
intersection of the Medicaid and CHIP population and the Exchange
population. We continue to improve on our integration with State
Medicaid and CHIP agencies to facilitate Medicaid and CHIP eligibility
determinations, but we do not currently have the same capabilities as
State Exchanges. However, we do collect both monthly and annual
projected income as a part of the application process for the Federal
Exchange, and we base Medicaid eligibility on monthly, not annual,
income. Exchanges on the Federal platform determines or assesses
eligibility for Medicaid and CHIP based on State rules for eligibility.
If a consumer was previously determined
[[Page 27128]]
eligible for Medicaid or CHIP, but their income has changed such that
they believe they will no longer be eligible for Medicaid or CHIP
coverage, we encourage them to return to the Exchange to update their
income and receive an updated eligibility determination.
Comment: All State Exchanges, as well as many other commenters,
expressed concerns related to the proposed requirement for State
Exchanges to implement this proposal. Most commented that State
Exchanges do not have the type of fraudulent behavior this proposal
attempts to address because nearly all State Exchanges have expanded
Medicaid. States also said they are not seeing any indication of
agents, brokers, or web-brokers purposefully overestimate income to be
above 100 percent of the FPL in their State. Some also commented that
they do not have agents, brokers, web-brokers or EDE partners in their
Exchange, which they attribute in part for the lack of this type of
program integrity concern. Additionally, some commenters mentioned that
many State Exchanges have more robust and cost-effective income
verification processes, and that implementing this new requirement
would stifle innovation.
Response: We appreciate that State Exchanges may not have
experienced the same challenges of agents, brokers, and web-brokers
improperly overestimating income resulting in improper payment of APTC.
We also acknowledge that many State Exchanges have robust income
verification processes and can integrate well with additional data
sources and their State's Medicaid and CHIP programs and appreciate
that State Exchanges continue to ensure accurate income eligibility
determinations. However, the persistently high levels of fraud
associated with fully-subsidized plans, which are widely available on
both Federal and State Exchanges, lead us to still believe this is a
vital program integrity policy that is important for all Exchanges,
including State Exchanges, to implement. Specifically, data illustrated
in this section of the preamble shows that all States, including State
Exchanges in non-Medicaid expansion States, experience some instances
of consumers overestimating their annual household income. Even in
States where this may occur in lower numbers, we still believe it is
vital to have this policy in place to ensure that these consumers'
annual household income is fully verified and they are receiving the
correct eligibility determinations. However, given these concerns by
State Exchanges, we believe that instituting the requirement that all
Exchanges sunset this proposal after PY 2026 will balance the need for
program integrity with overall costs to Exchanges. This modification is
also intended to be responsive to State Exchange comments noting that
this measure may not be necessary to ensure program integrity in these
State Exchanges in the long term. We also acknowledge that while we
have found that agents, brokers, and web-brokers intentionally
overestimate income, consumers also often intentionally overestimate
their annual household income without the assistance of an agent,
broker, or web-broker, so we believe this is still necessary in State
Exchanges that choose not to allow agents, brokers, or web-brokers on
their Exchange. As this is primarily a function of the incentive and
opportunity created by the expanded subsidies, we believe it to be
necessary to implement on all Exchanges until excess improper
enrollment levels have abetted. We reiterate that State Exchanges will
continue to be able to check additional income data sources after IRS
to attempt to verify a household's income which may minimize the burden
of reviewing paper documents submitted for verification.
Comment: Some commenters believed that, in addition to making this
proposal optional for State Exchanges, CMS should only implement this
proposal for States that have not expanded Medicaid. Commenters
recommended this because consumers in non-expansion States with annual
household incomes below 100 percent of the FPL may fall in a ``coverage
gap'' because they do not meet the income requirements for Medicaid in
their State or for APTC. Such consumers typically do not have another
affordable option for coverage available. Given this, those consumers
are potentially motivated to intentionally overestimate their income in
order to gain eligibility for APTC. In contrast, consumers in expansion
States do not fall into this ``coverage gap'' and therefore have less
reason to intentionally overestimate their income since they likely
will be eligible for Medicaid or CHIP if their income is below 100
percent of the FPL and they meet all other eligibility criteria.
Response: We understand commenters' concerns that consumers in
Medicaid expansion States may have less motivation to intentionally
overestimate their annual household income than those in non-expansion
States. In order to balance urgent program integrity concerns with
long-term operation costs and enrollment efficiencies, we are
sunsetting this policy after PY 2026. We do want to emphasize that
agents, brokers, and web-brokers who are intentionally misrepresenting
a household's annual household income attestation are motivated to do
so regardless of Medicaid expansion status, as any commissions they are
trying to receive that are tied to those enrollments would occur
regardless. We also note the potential selection issues that may exist
among people who reside in Medicaid expansion States with State
Exchanges who may take advantage of the lack of income verifications to
select coverage through State Exchanges with APTC over Medicaid based
on their health status. To the extent coverage through State Exchanges
provides better access to providers or other benefits to people with
higher health care needs compared to Medicaid, the lack of income
verification could harm the individual market risk pool.
Comment: A few commenters requested that CMS delay the
implementation of this proposed rule, with the earliest timeline
suggested being the beginning of PY 2026 rather than 60 days from the
effective date of the final rule, given concerns about operational
challenges and administrative burdens, especially for issuers.
Response: We do not believe that a delay in implementing this rule
is necessary or appropriate given it is a temporary policy designed to
address urgent program integrity concerns. Exchanges on the Federal
platform are able to implement this policy by the final rule's
effective date, and, given the minimal implementation burden on the
Federal Exchange, we believe State Exchanges should similarly be able
to implement this policy by the rule's effective date. With respect to
concerns about burden on issuers, CMS will ensure that issuers are
informed of the change in policy and what they should do to help
enrollees, both current and new, prepare for potentially receiving a
DMI ahead of the policy's implementation. Additionally, since consumers
will still receive the full time period to resolve their income DMI and
receive temporary eligibility during that period as is the case for
other DMI types, we believe issuers will have enough time to help their
enrollees determine documents to submit to resolve their DMI before
clients' DMIs would potentially expire and result in loss of APTC.
Given that the time frame of when this type of DMI could actually
expire and affect an enrollee's coverage is at least 150 days from the
rule's effective date (accounting for this
[[Page 27129]]
policy's implementation of 60 days after the rule's effective date and
the 90 days households have to resolve this type of DMI), as well as
our plans to inform and prepare issuers for this change, we believe
that this implementation timeline is feasible for issuers.
Comment: Some commenters suggested other types of improvements to
the income verification processes. Many of these commenters encouraged
Exchanges on the Federal platform to use other data sources to verify
income, such as the State Wage Information Collection Agency; data from
State agencies that have unemployment or human service programs; and
the National Directory of New Hires. They suggested that using such
additional data sources would reduce the reliance on Federal tax data,
align better with State Exchanges that use some of these data sources,
and help the APTC verification process become more streamlined and
accessible. One commenter said that Exchanges should be required to
leverage income data through the Verify Current Income Hub, as this
would help reduce improper enrollments and better direct consumers to
the correct coverage pathway, and that the data's accuracy and
efficiency outweighs the cost of using the service. One commenter
suggested that Exchanges on the Federal platform should implement a
``facilitated enrollment'' program. Some commenters suggested changes
to how APTC and PTC work, including basing APTC on prior year income
and working with Congress on legislation changes on APTC recoupment
rules.
Response: We appreciate the comments with additional ways in which
Exchanges on the Federal platform can improve the income verification
process. We continue to explore utilizing additional data sources to
verify income as well as other innovations and improvements. However,
additional data checks would take additional time and resources to set
up and integrate with existing processes, and some of the data sources
State Exchanges utilize are unavailable on the Federal level. As
outlined in 155.320 (c)(3)(vi)(A), the Federal Exchange must weigh
whether the available data will provide sufficiently accurate income
information for enough consumers to justify the costs of both
connecting to these data sources and continuing to pay for the data.
Additionally, we do not believe that those would replace the need for
this policy, as even with additional trusted data sources available to
potentially verify household income above 100 percent of the FPL, there
will still be consumers for whom the Exchange is unable to verify
household income. We would like to clarify that we currently use the
Verify Current Income Hub that one commenter suggested but continue to
allow State Exchanges flexibility in what additional data sources they
use beyond IRS.
Comment: One commenter stated that because this policy was
originally vacated in City of Columbus v. Cochran, the proper place to
contest this is in court rather than through this rule.
Response: We believe that the proposed and final rule address the
concerns raised in City of Columbus v. Cochran and therefore
reinstating this policy via rulemaking is appropriate. Specifically, we
have provided additional data demonstrating that consumers overestimate
their income so it is above 100 percent of the FPL when IRS data
sources show their income is below 100 percent of the FPL in order to
be determined eligible for APTC. Additionally, circumstances have
changed since the original proposal in the 2019 Payment Notice with
many more consumers being aided by agents, brokers, or web-brokers,
some of whom have used this gap in the income verification process to
enroll consumers with subsidies without their knowledge, making setting
income DMIs for this population even more needed than it was in the
original 2019 Payment Notice proposal.
Comment: One commenter expressed concerns that that the proposed
language could allow a State to perform Periodic Data Matching (PDM)
more than twice a year, resulting in consumers erroneously losing their
coverage without any legitimate increase in program integrity.
Response: We clarify that this proposal does not relate to PDM.
This proposal only refers to the process that occurs when a consumer
applies for coverage or updates their Marketplace application, and does
not involve Exchange-initiated verification of income.
Comment: Some commenters expressed concern that we are denying APTC
to low-income consumers if they do not immediately verify with tax
data.
Response: We clarify that if tax data from the IRS does not verify
an applicant's attestation of annual household income, we then check
other available income data sources and, if those do not verify their
attested annual household income, the household would be given an
income DMI. The applicant would be given 90 days \137\ to submit
documentation to verify their projected annual household income, during
which time the applicant would be given temporary eligibility for
financial assistance based on their application attestation allowing
them to use APTC to enroll in coverage. It is only after that 90-day
period has passed that the household, if they had not yet verified
their income DMI, would have their APTC decreased based on tax data,
potentially to zero if IRS data indicates they would be ineligible for
APTC altogether. Given this, we highly recommend consumers submit
documents to verify their income during that 90-day period to ensure
they maintain their financial assistance and health coverage, and, if
they need more time beyond that 90-day period, they can request
additional time on a case-by-case basis.
---------------------------------------------------------------------------
\137\ In section III.A.3.b of this final rule, Sec.
155.315(f)(7) is being removed. This regulation currently requires
Exchanges to give an automatic 60-day extension to the 90-day income
DMI period if the income DMI has not yet resolved after those 90
days.
---------------------------------------------------------------------------
Comment: We requested comments on our proposal's minimum income
threshold of 10 percent for all Exchanges, and the inclusion of an
optional dollar amount. This minimum income threshold is utilized by
Exchanges to compare an applicant's attested annual household income
with income amounts provided from trusted data sources or documents
submitted by the applicant. This information allows the Exchange to
determine whether applicant's attested annual household income is
within a reasonable threshold of the income reported from a trusted
data source or documents, such that the Exchange can consider the
applicant's attested annual household income verified. Comments on the
threshold proposal were mixed. Most commenters believed that 10 percent
is not a generous enough threshold as it does not account for
variability in projected annual household income from documents, but
there was no consensus on whether 20, 25, or 50 percent was the correct
percentage. One commenter cautioned CMS against having too generous of
a threshold, as they believed this could lead to income being verified
despite substantial variation between attested annual household income
and income from trusted data sources or documents, but they did not
suggest an alternative threshold. None of these commenters mentioned
the inclusion of an optional dollar amount.
Response: We appreciate the comments on the proposed minimum
threshold amount and would like to clarify that this is simply a
minimum, and not a maximum, threshold level
[[Page 27130]]
that all Exchanges must have. Because Exchanges may have a threshold
higher than the one specified in regulation, no commenters requested a
threshold lower than the 10 percent threshold or recommended against
including an optional dollar amount as considered in the proposed rule,
and because no comments were received expressing concerns with the
ability to include an optional dollar amount in addition to the
percentage difference, we are finalizing this as proposed, and will not
specify a specific threshold dollar amount or provide flexibility for
Exchanges to adopt one.
d. Income Verification When Tax Data is Unavailable (Sec.
155.320(c)(5))
In the 2025 Marketplace Integrity and Affordability proposed rule
(90 FR 12967 through 12968), we proposed 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 may
have contributed to 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 stated in the proposed rule (90 FR
12967) that we no longer believe the prior alternative verification
process was overly punitive. We stated that 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 of 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. In the proposed rule, we
stated that 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 sought comment on the accuracy of this
estimate of administrative burden. We stated in the proposed rule (90
FR 12967) that 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 stated in the proposed (90 FR 12967) rule that 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 stated in
the proposed rule (90 FR 12967) that the Department now believes 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, including by restricting Exchanges
from using the process under Sec. 155.315(f)(1) through (4), as well
as 1411(c)(4)(B) and 1412(b)(2). We previously stated in the 2024
Payment Notice 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, but stated in the proposed rule (90 FR
12967), that we believe our previous statutory justifications for this
policy were mistaken and inconsistent with Congress' intent.
Therefore, to strengthen the program integrity of the eligibility
determination
[[Page 27131]]
process for APTC, we proposed to remove Sec. 155.320(c)(5).
We sought comment on this proposal.
After consideration of comments and for the reasons outlined in the
proposed rule, this final rule, and our responses to comments, we are
finalizing this policy as proposed, but with a modification under which
the policy and related requirements will sunset for all Exchanges at
the end of PY 2026. Beginning in PY 2027, the income verification
policy under Sec. 155.320(c)(5), which was in effect prior to the
finalization of this rule, will become effective again. As we explain
in this section and in section III.B of this final rule, HHS is of the
view that the best way to address program integrity concerns created by
the proliferation of fully-subsidized plans policy is to require
further verification when the IRS reports no tax return data is
available for a tax-filer. Notwithstanding, we share concerns related
to the risk of coverage loss by low-income persons. For this reason, we
will codify this policy to be applicable only from this rule's
effective date until the end of PY 2026 to balance these concerns.
We summarize and respond to public comments received on the
proposed policy below.
Comment: Many commenters supported the proposal, including many
advocacy groups and issuers who stated the proposal would reduce fraud.
Additionally, one professional association and one advocacy group
supported the proposal because it would protect enrollees against
surprise tax bills by verifying attested information.
Response: We appreciate the commenter's support and agree that this
proposal will help mitigate currently high levels of fraud in
Exchanges. An accurate annual household income estimate is a critical
program integrity element for verifying and determining eligibility for
APTC. We believe that verifying annual household income with other
trusted data sources and then following the alternative verification
process when a tax return is unavailable will strengthen program
integrity.
We also agree with the commenters who stated that removing this
exception to verification of annual household income may protect
consumers from incurring large tax liabilities, due to incorrect income
information. Once these provisions have helped reduce holdover fraud
from the expansion of subsidies, they will go away.
Comment: Some commenters supported the proposal but provided
recommendations such as: providing exceptions for certain situations,
providing State Exchanges with implementation flexibility, ensuring
Exchanges are prepared to implement this proposal without undue harm to
consumers, requiring Exchanges to check additional data sources when
tax data is unavailable, obtaining new data sources for income
verification (such as the National Database for New Hires), and
delaying implementation.
Response: We appreciate the commenters' recommendations on
additional ways to improve the income verification process. We do not
agree that exceptions to the verification process should be provided
because the policy is temporary in nature and that would not align with
our goal of addressing urgent program integrity concerns. Once these
policies sunset at the end of PY 2026, the requirement for 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 will once again
apply to all Exchanges.
Comment: Most professional associations, provider groups, and
advocacy groups opposed this proposal, stating that it would create
barriers for vulnerable consumers, increase administrative costs, and
destabilize the risk pool because these changes could increase adverse
selection because sicker individuals have greater incentive to put in
the time and effort necessary to resolve income verification issues.
Response: We acknowledge commenters' concerns around administrative
burdens like cost and potential extra verifications steps and risk pool
impacts. Reintroducing income verification for applicants for whom no
tax return data is available would increase burden on some applicants,
but the currently high level of improper enrollments, which we believe
to be driven by the incentives and opportunities created by the
expanded subsidy regime, call for immediate action to improve program
integrity. That said, we understand that reactions to crisis levels of
improper enrollments may not strike the right balance with proper
enrollment access over the long term and, as such, are making this
policy temporary. Additionally, while in the proposed rule we connected
the need to use alternative income verification methods when the IRS
returns no data to the statutory framework, and while the proposal is
allowed by statute, we recognize the statute includes in section
1411(c)(4)(B) the provision to weigh the administrative and other costs
of a data matching program against its expected gains in accuracy,
efficiency, and program participation. In response to comments detailed
later in this section related to consumer and State Exchange burden and
risk pool concerns, and as explained in section III.B. and elsewhere in
this final rule, we are finalizing this policy to be effective only
through the end of the PY 2026. This will allow this policy, as well as
the other policies in this rule, to reduce the high levels of holdover
improper enrollments while mitigating long-term burden.
Comment: Some providers, provider groups, and organizations
expressed concern that it could take vulnerable enrollees longer than 1
hour to submit documentation related to this income verification
requirement.
Response: We recognize that it may take certain consumers longer
than 1 hour to submit documentation related to this income verification
requirement, and note that the 1-hour estimate is an average. However,
there are no data to support an alternative estimate of the time it
would take a consumer to submit income verification documentation.
Comment: Many commenters who opposed the proposal believed that
when self-attestation does not match trusted data sources, this is not
indicative of fraud, but rather people whose income fluctuates often or
dramatically enough that their projected household annual income would
not match records for previous years.
Response: We acknowledge the commenters' concern about the variable
nature of consumer income. We proposed to require Exchanges verify
household income when data from the IRS is unavailable. This is
different from when a consumer's attestation does not match trusted
data sources. If the additional verification processes result in the
consumer's attestation not matching the trusted data sources, the
Exchange would generate an income DMI. We acknowledge that many income
DMIs are created by eligible consumers and during the income DMI
resolution process, eligible consumers have the opportunity to verify
their income using a list of acceptable documents. Nevertheless, based
on the data set forth in this rule, we maintain our concern that
agents, brokers, and web-brokers may make improper attestations without
consumers' knowledge leading to unauthorized enrollments, and that
further income verification is needed to protect consumers from the
resulting harm.
[[Page 27132]]
Comment: Many State Exchanges opposed this proposal, stating that
it would cause unnecessary income DMIs and significantly increase
administrative burdens for applicants and members and lead to coverage
erosion that would adversely affect the States' risk pool since younger
people are more likely to not have IRS data available.
Response: We acknowledge the increase in DMIs that may result from
finalization of this proposal. We believe that the increases in program
integrity outweigh the increased administrative burdens that may be
encountered and believe that it is necessary to ensure accurate
projected household income attestations and eligibility determinations.
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.
This is because eligible applicants would likely have documentation
other than tax information, such as pay stubs, to verify their
household income as readily available to them as the standard tax filer
who is verified through the IRS. Because of the availability of these
documents to verify annual household income, the removal of Sec.
155.320(c)(5) would not deter many eligible people from enrolling and
will not destabilize the risk pool, especially given the provision's
temporary nature.
Comment: Multiple States stated that State Exchanges should retain
flexibility to determine the income verification processes and
procedures necessary and appropriate to meet program integrity
standards when determining eligibility for coverage and financial
assistance. Some States also opposed implementing this policy on the
grounds that the problem it would address is not present on their State
Exchanges according to internal State analysis.
Response: We appreciate the various comments highlighting how this
program integrity risk looks different for State Exchanges and the
recommendation to allow State Exchanges to retain flexibility to
determine income verification operations. We acknowledge that many
State Exchanges have robust income verification processes and can
integrate well with additional data sources and their State's Medicaid
and CHIP programs and appreciate the State Exchanges continue to ensure
accurate income eligibility determinations. States have existing
flexibilities, such as the option to call other data sources if the IRS
does not have data available when verifying income, therefore we do not
believe that additional flexibilities in implementing this rule are
necessary. For this reason and others outlined in section III.B of this
final rule, we think the temporary nature of this sunset modification
is also intended to be responsive to State Exchange comments noting
that this measure may not be necessary to ensure program integrity in
these State Exchanges in the long term.
Comment: Two Tribal organizations opposed this proposal because it
would create barriers to enrollment for American Indian and Alaskan
Native people who are not required to file taxes. They stated that the
proposal would complicate enrollment, delay access to care, and
increase administrative strain on Exchanges.
Response: We acknowledge that there are cases where consumers,
including Tribal members, are exempt from filing Federal income taxes
and thus the IRS may have no tax data upon which to verify the
consumer's household income. Tax data, however, is not the only way for
Exchange applicants to verify annual household income. When tax return
data is unavailable to immediately verify a consumer's attestation of
annual household income, the Exchange would trigger the rest of the
verification and data matching process. Specifically, an Exchange can
check other available income data sources and, if those do not verify
the annual household income, the household would be given an income
DMI. During the 90-day period, they would be given temporary
eligibility for financial assistance based on their application
attestation and can use that APTC to enroll in and start coverage. It
is only after that 90-day period has passed that the applicant or tax-
filer, if they had not yet resolved their income DMI, would have their
APTC decreased based on available tax data. The Department is of the
view that this 90-day period provided under statute provides ample time
for applicants to provide proof of their household income before their
APTC is reduced. While we understand this may result in negative
outcomes for some consumers and increased administrative burden on the
Exchanges, we believe implementing this policy is necessary due to the
program integrity benefits and protection of consumers enrolled without
their knowledge. The temporary nature of this policy strikes the right
balance between urgent program integrity concerns and long-term
enrollment efficiencies.
Comment: Some commenters expressed concern that APTC would be
denied to consumers if they do not have IRS data available to verify
their income.
Response: We clarify that when tax return data is unavailable to
immediately verify a consumer's attestation of annual household income,
they would go through the rest of the verification and data matching
process. Specifically, we then check other available income data
sources and, if those do not verify the annual household income, the
household would be given an income DMI. During the 90-day period, they
would be given temporary eligibility for financial assistance based on
their application attestation and can use that APTC to enroll in and
start coverage. It is only after that 90-day period has passed that the
household, if they had not yet verified their income DMI, would have
their APTC decreased based on tax data, potentially to zero. Given
this, we highly recommend consumers submit documents to verify their
income during that 90-day period to ensure they maintain their
financial assistance and health coverage.
6. Premium Payment Threshold (Sec. 155.400)
In the 2025 Marketplace Integrity and Affordability proposed rule
(90 FR 12974 through 12976), we proposed 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 stated
in the proposed rule that 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
proposed 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. We are
finalizing these changes as proposed with the following modification:
the removal of the fixed-dollar and gross-premium threshold
flexibilities will sunset after the completion of one new coverage
year, PY 2026, on December 31, 2026.
[[Page 27133]]
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 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.
As we noted in the proposed rule (90 FR 12975), we have compiled
data regarding enrollments effectuated during the OEP. 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. We stated in the proposed rule (90 FR 12975) that
although these numbers represent a decrease from the high of 39,985
complaints received in February 2024,\138\ the fact that the number of
complaints for 2024 remains substantially higher than for 2023
demonstrates that previous program integrity measures \139\ have not
resulted in a decrease in improper enrollments, and additional measures
are necessary to prevent rampant waste and abuse of Federal funds and
protect consumers from surprise tax liabilities and other negative
impacts that may flow when consumers are enrolled in coverage without
their knowledge. We further stated that 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. We also explained
that 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.
---------------------------------------------------------------------------
\138\ 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.
\139\ 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.
---------------------------------------------------------------------------
We stated in the proposed rule that 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). We stated in the proposed rule (90 FR 12975)
that this policy therefore increases the risk that improper enrollments
remain undetected, since the enrollee is less likely to receive
invoices, and a delinquency \140\ 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, we stated that an enrollee who stops paying premiums 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. We noted that,
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).
---------------------------------------------------------------------------
\140\ 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.
---------------------------------------------------------------------------
As we explained in the proposed rule (90 FR 12976), because of
these program integrity concerns, 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, in the proposed
rule, we estimated that, if finalized, the proposed rule would likely
result in about 184,111 policy terminations after application of the
available grace period. We noted that 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.
In the proposed rule (90 FR 12976), we stated that we have also
become
[[Page 27134]]
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.\141\ These cases have caused disruptions in coverage for
consumers, due to Medicaid's refusal to pay for services \142\ when the
consumer is enrolled in a QHP, and has also caused delays in payments
to health care providers. As noted previously, we stated that we expect
that the removal of these premium threshold options would 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.
---------------------------------------------------------------------------
\141\ See Sec. 156.1010(e).
\142\ As required by section 1902(a)(25) of the Social Security
Act, Medicaid is the payer of last resort.
---------------------------------------------------------------------------
We refer readers to the proposed rule (90 FR 12974 through 12976)
for a more detailed discussion of our proposal.
We sought comment on this proposal.
After consideration of comments and for the reasons outlined in the
proposed rule and this final rule, including our responses to comments,
we are finalizing this policy as proposed for all Exchanges, with the
following modification: the removal of the fixed-dollar and gross-
premium threshold flexibilities will sunset after the completion of one
new coverage year, PY 2026, on December 31, 2026. This will address the
urgent improper enrollment concerns previously noted, and allow the
Department to collect additional data on the effects of this policy.
Thereafter, the FFE and SBE-FPs will, and State Exchanges may, offer
issuers the flexibility to implement the premium payment thresholds
outlined in the 2026 Payment Notice (90 FR 4424). We summarize and
respond to public comments received on the proposed modifications to
the premium payment thresholds below.
Comment: Most commenters opposed the proposal because removing
premium payment thresholds could create barriers to coverage for low-
income enrollees who struggle to pay full premiums. For example, many
commenters stated that health center patients are disproportionately
financially strained compared to other patients, and that 61 percent
have incomes below 200 percent of the FPL.
Response: We recognize that it may be more difficult for low-income
consumers to pay premiums but believe that the urgent concern of
addressing the high level of improper enrollments driven in part by
individuals not paying any premium outweighs, at least temporarily, the
burdens associated with enrollees being terminated for failure to pay a
portion of their premium. Once the high levels of improper enrollment
have been addressed, those concerns may no longer persist. The
Department also acknowledges that collection of additional data, as
well as gaps or losses in coverage due to this provision would be
possible under a more permanent policy, and in response to comments,
the Department is finalizing this policy so that it addresses the
urgent program integrity concerns in PY 2026 without ongoing effects
after PY 2026.
Comment: Some commenters opposed the proposal because it could
disproportionately impact vulnerable populations, increase the
uninsured rate, and destabilize insurance markets. Commenters stated
that consumers with chronic conditions might be able to utilize either
the gross-premium percentage-based or fixed-dollar thresholds to avoid
coverage gaps. Commenters also stated that the resulting loss of
coverage could lead to poorer outcomes and increased healthcare costs.
Many commenters stated that the additional thresholds allow issuers to
focus on collecting most of the premium rather than pursuing small
outstanding amounts that might lead to coverage loss.
Response: We agree that it is in the best interest of all enrollees
to remain in steady coverage that they desired to obtain. However,
under a fixed-dollar or gross premium percentage-based threshold, a
consumer could unknowingly remain in unwanted coverage for a longer
period of time than under the net premium percentage-based threshold
before entering delinquency, while also accumulating debt, a dynamic
that has been exacerbated by the currently high levels of improper
enrollment.
Comment: Many commenters stated that removing the fixed-dollar and
gross premium percentage-based thresholds would not address program
integrity concerns, since both require the enrollee to pay their binder
in full before such thresholds would apply. One commenter recommended
that HHS increase efforts to monitor third party premium payments so
that agents and brokers are not paying binder payments or subsequent
premiums, and noted that some issuers have seen increased third party
payment activity in recent months, and would appreciate the Exchange's
increased vigilance to monitor third party premium payments,
particularly as these payments do not fall under the exceptions at
Sec. 156.1250.
Response: We disagree that rescinding the fixed-dollar and gross
premium percentage-based thresholds would not address program integrity
concerns, because although payment of binder is required, both policies
permit issuers to keep consumers enrolled in coverage for multiple
months without making any payments or otherwise indicating they are
aware of the coverage they are enrolled in. This policy balances the
urgent need for program integrity with the long-term desire for
flexibility and enrollment efficiencies.
Comment: Many commenters stated that the proposed rule did not
provide sufficient evidence that agent and broker fraud has anything to
do with premium payment thresholds or that these flexibilities have
been abused by anyone. In addition, commenters stated that the data on
unauthorized enrollments from PYs 2023-2024 did not reflect the effect
that new premium payment policies would have on improper enrollments
because these provisions did not take effect until January 15, 2025.
Commenters recommended instead that CMS wait to rescind these
thresholds until there has been sufficient time to gather and analyze
data on the impacts of these new premium payment thresholds and
continue to prohibit fixed-dollar thresholds for binder payments.
Response: As we noted previously, CMS continues to observe a high
level of unauthorized enrollments, which we attribute largely to the
proliferation of fully-subsidized plans. Although the fixed-dollar and
gross percentage-based premium thresholds have only been in place for a
short amount of time, the Department believes that allowing the use of
fixed-dollar and gross percentage-based premium payment thresholds by
issuers at this time is likely to exacerbate this problem at a critical
period. In order to protect consumers from fraudulent enrollments and
ensure that they are only enrolled in healthcare coverage that they
want and need, rather than in coverage that they are unaware of and do
not want, we believe it is important to safeguard against potential
vulnerabilities added to this dynamic by the fixed-dollar and gross-
premium thresholds. As with other policies, this addresses the imminent
program integrity concerns while reverting back to the previous policy
once the market has had a year to address the lack of expanded
subsidies.
[[Page 27135]]
Comment: One commenter stated that CMS is inappropriately
prioritizing concerns about enrollees' future tax liabilities over the
potential for future health care liabilities.
Response: We disagree that we are prioritizing concerns about
enrollees' future tax liabilities over the potential future health care
liabilities. This temporary policy balances urgent program integrity
concerns with the long-term desire for flexibility and enrollment
efficiencies.
Comment: One commenter stated that if enhanced PTCs expire at the
end of 2025, many more people will be enrolled in plans with nominal
premiums (rather than fully-subsidized premiums) in future years,
exacerbating the risk of disenrollment due to nonpayment of small
premium amounts.
Response: Although expiration of the enhanced subsidies may lead to
an increase in the number of enrollees whose coverage is terminated for
non-payment, including non-payment of small amounts of premium, it is
also important to ensure that consumers are protected from improper
enrollment. Temporarily eliminating the fixed-dollar and gross
percentage premium thresholds, while maintaining the net premium
thresholds, appropriately strikes a balance between ensuring that
Exchange enrollees do not lose coverage for owing only a small percent
of their net premium, while ensuring they do not remain enrolled in
coverage for extended periods of time without paying any premium. After
allowing the temporary program integrity policies in this rule to help
the Exchanges shed the currently high levels of improper enrollment,
our policies revert back to those in effect prior to this rule,
balancing urgent program integrity needs with long-term desire for
flexibility and enrollment efficiencies.
Comment: Several commenters stated that disruptions due to non-
payment terminations may mean a loss for providers of anticipated
reimbursement revenue and an increase in uncompensated care--further
challenging the financial health of health centers, which will lead to
less access to care for patients.
Response: We recognize that temporary interruptions in care may
mean a temporary loss of revenue for providers and increase
uncompensated care. However, since issuers have not yet implemented
either the fixed-dollar or gross premium percentage-based thresholds,
the risk of lost revenue is minimal as a result of this temporary
policy.
Comment: Several State Exchanges and State-specific advocacy
organizations stated that this provision would limit the ability of
their State to manage their own unique health insurance market, where
most State Exchanges already see lower rates of fraud.
Response: We appreciate these comments and concerns raised by State
Exchanges, but we maintain that the policy proposals above are an
appropriate balance of temporary measures to address urgent program
integrity concerns with long-term flexibility for State Exchanges. The
temporary actions are necessary to protect consumers from accruing
large tax liabilities and ensure program integrity, but the rule
reverts back to existing policy once immediate concerns have been
addressed, and State Exchanges regain the flexibility those policies
created. Given our expectation that the expiration of enhanced
subsidies will substantially decrease improper enrollments, the
Department believes it is reasonable to adopt certain policies
temporarily in response to commenter concerns.
Comment: Several commenters stated that issuers have historically
managed payment thresholds and are best positioned to implement these
thresholds due to their deep understanding of enrollee needs and local
market dynamics.
Response: While issuers have insight into payment habits of their
enrollees, Exchanges must provide guardrails to ensure the integrity
and affordability of their markets.
Comment: Several commenters stated that many issuers may have
already made substantial investments to implement the new thresholds.
Reversing course now could render those investments as sunk costs and
could exert modest upward pressure on premiums. Commenters also stated
that promoting continuous coverage contributes to a more stable and
balanced risk pool, and in turn reduces premiums.
Response: We recognize that some issuers may have begun
implementation of one or both of these premium payment thresholds.
However, we believe that the urgent program integrity concerns outlined
in this final rule outweigh the costs that may be associated with
issuers modifying their systems to eliminate the fixed-dollar and gross
percentage-based premium payment thresholds. Further, these measures
are temporary and work to implement these premium payment thresholds
will be relevant once again as issuers prepare for PY 2027.
Comment: A few commenters supported the proposal because of its
intention to address existing program integrity concerns.
Response: We agree that eliminating the fixed-dollar and gross
percentage-based premium payment threshold will address program
integrity concerns, as it will ensure that consumers must always pay
some amount of their monthly premium (at least 95 percent) and will
prevent consumers, especially those who are victims of unauthorized
enrollments, from accruing significant premium debts. We believe
finalizing these proposals through PY 2026 strikes the right balance in
addressing urgent program integrity concerns with long-term desires for
flexibility and enrollment efficiencies.
Comment: One commenter stated that the grace period for premium
payments would be shortened with the finalization of this rule.
Response: We clarify that this final rule does not modify the grace
period for enrollees receiving the benefit of APTC described in Sec.
156.270(d).
Comment: One commenter stated that the net premium threshold amount
(which must be at least 95 percent of net premium) was being modified
with this proposal.
Response: We clarify that this final rule does not modify the net
percentage-based premium payment threshold described in Sec.
155.400(g)(1).
7. Annual Open Enrollment Period (Sec. 155.410)
In the 2025 Marketplace Integrity and Affordability proposed rule
(90 FR 12976 through 12979), we proposed 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 proposed 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
proposed 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
[[Page 27136]]
impacting the stability of the risk pool, Exchange operations, and the
consumer experience (see Table 4). 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.
---------------------------------------------------------------------------
\143\ 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.
\144\ 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.
\145\ See CMS (2020). Public Use Files: FAQs. https://www.cms.gov/files/document/2020-public-use-files-faqs.pdf.
\146\ See CMS (2021). Public Use Files: FAQs. https://www.cms.gov/files/document/2021-public-use-files-faqs.pdf.
Table 4--Summary of Open Enrollment Period Length for Exchanges on the Federal Platform
[PY 2014-2027]
----------------------------------------------------------------------------------------------------------------
Duration
Plan year OEP start date OEP end date (days) Notes
----------------------------------------------------------------------------------------------------------------
2014............................. 10/1/2013 3/31/2014 182 Lengthy first enrollment period
to allow time for consumers to
explore new options and to raise
awareness.
2015............................. 11/15/2014 2/15/2015 93 Planned OEP for PY 2015 was
October 15 to December 7, but
challenges and delays meant the
OEP was extended.
2016............................. 11/1/2015 1/31/2016 92 Proposed a shorter OEP but
finalized more modest change
primarily to limit the burden of
a shift on Exchanges still
experiencing implementation
challenges.
2017............................. 11/1/2016 1/31/2017 92
2018............................. 11/1/2017 12/15/2017 45 Cleanup for late Exchange
activity \143\ occurred between
December 16, 2017 and December
23, 2017 for the 39 States that
used HealthCare.gov.
2019............................. 11/1/2018 12/15/2018 45 Cleanup for late Exchange
activity \144\ occurred between
December 16, 2018 and December
22, 2018 for the 39 States that
used HealthCare.gov.
2020............................. 11/1/2019 12/15/2019 45 Cleanup for late Exchange
activity \145\ occurred between
December 16, 2019 and December
21, 2019, which included the
additional time from December 16-
18 provided to consumers who
were unable to enroll by the
original deadline.
2021............................. 11/1/2020 12/15/2020 45 Cleanup for late Exchange
activity \146\ occurred between
December 16, 2020 and December
21, 2020 for the 36 States that
used HealthCare.gov.
2022............................. 11/1/2021 1/15/2022 76
2023............................. 11/1/2022 1/15/2023 76
2024............................. 11/1/2023 1/16/2024 77 In 2024, January 15 was a Federal
holiday; accordingly, consumers
had until midnight on Tuesday,
January 16 (5 a.m. EST on
January 17) to enroll in
coverage.
2025............................. 11/1/2024 1/15/2025 76
2026............................. 11/1/2025 1/15/2026 76
2027............................. 11/1/2026 12/15/2026 45
----------------------------------------------------------------------------------------------------------------
Sources: Marketplace Open Enrollment Period Public Use Files and Marketplace Open Enrollment Fact Sheets.
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 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
stated in the proposed rule (90 FR 12978) that we believe this data
shows consumers became accustomed to the deadline. Also, we stated that
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 on 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
[[Page 27137]]
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 4 for a summary of OEPs in effect from PY 2014 to PY 2025.
We noted in the proposed rule that 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.\147\ 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.\148\ 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. Some of these people may have switched to a more
affordable plan after receiving a bill in January with unexpected plan
costs. However, we stated in the proposed rule (90 FR 12978) that 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. In the 2024 OEP for Exchanges on the Federal platform,
1,490,000 consumers were added to coverage between 12/15 and 1/15.
Overall, this is about 9 percent of all consumers (~16.4 million) who
selected coverage in the entire 2024 OEP. After implementation of a
shorter OEP, we expect some portion of these 1,490,000 consumers will
adjust their behavior and enroll earlier, some portion will acquire
coverage through another means, and the remainder will miss the
opportunity to enroll due to this change to the OEP duration.
---------------------------------------------------------------------------
\147\ See CMS. (2024, Oct. 17). State-based Marketplaces: 2025
Open Enrollment. https://www.cms.gov/files/document/state-exchange-oe-chart-py-2025.pdf.
\148\ Whether or not a State expanded Medicaid affects the lower
end of the CSR eligibility income range. In States that have
expanded Medicaid, the lower income threshold for CSR eligibility is
138 percent of the FPL, while in non-expansion States it is 100
percent of the FPL. As a result, whether or not a State has expanded
Medicaid can have a substantial impact on enrollment differences
between States.
---------------------------------------------------------------------------
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 commissions.\149\ However, in the proposed rule, we also
noted 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 sought 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.
---------------------------------------------------------------------------
\149\ 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 to agent or broker
noncompliant behavior.
---------------------------------------------------------------------------
Based on the foregoing analysis, we stated in the proposed rule (90
FR 12979) that 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 sought 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 stated in the proposed rule (90 FR
12979) that the OEP plays a crucial role 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.
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.
In the proposed rule (90 FR 12979), we stated that 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 stated that we no longer believe the benefits of the OEP
extension outweigh the risk of adverse selection. We sought comment on
whether the risk of adverse selection supports changing the OEP end
date to December 15.
We anticipated in the proposed rule (90 FR 12979) that if an OEP
end date of December 15 were finalized, this change would apply to all
Exchanges,
[[Page 27138]]
including State Exchanges, for the 2026 coverage year and beyond.
Given our proposal to adopt a standard OEP, we sought comment on
whether we should also prohibit Exchanges from extending an OEP through
application of a blanket SEP. Where available, we requested that
comments include data demonstrating the impact of the OEP end date on
enrollment and adverse selection. Additionally, we sought 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.
We sought comment on this proposal.
After consideration of comments and for the reasons outlined in the
proposed rule and this final rule, including our responses to comments,
we are finalizing this policy with the following modifications: the
changes to the OEP period will take effect beginning with the OEP for
PY 2027 and the rule will provide flexibility for all Exchanges within
set parameters. Newly added Sec. 155.410(e)(5)(i) states that the OEP
must begin by November 1 of the year preceding the coverage year and
must end by December 31 of the year preceding the coverage year. Newly
added Sec. 155.410(e)(5)(ii) limits all Exchange OEPs to a maximum of
nine weeks in duration. Each State's Exchange OEP is also extended by
cross-reference to non-grandfathered individual health insurance
coverage outside of the Exchange per Sec. 147.104(b)(1)(ii). Thus,
beginning with the OEP for PY 2027, the dates of the OEP each year for
Exchanges operating on the Federal platform will be November 1 through
December 15 of the preceding year; however, the final rule provides
flexibility for all Exchanges, including those on the Federal platform,
to adjust OEP dates, within the outlined parameters, in future years as
operational processes evolve.
For example, in some cases the timelines and operations established
by Exchanges for premium rate filings and consumer noticing may
currently preclude beginning the OEP earlier than November 1. In
addition, while some Exchanges already have a December 31 cutoff date
for January 1 coverage, many Exchanges, including the Exchanges on the
Federal platform, have generally made coverage effective on February 1
when a plan selection is made between December 16 and December 31. Per
Sec. 155.410(f)(4), as finalized in this rule, all plan selections
made during the OEP must be effective as of January 1 of the plan year.
Therefore, in order to elect a December 31 end date to the OEP, the
Exchange and its issuers must be capable of making coverage effective
the very next day following a December 31 plan selection. Under this
final rule, Exchanges may adopt any start date on or before November 1,
and may adopt an end date as late as December 31, as long as
operational processes allow for meeting all other Exchange requirements
associated with the OEP. As we believe the open enrollment period
length is largely independent of subsidy levels set by Congress and the
current high levels of improper enrollment we are attempting to
mitigate, we are finalizing these changes for PY 2027 and beyond. We
summarize and respond to public comments received on the proposed
change in OEP dates below. and respond to public comments received on
the proposed change in OEP dates below.
Comment: Almost all commenters expressed support for delaying
implementation of a shorter OEP, if finalized as proposed. Most
commenters cited the sunset of enhanced PTC as a potential cause for
consumer confusion during the upcoming OEP, which will require
additional consumer support and staffing on the part of issuers,
agents, brokers, web-brokers and Exchanges. Commenters expressed
concern that these dynamics would be exacerbated by a shorter OEP. Many
issuers asserted that shortening the OEP in a year when consumers most
need additional time to assess and change plans has the potential to
create market instability. Some stated that there is not adequate time
to incorporate this change into premium rate filings for PY 2026.
Several organizations stated that there is insufficient time to
notify consumers and conduct educational outreach about this provision
prior to the OEP for PY 2026, and decreased Navigator enrollment
support funding for PY 2026 \150\ may contribute to consumer confusion.
---------------------------------------------------------------------------
\150\ See CMS (2025, Feb 14). Press Releases: CMS Announcement
on Federal Navigator Program Funding. https://www.cms.gov/newsroom/press-releases/cms-announcement-federal-navigator-program-funding.
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Some commenters said that technical modifications and testing were
already underway for PY 2026 OEP, so adding modifications would be
challenging and costly for Exchanges and their issuers to incorporate.
Response: We recognize that finalizing a rule that changes the OEP
dates only a few months prior to the start of an OEP for a plan year
during which nearly all enrollees receiving financial assistance will
experience changes in their APTC eligibility or amount has the
potential to be challenging for consumers, Exchanges, and issuers. In
light of these concerns, we are modifying the effective date for the
OEP change to begin for the PY 2027 OEP rather than the PY 2026 OEP.
Comment: Commenters addressing the proposal to amend Sec.
155.410(e) to shorten the annual OEP in all individual market
Exchanges, including State Exchanges, all expressed support for States
to retain flexibility to set their own OEP dates. Issuers and issuer
associations that supported the proposal for a shorter OEP for the FFEs
recommended that CMS permit State Exchanges to continue setting their
own OEP dates. All State Exchanges that submitted comments also
supported giving State Exchanges flexibility to set their own OEP,
primarily stating that States better understand local market
conditions, such as consumer demographics, enrollment patterns, fraud,
risk, and adverse selection, and therefore are better positioned to
decide the length of OEP that will work best for their residents. These
commenters also noted the need for flexibility in case of natural
disasters.
Response: After consideration of the comments received, we are
modifying our proposal to provide flexibility for States to set their
own OEP dates, with the condition that, beginning with the OEP for PY
2027, the end date is no later than December 31 of the preceding year
and all Exchange OEPs have a maximum length of 9 weeks. We specify the
9-week duration because it will allow most Exchanges to maintain their
OEP start date of November 1 and extend their OEPs through the latest
allowed end date of December 31. If an Exchange preferred to start the
OEP earlier, such as on October 15, the 9-week durational limit would
ensure that the Exchange's OEP length does not place excessive burden
on issuers and enrollment partners. We believe that a 9-week OEP
provides more than sufficient time for consumers to submit an
application, compare their plan options, and enroll in advance of the
new year. During the PY 2025 OEP, 97 percent of all Exchange
enrollments occurred by the end of the ninth week. The latest allowable
OEP end date of December 31, coupled with the finalized effective date
rules in Sec. 155.410(f) will ensure that all OEP enrollees have full
year coverage effective January 1 of the plan year for which they are
enrolling. We also note that throughout the year, Special Enrollment
Periods are available for consumers who live in areas that are
experiencing a natural disaster (or other national or State-level
emergency) when
[[Page 27139]]
it is designated a Federal Emergency Management Agency (FEMA) incident.
Comment: Several commenters supported shortening the annual OEP as
proposed, beginning with PY 2027 or later. One commenter cited
consistency across Exchanges to help consumers remember key dates and
reduce confusion from having two deadlines for two different coverage
start dates. Two commenters opined that the shorter OEP would reduce
adverse selection and ensure the stability of the individual market.
One commenter noted that an OEP that ends before the start of the next
calendar year begins allows health plans to better predict risk and
pricing models.
Response: We agree with these comments and are finalizing the
policy to end the annual OEP for all Exchanges no later than December
31 of the calendar year preceding the applicable benefit year,
beginning with PY 2027. This approach balances State flexibility with
consistency, because beginning with the PY 2027 OEP all Exchange OEP
enrollments across the country will have a January 1 effective date.
The single effective date ensures that consumers have only one
deadline. Ending the OEP before the plan year begins will mitigate
adverse selection because consumers will not be able to switch plans in
January based on emergent health needs or delay enrollment by forgoing
January coverage with the option of enrolling later instead. The
December 31 end date and the 9-week durational limit will shorten the
OEP for all Exchanges once effective for the PY 2027 OEP.
Comment: Many interested parties expressed concerns about the
proposed revision to the annual OEP. Commenters noted that a shorter
OEP would have potential for reduced enrollment and an increase in the
uninsured population. Some commenters commented on the importance of
the OEP providing enough time to support consumer choice and informed
decisions about coverage, noting in particular that vulnerable
populations, including those in rural areas with limited digital
access, those with language barriers, and those with disabilities, may
need additional time and assistance to enroll. Many commenters also
noted that some consumers need enough time to switch plans.
Response: We agree that the OEP must provide sufficient time for
all entities involved in the annual open enrollment process to conduct
outreach, provide assistance, and enroll in coverage. We intend to
conduct outreach to consumers in States with Exchanges operating on the
Federal platform to ensure that they are aware of the newly shortened
OEP are prepared to enroll or re-enroll in 2027 coverage. By providing
flexibility to State Exchanges to set their OEP dates within set
parameters, we anticipate that Exchanges can time their OEP period to
best accommodate the needs of the specific populations in their States,
including vulnerable populations. By delaying the effective date until
PY 2027, Exchanges can increase outreach to vulnerable populations or
consider tactics other than an extended OEP to promote their
participation.
Comment: Many commenters said that a shortened enrollment period
would strain agents, brokers, enrollment assisters, and call center
capacity as they would be supporting the same number of people in a
shorter timeframe. Some commenters noted that the reduction in Federal
funding for Navigators compounds the capacity concerns regarding
consumer assistance.
Response: A shorter enrollment period may require agents, brokers,
web-brokers, enrollment assisters, and the Marketplace call center to
assist the same number of people over a shorter timeframe. As noted
above, during the PY 2025 OEP, 97 percent of all Exchange enrollments
occurred by the end of the ninth week. The final rule provides States
flexibility to set their OEPs up to nine weeks in length. We encourage
Exchanges to work with the enrollment support interested parties in
their States to establish the OEP dates that best align with their
capacity.
Comment: Several commenters shared data from California, New York,
Massachusetts and Virginia State Exchanges showing that those who
enroll later in the OEP may on average be younger, healthier, and
therefore less costly consumers. Commenters worried that if some such
consumers miss the shortened deadline, it could destabilize the risk
pool and increase premiums. Many said that long-term effects would lead
to higher uninsurance rates, uncompensated care, and clinician burnout
that could strain the health care ecosystem.
Response: We noted the crucial role that 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 when
a longer OEP allows consumers to wait until the coverage year begins
before deciding whether to enroll. Enrollment periods are one of the
few tools established by the ACA to mitigate adverse selection and
contribute to a more stable, affordable market. Under the final rule,
beginning in PY 2027, consumers will have one clear and consistent
deadline for January 1 coverage within their Exchange that will not
differ from the end date of the OEP. By delaying the effective date
until PY 2027, Exchanges have sufficient time to message the clearer
OEP end date to consumers, especially the younger and healthier
consumers who may tend to enroll later in the OEP. While we cannot
foresee to what extent younger and healthier consumers will enroll
before the updated deadline, we do believe consumers are deadline-
driven. Given that State Exchange markets may experience unique
patterns of enrollment and have State-specific history of OEP dates and
enrollment outcomes, we are maintaining flexibility for State Exchanges
to set their own OEP dates in this final rule within set parameters.
Moreover, we believe that addressing adverse selection through all the
provisions of this rule will lead to lower premiums that will do more
to encourage younger and healthier consumers to enroll than additional
time does today. Therefore, we believe that the adjusted OEP period
will not lead to negative long-term consequences.
Comment: A few commenters responded to our request about the
overall effects and impacts of OEP placement within the calendar year.
Several commenters recommended that if CMS moves up the OEP end date to
December 15, the Exchanges should also move up the OEP start date to
October 15 to ensure consumers have sufficient time to enroll while
still maintaining a deadline for a January 1 coverage start. Others
suggested that December 31 be the last date of OEP for coverage
effective January 1. Several also mentioned that the OEP falls during a
busy holiday season, which brings its own time constraints and
financial challenges for consumers and business owners.
Response: We appreciate the comments noting potential benefits of
an OEP start date prior to November 1st. Therefore, the final
regulation at Sec. 155.410(e)(5) allows all Exchanges to set an
earlier start date for their OEP if desired. This change provides
additional flexibility to States as compared to the previous policy at
Sec. 155.410(e)(4)(iii) which did not allow an Exchange to set a start
date for their OEP earlier than November 1 unless that earlier start
date was already in place as of November 1, 2023. The rule does not
require any Exchange to establish an earlier OEP start date given that
the timing for issuer rate filings may make it difficult to a start OEP
prior to November 1. We agree that an end date
[[Page 27140]]
of December 31 or earlier coupled with the effective date rules at
Sec. 155.410(f) will ensure that all effective dates (other than those
pursuant to a SEP) will be on the same day (January 1 of the coverage
year).
Comment: A commenter noted that that many brokers write both
Medicare and individual market business, and a shorter OEP would reduce
agents' ability to balance these overlapping enrollment periods. Some
commenters worried that the overlap of the Exchange OEP with the
Medicare Advantage OEP may confuse consumers or strain the capacity of
agents and brokers.
Response: Ending the Exchange OEP prior to January will align more
closely with enrollment periods for other coverage such as employer
coverage which benefits consumers because it allows consumers to
compare their options within the same timeframe when they need to
switch from one coverage type to another at the end of the plan year.
In addition, each year since 2010 the Medicare Annual Enrollment Period
has run from October 15 to December 7, and this rule provides
flexibility for Exchanges to partially align their OEP with that
period. However, given the capacity concerns voiced by agents and
brokers and associated organizations, the final OEP policy strikes a
balance between goals of consistency with other OEPs and not straining
the capacity of enrollment assistance entities. We note that the
Medicare Advantage OEP occurs annually from January 1 to March 31, so
the Exchange OEP, with its last possible end date of December 31, will
not overlap.
Comment: Some commenters noted that future Medicaid changes could
cause more consumers to be eligible for Exchange coverage and therefore
the OEP would need to be long enough to ensure an opportunity for them
to enroll.
Response: We are not aware at this time of Medicaid eligibility
changes that would disrupt Exchange enrollment expectations. Consumers
who lose eligibility for Medicaid or CHIP qualify for a Special
Enrollment period under Sec. 155.420 and thus would not be limited to
the annual OEP for Exchange enrollment.
Comment: Some commenters noted that an OEP that extends beyond
January 1 allows a valuable ``free look'' period during which consumers
can change plans. One commenter noted that Exchange enrollees who are
automatically re-enrolled into a plan may not learn of cost increases
until after they receive their first bill in January. Another commenter
noted that an enrollee may discover their plan's clinician directory
included inaccurate information only after the enrollment period
begins.
Response: We provide notice in advance of the OEP to consumers
about the importance of updating information for the future plan year
and actively comparing plan options and prices. We note that section
2799A-5 of the Public Health Service Act requires issuers to verify and
update their provider directories on a regular basis. They are required
to verify that their provider directories are accurate at least once
every 90 days and to update the directory within 2 business days of
provider or facility notice of network agreement termination.
Additionally, if a plan participant receives information from the
issuer's provider directory that a provider or facility is in-network
when the provider or facility is in fact not in network, the issuer may
not charge a cost-sharing amount greater than the cost-sharing amount
that would apply to the item or service if the provider or facility was
in-network.
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)
In the 2025 Marketplace Integrity and Affordability proposed rule
(90 FR 12979 through 12982), we proposed 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 proposed 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) and 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 final
rule). We also proposed to amend the introductory text of Sec.
155.420(a)(4)(iii) to remove reference to paragraph (d)(16). Finally,
we also proposed 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 that 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, we now believe that the
SEP in combination with the widespread availability of zero-dollar
premium plans has increased opportunities and incentives to conduct
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. In the proposed
rule (90 FR 12979), we encouraged commenters and other interested
parties to provide comments on whether and how the 150 percent FPL SEP
has exacerbated these issues. Finally, we stated that 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 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.\151\
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.
---------------------------------------------------------------------------
\151\ 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
[[Page 27141]]
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
proposed 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 stated in the proposed rule (90 FR 12980) that 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.
We stated in the proposed rule (90 FR 12980) that 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),\152\ combined with easier access to
these fully-subsidized plans through the 150 percent FPL SEP, led to a
substantial increase in improper enrollments. We stated that 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. We noted
that 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.
---------------------------------------------------------------------------
\152\ 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.
---------------------------------------------------------------------------
We noted that this pattern of agents, brokers, and web-brokers
targeting low-income individuals with deceptive practices to entice
enrollment in fully-subsidized plans is illustrated in multiple
indictments recently pursued by the Department of Justice (DOJ). In one
case, an insurance brokerage firm allegedly schemed to maximize
commission payments by preying on vulnerable, low-income individuals,
using deceptive practices to improperly inflate the incomes of
consumers projected to earn no income.\153\ In another case, a
different insurance brokerage executive pleaded guilty to deceptive
marketing practices and fraudulently enrolling ineligible consumers
into fully-subsidized ACA plans by inflating their incomes.\154\
---------------------------------------------------------------------------
\153\ Press Release, Department of Justice https://
www.justice.gov/opa/pr/president-insurance-brokerage-firm-and-ceo-
marketing-company-charged-161m-affordable-
care#:~:text=The%20indictment%20alleges%20that%20Lloyd,initially%20pr
ojected%20having%20no%20income.
\154\ Press Release, Department of Justice, https://www.justice.gov/opa/pr/executive-vice-president-insurance-brokerage-pleads-guilty-133m-affordable-care-act-fraud.
---------------------------------------------------------------------------
Because of these practices, in 2024, we implemented various system
and logic changes to prevent some improper agent, broker, and web-
broker behavior and we have observed some improvements. However, we
stated in the proposed rule (90 FR 12980) that 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
that has been improperly cancelled by an agent, broker, or web-broker,
or eventually learns they must reconcile APTC when they file their
Federal income tax return.
In December 2024 the FFE 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. We stated in the proposed rule
(90 FR 12980) that this has caused us to reconsider 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.\155\ The complaint alleges that the false ads created by
the defendants ``resulted in hundreds of thousands of enrollments by
class members.'' \156\ We noted in the proposed rule (90 FR 126980)
that 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.\157\ This analysis estimates between 4 to 5
million improper enrollments in 2024 at a cost of $15 to $26 billion in
improper PTC payments.\158\
---------------------------------------------------------------------------
\155\ Complaint, Turner v. Enhance Health, LLC, No. 24-cv-60591-
MD. (S.D. Fla. Apr. 12, 2024).
\156\ Id. at 56.
\157\ Blase, B.; Gonshorowski, D. (2024, June). The Great
Obamacare Enrollment Fraud. Paragon Health Institute. https://paragoninstitute.org/private-health/the-great-obamacare-enrollment-fraud.
\158\ Ibid.
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We stated in the proposed rule (90 FR 12980) that our own analysis
confirms 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
[[Page 27142]]
HealthCare.gov during the 2024 OEP. Yet, 2022 Census surveys estimated
that only 1.5 million people who live in Florida fell within that
income level.\159\ We stated that this disparity between the number of
plan selections and Census population estimates suggests there were
likely over 1 million improper enrollments in Florida alone. We noted
that 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.\160\ A detailed discussion of the limitations
of this data analysis can be found in section V.C.18 of this final
rule. In the proposed rule, we encouraged commenters and other
interested parties to share their experiences in their respective
States, including the extent of improper enrollments and other data
disparities.
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\159\ U.S. Census Bureau (2022). American Community Survey.
Dep't of Commerce. https://www.census.gov/programs-surveys/acs/data.html.
\160\ Ibid.
---------------------------------------------------------------------------
We stated in the proposed rule (90 FR 12981) that 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. We noted that 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. We stated that this allows
agents, brokers, and web-brokers to conduct unauthorized enrollments or
enrollment changes 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, in the proposed rule (90 FR 12981) we stated that by
immediately ending this SEP as of the effective date of the final rule,
Exchanges would be protecting consumers by preventing improper
enrollments in addition to working to mitigate 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 stated in the
proposed rule (90 FR 12981) that 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. We
stated that additional research is necessary to accurately quantify the
negative impacts of this behavior to the risk pool, and we sought
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 misused. In the proposed rule, we
stated that 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 proposed changes to pre-enrollment verification for SEPs at
Sec. 155.420(g).
In the proposed rule (90 FR 12981), we stated our concern that the
risk of people waiting to enroll until sick 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 individuals must pay to reconcile any misestimate
on their taxes. We noted that 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
was limited to $375 in 2024.\161\ 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. We stated in the proposed rule that 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, we noted that 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. We further noted that
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.162 163
---------------------------------------------------------------------------
\161\ IRS (n.d.) Rev. Proc. 2023-34. Dep't of Treasury. https://www.irs.gov/pub/irs-drop/rp-23-34.pdf.
\162\ 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/.
\163\ 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/.
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We stated in the proposed rule (90 FR 12981) that this wide
flexibility in estimating income may also be open to misuse by
Navigators and Certified Application Counselors (CACs). We noted that
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.\164\ Navigators must provide progress reports to CMS and
future grant funding levels are based in part on progress toward this
goal.\165\ Navigators and CACs may even believe it is appropriate to
encourage applicants to understate their income to gain more affordable
coverage. We sought comment on this issue and the proposal generally.
---------------------------------------------------------------------------
\164\ Centers for Medicaid and Medicare Services, Cooperative
Agreement to Support Navigators in Federally Facilitated Exchanges,
CMS NAV 001, June 7, 2024, at 33. OMB 0938-1215.
\165\ Id. at 32.
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We stated in the proposed rule (90 FR 12981) that 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 stated that we believe stronger enforcement measures
can substantially reduce improper enrollments, we also stated that we
believe improper enrollments would continue to be a problem so long as
there is access to fully-subsidized
[[Page 27143]]
plans combined with even easier access through the 150 percent FPL SEP.
We noted that 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 stated that we believe that ending the 150 percent
FPL SEP remains one of the most critical ways to mitigate this risk of
improper enrollments and protect the individual risk pool. We also
stated that we 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).
In the proposed rule (90 FR 12982), we stated that these
conclusions no longer seem valid considering the recent Turner v.
Enhance Health, LLC litigation, higher numbers of consumer complaints
about 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. We noted that this new
information suggests the increase in the proportion of Exchange
enrollees who report household incomes under 150 percent of the FPL is
driven by improper enrollments. In addition, we explained that 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. We stated that people
already enrolled in fully-subsidized plans clearly have little
incentive to drop their plan. We further stated that 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.
We noted that people who wait can avoid enrollment if they never become
sick and, therefore, avoid contributing when healthy. We further noted
that 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 at 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 stated in the proposed rule (90 FR
12982) that 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. We stated in the
proposed rule that after fully accounting for the impact of people not
enrolling during the OEP and waiting to enroll until sick, we projected
the premium impact of the current policy would be between 0.5 to 3.6
percent. In this final rule, we have revised this estimate. We now
estimate that removing the current monthly SEP for people with incomes
below 150 percent of the FPL will result in premiums being 3 to 4
percent lower than they would be if the SEP were to remain in
place.\166\ A point estimate of 3.4 percent is used in the RIA, and an
explanation of this estimate can be found in section V.C.12 of this
rule.
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\166\ Based on internal CMS Office of the Actuary analysis,
removing this provision is expected to reduce premiums within the
range of 3 to 4 percent, and we use the point estimate of 3.4
percent to estimate expected claims impact and the shift in average
months of enrollment.
---------------------------------------------------------------------------
Based on the premium increase and the increase in improper
enrollments which was exacerbated by our previous SEP policy, we also
stated that 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 stated that we believe that the
costs may exceed the benefits and we encouraged commenters and other
interested parties to provide comments on the cost impact of the 150
percent FPL SEP.
In the proposed rule (90 FR 12982), we noted 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. We stated
that while these negative impacts from the 150 percent FPL SEP are
related, we account for them separately in our consideration. We
explained that 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. We also explained that 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,'' \167\ 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.''
---------------------------------------------------------------------------
\167\ Texas Med. Ass'n v. U.S. Dep't of Health & Hum. Servs.,
110 F.4th 762, 775 (5th Cir. 2024) (citing Nat'l Pork Producers
Council v. EPA, 635 F.3d 738, 753 (5th Cir. 2011); Texas v. United
States, 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 Act.'' We noted in the proposed rule (90
FR 12982) that 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. We stated that the 150 percent FPL SEP is likewise not one
of the SEPs specified in section 9801 of the Code, nor similar to such
SEPs.
We stated in the proposed rule (90 FR 12982) that this
interpretation aligns with our overall experience regarding the role
that enrollment periods play in mitigating adverse selection within the
[[Page 27144]]
structure of the ACA. We stated that 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 also stated that we believed that
Congress was correct to provide the Secretary with a comprehensive
statutory list of SEPs that omitted the 150 percent FPL SEP. We sought
comments on this proposal.
We stated in the proposed rule (90 FR 12982) that 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. We noted that 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. We further noted
that, 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 requested further comment on this proposal.
After careful consideration of comments and for the reasons
outlined in this final rule, we are finalizing this policy with a
modification under which the policy and related requirements will
sunset for all Exchanges at the end of PY 2026. Thereafter, the 150
percent FPL SEP that was available at the option of the Exchange prior
to the finalization of this rule will become available again. As
mentioned throughout this proposed rule, there are currently high
levels of improper enrollment in the 100 to 150 percent of the FPL
cohort as a result of the fully-subsidized benchmark plans available to
them. Despite the expiration of the fully-subsidized benchmark plans,
we expect there to be significant numbers of improperly enrolled
individuals in this income cohort that remain enrolled and receiving
APTC for which they are ineligible for some time before markets
normalize. That said, we received significant comments in opposition to
our proposal to end the 150 percent FPL SEP with commenters raising
significant concerns over its impacts on low-income Americans that
properly utilize this pathway to receive coverage.
While we agree that low-income Americans properly seeking coverage
should not be locked out of it, the 150 percent FPL SEP for individuals
with fully-subsidized premiums--as a result of the expanded subsidies--
has enabled significant improper enrollment. That said, once the
expanded subsidies expire and individuals are exposed to greater
premium costs, the ability of individuals or actors on behalf of
individuals to improperly enroll in plans that the 100 to 150 percent
of the FPL cohort are eligible for is significantly diminished. In
order to address the currently high rate of improper enrollments, we
believe it to be necessary to pause the 150 percent FPL SEP
temporarily. Coupled with the other temporary policies in this rule and
the expiration of fully-subsidized plans, we expect the level of
improper enrollments to come down drastically in PY 2026, diminishing
the need for ongoing crisis-level program integrity policies. This
dynamic, combined with the significant concerns raised by commenters on
our proposal, has led us to finalize a pause on the 150 percent FPL SEP
thorough PY 2026, with a reversion to the previous policy for PY 2027
and beyond.
We summarize and respond to public comments received on the
proposed repeal of the 150 percent FPL SEP below.
Comment: Some commenters supported the proposed repeal of the 150
percent FPL SEP, including issuers and advocacy groups. Commenters
acknowledged that the 150 percent FPL SEP was created to accommodate
individuals losing Medicaid while States worked to ``unwind'' from the
Families First Coronavirus Response Act (FFCRA) continuous enrollment
condition and to return to regular eligibility and enrollment processes
in Medicaid and CHIP. However, now that State Medicaid Agencies have
generally completed unwinding activities, commenters stated that
consumers should utilize other SEPs based on qualifying life events to
enroll into coverage outside of the OEP. Commenters expressed that with
numerous existing pathways to coverage, income level alone is not a
compelling reason to offer a SEP, and that the 150 percent FPL SEP
departed from the ACA's structure to reserve SEPs for those
experiencing life events necessitating a coverage change.
Response: We appreciate the commenters' support for our proposal.
That said, given the substantial uncertainty over the future of the
Exchanges and individual health insurance market, we don't believe a
permanent repeal is appropriate, and as explained previously, we are
finalizing a pause to best balance the urgent need for program
integrity with the long-term desire for enrollment efficiencies.
Comment: Some actuaries, community advocacy organizations, and
issuers supported the repeal of the 150 percent FPL SEP, as the SEP
contributes to adverse selection. Commenters wrote that the SEP
introduces volatility, making it challenging for issuers to distribute
enrollee risk and gauge the market, resulting in higher premiums.
Commenters cited CMS data showing that five million enrollees have
utilized the SEP since it was implemented. They further noted that, in
PY 2024, nearly half of Exchange enrollees had incomes below 150
percent of the FPL, and the sheer volume of the SEP contributed to the
challenges issuers faced gauging the market. Commenters also noted that
they expect the risk of adverse selection through this SEP to
significantly increase once the enhanced IRA subsidies expire. One
commenter indicated that they expected the removal of the 150 percent
FPL SEP, in concert with the other policies listed in the rule, would
improve the risk pool and reduce premiums.
Response: We appreciate the commenters sharing their insights on
how they believe this SEP affected the market. That said, once the
enhanced IRA subsidies expire, fewer consumers with income below 150
percent FPL will have fully-subsidized QHPs available to them, making
it less likely that the SEP can be abused for inappropriate enrollment.
We believe the pause best balances the need for urgent program
integrity measures with the long-term desire to promote enrollment
efficiencies.
Comment: Some issuers and advocacy groups agreed that removing the
150 percent FPL SEP would reduce opportunities for noncompliant agents,
brokers, web-brokers to perform improper enrollments. Commenters stated
that removing this SEP would reduce taxpayer costs in the form of
improper APTC outlays and would protect low-income individuals from
unauthorized enrollments and plan switching. Commenters noted the many
ways in which unauthorized enrollments and plan switches harm
consumers, who may face disruptions in care, inability to fill needed
prescriptions, or tax liabilities as a result. One commenter estimated
that this SEP led to billions of dollars in fraudulent subsidy
expenditures, based on analysis of HHS reports of 50,000 complaints of
unauthorized enrollment and 40,000 complaints of unauthorized plan
switches in the first three months of 2024.
Response: We appreciate these comments highlighting that this
policy will have the desired effect of increasing program integrity and
addressing fraud in Exchanges on the Federal platform. We believe the
pause best balances the
[[Page 27145]]
urgent program integrity concerns with the long-term desire to promote
enrollment efficiencies.
Comment: One commenter said they supported repealing the 150
percent FPL SEP because it allows individuals with income below 100
percent of the FPL, who would not otherwise be eligible for APTC, to
gain access to APTC.
Response: We clarify that the 150 percent FPL SEP does not have any
bearing on whether an individual is eligible for APTC. Individuals with
income below 100 percent of the FPL who are not otherwise eligible for
APTC are not made eligible for APTC by the 150 percent FPL SEP.
Comment: Some individuals, local and national advocacy groups, and
healthcare providers opposed the repeal of the 150 percent FPL SEP.
Commenters stated that the 150 percent FPL SEP provides an important
pathway into coverage, acting as a safety net for uninsured individuals
who may face barriers enrolling during the annual OEP or other SEPs.
Commenters noted many populations to whom this SEP is particularly
valuable, including individuals who experience income fluctuations
throughout the year, individuals who move in-and-out of Medicaid
coverage frequently, and individuals who reside in States that have not
expanded Medicaid coverage to adults. Commenters further expressed that
this SEP is helpful for individuals who may face barriers to navigating
enrollment during the annual OEP or other SEPs, including individuals
with low health literacy, limited English proficiency, disabilities, or
high health care needs. Commenters expressed concern that more
individuals may face administrative challenges related to enrollment
during the annual OEP or other SEPs due to recent cuts to Navigator
funding, as well as the proposals in this rule to instate new SEP
verification requirements and to shorten the annual OEP.
Response: We acknowledge commenters' concerns. However, pausing the
150 percent FPL SEP simply provides a year to allow the market to shed
excess levels of improper enrollments while allowing the market to
adjust to the expiration of the expanded subsidies that enabled such
high levels in the first place. After PY 2026, the SEP will return to a
market without fully-subsidized premiums and exposure to premium costs
should mitigate the fraud that previously proliferated under the
expanded subsidies. We believe that the pause best balances the need to
address urgent program integrity concern with the long-term desire to
promote enrollment efficiencies.
We acknowledge commenters' concerns about the number of consumers
that may be served by Navigators due to changes in funding, but do not
believe that that is a compelling reason not to pursue this proposal.
Comment: Some issuers and advocacy groups agreed that removing the
150 percent FPL SEP would reduce opportunities for noncompliant agents,
brokers, and web-brokers to perform improper enrollments. Commenters
stated that removing this SEP would reduce taxpayer costs in the form
of improper APTC outlays and would protect low-income individuals from
unauthorized enrollments and plan switching. Commenters noted the many
ways in which unauthorized enrollments and plan switches harm
consumers, who may face disruptions in care, inability to fill needed
prescriptions, or tax liabilities as a result. One commenter estimated
that this SEP led to billions of dollars in fraudulent subsidy
expenditures, based on analysis of HHS reports of 50,000 complaints of
unauthorized enrollment and 40,000 complaints of unauthorized plan
switches in the first three months of 2024.
Response: We appreciate these comments highlighting that this
policy will have the desired effect of increasing program integrity and
addressing fraud in Exchanges on the Federal platform. While
noncompliant agents, brokers, and web-brokers contributed to these
issues, we want to acknowledge that most comply with CMS rules and
regulations and act in good faith. The expiration of the enhanced
subsidies will diminish the incentive and opportunity for improper
enrollments.
Comment: Commenters anticipated that this policy change could
result in more individuals having longer periods of uninsurance,
resulting in decreased access to care, worse health outcomes, and
increased financial instability for impacted individuals. Commenters
noted that in addition to impacting individual health outcomes,
increased uninsurance would also have a negative impact on community
and public health, and on businesses that rely on a healthy workforce.
Commenters expressed concerns that care would shift from primary and
preventive care settings to more costly urgent and emergency care
settings, and that increased uncompensated care costs would negatively
impact hospitals, community health centers, issuers, municipalities,
and States. Commenters anticipated that increased risks of uninsurance
would disproportionately impact vulnerable populations, including
individuals with substance use disorders, individuals at risk of or
living with HIV, individuals with cancer, individuals with multiple
sclerosis, and individuals recently released from incarceration. One
commenter noted that repealing this SEP without modifying existing
limits on Short-Term Limited Duration Insurance (STLDI) would result in
coverage gaps for low-income individuals. One commenter raised concerns
that consumers who become uninsured due to the proposed the repeal of
this SEP would instead need to utilize Medicaid if they have a medical
emergency.
Response: We acknowledge commenters' concerns and note that we are
simply finalizing a 1-year pause to the 150 percent FPL SEP to address
urgent program integrity concerns. At the beginning of PY 2027, the 150
percent FPL SEP will begin again.
We appreciate the commenter's analysis of the intersection between
STLDI and the repeal of this SEP and acknowledge the commenter's
suggestions for future changes to STLDI policy. We agree that STLDI
coverage may be a valuable option for uninsured individuals who are not
able to enroll in Exchange coverage through an SEP, given that STLDI
policies generally offer year-round enrollment.\168\
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\168\ https://www.cato.org/policy-analysis/biden-short-term-health-plans-rule-creates-gaps-coverage#short-term-limited-duration-insurance.
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We disagree with the commenter who expressed concerns about
individuals who would have otherwise used this SEP during the pause
needing to rely on Medicaid instead. The 150 percent FPL SEP is only
available to individuals who are eligible for APTC, meaning that they
are not eligible for Medicaid. Therefore, individuals who would have
otherwise used the 150 percent FPL SEP during the pause are generally
not otherwise eligible for Medicaid. Individuals who are eligible for
Medicaid can and should continue to utilize Medicaid's year-round
enrollment.
Comment: Comments from States, individuals, and advocacy groups
opposed the repeal of the 150 percent FPL SEP and expressed their view
that it is not a major driver of adverse selection, as claimed in the
proposed rule. Commenters asserted that people do not wait until they
are sick to enroll in coverage as they have no incentive to wait when
their monthly premiums are zero or nearly zero dollars. Commenters
further noted that it is not prudent for individuals to wait until they
are sick to
[[Page 27146]]
enroll in coverage through this SEP because their plan effective date
and their access to care are not instantaneous.
Some commenters stated that even if individuals wait until sick to
enroll into coverage, the opportunity to enroll via the 150 percent FPL
SEP should be made available as it could result in a net positive
impact because it promotes continuous coverage in the future. One
commenter cited a study showing that even if there is some evidence of
adverse selection amongst SEP enrollees, most care that was sought was
``nondiscretionary''. One State Exchange cited data showing that 85
percent of the 150 percent FPL SEP enrollees remained enrolled
throughout the rest of the plan year, claiming that this shows the SEP
supports continuous coverage. One organization noted that in 2024, only
half of Coloradans who qualified for subsidized coverage enrolled in
coverage, demonstrating that not everyone who is eligible enrolls into
coverage regardless of their health needs. The organization also stated
that in prior rulemaking we found that the risk of adverse selection
associated with this SEP was lower than anticipated.
Response: We appreciate commenters' analysis of the extent to which
the 150 percent FPL SEP may contribute to adverse selection and we
acknowledge commenters' concerns. While we are not able to quantify the
extent to which the 150 percent FPL SEP may drive adverse selection, we
still believe it is reasonable to conclude that this SEP creates a risk
of adverse selection.
We are committed to ensuring that consumers have continuous
coverage, however, and we believe that finalizing the pause of the 150
percent FPL best balances the need to address urgent program integrity
concerns with the long-term desire to promote enrollment efficiencies.
We will continue to evaluate adverse selection in the marketplace after
the enhanced subsidies expire.
Comment: Commenters from States, individuals, and advocacy groups
opposed the repeal of the 150 percent FPL SEP by stating that removing
the 150 percent FPL SEP could deter young and healthy people from
enrolling in coverage and destabilize the risk pool, given that healthy
individuals may be more easily deterred by administrative hurdles to
coverage. State Exchanges cited their own research and researchers
cited State Exchange data showing that the per member per month claims
costs associated with SEP enrollees were lower than costs for non-SEP
enrollments. One commenter referenced actuarial research specific to
the State of New York suggesting that lower-income APTC enrollees had
better risk than their higher income counterparts. Commenters
additionally cited studies demonstrating that States that offered
broad, continuous SEPs during the COVID-19 PHE saw greater decreases in
consumers' prospective risk scores, indicating a healthier enrollee
population, than States that did not. One commenter shared an analysis
conducted by industry pricing actuaries showing that premiums could
increase after the repeal of 150 percent FPL SEP, based on data
demonstrating that loss ratios for SEP enrollees as compared to OEP
enrollees have improved since the 150 percent FPL SEP was introduced.
Commenters encouraged HHS to include data in this rulemaking regarding
the claims costs, loss ratios, or risk profiles of individuals who
utilized the 150 percent FPL SEP to enroll in coverage through the FFM,
and one commenter suggested that failing to do so constituted a
violation of the APA.
Response: We appreciate commenters' narrative on how repealing the
150 percent FPL SEP along with the administrative barriers to
enrollment may disproportionately deter individuals who are healthy
from enrolling in coverage. As explained in this rule, we are not
repealing the 150 percent FPL SEP, we are pausing it through PY 2026 to
address the surge in improper enrollments for ineligible consumers as
the expanded subsidies expire.
Comment: Commenters also disagreed with the agency's claim that the
150 percent FPL SEP is a major driver of fraud and stated that efforts
to address improper enrollments, while laudable, should be more focused
on preventing abuses by agents and brokers instead of limiting
enrollment pathways. Many commenters expressed their belief that HHS'
estimate of improper enrollments was flawed and noted that HHS'
analysis of Census data in Florida to Exchange data was an ``apples-to-
oranges'' comparison and was not generalizable nationwide. One State
Exchange highlighted that they performed a similar analysis of Census
data in their State and found that they had fewer enrollees with
incomes at or below 150 percent of the FPL than were reported in Census
data. Some asserted that increased enrollment among low-income
enrollees could be explained by Medicaid Unwinding, improved messaging
and outreach, enhanced premiums subsidies. and other factors.
Many commenters responded to our concerns that, in addition to
well-documented instances of improper agent and broker behavior,
Navigators and Certified Application Counselor (CACs) may encourage
individuals to underreport their income so that they qualify for the
150 percent FPL SEP. Commenters noted that enrollment assisters are
subject to strict integrity guardrails and that, if anything, assisters
tend to encourage consumers to overestimate their income to reduce risk
of tax liability. One commenter pointed out that Navigators and CACs
were instrumental in sounding the alarm about increases in fraudulent
agent and broker behavior in 2023 and 2024, including by participating
in meetings with CMS to relay the experiences of their clients. They
noted that Navigators and CACs often spend significant time working to
resolve issues for clients who have experienced unauthorized
enrollments or plan switches performed by agents and brokers, and that
there have been no media reports or Department of Justice
investigations related to Navigators or CAC misconduct.
Response: Our conclusion that the 150 percent FPL SEP was a source
of improper enrollments and plan switches for fully-subsidized
enrollees was informed by our work responding to the influx of consumer
complaints; these complaints included detailed narratives that often
implicated the 150 percent FPL SEP as a pathway for unauthorized
behavior. The Department of Justice (DOJ) has recently initiated action
against several brokers alleging that they have inflated consumers'
income levels to make them appear eligible and enroll in coverage they
do not qualify for, resulting in improper payments of APTC and improper
commissions for agents, brokers, and web-brokers.
We acknowledge that with the expiration of the expanded subsidies
there is diminished incentive and opportunity for fraud and improper
enrollment. That said, the current rates of such improper enrollment
are exceedingly high and necessitate some action as the subsidy
environment normalizes. Pausing the 150 percent FPL SEP will help the
Exchanges shed the excess levels of improper enrollments they are
currently experiencing in PY 2026 before reverting back to current
policy in PY 2027.
We further acknowledge commenters' appreciation for navigators and
CACs. However, we also note that commenters did not provide any data
supporting the assertion that navigators and CACs are not contributing
to improper enrollments.
Comment: Commenters offered other policy and operational solutions
to curb the adverse selection and program
[[Page 27147]]
integrity concerns that we expressed in the rule, including limiting
the SEP to new enrollments, limiting consumers to one enrollment or
plan change through the SEP every three months, limiting consumers to
one enrollment or plan change through the SEP per year, and requiring
that consumers' income be verified in order to utilize the SEP. Some
commenters proposed alternative approaches to protecting consumers from
unauthorized enrollments and plan switches, including requiring two-
factor authentication, requiring verbal authorization from a consumer
before certain changes can be made, better monitoring of DE/EDE
pathways, additional monitoring requirements for agents and brokers
with fully-subsidized clients, new penalties for agents and brokers,
and more resources for State Departments of Insurance to investigate
fraud.
Response: We appreciate the suggestions to focus on alternative
methods to enhance program integrity and to explore other solutions to
curb fraudulent activities. We agree that these issues require a multi-
faceted approach, and we have already been taking actions to address
fraud, safeguard the consumers from fraud and harm, and reduce improper
payments of APTC. This rule takes a holistic approach to improving
integrity and affordability in the individual market through a series
of temporary policies designed to address urgent integrity issues and
permanent policies designed to improve affordability. We are continuing
to explore additional operational solutions to further curb improper
enrollments, including two-factor verification. We believe that at
least temporarily pausing the 150 percent FPL SEP is an important step
to curb improper enrollments while the subsidy environment normalizes.
This policy will sunset after the end of PY 2026 and Exchanges will
again be permitted to offer 150 percent FPL SEPs.
Comment: Some commenters pointed out that the ACA directs HHS to
establish SEPs in circumstances similar to those in Medicare Part D and
that Part D has a similar low-income SEP that allows individuals with
low incomes to change plans once per month. Commenters also expressed
that HHS has a broad legal authority under section 1321(a) and that
1311(c)(6)(C) of the ACA to offer Exceptional Circumstances SEPs as it
sees fit.
Response: Section 1311(c)(6)(C) of the ACA states that the HHS
Secretary shall require Exchanges to provide SEPs ``under circumstances
similar to such periods under part D of title XVIII of the Social
Security Act,'' which prescribes SEPs for Medicare Part D coverage. The
Medicare Part D SEPs enumerated in title XVIII of the Act primarily
include changes in circumstance that necessitate a change in coverage,
such as involuntary coverage loss. While we acknowledge that Medicare
Part D offers a low-income SEP in regulation at 42 CFR
423.38(c)(4),\169\ section 1311 of the ACA only requires that Exchanges
provide SEPs similar to those established in title XVIII of the Act,
and title XVIII of the Act does not include income-based SEPs.
Therefore, the Department is of the view that the best reading of
section 1311 of the ACA is that it does not require CMS to allow
Exchanges to offer income-based SEPs. That said, after evaluating
comments we have decided that pausing the income-based SEP is the best
course of action to balance urgent program integrity needs with long-
term desires to promote enrollment efficiencies. The pause will honor
commenter concerns that additional data is necessary to discern the
causes of improper enrollments.
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\169\ Social Security Act Sec. 1860D-01(b)(3)(A).
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We further agree with commenters that, since SEPs for exceptional
circumstances are allowed under title XVIII of the Act, that Exchanges
are required by statute to offer exceptional circumstance SEPs. This
requirement is also reflected in Exchange regulations at Sec.
155.420(d)(9). While both the statute and Exchange regulations do not
define what constitutes an exceptional circumstance, we believe that a
plain understanding of the term compels the conclusion that simply
having a low income is not an exceptional circumstance. This
interpretation is further supported by longstanding FFE sub-regulatory
guidance, which notes that exceptional circumstance SEPs are generally
granted on a case-by-case basis.\170\
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\170\ See Section 5.8 of the FFE Enrollment Manual: https://regtap.cms.gov/reg_librarye.php?i=5507.
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Comment: Commenters stated that nearly all State Exchanges
currently offer the 150 percent FPL SEP or income-based SEPs with
higher income thresholds. Many State Exchanges that offer income-based
SEPs indicate that they are aware of zero reports of unauthorized plan
switching or enrollments in their Exchanges, due to factors including
more stringent security measures as compared to the FFM's DE and EDE
pathways. One State Exchange noted it has an integrated eligibility and
enrollment system that prevents Medicaid-eligible consumers from
utilizing this SEP and experiences limited utilization of the SEP,
along with no program integrity issues. As such, commenters pointed out
that State Exchanges should be able to maintain the flexibility to
design their Exchanges to meet local needs. Commenters also stated that
Federal law specifies required SEPs, but does not preclude States from
establishing additional SEPs. One State Exchange expressed concerns
that the proposal reverses standing deference to State authority
regarding the establishment of SEPs. They also stated that the
effective date to repeal the 150 percent FPL SEP imposes major costs on
State Exchanges which were not accounted for in the proposed rule.
Response: While we appreciate commenters' concerns, we feel it is
critical to pause this SEP pathway as soon as possible and for all
Exchanges, due to its potential to drive improper enrollments in the
fully-subsidized QHP policy environment. We also believe that there
will be residual improper enrollments extending into PY 2026,
necessitating a pause through the end of PY 2026, at which time the 150
percent FPL SEP will resume. We acknowledge that State Exchanges,
unlike the FFE, have not experienced high rates of unauthorized
enrollments or unauthorized plan switches driven by noncompliant
agents, brokers, and web-brokers. However, as discussed in detail in
section V.C.18. of this final rule, improper enrollments also include
individuals with incomes below 100 percent of the FPL who intentionally
overstate their incomes in order to qualify for subsidized Exchange
coverage, as well as for the 150 percent FPL SEP. We believe that
pausing the 150 percent FPL SEP best balances the need to address
urgent program integrity concerns with the long-term desire to promote
enrollment efficiencies. This modification is intended to be responsive
to State Exchange comments noting that this measure may not be
necessary to ensure program integrity in these State Exchanges in the
long term. We further note that Exchange regulations at Sec.
155.410(a)(2) require that all Exchanges, including State Exchanges,
only permit individuals to enroll in or change their QHP during OEP or
during a special enrollment period described in Sec. 155.420.
We acknowledge that we did not fully account for State Exchanges'
implementation costs in the proposed rule and have updated section
V.C.12. of this final rule to include an estimate of such costs.
Comment: Some commenters expressed concerns with the proposal's
effective date and asked that the effective date be delayed until PY
2026 or PY 2027 to give State Exchanges more
[[Page 27148]]
time to make IT changes and to give consumer-facing organizations time
to update education and outreach strategies.
Response: Because of concerns regarding improper enrollment and in
order to protect the integrity of all Exchanges, we are maintaining our
proposed effective date. Due to the primary concerns of fraudulent
enrollments, unauthorized plan switching, and the 150 percent FPL SEP's
overall impact on the risk pool, the provisions in this section will be
effective 60 days following the effective date of this rule. In
response to concerns, however, we are simply pausing the 150 percent
FPL SEP through PY 2026, at which time Exchanges will be permitted to
begin offering the SEP again.
Comment: Some commenters expressed concerns related to the proposed
change at Sec. 147.104(b)(2), stating that they opposed changes to
eliminate the 150 percent FPL SEP for all group and individual market
coverage.
Response: We clarify that the conforming amendment to Sec.
147.104(b)(2) does not substantively impact group or individual market
SEP availability. Rather, the change to Sec. 147.104(b)(2) pauses the
150 percent FPL SEP from a list of SEPs that issuers are not required
to provide for individual market coverage offered outside of the
Exchange through PY 2026.
Comment: One commenter expressed concern about the impact of the
proposed removal of the 150 percent FPL SEP on the monthly SEP
available to members of a Federally recognized Tribe.
Response: We clarify that the proposal to pause the 150 percent FPL
SEP does not impact the monthly SEP for members of Federally recognized
Tribes under 45 CFR 155.420(d)(8).
Comment: One commenter, a State Insurance Commissioner, noted that
they opposed the proposed repeal of the 150 percent FPL SEP but did not
have adequate time to fully analyze the impact of the proposed change
due to the limited comment window and requested that interested parties
be granted additional time.
Response: We acknowledge the commenter's concerns and have
accounted for them by finalizing a pause to the 150 percent FPL SEP to
best balance urgent program integrity concerns with a long-term desire
to promote enrollment efficiencies.
9. Pre-Enrollment Verification for Special Enrollment Period (Sec.
155.420(g))
In the 2025 Marketplace Integrity and Affordability proposed rule
(90 FR 12982 through 12985), we proposed 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 conduct pre-enrollment special
enrollment verification of eligibility only for SEPs under paragraph
(d)(1) of this section.\171\ We proposed 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.
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\171\ Currently, Sec. 155.420(g) provides that Exchanges on the
Federal platform will conduct pre-enrollment special enrollment
verification of eligibility only for SEPs 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.
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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). 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.
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 stated in the proposed rule
(90 FR 12983) that 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 stated that we
believe the positive impact of verification on the risk pool far
exceeds the potential negative impact on the risk pool. Therefore, we
proposed to amend Sec. 155.420(g) to remove the provision that limits
Exchanges on the Federal platform from 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 proposed 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.\172\ In 2016 we added warnings on HealthCare.gov regarding
inappropriate use of SEPs. We also eliminated several SEPs and
tightened certain eligibility rules.\173\ Also in 2016, we announced
retrospective audits of a random
[[Page 27149]]
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.\174\ Finally, we proposed
to implement (beginning in June 2017) a pilot program for conducting
pre-enrollment verification of eligibility for certain SEPs.\175\
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\172\ 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.
\173\ CMS. (2016, Feb. 24). Fact Sheet: Special Enrollment
Confirmation Process. https://www.cms.gov/newsroom/fact-sheets/fact-sheet-special-enrollment-confirmation-process.
\174\ Ibid.
\175\ 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.
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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.\176\ 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.\177\ 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.
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\176\ 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.
\177\ Consumers who resolve an SVI in more than 30 days are able
to do so through extensions they are eligible to receive.
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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
consumer experience, we then scaled back pre-enrollment verification
for every SEP type, 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 3 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 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.\178\ 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.\179\ 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.\180\ 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.\181\ 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.
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\178\ Comment ID CMS-2021-0196-0196, 01/27/2022 available at
https://www.regulations.gov/comment/CMS-2021-0196-0196.
\179\ Comment ID CMS-2021-0196-0222, 01/27/2022 available at
https://www.regulations.gov/comment/CMS-2021-0196-0222.
\180\ Derived from issuer enrollment data, CMS. (2024, Sept.
10). Issuer Enrollment Data. https://www.cms.gov/marketplace/resources/data/issuer-level-enrollment-data.
\181\ Ibid.
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In the proposed rule (90 FR 12984), we stated that 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
[[Page 27150]]
enrollment. We also stated 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.\182\ 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.
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\182\ Descriptions and information on the length of SEPs can be
found at Sec. 155.420(c).
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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.\183\ 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, in the proposed rule (90 FR 12984), we stated that we expect
any negative impact on the risk pool would be minimal and substantially
outweighed by the reductions in people misusing and abusing SEPs.
---------------------------------------------------------------------------
\183\ 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, we stated in the proposed rule (90 FR 12984) that 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- and CSR-subsidized coverage.
Therefore, we proposed 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, 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 stated
in the proposed rule (90 FR 12985) that we believe State Exchange
enrollments would benefit from implementing a similar policy.
In the proposed rule (90 FR 12985), we stated that we also believe
State Exchanges now have more experience with conducting SEP
verifications, which would make broader implementation less burdensome
than before. We sought 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
proposed to amend Sec. 155.420(g) to require all Exchanges to conduct
eligibility verification for SEPs.
We also proposed 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 proposed that Exchanges must verify
at least 75 percent of such new enrollments based on the current volume
of SEP verification by Exchanges. In the proposed rule (90 FR 12985),
we stated that 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 we stated that 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.
We stated in the proposed rule that the determination of how many
enrollments would constitute 75 percent would be required to be based
on enrollment through all SEPs. We stated that 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 proposed to eliminate the current flexibility Exchanges
have under Sec. 155.420(g) to provide exceptions to SEP verification
processes, we stated in the proposed rule (90 FR 12985) that we are
continuing 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
[[Page 27151]]
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 proposed 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).\184\ We stated that 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 also
stated that 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 proposed to allow Exchanges until PY 2026 to implement SEP
verification. We sought comment on this topic and suggestions to
alleviate this concern.
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\184\ Such requests would be made through the State-based
Marketplace Annual Reporting Tool (SMART; OMB Control Number 0938-
1244).
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We sought comment on these proposals. With respect to SEP
verification, we sought 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. In the proposed rule
(90 FR 12985), we stated that 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 invited
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.
After careful consideration of public comments, we have decided to
finalize and implement these policies with a significant modification--
for Exchanges on the Federal platform, each of the rules outlined in
this section will automatically sunset at the end of PY 2026, on
December 31, 2026. As with other policies in this rule and as discussed
in the Executive Summary and section III.B. earlier in this final rule,
we recognize that the imminent program integrity concerns are being
driven by the existence of fully-subsidized plans. The expiration of
the enhanced subsidies coupled with the temporary program integrity
requirements enacted by this rule will right-size marketplace
enrollment in PY 2026 and should obviate the need for ongoing higher
levels of program integrity policies. As the excess levels of improper
enrollments are taken down in 2026, we expect the lower subsidy levels
to appropriately deter future levels of improper enrollments from ever
growing so high again, diminishing the returns of the temporary
policies we are enacting in this rule. In other words, the burden of
continuing such policies will reach a point at which they outweigh any
benefits. For these reasons, we are finalizing this policy for PY 2026
only, with a reversion to the previous policy for PY 2027 and beyond.
Further, we are declining to finalize these provisions for State
Exchanges. As discussed in great detail in this rule, the program
integrity issues are largely concentrated in Exchanges utilizing the
Federal platform. Given the lower levels of improper enrollment in
States, we don't believe the burden that would be imposed by
implementing these requirements for PY 2026 would be worth the
benefits.
We summarize and respond to public comments received on the
proposed adjustments to pre-enrollment SEP verification below.
Comment: The majority of commenters, including general advocacy
groups, disease advocacy groups, providers, State agencies, State
Exchanges, agents and brokers, and one health insurance issuer, noted
that the increased SEP verification requirements would pose an
additional burden to consumers and increase barriers to coverage for
qualified individuals. These commenters also noted that these increased
burdens and barriers would result in decreased enrollment and worse
health outcomes for those impacted.
Response: We acknowledge commenters' concerns. However, we believe
that the additional burden is not significant enough to outweigh the
merits of SEP verification and the increases in program integrity that
it provides, especially since we are only finalizing the requirement
for a single year. We also note that the SEP verification policy we are
proposing for the Exchanges on the Federal platform is not wholly new
and is partially a return to the previous policy. When SEP verification
was active for most SEP types prior to the changes implemented in the
2023 Payment Notice, most consumers who received SEP Verification
Issues were able to resolve them in a timely manner as noted previously
in this preamble.
Comment: Many commenters, particularly advocacy groups,
individuals, labor groups, and State Exchanges, noted concerns that SEP
verification negatively impacts younger consumers in particular who
have lower resolution rates than other generations of consumers. These
commenters noted that younger individuals improve the risk pool and
help to lower premiums. On average, increased verification tends to
deter younger individuals from enrolling, which could have the effect
of raising enrollee premiums.
Response: We appreciate the concerns raised. As noted previously in
this preamble, we acknowledge that younger consumers do resolve their
SEP verification issues at a lower rate than older consumers. While we
acknowledge that this policy can have the effect of deterring some
young people from enrolling in coverage, we do not think that it
outweighs the benefits of preventing improper enrollments in Exchanges
on the Federal platform. Further, finalizing the policy for a single
year is unlikely to have demonstrable effects on the risk pool over any
longer term. This policy balances the need to address urgent program
integrity concerns with the long-term desire to promote enrollment
efficiencies.
Comment: Several commenters, which included health insurance
issuers, providers, advocacy groups, and individuals, expressed support
for this proposal. These comments cited concerns around fraud in the
marketplace and how they believe that increased SEP verification would
reduce or eliminate fraud related to SEPs. Several commenters, in
particular, noted that increased verification would help to prevent
agent, broker, and web-broker fraud. Overall, these commenters agreed
that the SEP verification provision would have the desired effect of
increasing program integrity on the Exchanges.
Response: We appreciate these comments highlighting that this
policy will have the desired effect of increasing program integrity and
addressing improper enrollments in the marketplace during its temporary
implementation in PY 2026. While we do acknowledge that most agents,
brokers, and web-brokers seek to comply with HHS rules in good bad
[[Page 27152]]
faith, we also believe that increased verification requirements for
SEPs will deter agents, brokers, web-brokers, and consumers from
completing enrollments when a consumer is not eligible. We believe that
implementing SEP verification policy will ensure only qualified
consumers are enrolling through SEPs and, as expressed previously, we
anticipate benefits similar to those we experienced when SEP
verification was first implemented as a result of the 2017 Market
Stabilization Rule. This temporary policy will help stabilize the
marketplace in PY 2026 as the subsidy environment normalizes and the
high levels of improper enrollments are reduced before reverting back
in PY 2027.
Comment: Many commenters, particularly State Exchanges, advocacy
groups, providers, and individuals, noted concerns around the increased
financial and administrative burdens the rule would have on State
Exchanges and the Exchanges on the Federal platform. They also noted
concern around a decrease in flexibility for State Exchanges to
determine what verification methods work best for their States. Many
State Exchanges expressed that they do not see any indications of SEPs
being used fraudulently on their Exchange and believe that the proposed
rule would place additional costs and burdens on them with no real
benefit. Other State Exchanges did note that they were not concerned
because they are already in compliance with this proposal.
Response: We appreciate commenters' concerns. We recognize that
there is a great deal of variance between States in terms of levels of
SEP verification and whether it is conducted pre or post enrollment.
After careful consideration of public comments, we have decided we will
not be finalizing these proposals for State Exchanges in an effort to
address concerns around increased burdens and costs. Additionally, we
have decided to finalize and implement the proposed policy with a
significant modification--for Exchanges on the Federal platform, each
of the rules outlined in this section will sunset by their terms after
the completion of one new coverage year, PY 2026, on December 31, 2026.
Sunsetting these rules after PY 2026 will allow the policy to achieve
its desired effect of program integrity.
Comment: Several commenters, which included providers, advocacy
groups, one State Exchange, one EDE partner, one health insurance
issuer, and individuals, expressed that Exchanges should pursue
alternate verification methods or focus on improving the current system
as opposed to increasing SEP verifications for consumers. Some of these
commenters noted that HHS should focus more on regulating agents and
brokers and less on increasing consumer verifications.
Response: We appreciate the suggestions related to alternate
methods of verification and system improvements to improve program
integrity. While we will continue to identify and consider effective
methods of verifying eligibility, we believe that solely focusing on
agents, brokers, and web-brokers to the exclusion of adopting effective
verification processes is not the best policy because it ignores
identified weaknesses in Exchange verification processes as well as our
responsibility to comply with the ACA. We acknowledge that improper
enrollments are not conducted solely by agents, brokers, and web-
brokers, and that most are compliant with HHS rules, and operate in
good faith. We have already taken action to address improper
enrollments by agents, brokers, and web-brokers as outlined elsewhere
in this rule. We are committed to continuing to address those issues.
We believe the temporary policies in this rule, including SEP
verification, will help to directly address improper enrollments
committed by agents, brokers, and web-brokers, while promoting
flexibility and efficiencies in enrollment processes over the long-
term.
C. Part 156--Health Insurance Issuer Standards Under the Affordable
Care Act, Including Standards Related to Exchanges
1. Prohibition on Coverage of Specified Sex-Trait Modification
Procedures as an EHB (Sec. Sec. 156.115(d) and 156.400)
In the 2025 Marketplace Integrity and Affordability proposed rule
(90 FR 12985 through 12987), we proposed 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 HHS
Secretary), 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.\185\
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\185\ 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.
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Section 156.115(d) currently provides that for plan years beginning
on or before January 1, 2026, an issuer of a plan offering EHB may not
include routine non-pediatric dental services, routine non-pediatric
eye exam services, long-term/custodial nursing home care benefits, or
non-medically necessary orthodontia as EHB; 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.\186\
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\186\ In the 2025 Payment Notice (89 FR 26343), we finalized the
removal of the regulatory prohibition at Sec. 156.115(d) on issuers
from including non-pediatric dental services as EHB for plan years
beginning on or after January 1, 2027.
---------------------------------------------------------------------------
Because the scope of EHB must be equal in scope to the benefits
provided under a typical employer plan, and coverage of sex-trait
modification is not typically included in employer-sponsored plans, in
the proposed rule (90 FR 12986), we proposed to add ``sex-trait
modification'' to the list of items and services that may not be
covered as EHB beginning in PY 2026. As noted in the proposed rule (90
FR 12986), such procedures sometimes are referred to as ``gender
affirming care,'' and were referred to in the proposed rule as ``sex-
trait modification.'' The proposed rule (90 FR 12986) stated that the
term ``sex'' is defined as 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.\187\
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\187\ See also, Section 2 of E.O. 14168 and 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.
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[[Page 27153]]
In the proposed rule (90 FR 12986), we stated that although the
fact that sex-trait modification is not typically included in employer-
sponsored plans is an independent, sufficient, and legally compelling
reason for our proposal, we acknowledged recent executive orders \188\
that have been subject to preliminary injunctions. We stated that the
agency made 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
acknowledged in the proposed rule that two courts have issued
preliminary injunctions relating to the executive orders described
above and stated that it did not rely on the enjoined sections of the
executive orders in making this proposal.
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\188\ Executive Order 14168, ``Defending Women From Gender
Ideology Extremism and Restoring Biological Truth to the Federal
Government'' (E.O. 14168); Executive Order 14187, ``Protecting
Children From Chemical and Surgical Mutilation'' (E.O. 14187).
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In particular, we noted in the proposed rule (90 FR 12986) that 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),
appeal docketed, No. 25-1922 (9th Cir. Mar. 24, 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), appeal docketed, No. 25-1279 (4th Cir. Mar. 24, 2025).
We stated in the proposed rule that if our proposal were finalized, it
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. We
further stated that 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.\189\
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\189\ HHS intends to notify the courts in both cases about this
rule after it has been published in the Federal Register.
---------------------------------------------------------------------------
In the proposed rule (90 FR 12986), we noted that with regard to
whether sex-trait modification is typically included in employer-
sponsored plans, 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. We stated that this includes many small group plans that do not
cover such services and noted that 42 States chose or defaulted to
small group plans as their EHB-benchmark plan selections in 2014 and
2017.\190\ In addition, we stated that, 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. We noted that 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, and we stated our understanding 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.\191\ In addition, we noted that 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.\192\
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\190\ CMS. (2016, April 8). Final List of BMPs. https://www.cms.gov/cciio/resources/data-resources/downloads/final-list-of-bmps_4816.pdf.
\191\ Movement Advancement Project. 2025. ``Equality Maps:
Healthcare Laws and Policies.'' https://www.mapresearch.org/equality-maps/healthcare_laws_and_policies. Accessed Feb. 23, 2025.
\192\ Ibid.
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As explained in the proposed rule (90 FR 12986 through 12987), we
believe that coverage of sex-trait modification may be sparse among
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,\193\ and this low
utilization is apparent in the External Data Gathering Environment
(EDGE) limited data set.\194\ 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.\195\
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\193\ 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.
\194\ 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.
\195\ 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.
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We noted 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 stated in the proposed rule (90 FR 12987) that we are also aware
that some interested parties 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. As discussed in the proposed rule (90 FR 12987), the items
and services that comprise sex-trait modification are performed to
align or transform an individual's physical
[[Page 27154]]
appearance with an identity that differs from his or her sex. We stated
that we are also concerned about the scientific integrity of claims
made to support their use in health care settings. As such, we sought
comment on whether it would be appropriate to exclude sex-trait
modification as an EHB.
Consistent with the other listed benefits that issuers must not
cover as an EHB at Sec. 156.115(d), we did not propose a definition of
``sex-trait modification.'' However, we sought 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 recognized in the proposed rule (90 FR 12987) 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 sought
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.
We noted in the proposed rule (90 FR 12987) that 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.
In the proposed rule (90 FR 12987), we also noted that 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.\196\ We stated that if this
proposal were finalized as proposed, health insurance issuers would be
prohibited from providing coverage for sex-trait modification as an EHB
in any State beginning in PY 2026. We further stated that 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. We explained, however, that 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. We noted that 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, we explained that 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, we explained that they may opt to continue covering sex-trait
modification consistent with applicable State law, but not as an EHB.
We sought comment on whether additional program integrity measures
would be necessary to ensure Federal subsidies do not continue to fund
sex-trait modification if this proposal is finalized.
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\196\ 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.
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Lastly, we sought comment on the proposed effective date of this
proposal. We proposed PY 2026 as the effective date for when issuers
subject to EHB requirements would be prohibited from covering sex-trait
modification as an EHB. We sought 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.
After consideration of comments and for the reasons outlined in the
proposed rule and this final rule, including our responses to comments,
we are finalizing this policy with the following modification. In
response to comments, we are finalizing at Sec. 156.400 the addition
of a definition of ``specified sex-trait modification procedure,''
which means any pharmaceutical or surgical intervention that is
provided for the purpose of attempting to align an individual's
physical appearance or body with an asserted identity that differs from
the individual's sex either by: (1) intentionally disrupting or
suppressing the normal development of natural biological functions,
including primary or secondary sex-based traits; or (2) intentionally
altering an individual's physical appearance or body, including
amputating, minimizing or destroying primary or secondary sex-based
traits such as the sexual and reproductive organs. Such term does not
include procedures undertaken (1) to treat a person with a medically
verifiable disorder of sexual development, or (2) for purposes other
than attempting to align an individual's physical appearance or body
with an asserted identity that differs from the individual's sex. This
policy is applicable for PY 2026 and beyond.
We summarize and respond below to public comments received on our
proposal to prohibit issuers subject to EHB requirements from covering
sex-trait modification as an EHB beginning with PY 2026.
Comment: Many commenters disagreed with the proposition that
coverage for sex-trait modification is not included under a typical
employer plan. These commenters cited various reports, including a
report from Marsh McLennan,\197\ a major employee benefit services
company, to dispute this proposition. Many commenters raised as
evidence that in the 2025 Corporate Equality Index,\198\ the Human
Rights Campaign Foundation found that 72 percent of Fortune 500
businesses, and 91 percent of businesses listed on the Corporate
Equality Index, offer coverage of treatment for gender dysphoria. These
commenters noted that, as a result, over 1,300 major employers
nationwide cover this care, 28 times as many businesses as in 2009.
These commenters further stated that coverage for gender dysphoria is
widespread among State employee plans (24 States and DC), Medicaid (27
States, Puerto Rico, and DC), and QHPs offered on the Exchanges (55
percent of QHPs across all 50 States covered this care in PY 2025) and
that many States prohibit exclusions of coverage for gender
[[Page 27155]]
dysphoria (24 States and DC).\199\ Many of these same commenters stated
that the KFF 2024 Employer Health Benefit Survey found that only one-
third of employers with 200 or more employees responded that they did
not offer coverage for sex-trait modification hormone therapy. These
commenters further stated that the survey found that the largest firms
in the country (5,000 or more employees) employ 43 percent of people
with job-based coverage and were significantly more likely to report
covering hormone therapy in relation to sex-trait modification in their
largest plan by enrollment. Another commenter pointed to a study by
Out2Enroll of 2025 silver plans in all 50 States and DC, which found
that 92.9 percent of the 2,138 silver plans did not exclude certain
services for transgender-identifying people and that over half of all
reviewed plans (54.6 percent) included affirmative language indicating
that medically necessary care is covered.
---------------------------------------------------------------------------
\197\ Umland, B; Hifer, E. Health benefits that matter to the
LGBTQ+ community: By the numbers. US Health News, Marsh McLennan,
available at https://www.mercer.com/en-us/insights/us-health-news/health-benefits-that-matter-to-the-lgbtq-community/.
\198\ Human Rights Campaign Foundation. ``Corporate Equality
Index 2025'' available at https://reports.hrc.org/corporate-equality-index-2025.
\199\ Movement Advancement Project. ``Equality Maps: Healthcare
Laws and Policies'' available at https://www.lgbtmap.org/equality-maps/healthcare_laws_and_policies.Accessed05/28/2025.https://www.lgbtmap.org/equality-maps/healthcare_laws_and_policies. Accessed
05/28/2025.
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Some commenters opined that CMS failed to include evidence in the
proposed rule that coverage for sex-trait modification is not typically
included in employer-sponsored coverage.
One commenter disagreed with the proposed rule's reliance on the
Movement Advice Project (MAP) report to support the claim that sex-
trait modification generally is not covered under typical employer-
sponsored plans for treatment of gender dysphoria. This commenter
stated that the MAP report conflicts with several studies, HHS did not
include portions of the report that did not support its conclusions,
and that the MAP report conflates States' transgender-identifying
population numbers with an analysis of how many employers categorically
exclude from coverage sex-trait modification services as treatment for
gender dysphoria.
One commenter disagreed that the fact that some States that do not
mention or have no clear policy on coverage of sex-trait modification
services is evidence that sex-trait modification is not covered in
typical employer plans. This commenter stated that this lack of clarity
is likely because sex-trait modification encompasses a wide array of
services that are also used to treat other health conditions, in
addition to treatment for gender dysphoria, so coverage of such
services for sex-trait modification purposes may not explicitly be
stated in some health plans.
Response: We disagree with commenters' assertion that sex-trait
modification is covered under typical employer-sponsored plans. In
fact, according to the KFF 2024 Employer Health Benefits Survey, which
was cited by many commenters, only 24 percent of employers with 200 or
more employees responded that they cover gender-affirming hormone
therapy; \200\ and an additional 45 percent of such employers were
unable to confirm whether they offer coverage for such services. It is
also reasonable to assume that, compared to gender-affirming hormone
therapy coverage rates, an even lower percentage of the employers
surveyed by KFF cover more invasive, higher cost sex-trait modification
surgeries. We believe this evidence substantiates the claim that
typical employer plans are not covering specified sex-trait
modification procedures, as defined in this rule.
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\200\ Claxton, G. Et al. (2024, October 9). Employer Health
Benefits. KFF. https://www.kff.org/health-costs/report/2024-employer-health-benefits-survey/.
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Additionally, we disagree with the commenter who took issue with
the MAP report as a basis for this policy change. The Department is of
the view that we appropriately relied on and represented the materials,
and that they represent a sound statistical basis to inform our final
policy. This is consistent with the statutory requirement that EHB
align with the coverage provided by a typical employer plan,\201\ and
CMS history of excluding by regulation such services from EHB.\202\
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\201\ 42 U.S.C. 18022(b)(2).
\202\ 45 CFR 156.115(d).
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We acknowledge that very large employers that represent a larger
share of employees may be more likely to cover the specified sex-trait
modification procedures that are the focus of this policy. However, in
the Department's experience, this mainly reflects the fact that larger
employers tend to have more financial resources to provide a more
generous benefit set. The statute specifically references the typical
employer and not the typical employee, which acts to restrain the EHB
from reflecting the more generous and costly health plans offered by
very large employers. Moreover, very large employers also receive more
pressure from advocacy organizations to cover sex-trait modification
procedures and, therefore, likely do not represent the typical employer
to the degree a portion respond to this pressure. In regard to the
Human Rights Foundation Corporate Equality Index findings, we note that
the employers referenced in this report volunteered to participate in
the advocacy organization's program and such voluntary participation
suggests these employers do not represent the typical employer and,
instead, align with the advocacy organization's views.
Comment: Some commenters stated that the argument that typicality
is equivalent to a benefit's utilization rate is flawed, and that no
one would argue against coverage for people with rare cancers that
affect few people, or heart transplants, for example. Some commenters
also stated that the utilization data cited in the proposed rule did
not support CMS' claims regarding typical employer coverage because
they: (1) spoke to actual utilization and not available coverage, and
(2) reflect consumer experience for consumers participating in Exchange
rather than employer-sponsored insurance. Other commenters raised
concerns that the observed low utilization of sex-trait modification
services may reflect the relative rarity of gender dysphoria as a
diagnosis, rather than low levels of coverage for such services under
Exchange or employer-sponsored coverage.
Response: We continue to believe that utilization data from the
EDGE limited data set offers a useful picture of the coverage offered
by a typical employer. While commenters raised concerns that the
observed low utilization of sex-trait modification services may reflect
the relative rarity of gender dysphoria as a diagnosis, rather than low
levels of coverage for such services under Exchange or employer-
sponsored coverage, low utilization, as evidenced by EDGE data, also
supports the contention that specified sex-trait modification
procedures, as defined in this final rule, are not covered by typical
employer plans. Specifically, we believe these data reflect the
coverage experiences of consumers receiving coverage through the small
business health options program (SHOP), which we believe to be more
reflective of the coverage typically provided by the majority of
employers, which are significantly smaller \203\ than those employers
surveyed by, for example, the Corporate Equity Index or KFF. We
disagree with commenters' concern that utilization, as measured through
the EDGE database, does not accurately
[[Page 27156]]
reflect the level of coverage available to the enrollees receiving
employer-sponsored coverage, given that all plans available to Exchange
consumers (those upon whom EDGE data are based), must adhere to the
requirements for EHB, which are themselves closely tied to typical
employer-sponsored coverage.
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\203\ Bureau of Labor Statistics data (available at: https://www.bls.gov/charts/county-employment-and-wages/employment-by-size.htm) suggest that approximately 58% of U.S. employers employ 99
or fewer employees--substantially fewer than the employers surveyed
by KFF or the Corporate Equity Index.
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Comment: One commenter noted that gaps in coverage or ambiguity
regarding coverage because the issuer's plan documents do not reference
sex-trait modification often means issuers will adjudicate medical
necessity on a case-by-case basis and do not justify a claim that sex-
trait modification is not typically covered by employer plans. Another
commenter suggested that the typicality standard should be understood
only as setting a guideline for minimum benchmark coverage and that
typical employer plans have historically excluded coverage for the same
services that the EHB provision was intended to expand. This commenter
therefore suggested that CMS should not take the requirement that EHBs
be equal in scope to a typical employer plan to mean that (1) EHB-
benchmark plans cannot or should not be more generous than a typical
employer plan, nor that (2) just because a particular service is not
commonly covered by typical employer plans, that that should
automatically exclude those services from being EHB.
Other commenters stated that the proposal conflicts with CMS'
regulations on typicality for EHB-benchmark plans, which allow States
to require coverage beyond what is covered in a typical employer plan,
so long as the scope of benefits is not more generous than the scope of
benefits in the most generous plan in the State. Other commenters urged
that the appropriate analysis regarding the typical employer plan per
CMS' own regulations is not whether most other States include sex-trait
modification in their EHB-benchmark plans or the number of enrollees
utilizing this care nationwide, but instead whether such care is
covered by typical employer plans in the State selecting it as EHB.
These commenters emphasized that a requirement that States exclude sex-
trait modification from their State EHB-benchmark plans would be
inconsistent with typical employer plans in their respective States.
Response: We disagree with commenters' position that the statutory
requirement that EHB be equal in scope to the benefits provided by a
typical employer plan was intended to close gaps in coverage by setting
a floor for coverage. We further disagree that sex-trait modification
procedures, if not covered by typical employer plans, are required to
be covered as an EHB to correct gaps in coverage. The position that EHB
be defined in a manner that addresses gaps in coverage must conform to
the typicality requirement.
Comment: Some commenters stated that CMS should consider in its
analysis of typical employer plan coverage for sex-trait modification
that half of all States have interpreted Federal and State laws to
prohibit discrimination based on sexual orientation and gender
identity, which extends to most public and private health insurance
plans.
Response: We acknowledge that several States have interpreted
Federal and State laws to prohibit discrimination against sexual
orientation and gender identity, which may influence employer coverage
of sex-trait modification services. We have considered this and have
found that, despite such State efforts, coverage of sex-trait
modification in employer-sponsored plans remains atypical. After
finalizing the section 1557 nondiscrimination rules in 2016 that added
a definition of sex discrimination to incorporate discrimination on the
basis of gender identity, some State departments of insurance issued
policy bulletins making clear that exclusion of such types of coverage
are discriminatory based on section 1557.\204\ Immediately after our
amendment to section 1557 nondiscrimination regulations in 2020
(amending the 2016 definition of sex discrimination to incorporate
discrimination on the basis of gender identity), an advocacy
organization that tracks coverage of sex-trait modification procedures
on the Exchanges found ``the number of insurers using transgender-
specific exclusions . . . more than doubled.'' \205\ Since 2021, over
half of States have taken action to restrict sex-trait modification
procedures for minors.\206\ We believe these swings in State and
Federal policy reflect the relatively recent emergence and ongoing
controversy over coverage of the specified sex-trait modification
procedures we address in this final rule, which supports the conclusion
that such procedures are not typically covered by employer-plans.
---------------------------------------------------------------------------
\204\ See, e.g., Oregon Department of Consumer and Business
Services, Division of Financial Regulation. Bulletin DFR 2016-1
(September 7, 2016), available at https://dfr.oregon.gov/laws-rules/Documents/Bulletins/bulletin2016-01.pdf; State of Vermont,
Department of Financial Regulation. Insurance Bulletin 174 (rev.
June 12, 2019), available at https://dfr.vermont.gov/sites/finreg/files/regbul/dfr-bulletin-insurance-174-gender-dysphoria-surgery.pdf; Pennsylvania Bureau of Life, Accident and Health,
Office of Insurance Product Regulation. Notice Regarding
Nondiscrimination; Notice 2016-05 (April 30, 2016), available at
https://www.pacodeandbulletin.gov/Display/pabull?file=/secure/pabulletin/data/vol46/46-18/762.html.
\205\ AGLY v. USDHHS, 557 F. Supp. 3d 224, at 239 (internal
citations omitted).
\206\ https://www.lgbtmap.org/equality-maps/healthcare_youth_medical_care_bans.
---------------------------------------------------------------------------
Comment: One opposing commenter stated that HHS provided no
evidence in the proposed rule that treatment for gender dysphoria has
ever been offered by issuers under an excepted benefit plan and noted
that treatment for gender dysphoria is therefore dissimilar to the
other benefits in Sec. 156.115(d) that are excluded from being covered
as EHB. This same commenter stated that the other benefits at Sec.
156.115(d) are excluded as EHB by general designation (eye exam
services, home care benefits, and non-medically necessary orthodontia),
but that here HHS seeks to categorically prohibit specific medical
services used by a specific population (people diagnosed with gender
dysphoria) even when they are medically necessary. Many commenters
raised concerns that this could be a slippery slope to excluding other
medically necessary benefits as EHB.
Some opposing commenters urged CMS to preserve the framework that
allows States to adopt an EHB-benchmark plan that best fits their
unique market dynamics. Such commenters stated that this proposal would
be a significant departure from the existing EHB-benchmark plan
framework because it would prohibit coverage of services as EHB at a
more granular level than before and that this could restrict the
ability of States to respond to local needs, increase the price of
coverage, limit plan and provider innovation, and hinder flexibility
for issuers to respond to changes in scientific evidence and clinical
practice. Many commenters noted that the impact of the proposal on
individuals without gender dysphoria seeking care will also lead to
higher out-of-pocket costs and access issues throughout the U.S.
Response: We disagree that the prohibition on coverage of specified
sex-trait modification procedures as EHB, as finalized in this rule, is
likely to create a slippery slope towards additional coverage
exclusions. We acknowledge commenters' concern that other services are
excluded from coverage as EHB on the grounds that they are excepted
benefits and that specified sex-trait modification procedures are not
generally covered as excepted benefits. However, the contention
underlying the prohibition of other services (for example, routine
adult vision) is the same as that at issue with respect to specified
sex-trait modification
[[Page 27157]]
procedures--that they are not typically covered by employer-sponsored
plans. Specifically, specified sex-trait modification procedures have
not typically been provided by employers through any coverage vehicle,
be that an excepted benefit plan or otherwise. As such, we are not
concerned that prohibiting coverage of specified sex-trait modification
procedures as EHB is likely to curtail the coverage of other services,
given that nothing in this prohibition is intended to place limitations
on services deemed EHB, so long as those services are in accordance
with the statutory requirement that EHB be equal in scope to the
benefits provided under atypical employer plan.
Additionally, while we are largely supportive of State flexibility
with regard to establishing EHB, we take seriously the responsibility
to ensure consistency with the parameters on EHB enumerated in the
statute. As such, we have engaged in rulemaking on a number of
occasions to refine our interpretation of the typicality standard. We
believe the policy we are finalizing is neither a departure from our
previous posture on prohibited benefits, in which we have considered
whether such benefits are included in a typical employer plan, nor an
action that exceeds the authority explicitly articulated in statute.
Rather, we rely on the Secretary's broad regulatory authority to define
EHB and the statutory requirement that EHB be equal in scope to the
benefits provided under a typical employer plan.
Finally, we do not believe there is merit to commenters' concerns
regarding unreasonable increases in out-of-pocket costs for consumers
utilizing sex-trait modification services that do not meet the
definition of specified sex-trait modification procedures finalized in
this rule, or negative impacts to care based on alleged ambiguities
introduced by this policy change. We believe that issuers have the
appropriate flexibility to ensure that services that may or must remain
covered as EHB retain such coverage, and that services that may not be
covered as EHB will no longer be covered as such without disrupting
enrollees' receipt of appropriate care. And, to the extent that out-of-
pocket costs do increase for some consumers utilizing specified sex-
trait modification procedures as defined in this rule, whose cost-
sharing may increase as a result of such services no longer qualifying
as EHB, we believe that will align with the degree of out-of-pocket
costs for such services experienced by consumers covered by employer-
sponsored plans.
Comment: Some commenters disagreed with the proposal to prohibit
coverage of sex-trait modification as an EHB on the basis that numerous
leading medical professional organizations, including the American
Medical Association, American Academy of Pediatrics, American College
of Obstetricians, and Pediatric Endocrine Society, and medical journal
articles have found sex-trait modification to be medically necessary
and that people who have received sex-trait modification services
rarely regret those services. Many commenters stated that sex-trait
modification is the standard of care for gender dysphoria and provided
copies of or links to peer-reviewed journal articles in support of this
assertion.
Other commenters supported the proposal and referenced peer-
reviewed studies and medical evidence or anecdotal scenarios in support
of the policy. For example, some commenters stated that patients,
especially children, may feel regret after utilizing sex-trait
modification services and may suffer negative effects on their future
fertility and sexual function.
One commenter opined that use of puberty blockers to suppress
puberty could possibly further gender dysphoria symptoms, and that
those symptoms, but for the puberty blockers, might have otherwise
naturally subsided over time. Some commenters stated that sex-trait
modification treatment is ``experimental'' and ``dangerous,''
especially for children, and that it can lead to sexual dysfunction
and/or sterility and place people at higher risk of other conditions
such as obesity, diabetes, and cardiovascular disease. Some commenters
argued that many States have prohibited sex-trait modification
interventions for children and that this is evidence that science
supporting such services is medically unsound.
Response: CMS understands the lack of consensus regarding the
efficacy and necessity of sex-trait modification services for people
with gender dysphoria, and especially children, as evidenced by the
comments received and published peer-reviewed studies.\207\ Likewise,
on June 18, 2025, the Supreme Court upheld a State's ban on certain
medical treatments for transgender minors, acknowledging that the
dispute regarding these treatments ``carries with it the weight of
fierce scientific and policy debates about the safety, efficacy, and
propriety of medical treatments in an evolving field.'' \208\ We
carefully read each comment submitted and appreciate that commenters
shared a myriad of opinions and personal stories, both in support of
and against the proposal. However, we are not persuaded that the
existence of journal articles and clinical guidelines supporting the
use of sex-trait modification services for the treatment of gender
dysphoria should require that specified sex-trait modification
procedures be covered as an EHB. In fact, such a stance would be a
departure from the current EHB
[[Page 27158]]
framework which, with the very limited exceptions of the preventive
services and prohibition on discrimination at Sec. 156.125(a), makes
no reference to clinical bases as a justification for whether something
is EHB or not.
---------------------------------------------------------------------------
\207\ See Treatment for Pediatric Gender Dysphoria, May 1, 2025,
Department of Health and Human Services. (``The umbrella review
found that the overall quality of evidence concerning the effects of
any intervention on psychological outcomes, quality of life, regret,
or long-term health, is very low. . . The risks of pediatric medical
transition include infertility/sterility, sexual dysfunction,
impaired bone density accrual, adverse cognitive impacts,
cardiovascular disease and metabolic disorders, psychiatric
disorders, surgical complications, and regret.'') https://opa.hhs.gov/gender-dysphoria-report. Straub, J.J., Paul K.K.,
Bothwell, L.G., Deshazo, S.J., Golovko, G., Miller, M.S., & Jehle,
D.V. (2024). Risk of Suicide and Self-Harm Following Gender-
Affirmation Surgery. Cureus, 16(4):e57472. doi: 10.7759/
cureus.57472. (``There is ongoing controversy surrounding the
benefits of gender-affirmation surgery on mental health. This
controversy reflects diverse perspectives within the medical and
research communities, emphasizing the need for a more comprehensive
understanding of the psychological outcomes of gender-affirming
procedures.''); Surendran, S., Toh, H.J., Voo, T.C., De Foo, C., &
Dunn, M. (2025). A scoping review of the ethical issues in gender-
affirming care for transgender and gender-diverse individuals. BMC
Med Ethics 26, 54. https://doi.org/10.1186/s12910-025-01216-2
(``Despite extensive discussion, there remains significant
disagreement and a lack of resolution on . . . ethical issues
[related to sex-trait modification procedures].''); Effects of
gender affirming therapies in people with gender dysphoria:
evaluation of the best available evidence. Dr. Romina Brignardello-
Petersen and Dr. Wojtek Wiercioch; Main report; May 16, 2022 (``[I]t
is unknown whether people with gender dysphoria who use puberty
blockers experience more improvement in gender dysphoria,
depression, anxiety, and quality of life than those with gender
dysphoria who do not use them. There is very low certainty about the
effects of puberty blockers on suicidal ideation.''); Ludvigsson JF,
Adolfsson J, H[ouml]istad M, Rydelius PA, Kristr[ouml]m B,
Land[eacute]n M. A systematic review of hormone treatment for
children with gender dysphoria and recommendations for research.
Acta Paediatr. 2023 Nov;112(11):2279-2292. doi: 10.1111/apa.16791.
Epub 2023 May 1. PMID: 37069492 (this systematic literature review
concluded that the long-term effects of treatment of gender
dysphoria in children below 18 years old with gonadotropin-releasing
hormone analogues (GnRHa) are unknown and that ``GnRHa treatment in
children with gender dysphoria should be considered experimental
treatment of individual cases rather than standard procedure);
Straub J.J., Paul K.K., Bothwell L.G., et al. (April 02, 2024) Risk
of Suicide and Self-Harm Following Gender-Affirmation Surgery.
Cureus 16(4): e57472. doi:10.7759/cureus.57472 (``The results of
this study indicate that patients who have undergone gender
affirmation surgery are associated with significantly higher risks
of suicide, self-harm, and PTSD compared to general population
control groups in this real-world database.'').
\208\ See United States v. Skrmetti et al., No. 23-477 slip op.
at *24 (U.S. June 18, 2025), available at https://www.supremecourt.gov/opinions/24pdf/23-477_2cp3.pdf.
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The basis for prohibiting the coverage of specified sex-trait
modification procedures as an EHB, as previously stated in the proposed
rule and in this final rule, is that such benefits are not covered
under typical employer plans. Section 1302(a)(1) of the ACA gives the
Secretary broad latitude to define EHB, subject to ensuring that EHB is
equal in scope to the benefits provided under a typical employer plan
pursuant to section 1302(b)(2) of the ACA and meets the other
limitations enumerated in section 1302(b) of the ACA. We understand
that EHB cannot include all possible items and services for all
possible diagnoses, simply by the plain language of section 1302 of the
ACA, such as the requirement that benefits be ``essential,'' limited to
at least the 10 enumerated categories, and equal in scope to the
benefits provided under a typical employer plan.
The Department has also examined these issues elsewhere, including
in a commissioned review of evidence and best practices \209\ regarding
pediatric gender dysphoria. The report echoes some of the concerns
commenters raised, however the report was distributed solely for the
purpose of pre-dissemination peer review under applicable information
quality guidelines. It has not been formally disseminated by the
Department, therefore it does not represent and should not be construed
to represent agency determination or policy. The report will undergo
formal post-publication peer review involving interested parties with
different perspectives according to the Information Quality Bulletin
for Peer Review.
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\209\ HHS (2025, May 1). Treatment for Pediatric Gender
Dysphoria. Office of Population Affairs, Office of the Assistant
Secretary for Health, available at https://opa.hhs.gov/sites/default/files/2025-05/gender-dysphoria-report.pdf.
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Comment: Numerous commenters commented on the need to specifically
define what sex-trait modification is, so that issuers have certainty
as to what they can cover as EHB and consumers can have certainty as to
what their plans cover. Some commenters raised concerns with the use of
the term sex-trait modification and stated that the proposed rule
lacked clarity regarding what specific sex-trait modification services
would be prohibited from being covered as EHB.
Commenters also provided numerous examples of services they believe
should fall under the definition of sex-trait modification. One
commenter urged CMS to provide examples of services that would be
prohibited from being covered as EHB under the term sex-trait
modification, including the following: puberty blockers; hormone
therapy; genital surgery (amputation, building replica cross-sex
organs); non-genital cosmetic surgeries (mastectomy, breast
construction, cheek/chin implants, rhinoplasty, feminization surgeries,
liposuction, voice surgery, hair removal, and ``Adam's Apple''
reduction), and ``erroneous'' sex-trait modification psycho-social
interventions. One commenter suggested that issuers be required to
cover as EHB services to reverse the effects of sex-trait modification.
Other opposing commenters noted that sex-trait modification is not
the clinically appropriate terminology when referring to treatment of
individuals with gender dysphoria, citing to medical professional
organizations, such as the American College of Obstetricians and
Gynecologists, the American Medical Association, the American Academy
of Family Physicians, and the American Psychiatric Association, which
recommend the use of the term ``gender-affirming care.'' Several
commenters opposing the proposal raised concerns that the proposal is
too broad and could lead to inappropriate exclusions of treatments that
are clinically distinct from sex-trait modification services for gender
dysphoria. Many commenters stated that while sex-trait modification
services can be used to affirm an individual's physical appearance or
body with an asserted identity that differs from the individual's sex,
sex-trait modification services are not used most commonly for gender
transition purposes (for example, a biological female receiving hormone
therapy for symptoms of menopause). Numerous commenters expressed that
most people will use at least one service that could be used for sex-
trait modification purposes in their lifetime. They expressed concern
that without clarification, numerous services and drugs could be
excluded for people who do not have gender dysphoria but who need them
to treat other conditions.
Commenters opposing the proposal listed the following as some of
the treatments and conditions unrelated to gender dysphoria that may be
implicated by the broad scope of the proposal: precocious puberty;
hormone replacement therapy to mitigate symptoms of vaginal atrophy and
menopause; hysterectomies and mastectomies for cancer treatment or
prevention; birth control; endocrine disorders; facial reconstruction;
hair removal; hair implants; speech therapy; counseling; oophorectomy;
sexual organ removal due to cancer; treatment for endometriosis,
polycystic ovary syndrome, and other gynecological conditions;
treatment for intersex conditions; and other reconstructive procedures
(such as for trauma victims or cancer patients). Many commenters
opposing the proposal noted that several of these interventions may
involve modifying secondary sex characteristics, but are clearly not
related to gender transition, and that CMS should either remove the
term ``sex-trait modification'' from the final rule or define it
narrowly and with specificity, consistent with accepted medical usage,
to allow exceptions for unrelated and medically necessary treatments.
A few commenters who supported the proposal also requested
clarification regarding the scope of services that are included in the
term sex-trait modification. These commenters supported the proposal,
but requested that CMS define what sex-trait modification means and
specify the precise exclusions from the proposed prohibition on
coverage of sex-trait modification as EHB, emphasizing the importance
of these clarifications for enforceability of the proposal. One
commenter suggested that coverage of EHB include services to assess the
origins of a person's gender dysphoria.
One commenter supporting the proposal stated that sex-trait
modification should mean services that reinforce an erroneous identity
inconsistent with one's sex but should exclude from the definition of
sex-trait modification any services that are routine or medically
necessary to maintain physiological integrity or organ functioning or
that are aimed at restoring or reconstructing form and function
consistent with one's sex. One commenter supported coverage of
diagnostic testing of newborns with congenital anomalies such as
ambiguous genitalia, ostensibly to determine if the newborn has a
disorder of sexual development.
One commenter opposing the proposal stated that CMS should not
define explicit exceptions to the proposal for conditions other than
gender dysphoria, such as cancer or precocious puberty, as doing so
would discriminate on the basis of health conditions as well as
transgender status. Many commenters expressed concern that patient
conditions could worsen if their access to drugs or services were
disrupted abruptly after losing coverage
[[Page 27159]]
for a service due to ambiguity as to what is considered sex-trait
modification. Another opposing commenter urged CMS to refrain from
defining ``sex-trait modification,'' stating that attempting to codify
a definition risks oversimplifying the range of medical treatments that
could fall under this term. One commenter suggested that coverage of
EHB include services to assess the origins of a person's gender
dysphoria, while another commenter opposing the proposal disagreed with
how the proposed rule defined sex because the commenter believed the
policy would exclude individuals who identify with their sex assigned
at birth, but who have medical conditions that make them unable to
reproduce. Many commenters opposing the policy expressed specific
concern regarding how the proposal would apply to intersex people.
These comments asserted that persons with disorders of sexual
development may have variations in chromosomes, external genitalia,
hormones, and reproductive organs, among other characteristics, that
make them neither ``male'' nor ``female.''
Response: We acknowledge concerns raised by commenters regarding
the ambiguity of the term ``sex-trait modification'' as used in the
proposed rule. As discussed elsewhere in this final rule, we are
finalizing the addition of a definition of ``specified sex-trait
modification procedure'' at Sec. 156.400 to ensure greater clarity
regarding what procedures related to sex-trait modifications may and
may not be covered as EHB. Additionally, we acknowledge that issuers
may not categorize some benefits as sex-trait modification services,
because they may instead adjudicate claims for such care based on
determinations of medical necessity and the specific condition the
service in question is intended to treat. We note that this policy
change will not prohibit issuers from covering specified sex-trait
modification procedures when deemed medically necessary. This is both
because (1) this prohibition does not prohibit issuers from covering
any types or forms of care; the prohibition is only on covering
specified sex-trait modification procedures as EHB, and (2) this
prohibition only prohibits issuers from covering specified sex-trait
modification procedures as EHB if they meet the definition we are
finalizing at Sec. 156.400.
We agree with commenters that providing a definition of the
services implicated by this policy would provide issuers, consumers,
health care providers, and other interested parties with greater
certainty. Accordingly, after considering comments, we are finalizing
the addition of a definition of ``specified sex-trait modification
procedure'' at Sec. 156.400. Specifically, the term ``specified sex-
trait modification procedure'' means any pharmaceutical or surgical
intervention that is provided for the purpose of attempting to align an
individual's physical appearance or body with an asserted identity that
differs from the individual's sex either by: (1) intentionally
disrupting or suppressing the normal development of natural biological
functions, including primary or secondary sex-based traits; or (2)
intentionally altering an individual's physical appearance or body,
including amputating, minimizing, or destroying primary or secondary
sex-based traits such as the sexual and reproductive organs. Such term
does not include procedures undertaken (1) to treat a person with a
medically verifiable disorder of sexual development, or (2) for
purposes other than attempting to align an individual's physical
appearance or body with an asserted identity that differs from the
individual's sex.
After closely reviewing public comments, we believe this definition
of ``specified sex-trait modification procedure'' addresses commenters'
concerns that regulated entities may be confused regarding the scope of
services subject to the policy, as well as concerns that people be able
to access benefits as EHB when provided for purposes other than
attempting to align an individual's physical appearance or body with an
asserted identity that differs from the individual's sex, as discussed
further below. For example, this final rule would not prevent an issuer
from covering as EHB mastectomies or breast reconstruction after a
mastectomy for women with breast cancer or hormone therapy for a person
with precocious puberty, cancer, or infertility, if those services are
otherwise covered.
In response to comments received regarding the applicability of the
term ``sex-trait modification'' versus the term ``gender-affirming
care'', we have adopted a narrowly tailored definition of ``specified
sex-trait modification procedures,'' in part, because of commenter
concerns that the term ``gender-affirming care'' generally encompasses
a broader set of medical services, such as mental health services. For
example, hormone replacement therapy may or may not be prohibited from
coverage as EHB under our final policy, depending on whether or not
that therapy is being provided in an attempt ``to align an individual's
physical appearance or body with an asserted identity that differs from
the individual's sex,'' among other defined considerations.
Although some commenters suggested including certain other services
in the definition of sex-trait modification services, we decline to
adopt an exhaustive list. We believe that the definition we are
finalizing in this rule provides an appropriate and actionable degree
of certainty and clarity for consumers, issuers, providers, and other
interested parties, while also maintaining flexibility to accommodate
changes in medical science and standards of care.
We agree with commenters that services or procedures that would
constitute sex-trait modification procedures if provided for the
purpose of ``attempting to align an individual's physical appearance or
body with an asserted identity that differs from the individual's sex''
do not constitute specified sex-trait modification procedures if
provided for a different purpose. Specifically, the definition of a
specified sex-trait modification procedure categorically excludes
procedures undertaken: (1) to treat a person with a medically
verifiable disorder of sexual development, and (2) for purposes other
than attempting to align an individual's physical appearance or body
with an asserted identity that differs from the individual's sex. We
believe these exclusions are fully responsive to commenters' concerns
that sex-trait modification be narrowly defined. These exclusions will
ensure that services that may be employed to effectuate sex-trait
modification are not categorically excluded from coverage as EHB for
other purposes.
We note, for example, that this definition will allow people with
medically verifiable disorders of sexual development to receive
surgical services as EHB, if otherwise covered by the plan. Similarly,
those needing hormone therapy for cancer, menopause, or other
conditions will still be able to receive that therapy as an EHB, if
otherwise covered by the plan, as this is for purposes other than
attempting to align an individual's physical appearance or body with an
asserted identity that differs from the individual's sex. These are
examples and not an exhaustive list. Additionally, services to reverse
the effects of specified sex-trait modification procedures and to treat
conditions caused by specified sex-trait modification procedures, such
as testing, medication, and care for iatrogenic hypogonadism,
osteoporosis, osteopenia, and low testosterone, are still covered as
EHB if otherwise included by the State's EHB-benchmark
[[Page 27160]]
plan. Further, nothing in this rule precludes coverage of testing to
determine disorders of sexual development, including for newborns, from
being an EHB, nor is coverage of diagnostic treatment to determine the
psychological and/or physiological origin of an individual's gender
dysphoria diagnosis precluded from being covered as EHB by this rule,
should such treatment exist.
Comment: Several commenters raised different issues regarding
costs. One commenter stated that an issuer's ongoing implementation
costs by virtue of, for example, having to modify its claims processes
and systems, would be higher than what the issuer would reimburse
providers for the sex-trait modification services themselves, if these
services were covered benefits, and that such implementation costs are
not minuscule. This commenter noted that the policy would
disproportionately affect smaller issuers and those issuers that
primarily cater to low-income and medically underserved populations.
Other commenters noted that covering sex-trait modification services in
insurance plans is cost-neutral or cost-saving as there is no actuarial
basis to price sex-trait modification surgeries separately from any
other type of surgery.
Many commenters noted their belief that issuers dropping coverage
of sex-trait modification services due to this proposal would increase
out-of-pocket consumer costs, as the cost of care would be shifted to
consumers. Numerous commenters also expressed concerns that this
proposal would block consumers from accessing sex-trait modification
services with the same cost-sharing and benefit design protections as
the same services covered for non-sex-trait modification still included
in the EHB package, and that users of these services are more likely to
be low-income and economically vulnerable.
Many commenters expressed concern that the proposal would increase
overall health care costs by shifting current treatment costs for sex-
trait modification to hospitals and State and local governments. Other
commenters opposing the proposal stated that this proposal could lead
to States with budget concerns removing State coverage requirements for
sex-trait modification services because they would otherwise be forced
to defray the cost of requiring such coverage. Some commenters stated
that they believed that if sex-trait modification is not covered as an
EHB, there will be an increased prevalence of more costly conditions,
like severe depression or osteoporosis. Other commenters noted concern
that individuals will seek sex-trait modification procedures through
unregulated and unofficial channels if issuers stop covering it
entirely which could lead to downstream health issues. Commenters noted
that uncompensated care would likely increase; these commenters also
noted concerns with the proposal leading to increased risk of
psychiatric symptoms leading to more utilization of psychiatric
services, including psychiatric hospitalizations for these patients if
current treatments were no longer covered. One commenter believed that
the proposal would have a destabilizing effect on insurance markets
where sex-trait modification services were previously covered.
Response: We realize that smaller issuers often have outsized costs
when new requirements are put into place that apply to all issuers,
simply because they lack economies of scale that some of their larger,
nationwide counterparts may have. However, we also believe that this
final rule does not require issuers to undergo complex system builds or
process changes in order to implement this policy and are not persuaded
that the burden of any changes to processes and systems is a compelling
basis for not finalizing this proposal. Specifically, issuers are
already required to ensure that benefits that are not EHB are
appropriately designated as such in the Plans & Benefits Template
completed as part of the QHP certification application and that the
percentage of premium attributable to EHB is accurately reflected, so
that APTC does not erroneously subsidize non-EHB. Although under this
final rule, there could be services that can or cannot be covered as
EHB depending on diagnosis, we believe that issuers should already have
the capability to differentiate between these claims since they already
have to make these distinctions today. For example, currently, issuers
must ensure that benefits that can never be EHB, such as routine non-
pediatric eye exam services or non-medically necessary orthodontia
pursuant to Sec. 156.115(d), are not erroneously noted as EHB in plan
filings and claims processing. We believe that what an issuer is
required to do under this final policy to exclude coverage for
specified sex-trait modification procedures as EHB is similar to how
issuers currently handle coverage for other claims. Additionally, while
issuers may not be currently differentiating claims for specified sex-
trait modification procedures in this manner, in any State there exists
the possibility of State mandated benefits changing the manner in which
the issuer designates discrete covered services as either EHB or non-
EHB--as such, we believe issuers have this capability for any benefit.
We do not believe that whether a benefit is cost-neutral from an
actuarial perspective has bearing on whether it should be an EHB. A
benefits package is comprised of numerous benefits, some of which are
cost-neutral or even cost-saving, and some of which are not. If issuers
seek to voluntarily cover specified sex-trait modification procedures
as non-EHB, they would need to price the services accordingly.
We agree with commenters that for those States that wish to mandate
coverage of specified sex-trait modification procedures, they will be
responsible for defraying this cost pursuant to Sec. 155.170(b).
However, there is nothing inherently unique about specified sex-trait
modification procedures as related to the overall defrayal policy; if a
State wishes to mandate a benefit that is not EHB, it must defray the
cost of that benefit, regardless of what that benefit is. This is a
longstanding EHB policy and furthers State flexibility to regulate
their own markets and ensure coverage of benefits that are most
critical in their State.
We also understand concerns that there may be some people enrolled
in plans that must cover EHB who seek specified sex-trait modification
procedures who will now need to pay for the full cost out-of-pocket,
unless the coverage is State-mandated or an issuer voluntarily offers
such coverage. However, this is the case with any benefit that is not
EHB. The framework for EHB as established in section 1302(b)(2) of the
ACA requires EHB to be ``equal to the scope of benefits provided under
a typical employer plan.'' There will necessarily be some benefits that
are not EHB. This final rule better aligns coverage with the statutory
requirements. In response to concerns that people seeking sex-trait
modification services are often medically underserved, lower-income,
and more economically vulnerable than the general population, we note
that in defining the EHB, we have attempted to balance coverage
generosity and affordability, with the realization that what makes
coverage more affordable for some, may in turn make certain benefits
less affordable for others.
In addition, while some commenters expressed concerns about costs
being shifted to local governments and hospital uncompensated care, we
emphasize that nothing in this final rule requires States or hospitals
to develop
[[Page 27161]]
programs to fund specified sex-trait modification procedures. This
policy is not likely to result in additional uncompensated care for
mental health services because it does nothing to change the status of
mental health services as EHB. We reiterate that mental health services
will continue to be available, including for persons with gender
dysphoria and those seeking specified sex-trait modification
procedures, within their respective healthcare plans. We also expect
that covered services for purposes other than attempting to align an
individual's physical appearance or body with an asserted identity that
differs from the individual's sex will continue to be available.
Additionally, to the extent they are presently covered as EHB, services
that become necessary due to discontinuation of specified sex-trait
modification procedures, such as treatment for bone mineral density
loss, will continue to be covered as EHB.
We disagree that prohibiting coverage of specified sex-trait
modification procedures as EHB in States that previously required such
coverage would be destabilizing for the insurance market. First, States
have the option of requiring this coverage as long as they defray the
cost pursuant to Sec. 155.170. Second, the current EHB-benchmark plan
framework at Sec. 156.111(a) and substitution policy at Sec.
156.115(b) allow benefits to change as long as they comply with other
requirements related to EHB.
We also acknowledge commenters' concern that gender dysphoria is
often associated with severe depression and individuals could seek
specified sex-trait modification procedures through unregulated and
unofficial channels. As we have noted, pursuant to 1302(b)(2) of the
ACA, EHB must be ``equal to the scope of benefits provided under a
typical employer plan'', and thus, not all benefits will fall under the
definition of EHB. Just as States and issuers are not prohibited from
covering specified sex-trait modification procedures as a non-EHB
consistent with applicable State law, individuals have the ability to
identify health care plans that provide coverage related to their
conditions and health issues in an appropriate manner.
We also clarify that if an issuer were to voluntarily cover
specified sex-trait modification procedures, as defined in this rule,
as non-EHB, those services would not be subject to EHB protections such
as the prohibition on discrimination at Sec. 156.125, the prohibition
on annual and lifetime dollar limits at Sec. 147.126, and the
requirement to accrue enrollee cost sharing towards the annual
limitation on cost sharing at Sec. 156.130. We note that because the
premium attributable to these procedures would not be for an EHB, the
portion of the premium attributable to specified sex-trait modification
procedures would not be eligible for PTC or CSR, and the enrollee would
be responsible for the cost of any associated premium and cost sharing.
Similarly, if a State were to mandate coverage of specified sex-trait
modification procedures, those procedures would not be EHB, and not
subject to the prohibition on discrimination or annual and lifetime
dollar limits applicable to EHBs. However, in such a case, the State
would bear the cost of the portion of premium attributable to these
procedures, though the enrollee would still be responsible for any
applicable cost sharing.
Comment: Several commenters expressed concern with the proposal
being effective for PY 2026, citing concerns about interruption of care
as well as Federal and State filing deadlines. They noted they believed
that the effective date was too soon and would be disruptive to
issuers' plan filings for PY 2026, since that process generally began
prior to the publication and the effective date of this rule. One
commenter noted that some States have an April 25, 2025 QHP application
filing deadline for PY 2026, and many others have QHP application
filing deadlines of May 15. Another commenter opined that EHB-benchmark
plans for PY 2026 have already been finalized, and that any EHB-
benchmark plans that include sex-trait modification should be permitted
to keep those benefits as EHB for PY 2026. Some commenters explained
that issuers will need to make changes to claims systems and
utilization management policies and processes as a result of this
policy, which takes time. Other commenters stated that such quick
finalization for PY 2026 could create market instability and
disproportionately affect smaller safety net plans that are
predominantly community-based, and local issuers that primarily serve
lower-income consumers. Some commenters suggested that the policy be
effective for fiscal year 2026, as opposed to PY 2026. Others suggested
delaying the effective date of the proposal until calendar year 2027
and one commenter suggested delaying the effective date until no
earlier than PY 2028. As support for requesting a later effective date,
some commenters noted that when States make updates to their EHB-
benchmark plans under Sec. 156.111, States must submit their EHB-
benchmark plan application 2 years in advance of the plan year for
which the new EHB-benchmark plan will be effective.
Response: We are finalizing an effective date of PY 2026 for this
policy. Although we acknowledge that issuers may need to alter their
plan filings to ensure specified sex-trait modification procedures are
either not covered at all or covered but as non-EHB, we believe this
rule will be finalized with sufficient time for issuers to make such
changes and ask that States permit changes to rate filings as
appropriate to reflect such changes. Specifically, this rule will be
finalized prior to the conclusion of QHP certification for PY 2026,
such that we believe issuers will have time to adjust their plan
offerings in accordance with this rule, regardless of the size,
location, or resources of the issuer. We also reiterate that we do not
believe issuers will be required to undergo complex system builds or
process changes in order to implement this policy, as discussed in more
detail above. We believe that finalizing this policy without delay, for
PY 2026, is important to align issuer coverage of EHBs with section
1302 of the ACA. Additionally, we do not believe that this change is
analogous to the changes States make to their EHB-benchmark plans (for
which we require that changes are finalized well in advance of the
applicable plan year). Rather, we believe that this change affects
rarely utilized coverage, and will be uniformly applied across States,
making this change easier for issuers to make for the upcoming plan
year.
Comment: Many commenters presented a variety of legal arguments in
support of their opposition to the proposal. Many commenters opposing
the policy argued that the proposal violates the Supreme Court's
holding in Bostock v. Clayton County, 590 U.S. 644 (2020), which held
that discrimination based on transgender status constitutes sex
discrimination under Title VII. Many commenters stated that this policy
would violate Title IX and section 1557 which also prohibit
discrimination on the basis of sex, and that the reasoning in Bostock
has since been extended to Title IX and Section 1557 in a growing body
of Federal case law holding that discrimination on the basis of gender
identity and transgender status is prohibited sex discrimination. Many
objecting commenters also stated the proposal would prohibit EHB
coverage for a protected group on the basis of animus. Many commenters
also raised that denying EHB coverage of sex-trait modification
procedures such as hormone replacement therapy only to individuals with
gender dysphoria
[[Page 27162]]
while permitting the exact same treatments to be covered as EHB for
individuals without gender dysphoria is overtly discriminatory on the
basis of sex in violation of section 1557 of the ACA. Many commenters
further stated that the proposal discriminates on the basis of sex by
reinforcing sex stereotypes and punishing gender nonconformity.
One commenter supporting the proposed policy stated it would not
violate nondiscrimination requirements in the ACA or other applicable
Federal nondiscrimination laws, because such laws do not support claims
that exclusions for coverage of sex-trait modification are
discriminatory.
Response: We disagree with comments questioning HHS's legal
authority to make these policy changes. Section 1557 of the ACA
prohibits discrimination on the basis of race, color, national origin,
sex, age, or disability in certain health programs or activities. We
disagree that the policy in the proposed rule, and as revised in this
final rule, constitutes sex discrimination in violation of section 1557
of the ACA. On May 6, 2024, we finalized the Nondiscrimination in
Health Programs and Activities final rule, issued in the Federal
Register on May 6, 2024 (``2024 Section 1557 final rule'') (89 FR
37522), which expanded the definition of prohibited discrimination on
the basis of sex to include, inter alia, discrimination on the basis of
sex characteristics, including intersex traits, gender identity, and
sex stereotypes. Several district courts stayed or preliminarily
enjoined HHS from enforcing certain portions of the 2024 Section 1557
final rule--primarily those prohibiting discrimination on the basis of
gender identity. See Florida. v. Dep't of Health & Hum. Servs., 739 F.
Supp. 3d 1091 (M.D. Fla. 2024); Tennessee v. Becerra, 739 F. Supp. 3d
467 (S.D. Miss. 2024); Texas v. Becerra, No. 6:24-CV-211-JDK, 2024 WL
4490621 (E.D. Tex. Aug. 30, 2024). Although the Secretary filed appeals
in these cases, the United States Court of Appeals for the Fifth and
Eleventh Circuits subsequently dismissed all appeals pursuant to
motions filed after the change in administration, and HHS remains
enjoined from enforcing the 2024 Section 1557 final rule's expanded
interpretation of sex discrimination.\210\ According to the reasoning
in these cases, section 1557 of the ACA does not create an obligation
to provide or extend coverage to specified sex-trait modification
procedures.\211\
---------------------------------------------------------------------------
\210\ In Florida v. Department of Health and Human Services, 739
F. Supp. 3d 1091 (M.D. Fla. 2024), the court stayed 45 CFR
92.101(a)(2)(iv), 92.206(b), 92.207(b)(3)-(5), and 42 CFR
438.3(d)(4), in Florida. OCR also may not enforce the interpretation
of discrimination ``on the basis of sex'' in 45 CFR
92.101(a)(2)(iv), 92.206(b), or 92.207(b)(3)-(5) in Florida. In
Tennessee v. Becerra, 739 F. Supp. 3d 467 (S.D. Miss. 2024), the
court stayed nationwide the following regulations to the extent they
``extend discrimination on the basis of sex to include
discrimination on the basis of gender identity'': 42 CFR 438.3,
438.206, 440.262, 460.98, 460.112; 45 CFR 92.5, 92.6, 92.7, 92.8,
92.9, 92.10, 92.101, 92.206-211, 92.301, 92.303, 92.304; and
enjoined HHS from enforcing the 2024 Section 1557 final rule ``to
the extent that the final rule provides that `sex' discrimination
encompasses gender identity.'' In Texas v. Becerra, No. 6:24-CV-211-
JDK, 2024 WL 4490621 (E.D. Tex. Aug. 30, 2024), the court stayed
nationwide the following regulations: 42 CFR 438.3(d)(4),
438.206(c)(2), 440.262, 460.98(b)(3), 460.112(a); 45 CFR
92.101(a)(2) (and all references to this subsection), 92.206(b),
92.207(b)(3)-(5).
\211\ 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.
---------------------------------------------------------------------------
We also disagree that this policy would violate the ruling in
Bostock. The Supreme Court's holding in Bostock applied to
discriminatory employment decisions under Title VII of the Civil Rights
Act of 1964. We reject the notion that Bostock would have any bearing
on the prohibition of coverage of sex-trait modification as an EHB.
Such an application would be outside the scope of the Bostock decision.
As the United States District Court for the Southern District of
Mississippi stated in the order granting a preliminary injunction on
enforcement of the 2024 Section 1557 final rule, ``[T]he Court has
found no basis for applying Bostock's Title VII analysis to section
1557's incorporation of Title IX. HHS acted unreasonably when it relied
on Bostock's analysis in order to conflate the phrase `on the basis of
sex' with the phrase `on the basis of gender identity.' Specifically,
the Bostock holding did not `sweep beyond Title VII to other Federal or
State laws that prohibit sex discrimination.' ''See Tennessee v.
Becerra, 739 F. Supp. 3d 467, 482 (S.D. Miss. 2024). Further, the
Supreme Court in Bostock made the intended limited application to Title
VII claims clear when it stated, ``[N]one of these other [sex
discrimination] laws are before us; we have not had the benefit of
adversarial testing about the meaning of their terms, and we do not
prejudge any such question today . . .'' See Bostock, 590 U.S. at 681,
140 S.Ct. 1731.
On June 18, 2025, the Supreme Court concluded that Bostock ``does
not alter our analysis'' when they upheld a State ban on certain
medical treatments for transgender minors.\212\ In Bostock, the Supreme
Court specifically ``held that an employer who fires an employee for
being gay or transgender violates Title VII's prohibition on
discharging an individual `because of'' their sex'' after
``incorporat[ing] the traditional but-for causation standard'' to
determine but-for cause.\213\ Applying the Bostock reasoning to an
example of a transgender boy who is restricted from receiving
testosterone to treat gender dysphoria under the State law, the Supreme
Court concluded ``neither his sex nor his transgender status is the
but-for cause of his inability to obtain testosterone.'' \214\
Consistent with this conclusion, neither an individual's sex nor
transgender status is the but-for cause of their inability to obtain
certain sex trait modification procedures as an EHB. Therefore, we
likewise conclude the Bostock reasoning does not apply here.\215\
---------------------------------------------------------------------------
\212\ United States v. Skrmetti et al., No. 23-477 slip op. at
*18 (U.S. June 18, 2025).
\213\ Ibid.
\214\ Ibid. at *19.
\215\ The Supreme Court declined to rule on whether the Bostock
reasoning applies outside the context of Title VII because, under
the State law at issue in the case, neither a person's sex nor their
transgender status would be the but-for cause of their inability to
obtain the services banned under the law. Ibid.
---------------------------------------------------------------------------
Comment: Commenters opposing the proposal also argued that it
violates the authority granted to the Secretary to define EHB under
section 1302 of the ACA because the proposal does not take into account
health needs of diverse segments of the population. One commenter
stated that because gender dysphoria is recognized by experts as a
disability, this policy would be directly contrary to the plain
language and intent of the ACA to provide patient protection and access
to care. Some opposing commenters also claimed that the proposal
conflicts with the EHB nondiscrimination standards at Sec. 156.125
because the proposal creates discriminatory benefit designs that are
not clinically based. Several commenters also stated that this proposal
would violate Sec. 156.125 because it discriminates on the basis of
sex characteristics, which includes but is not limited to intersex
traits, pregnancy or related conditions, sexual orientation, gender
identity, and sex stereotypes, which is prohibited under Sec.
156.125(b). Many commenters objecting to the proposal stated that
prohibiting coverage as EHB for medical care for individuals with
gender dysphoria, while expressly proposing to create exceptions to
cover these same services for other indications, is discriminatory.
Many opposing commenters also expressed concern that the proposal
is at odds with the State EHB benchmark approach at Sec. 156.111 which
relies on
[[Page 27163]]
the States to address specific gaps in coverage affecting their
populations. Some commenters also stated that the proposal exceeds the
Secretary's EHB authority by imposing condition-based exclusions on
health plans, providers, or enrollees. Many objecting commenters also
stated it is unclear how Sec. 156.110, which requires that an EHB-
benchmark plan provide coverage for mental health and substance use
disorder services, does not conflict with the removal of sex-trait
modification as EHB, since care for gender dysphoria falls under the
definition of mental health and substance use disorder services in the
most recent version of the Diagnostic and Statistical Manual of Mental
Disorders.
Response: We disagree with commenters who stated that this policy
violates EHB nondiscrimination rules at Sec. 156.125. That regulation
applies only to services that are covered as EHB under a plan. As
finalized at Sec. 156.115, specified sex-trait modification procedures
will be prohibited from being covered as EHB. Therefore, the
nondiscrimination requirements at Sec. 156.125 will not apply to such
procedures.
We also disagree with commenters who stated that this policy
violates section 1302(b)(4)(C) of the ACA, which requires that in
defining the EHB the Secretary take into account the health care needs
of diverse segments of the population, including women, children,
persons with disabilities, and other groups. Section 1302(b)(2)(A) of
the ACA requires the Secretary to ensure that the scope of EHB be equal
in scope to the benefits provided under a typical employer plan. We
read these provisions together so that they do not conflict with one
another. Therefore, although the Secretary must take into account the
health care needs of diverse segments of the population, the Secretary
must only do so insofar as it does not conflict with the requirement
that the scope of the EHB be equal to the scope of the benefits
provided under a typical employer plan. Because specified sex-trait
modification procedures are not typically covered by employer plans,
specified sex-trait modification procedures are not among the benefits
the Secretary is required to consider under section 1302(b)(4)(C) of
the ACA.
Similarly, we disagree with commenters that asserted that the
proposed policy would violate the State benchmark-based approach.
Although this approach provides States with flexibility in determining
which benefits will be EHB in the State, such flexibility is not
without limitations. States selecting EHB-benchmark plans must do so in
accordance with Sec. 156.111, which requires that the EHB-benchmark
plan provide a scope of benefits equal to the scope of benefits
provided under a typical employer plan. As explained, specified sex-
trait modification procedures are not typically included in employer-
sponsored plans. Therefore, this policy change aligns with the plain
language and intent of section 1302 of the ACA.
We also disagree with commenters that the policy creates
discriminatory circumstances under which individuals would be denied
coverage of medical care for gender dysphoria as EHB, while others
could receive the same services as EHB for other indications. This is
not the case. We clarify that nothing in this rule prohibits issuers
from providing coverage beyond the defined exceptions for specified
sex-trait modification procedures as non-EHB.
We believe that the amendments we are finalizing to add a
definition for specified sex-trait modification procedure at Sec.
156.400 resolve commenters' concerns that an EHB-benchmark plan provide
coverage for mental health and substance use disorder services, as the
finalized definition at Sec. 156.400 will permit non-pharmaceutical
and non-surgical mental health and substance use disorder services to
treat gender dysphoria to be covered as EHB.
Comment: Some commenters opposing the policy also argued that the
proposal violates the Americans with Disabilities Act (ADA) and section
504 of the Rehabilitation Act. Commenters raising ADA concerns cited as
support Williams v. Kincaid, 45 F.4th 759, 766-74 (4th Cir. 2022),
which held that gender dysphoria is a covered disability for purposes
of the ADA.
Response: We disagree with concerns that the policy violates the
Americans with Disabilities Act or section 504 of the Rehabilitation
Act; the final policy does not explicitly single out treatment for
gender dysphoria or any particular medical condition for exclusion or
prohibit any issuer's coverage of specified sex-trait modification
procedures, but instead excludes specified sex-trait modification
procedures from being covered as an EHB.
Comment: Many commenters opposing the proposal asserted that it
violates the APA, with many of these commenters stating that the
proposal is arbitrary and capricious because it fails to consider
important facts, including the widespread coverage of sex-trait
modification procedures by large employer-based health plans and the
established clinical evidence that these services are medically
necessary and considerably improve the lives and health outcomes for
its recipients. Other commenters argued the proposal is an agency
action that exceeds statutory authority in violation of the APA because
the policy would discriminate on the basis of sex in violation of
section 1557 of the ACA. Many commenters objecting to the proposal also
stated that the proposal constitutes unlawful discrimination in
violation of the Equal Protection Clause and several court opinions
finding that medically unsupported exclusions of specific treatments
for beneficiaries with gender dysphoria could constitute discrimination
in violation of Federal law. Many opposing commenters raising Equal
Protection Clause arguments noted that because they believe this policy
discriminates against a protected class, the policy would trigger
heightened scrutiny review, and stated that they believe HHS offers no
legitimate justification showing that the proposal serves important
governmental objectives or that the discriminatory means employed are
substantially related to the achievement of those objectives. Such
commenters argued that the justification provided--that sex-trait
modification procedures are not typically included in employer-
sponsored plans--lacks sufficient evidence or analysis and is readily
disproven. These commenters also stated that the proposed rule
suggested that part of the reasoning for the proposal is that the
Secretary is concerned about the scientific integrity of claims made to
support the use of sex-trait modification procedures in health care
settings, but that the proposed rule did not cite any evidence to
support this claim and, in failing to do so, cannot articulate a
satisfactory explanation for its action.
One commenter supporting the proposal asserted that whether gender
identity qualifies as a protected class under the Equal Protection
Clause is not settled law. The commenter also argued that, even if it
were a protected class, the proposed policy would not need to survive
heightened constitutional scrutiny if reviewed by courts. As support,
this commenter cited to the Supreme Court's decision in Geduldig v.
Aiello, 417 U.S. 484 (1974), which found that ``[t]he regulation of a
medical procedure'' specific to a protected class ``does not trigger
heightened constitutional scrutiny'' absent ``invidious
discrimination.'' This commenter also stated that the proposed policy
lacks invidious discrimination
[[Page 27164]]
because the proposed change is required by law as most employer health
plans do not cover sex-trait modifications.
Another commenter objecting to the proposal noted that the proposal
conflicts with State law, because according to the commenter, half of
all States have interpreted their State health laws to bar
discrimination against people with gender dysphoria. Commenters
objecting to the proposal also raised Federalism concerns, noting that
the proposal goes against the premise that States determine the best
way to enable and regulate health insurance within their borders.
Commenters also raised concerns that the proposal contravenes section
1554 of the ACA, which prohibits the Secretary from promulgating a
regulation that ``creates any unreasonable barriers to the ability of
individuals to obtain appropriate medical care.'' One commenter
explained it would violate section 1554 of the ACA because prohibiting
coverage of sex-trait modification procedures as EHB in turn means
removing important EHB protections for such services, such as requiring
cost-sharing for EHBs to accrue towards the annual limitation on cost
sharing and prohibitions on annual and lifetime dollar limits on EHBs.
Response: We disagree that the policy would violate the Equal
Protection Clause, which provides that no State shall ``deny to any
person within its jurisdiction the equal protection of the laws,''
because the policy applies equally to coverage for all persons,
including both sexes. The policy also does not discriminate on the
basis of transgender status, because it turns on the purpose and effect
of the procedures at issue, not the status of the patient. Moreover,
transgender persons do not exhibit ``obvious, immutable, or
distinguishing characteristics that define them as a discrete group''
sufficient to make them a protected class under the Supreme Court's
equal protection jurisprudence. Bowen v. Gilliard, 483 U.S. 587, 602
(1987). Additionally, on June 18, 2025, the Supreme Court upheld a
State's ban on the provision of puberty blockers and hormones for
minors to treat gender dysphoria, gender identity disorder, or gender
incongruence for minors, concluding that the ban did not violate the
Equal Protection Clause because the State only prohibited healthcare
providers from administering puberty blockers or hormones to minors for
certain medical uses, regardless of a minor's sex.\216\ In any event,
the policy would pass constitutional muster even under heightened equal
protection scrutiny because it serves the important governmental
interest of complying with the law governing the scope of EHBs under
the ACA and is substantially related to achievement of that objective.
The Department also agrees that the law is far from settled with regard
to whether persons diagnosed with gender dysphoria or other identity-
related conditions fit within the class of persons protected from
discrimination under the Equal Protection Clause.
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\216\ See United States v. Skrmetti et al., No. 23-477 slip op.
at *10 (U.S. June 18, 2025), available at https://www.supremecourt.gov/opinions/24pdf/23-477_2cp3.pdf.
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In response to comments arguing this policy violates conflicting
State laws, we note that the policy we are finalizing does not prohibit
health plans from voluntarily covering specified sex-trait modification
procedures as non-EHB consistent with applicable State law, nor does it
prohibit States from requiring the coverage of specified sex-trait
modification procedures, subject to the rules related to State-mandated
benefits at Sec. 155.170. Likewise, we disagree with commenters'
assertions that this policy would violate section 1554 of the ACA which
prohibits the Secretary from promulgating a regulation that ``creates
any unreasonable barriers to the ability of individuals to obtain
appropriate medical care,'' as the finalized policy only prohibits
coverage for specified sex-trait modification procedures as EHB but
otherwise permits such coverage to continue, so long as it is not EHB.
In response to comments suggesting that part of the reasoning for
the proposal is that the Secretary is concerned about the scientific
integrity of claims made to support the use of sex-trait modification
procedures in health care settings but that the proposed rule did not
cite any evidence to support this concern, we note that concern about
the scientific integrity of claims made to support the use of specified
sex-trait modification procedures in health care settings supports our
rationale that specific sex-trait modification procedures are not
typically covered under employer-sponsored plans. As we stated and
reiterated in the proposed rule and earlier in this final rule,
specified sex-trait modification procedures are not typically included
in employer-sponsored plans, which is an independent, legally-
sufficient basis for adoption of this policy.
For the reasons cited in a previous response to comments addressing
section 1557 of the ACA, we disagree with commenters that the policy
proposed in the proposed rule, and as revised in this final rule,
exceeds statutory authority in violation of the APA because it
constitutes sex discrimination in violation of section 1557 of the ACA.
We refer readers to our discussion of section 1557 of the ACA in the
respective response above.
Further, commenter concerns regarding Federalism or the APA are
misguided. The ACA expressly authorizes and provides broad flexibility
to the Secretary to define the EHB under section 1302 of the ACA. While
the ACA outlines 10 general categories that EHBs must include, the
Secretary has the authority to determine the specific services and
items within those categories. As discussed elsewhere in this final
rule, there is ample data suggesting that the specified sex-trait
modification procedures, as defined in this rule, are not benefits
covered under a typical employer plan. Therefore, we disagree that this
policy, as finalized, is arbitrary and capricious and exceeds statutory
authority in violation of the APA.
Comment: Many commenters opposing the proposal also stated that the
proposal conflicts with the preliminary injunctions on the executive
orders cited in support of the proposal in the proposed rule (E.O.
14168 and E.O. 14187). Some commenters objecting to the policy stated
it is premature in light of ongoing litigation and urged CMS to
postpone consideration of finalizing this policy until the various
lawsuits enjoining application of the executive orders are resolved.
Another opposing commenter stated that E.O. 14187 is limited to sex-
trait modification procedures for minors, whereas the proposal applies
more broadly to both minors and adults. Two commenters supportive of
the proposal stated that they do not believe the existing injunctions
on the executive orders should preclude finalizing this policy as
proposed, with one commenter noting that the proposal does not rely on
the enjoined executive orders but also arguing that the injunctions
rely on incorrect legal reasoning. One commenter noted support for the
proposal because they noted it protects the rights of employers and
enrollees who object to covering services or paying premiums that
violate their deeply held religious or moral beliefs.
[[Page 27165]]
Response: We agree with commenters supporting the proposed policy
in spite of the injunctions on the executive orders. As we stated in
the proposed rule (90 FR 12986), we made this proposal independently of
the executive orders because specified sex-trait modification
procedures are not typically included in employer health plans and
therefore cannot legally be covered as EHB. We acknowledge that two
courts have issued preliminary injunctions relating to the E.Os
described above, and we do not rely on the enjoined sections of the
executive orders in making this proposal. The finalized policy does not
conflict with those preliminary injunctions because, among other
things, it is based on independent legal authority and reasons and not
the enjoined sections of the executive orders. Further, this policy as
finalized will not be effective until PY 2026, and will not be
implemented, made effective, or enforced in contravention of any court
orders.\217\
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\217\ HHS intends to notify the courts in both cases about this
Rule after it has been published in the Federal Register.
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Comment: Numerous commenters opposed the proposal on the basis that
it would lead to adverse mental health outcomes and increase suicide
risk, though commenters both for and against the proposal universally
supported mental health treatment for gender dysphoria. Many commenters
who did not support the proposal noted that medical evidence indicates
lack of access to services for sex-trait modification procedures, and
especially hormone therapy, will lead to an overall increase in
suicidality and self-harm and create or exacerbate mental health
conditions. Many commenters noted that people with gender dysphoria and
other identity-related conditions experience higher rates of violence,
discrimination, and harassment, which often compounds mental health
symptoms. One commenter expressed concern that their treatment would be
stopped midstream if the proposal were finalized, and that this would
put them at continued risk of violence.
Numerous commenters opposing the proposal also argued that, due to
discrimination and stigma, suicide rates are four times higher for
individuals with gender dysphoria than the general population, with one
commenter stating this rate is even higher among people of color with
gender dysphoria. Commenters stated this proposal would result in the
denial of medically necessary care that has proven associations with
lowering suicidal ideation and that denial of this care would
subsequently lead to worse mental health outcomes for persons with
gender dysphoria, including higher rates of depression, anxiety,
suicide, and suicidal ideation. These commenters cited to multiple
studies demonstrating that access to sex-trait modification procedures
is associated with lower odds in both children and adults of
depression, self-harm, and suicidal thoughts compared to individuals
not receiving these services. Commenters opposing the proposal noted
particular concern with the mental health impact of this proposal on
youth with gender dysphoria.
Commenters opposing the proposal also expressed concern that
inability to access certain care as a result of the proposal would
exacerbate other conditions. One commenter opposing the proposal stated
this would be particularly true for health care services that require
risk assessment or consistent engagement with a provider. For example,
this commenter noted that receiving a prescription for hormone therapy
for sex-trait modification is associated with lower rates of acquiring
HIV and increased rates of HIV viral suppression among patients with
gender dysphoria and that limiting access to sex-trait modification
services for Exchange enrollees will only exacerbate the HIV epidemic
given the disproportionate impact of HIV among individuals with gender
dysphoria. Other commenters opposing the proposal noted specific
concerns regarding increased substance use in the absence of access to
sex-trait modification procedures, as substance use may be used as a
coping mechanism.
One commenter that supported the proposal stated that although
deaths by suicide are higher than average among the population of
persons with gender dysphoria there is no evidence supporting the claim
that sex-trait modification procedures reduce this risk. One commenter
supporting the proposal stated that there is no scientifically valid
evidence that suicide risk among persons with gender dysphoria
increases in the absence of sex-trait modification and that puberty
blockers are associated with depression. This commenter stated that
transition may exacerbate psychological distress, which could lead to
suicide, and that persons with gender dysphoria would benefit from
mental health services shown to be useful in treating other body
dysphoria disorders such as anorexia nervosa, as well as counseling or
other treatment for depression and anxiety.
Response: The Department agrees with commenters that mental health
services are a critical part of treating gender dysphoria, and we are
committed to improving the quality of, and access to, mental health
care services.\218\ As discussed earlier in this final rule, mental
health services will continue to be covered as an EHB as required by
section 1302(b)(1)(E) of the ACA, including for those who seek or
undergo specified sex-trait modification procedures or are diagnosed
with gender dysphoria. We note that the definition of ``specified sex-
trait modification procedure'' we adopt in this rule places no
prohibition on coverage of mental health services as EHB. Specifically,
the definition neither prohibits coverage for mental health treatment
for specific conditions as EHB (for example, for mental health
treatment for gender dysphoria), nor prohibits coverage for mental
health treatment for any specific populations as EHB (for example,
mental health treatment for consumers with gender dysphoria).
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\218\ Behavioral Health, CTRS. FOR MEDICARE & MEDICAID SERVS.,
https://www.cms.gov/about-cms/what-we-do/behavioral-health (last
visited May 13, 2025).
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Comment: Several commenters opposing the proposal also raised
concerns that the proposal would conflict with the Mental Health Parity
and Addiction Equity Act (MHPAEA). One such commenter stated that the
prohibition of coverage for sex-trait modification is contrary to the
MHPAEA prohibition on group health plans and health insurance issuers
from imposing less favorable benefit limitations on mental health and
substance abuse benefits as compared to medical/surgical benefits, as
gender dysphoria is a mental health condition defined in the Diagnostic
and Statistical Manual of Mental Disorders (DSM-5-TR) as a serious
medical condition characterized by distress due to incongruence between
the patient's gender identity (that is, the innate sense of one's own
gender) and sex. These commenters noted concern that complying with
this proposal would put group health plans and issuers out of
compliance with MHPAEA.
Response: On May 15, 2025, the Departments of Labor, HHS, and the
Treasury (the Departments) announced that the Departments will not
enforce the September 23, 2024 final rule ``Requirements Related to the
Mental Health Parity and Addiction Equity Act,'' 89 FR 77586 (2024
MHPAEA Final Rule) or otherwise pursue enforcement actions based on a
failure
[[Page 27166]]
to comply with the 2024 MHPAEA Final Rule that occur prior to a final
decision in ongoing litigation regarding the 2024 MHPAEA Final Rule,
plus an additional 18 months.\219\ The Departments also announced their
intention to reconsider the 2024 MHPAEA Final Rule, including whether
to issue a notice of proposed rulemaking rescinding or modifying the
regulation through notice and comment rulemaking. Further, the
Departments announced that they will undertake a broader reexamination
of each Department's respective enforcement approach under MHPAEA.
Nothing in this final rule prevents a plan or issuer from providing
benefits for treatment for gender dysphoria; the benefits simply would
not be considered EHB if they fall under the definition of specified
sex-trait modification procedures we are finalizing at Sec. 156.400.
Additionally, we reiterate that the definition of ``specified sex-trait
modification procedure'' neither prohibits coverage for mental health
treatment for specific conditions as EHB (for example, for mental
health treatment for gender dysphoria), nor prohibits coverage for
mental health treatment for any specific populations as EHB (for
example, mental health treatment for consumers with gender dysphoria).
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\219\ Statement of U.S. Departments of Labor, Health and Human
Services, and the Treasury regarding enforcement of the final rule
on requirements related to the Mental Health Parity and Addiction
Equity Act, May 15, 2025, available at https://www.dol.gov/agencies/ebsa/laws-and-regulations/laws/mental-health-parity/statement-regarding-enforcement-of-the-final-rule-on-requirements-related-to-mhpaea.
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Comment: Many commenters objected to the proposal in general or did
not state a basis for the objection. Some commenters stated that the
proposal is motivated by animus against transgender-identified people
and intended to cause harm to a specific group of people and others
stated that the proposal would target individuals already at
significantly higher risk for negative health and mental health
outcomes. Some commenters stated they believed that the proposal is
contrary to HHS' role in protecting the vulnerable, the Make America
Healthy Again movement, and pro-life beliefs given the increased risk
of suicide among persons with gender dysphoria. Other commenters opined
that the proposal creates a double standard through which persons
without gender dysphoria may continue to receive sex-trait modification
services as EHB but persons with gender dysphoria cannot. Several
commenters opined that a prohibition on coverage of sex-trait
modification services as EHB is tantamount to eugenics or genocide and
a crime against humanity. Other commenters stated that if the proposed
rule were finalized as proposed, it would have downstream psychological
effects on the friends and family of persons with gender dysphoria who
had been seeking sex-trait modification services. Some comments were
out of the scope of this rule.
Response: We share commenters' concern for vulnerable groups and
individuals. However, we disagree with commenters that prohibiting
coverage of specified sex-trait modification procedures as EHB is
discriminatory or will be damaging to the health and wellbeing of the
nation. Specifically, we disagree with commenters that finalization of
the proposal would mean persons without gender dysphoria will have
access to specified sex-trait modification procedures while persons
with gender dysphoria will not. All people will be able to access
covered items and services as EHB, so long as the items and services do
not meet the definition of ``specified sex-trait modification
procedures,'' in that they are not, in a given instance, surgical or
pharmaceutical interventions being provided for the purpose of
attempting to align an individual's physical appearance or body with an
asserted identity that differs from the individual's sex, or they
otherwise fall within an exception. Additionally, we emphasize that we
are not prohibiting any consumers from accessing specified sex-trait
modification procedures when paid for out of pocket, or prohibiting
issuers on the Exchanges from providing coverage for such services as
non-EHB. We are only prohibiting the coverage of specified sex-trait
modification procedures specifically as EHB, given that they are not
within the scope of benefits provided by a typical employer plan, as
directed in statute.
2. Premium Adjustment Percentage (Sec. 156.130(e))
In the 2025 Marketplace Integrity and Affordability proposed rule
(90 FR 12987 through 12995), we proposed to update the premium
adjustment percentage methodology to establish a premium growth measure
that captures premium changes in the individual market in addition to
ESI premiums for PY 2026 and beyond. In addition, based on this
proposed updated methodology, we proposed 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.
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.
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 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
[[Page 27167]]
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). As such, in the 2020
Payment Notice (84 FR 17537 through 17541), we finalized the use of 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 (the
amendment to Sec. 156.130(e)) 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 the
2022 Payment Notice proposed rule (85 FR 78633 through 78635), 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 in response to comments requesting that we revert to the
use of the NHEA ESI premium measure to estimate premium growth, which
was the methodology used for PY 2015 through PY 2019. 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.
Because the COVID-19 PHE has ended and should no longer impact the
premium adjustment percentage, and because evidence described in the
proposed rule 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), in the proposed rule (90 FR 12987 through 12993),
we proposed 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 proposed 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.\220\ NHEA's private health insurance premium measure includes
premiums 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 proposed 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).
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\220\ 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.
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We proposed 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.\221\ For example, Medigap coverage supplements Original
Medicare \222\ coverage by helping to pay certain out-of-pocket costs
not covered by Original Medicare such as co-payments, coinsurance, and
deductibles. Specifically, we stated in the proposed rule that 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). We
stated that 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. We explained that 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.
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\221\ 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.''
\222\ 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.
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In addition to the proposal to use the private health insurance
premium measure data (excluding Medigap and property and casualty
insurance) to measure premium growth for the PY 2026 and beyond, in the
proposed rule (90 FR 12991 through 12992), we also proposed the premium
adjustment percentage value for PY 2026. Specifically, we proposed 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 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).\223\ Using this formula, in the proposed rule (90 FR 12992),
we proposed a premium adjustment percentage for 2026 of 1.6726771319
($7,885/$4,714). We stated in the proposed rule that this would
represent an increase in private health insurance premiums (excluding
Medigap and property and casualty insurance) of approximately 67.3
percent over the period from 2013 to 2025 and would reflect an overall
growth rate for this period that is approximately 7.2 percentage points
higher than the overall growth rate reflected by the previously
published
[[Page 27168]]
PY 2026 premium adjustment percentage (1.6002042901).\224\
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\223\ 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.
\224\ 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.
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We refer readers to the proposed rule (90 FR 12987 through 12997)
for a more detailed discussion of our proposed methodology, including
further information regarding the background, rationale, and expected
impacts of this proposal.
Based on the proposed PY 2026 premium adjustment percentage, we
proposed the 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
as further described 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,\225\ in the proposed rule (90 FR 12993), we proposed 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. We
stated in the proposed rule that 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.\226\
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\225\ See IRS. (n.d.) Rev. Proc. 2013-25. Dep't of Treasury.
http://www.irs.gov/pub/irs-drop/rp-13-25.pdf.
\226\ 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.
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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 (78 FR 15410). In the 2014
Payment Notice, 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.\227\ 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. We noted in the proposed rule (90 FR 12993)
that 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).
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\227\ 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.
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As indicated in Table 8 of the proposed rule (90 FR 12994), we
proposed 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. We stated that these proposed values reflect 4.3 to 4.5
percent increases relative to the previously published PY 2026
parameters.\228\
---------------------------------------------------------------------------
\228\ 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 refer readers to the proposed rule (90 FR 12993 through 12995)
for a more detailed discussion of the proposed values of the PY 2026
reduced maximum annual limitation on cost sharing, including further
information regarding the background, rationale, and expected impacts
of these proposed values. Table 5 outlines the final values for the PY
2026 reduced maximum annual limitation on cost sharing, as calculated
using the final PY 2026 premium adjustment percentage and final PY 2026
maximum annual limitation on cost sharing.
Table 5--Final Reductions in Maximum Annual Limitation on Cost Sharing
for PY 2026
------------------------------------------------------------------------
Reduced maximum Reduced maximum
annual limitation annual limitation
on cost sharing on cost sharing
Eligibility category for self-only for other than
coverage for BY self-only coverage
2026 for BY 2026
------------------------------------------------------------------------
Silver 94% AV * CSR Plan $3,500 $7,000
Variant: Individuals eligible
for CSRs under Sec.
155.305(g)(2)(i) (household
income greater than or equal to
100 and less than or equal to
150 percent of the FPL)........
[[Page 27169]]
Silver 87% AV * CSR Plan 3,500 7,000
Variant: Individuals eligible
for CSRs under Sec.
155.305(g)(2)(ii) (household
income greater than 150 and
less than or equal to 200
percent of the FPL)............
Silver 73% AV * CSR Plan 8,450 16,900
Variant: Individuals eligible
for CSRs under Sec.
155.305(g)(2)(iii) (household
income greater than 200 and
less than or equal to 250
percent of the FPL)............
------------------------------------------------------------------------
* Under section 1402(d) of the ACA, American Indian/Alaska Native (AI/
AN) enrollees with incomes under 300 percent of the FPL are eligible
for Zero Cost Sharing plan variants. Additionally, all AI/AN QHP
enrollees are eligible for no cost sharing for items and services
provided by the Indian Health Service, an Indian Tribe, Tribal
Organization, or Urban Indian Organization or through referral under
contract health services. Under Sec. 155.305(g)(1)(ii), all other
enrollees must be enrolled in a silver plan variant to be eligible for
CSRs.
c. 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, in the proposed rule (90 FR
12995), we proposed 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 \229\ 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).
---------------------------------------------------------------------------
\229\ 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 the proposed PY 2026
premium adjustment percentage, we stated in the proposed rule (90 FR
12995) that 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. We determined that 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 \230\ (7.70 percent).
---------------------------------------------------------------------------
\230\ 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 noted 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.
We stated in the proposed rule that 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 the proposed
rule would supersede the values published in the October 2024 PAPI
Guidance.\231\
---------------------------------------------------------------------------
\231\ Ibid.
---------------------------------------------------------------------------
We sought 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 sought
comment on the resulting proposed 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.
After consideration of comments and for the reasons outlined in the
proposed rule and this final rule, including our responses to comments,
we are finalizing the use of private health insurance premiums
(excluding Medigap and property and casualty insurance premiums) to
estimate the growth in premiums for PY 2026 and beyond. We are also
finalizing the values for the PY 2026 premium adjustment percentage,
maximum annual limitation on cost sharing, reduced maximum annual
limitations
[[Page 27170]]
on cost sharing, and required contribution percentage as proposed.
Table 6 provides the final premium adjustment percentage index and
related payment parameters for PY 2026:
Table 6--Final Premium Adjustment Percentage Index and Related Payment
Parameters for the PY 2026
------------------------------------------------------------------------
Area Metric Value
------------------------------------------------------------------------
Premium Adjustment Percentage. NHEA Projections 2023- $4,714
2032 value \a\ for
per enrollee Private
Health Insurance
premiums (excluding
Medigap and property
and casualty
insurance) for 2013.
NHEA Projections 2023- $7,885
2032 value \a\ for
per enrollee Private
Health Insurance
premiums (excluding
Medigap and property
and casualty
insurance) for 2025.
2026 Premium 1.6726771319
Adjustment Percentage.
Required Contribution......... NHEA Projections 2023- $44,559
2032 value \(a)\ for
of per capita
personal income for
2013.
NHEA Projections 2023- $74,083
2032 value \(a)\ for
of per capita
personal income for
2025.
Income Growth......... 1.6625821944
Premium Growth over 1.0060718427
Income Growth Index. 8.05%
2026 Required
Contribution
Percentage.
Maximum Annual Limitation on 2026 Maximum Annual $10,600
Cost Sharing--Self Only \b\. Limitation on Cost $3,500
Sharing.
2026 Reduced Maximum
Annual Limitation on
Cost Sharing--
household income
greater than or equal
to 100 percent and
less than or equal to
150 percent of the
FPL.
2026 Reduced Maximum $3,500
Annual Limitation on
Cost Sharing--
household income
greater than 150
percent and less than
or equal to 200
percent of the FPL.
2026 Reduced Maximum $8,450
Annual Limitation on
Cost Sharing--
household income
greater than 200
percent and less than
or equal to 250
percent of the FPL.
------------------------------------------------------------------------
\a\ For the calculation of the PY 2026 premium adjustment percentage,
maximum annual limitation on cost sharing, reduced maximum annual
limitation on cost sharing, and required contribution percentage, we
are using the NHEA Projections 2023-2032 (published June 12, 2024),
which were the most recent projections that had been released as of
the publication of the proposed rule.\232\
\b\ The maximum annual limitation on cost sharing and reduced maximum
annual limitations on cost sharing for other than self-only coverage
is twice the dollar limit for self-only coverage. See 45 CFR
156.130(a)(2)(ii). For example, for the PY 2026, the maximum annual
limitation on cost sharing for other than self-only coverage is
$21,200.
We summarize and respond below to public comments received on the
proposed premium adjustment percentage methodology for the 2026 benefit
year and beyond and the resulting proposed 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.
---------------------------------------------------------------------------
\232\ In the 2021 Payment Notice (85 FR 29228), we finalized a
policy that we would calculate final payment parameters that depend
on NHEA data based on the data that are available as of the
publication of the proposed rule for that benefit year to increase
the predictability of benefit design.
---------------------------------------------------------------------------
Comment: A few commenters supported the proposed change to the
premium adjustment percentage methodology, stating that the proposed
methodology would better align with the plain language of section
1302(c)(4) of the ACA, which directs the Secretary to determine the
premium adjustment percentage for any calendar year based on the
``average per capita premium for health insurance in the United
States.'' \233\ These commenters also noted that basing the premium
adjustment percentage on a more comprehensive measure of premiums in
the market would provide issuers with more flexibility to design
innovative plans that better meet consumer needs.
---------------------------------------------------------------------------
\233\ See Section 1302(c)(4) of the ACA.
---------------------------------------------------------------------------
However, many other commenters expressed opposition to or concerns
about the proposed change to the premium adjustment percentage
methodology and the related proposed PY 2026 parameters. Many of these
commenters indicated HHS should continue to use the current measure,
ESI premiums, to measure premium growth because ESI premiums presently
result in a lower premium adjustment percentage, maximum annual
limitation on cost sharing, and reduced annual limitations on cost
sharing than the proposed values using all private health insurance
premiums (excluding Medigap and property and casualty insurance).
Additionally, several of these commenters noted that, because the
IRS has historically adopted the same measure of premium growth as HHS
for indexing under Section 36B(b) and (c) of the Code, the proposed
change to the premium adjustment percentage methodology will likely
impact the coverage ``affordability'' percentages that IRS releases
annually, which are used by applicable employers to determine the
affordability of their offers of coverage for purposes of the employer
shared responsibility provisions, resulting in increased net premiums
for enrollees who receive health insurance coverage through their
employers.
Many commenters also expressed concerns about the impact of the
proposal on the health insurance market and individuals and families,
citing HHS' estimates of the impacts in the Regulatory Impact Analysis
section of the proposed rule, including a decrease in enrollment and
increase in net premiums, under the assumption that the IRS will adopt
HHS' premium indexing methodology for the applicable percentage table,
as it has historically done.
Among commenters who expressed concern that the increase in net
premiums would lead to a decrease in health insurance enrollment, a few
commenters noted that an increase in individuals without health
insurance coverage would also lead to an increase in medical debt.
Furthermore, many commenters expressed concerns about the impact of the
higher proposed premium adjustment percentage on the maximum annual
limitation on cost sharing and reduced maximum annual limitations on
cost sharing, which they noted would increase out-of-pocket costs for
consumers. Many of these commenters expressed concerns that the
increased limits on cost sharing would disproportionately impact older
enrollees, individuals with chronic health conditions, and other
individuals who have a higher likelihood of incurring high medical
costs. These commenters expressed concerns that the higher costs would
lead to these enrollees choosing to forgo care to manage their
conditions, leading to
[[Page 27171]]
higher rates of complications and lower levels of overall health in the
population. A few of these commenters noted that many people with
chronic or serious health conditions have non-covered or out-of-network
costs that are not subject to their plans' annual limitation on cost
sharing and that the increase in the maximum annual limitation on cost
sharing would compound the financial burden of these enrollees.
Several commenters also noted that the increase in net premiums is
likely to have a disproportionate impact on enrollment in rural and
low-income communities. Many of these commenters expressed concern that
hospitals, community health clinics, and other providers that serve
these low-income communities would see an increase in patients without
insurance or who cannot afford the out-of-pocket costs of care, causing
providers to be unable to cover their expenses and to close, increasing
burdens on the health system and decreasing health care access.
Additionally, several commenters expressed concern that the impact of
the increase in net premiums would be further compounded when the
expanded PTC subsidies made available under the American Rescue Plan
Act of 2021 (ARPA) (and extended under the Inflation Reduction Act of
2022 (IRA) until the end of 2025) expire. One commenter requested more
detailed modelling of the impact of the proposed change to the premium
adjustment percentage methodology before implementation, stating that
projections of the impacts on various income and demographic groups are
necessary to ensure that interested parties can offer thoroughly
informed feedback.
Regarding the impact on low-income consumers, some commenters
stated the justification provided by HHS for this proposed change is
inadequate and contrary to the legislative intent of the financial
assistance structure of the ACA. A few commenters noted that the
primary purpose of providing PTC to Exchange enrollees is so the
Federal Government, rather than low-income individuals and families,
bears the burden of any premium increases in the individual market.
Additionally, several commenters expressed concern that healthier
enrollees are more likely to choose not to enroll in health insurance
plans in response to higher net premiums than sicker enrollees,
therefore increasing the average risk in the risk pool, prompting
issuers to increase premiums across the entire risk pool.
Response: We appreciate the comments in support of the proposed
change to the premium adjustment percentage methodology and are
finalizing the change, as proposed, to use per enrollee private health
insurance premiums (excluding Medigap and property and casualty
insurance) as the premium growth measure for purposes of calculating
the premium adjustment percentage because we agree that this approach
allows us to better achieve the statutory and regulatory goals of
adopting a more comprehensive and accurate measure of premium costs
across the private health insurance market. Specifically, 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. As the purpose of this index is to measure growth
in premiums, we believe it is appropriate to use a premium measure that
comprehensively reflects the actual growth in premiums in the related
insurance markets. We also agree that a measure of premium that more
comprehensively includes plans from both the individual and employer-
sponsored market is better aligned with the language of the ACA and
that the resulting higher maximum annual limitation on cost sharing
will provide issuers with more flexibility to set other cost sharing
parameters to better meet consumer needs.
We acknowledge commenters' concerns about the assumption noted in
the proposed rule (90 FR 13018) that the IRS will adopt the same
premium growth indexing methodology as HHS, as it has historically
done. IRS utilizes HHS' methodology for indexing the applicable
percentage table that determines PTC payments and ``affordability
percentages'' used by applicable employers to determine the
affordability of their coverage offerings for the employer shared
responsibility provisions. As we did in the proposed rule, we also
acknowledge that these changes will increase net premiums for enrollees
under 400 percent of the FPL, consistent with section 36B(b)(3) of the
Code, potentially decreasing enrollment through the Exchange as noted
in the Regulatory Impact Analysis section of this final rule and that
the change may also lead to enrollees in ESI being required to pay more
of their income towards their health insurance premiums, consistent
with section 36B(c)(2)(C) of the Code.
Because the projected decrease in Exchange enrollment is driven by
decreased PTC resulting in increased net premiums for lower income
enrollees, we do not disagree with the commenters' statement that low-
income enrollees are more likely to be impacted by this policy change.
It is also reasonable to assume that providers who serve a
disproportionate number of low-income patients, which may include
providers in rural communities, may experience downstream impacts of
the policy change and its impact on low-income consumers in the form of
increased provision of unpaid care and reduced utilization by
consumers. Specifically, we stated in the proposed rule (90 FR 13019)
that the proposal may increase the number of uninsured, and that this
may increase Federal and State uncompensated care costs and contribute
to negative public health outcomes.\234\
---------------------------------------------------------------------------
\234\ 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.
---------------------------------------------------------------------------
Furthermore, we recognize commenters' concerns about the burden
that an increase in the maximum annual limitation on cost sharing
places on consumers who meet the annual limit for the plan in which
they have enrolled. The proposed change will raise the cap on the
dollar value an issuer may set for a plan's annual limitation on cost
sharing, leading to higher out-of-pocket costs for enrollees who use
enough medical services to reach the limit for their plan.
With the impacts on premiums, enrollment, and out-of-pocket costs
in mind, to the extent that lack of coverage or higher out-of-pocket
costs are correlated to medical debt, it is also reasonable to believe
that rates of medical debt may increase for those enrollees who choose
not to enroll due to higher net premiums or who cannot afford out-of-
pocket costs associated with medical care. Likewise, it is reasonable
to believe that some individuals, including those with chronic
conditions, may choose to forgo care due to higher-out-of-pocket costs
or lack of coverage, which may in turn worsen the state of overall
health for those individuals.
Although we recognize commenters' concerns on these matters, we
believe that the scope of the impacts on enrollee cost sharing and
medical debt will be relatively limited. As we noted in the proposed
rule (90 FR 13019), those plans that are required to comply with the
maximum annual limitation on cost sharing are generally required to
comply with AV (or with minimum value) requirements, constraining the
range of cost-sharing parameter values that
[[Page 27172]]
issuers can offer for those plans, regardless of the maximum annual
limitation on cost sharing. This proposal allows issuers to set higher
annual limitations on cost sharing for their plans, but higher annual
limitations on cost sharing would generally also require lower
deductibles, coinsurance, or copayment parameters for a plan to be able
to meet AV requirements. As such, this proposal gives issuers
additional flexibility to set cost-sharing parameters that meet their
populations' needs without impacting the overall value of coverage.
Furthermore, we continue to believe the definition of the premium
adjustment percentage in section 1302(c)(4) of the ACA as growth in the
``average per capita premium for health insurance coverage in the
United States'' suggests that the measure of growth was intended to be
comprehensive. Therefore, a premium growth measure should reflect
premium growth in all affected markets and should not be limited to ESI
premium growth. In effect, this change is a correction for measuring
premium growth, as the previous exclusion of individual market data was
not the most comprehensive method of premium growth measurement, but
was deemed necessary as a result of the premium instability in the
individual market immediately following implementation of the ACA
market reforms (79 FR 13801 through 13804) and then again as a result
of anticipated premium instability in the individual market during the
COVID-19 PHE (86 FR 24233 through 24237). In both of these cases, our
decision to exclude individual market premiums from the measure of
premium growth was primarily intended to account for short-term market
distortions and the impact of those potential distortions on various
parameters, rather than to provide relief for specific groups of
consumers or other interested parties. Moreover, as described in the
proposed rule (90 FR 12988 through 12991), the COVID-19 PHE did not
impact the individual market as we originally anticipated and
conversely appears to have increased premiums in the employer-sponsored
market more than in the individual market during this period,
suggesting in hindsight that the primary justification for reverting to
using only employer-sponsored premiums to calculate the premium
adjustment percentage was unfounded.
Although the ACA does contain financial assistance provisions that
shift costs from consumers to the Federal Government as noted by some
commenters, increasing access to health insurance coverage and care for
low-income communities, the indexing methodology of the premium
adjustment percentage is not in itself one of those provisions.
Instead, the premium adjustment percentage reflects the intent of
Congress to appropriately index financial assistance provision related-
parameters which were initially determined at the time of passage of
the ACA. Because the role of the premium adjustment percentage is to
appropriately index various parameters defined in the ACA, the primary
consideration for setting the value of the premium adjustment
percentage should be whether it accurately and comprehensively captures
the rate of premium growth in the United States rather than the impact
of the indexing methodology on net premiums, enrollment, access to
health care, health outcomes, or out-of-pocket costs for those who
receive non-covered or out-of-network care. Considering these other
impacts when setting the premium adjustment percentage may result in a
measure of premium growth that does not accurately reflect actual
premium growth in the United States, artificially inflating the
generosity of provisions of the ACA beyond the intent of Congress.
Likewise, in response to the comments expressing concern that the
impact of the change in the premium adjustment percentage methodology
on net premiums would be further compounded when the expanded PTC
subsidies made available under the ARPA and extended by the IRA expire,
it would be beyond the intent of Congress as expressed in the ACA,
ARPA, or IRA to take into account the expiring enhanced subsidies in
setting the premium adjustment percentage indexing methodology.
As such, we believe that the measure of premium growth should aim
to be comprehensive and accurate to best satisfy the statutory
requirement that the premium adjustment percentage reflect growth in
the ``average per capita premium for health insurance coverage in the
United States,'' regardless of the impacts of a given premium
adjustment methodology on specific groups of consumers, including rural
and low-income consumers and consumers with chronic or severe
conditions. Again, we note that we shifted away from utilization of a
more comprehensive measure in Part 2 of the 2022 Payment Notice (86 FR
24233 through 24237) primarily due to concern that anticipated market
distortions related to the COVID-19 PHE would distort the indexing set
by the premium adjustment percentage. Because evidence appears to
demonstrate that this anticipated distortion among private health
insurance (excluding Medigap and property and casualty insurance) did
not occur, we do not consider the continued exclusion of these premiums
from the index to be appropriate. With these considerations, we do not
think the premium adjustment percentage methodology in this rulemaking
is contrary to the legislative intent of the financial assistance
structure of the ACA because the Federal Government will continue to
provide appropriately indexed premium assistance for enrollees with
incomes less than 400 percent of the FPL and will continue to set
appropriately indexed limitations on cost sharing and employer
responsibility requirements. We also believe the premium adjustment
percentage finalized in this rule is more consistent with the intent of
the indexing provisions of the ACA than the previous premium adjustment
percentage methodology. Because appropriately aligning with the intent
of Congress is our primary consideration in setting the premium
adjustment percentage methodology to include all private health
insurance premiums (excluding Medigap and property and casualty
insurance), we do not see the need to delay this change for the
purposes of analyzing impacts on various income and demographic groups,
as suggested by one commenter. Furthermore, we believe that section
1302(c)(4) of the ACA provides the Secretary with the authority to
update and modify the premium adjustment percentage and premium growth
rate measure as appropriate, and that our policy is within this
authority.
Finally, we acknowledge commenters' concern that healthy enrollees
may be less likely to enroll due to the higher net premiums that result
from the change in the premium adjustment methodology, to the extent
that consumers consider the costs and benefits of enrolling in health
insurance coverage. However, as with the other concerns discussed
above, we believe the consideration of the impact of this proposal on
the risk pool to be outside the scope of the indexing provisions of the
ACA because the purpose of the premium adjustment percentage is to
accurately index program parameters against the growth in premiums, not
to control the growth of those premiums. Nevertheless, we believe the
impact of the change in the premium adjustment percentage methodology
on enrollment, and likewise, the impact on the risk pool and overall
premiums, will be relatively limited. As noted in the Regulatory
[[Page 27173]]
Impact Analysis sections of the proposed rule and this final rule, the
decrease in enrollment for PY 2026 due to the premium adjustment
percentage change is estimated to be 80,000 Exchange enrollees,
approximately 0.3 percent of the number of individuals who selected
coverage in the Exchange during the PY 2025 OEP.\235\ Also, we
estimated the impact of this proposal on gross premiums to be
negligible, reflecting the limited impact of the change in the premium
adjustment percentage methodology on the average risk in the risk pool.
---------------------------------------------------------------------------
\235\ See the CMS press release ``Over 24 Million Consumers
Selected Affordable Health Coverage in ACA Marketplace for 2025''
(January 17, 2025), available at: https://www.cms.gov/newsroom/press-releases/over-24-million-consumers-selected-affordable-health-coverage-aca-marketplace-2025.
---------------------------------------------------------------------------
Based on these considerations, we are finalizing the premium
adjustment percentage, maximum annual limitation on cost sharing,
reduced maximum annual limitations on cost sharing, and required
contribution percentage as proposed, effective for PY 2026, and these
values will supersede the PY 2026 values published in the October 2024
PAPI Guidance.\236\
---------------------------------------------------------------------------
\236\ 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.
---------------------------------------------------------------------------
Comment: A few commenters noted that because the premium adjustment
percentage is a cumulative measure, including individual market
premiums in the definition of premium growth implicitly incorporates
the impact on premiums of the significant enhancement of benefits in
the individual market as a result of the ACA's market reforms. As such,
the commenters stated that individual market premiums should not be
used to measure premium growth since 2013 because premiums in the early
years of ACA were volatile, even in comparison to the growth in
employer-sponsored premiums during the COVID-19 PHE that we cited in
the proposed rule. Due to the cumulative nature of the premium
adjustment percentage, these commenters stated that the early years of
ACA implementation will continue to impact the premium adjustment
percentage if individual market premiums are included in the measure.
One of these commenters recommended HHS use a benchmark year no earlier
than 2018 (rather than 2013) to avoid inclusion of premium increases
resulting from the ACA market reforms and other Federal policy and
legislative decisions such as the cessation of Federal funding for CSRs
and the elimination of the individual mandate penalty. This commenter
also suggested that individual market premiums may be impacted by the
expansion of section 1332 waivers since the implementation of the ACA.
Response: As stated in the 2015 Payment Notice (79 FR 13801 through
13804), we previously excluded premiums from the individual market
because they were most affected by the significant changes in benefit
design and market composition in the early years of implementation of
the ACA market rules and were most likely to be subject to risk premium
pricing. Likewise, in part 2 of the 2022 Payment Notice (86 FR 24233
through 24237), we excluded premiums from the individual market
because, at the time, we anticipated that these premiums would be more
volatile in response to the COVID-19 PHE than employer-sponsored
premiums. As noted in the 2020 Payment Notice (84 FR 17537 through
17541), the rule in which we first adopted a premium adjustment
percentage methodology that incorporated all private health insurance
(excluding Medigap and property and casualty insurance), the ACA is now
past the initial years of implementation and issuers have had the
opportunity to collect data on the risk composition of the individual
market and adjust pricing accordingly. Additionally, as noted in the
proposed rule (90 FR 12990 through 12991), premiums in the employer-
sponsored market increased more rapidly than premiums in the individual
market during the COVID-19 PHE, the impact of which has led to a
decreasing gap in premium growth between the individual market and
employer-sponsored market. As such, we believe that a comprehensive
measure incorporating both individual market and employer-sponsored
premiums will more accurately reflect true premium growth going
forward. Therefore, we are finalizing our proposal to measure growth of
premiums issuers charged enrollees more comprehensively by once more
including individual market premiums. We acknowledge that the premium
adjustment percentage is a cumulative measure and, as such, the market
fluctuations in the early years of ACA implementation are included in
the calculation when using private health insurance premiums (excluding
Medigap and property and casualty insurance) as the data source for
indexing. However, because it is a cumulative measure, the impact of
these early years decreases as more time elapses between the applicable
plan year and the benchmark year (2013). For example, for PY 2018, PY
2014 was 1 of 4 years of growth included in the premium adjustment
percentage measure and therefore the weight of PY 2014 premium growth
was approximately one quarter of the overall measure. For PY 2026, PY
2014 is 1 of 12 years of growth included in the measure. Therefore, for
PY 2026, the weight of PY 2014 is only one twelfth of the overall
measure. As such, the greater time between the benchmark year and the
applicable plan year reduces the impacts of any individual year, even
if the premium growth in that year is unusual.
Furthermore, as we have said in response to other comments on this
proposal, the premium adjustment percentage reflects the intent of the
Congress to appropriately index parameters which were initially
determined at the time of passage of the ACA. Because the role of the
premium adjustment percentage is to appropriately index various
parameters defined in the ACA, the primary consideration for setting
the value of the premium adjustment percentage should be whether it
accurately and comprehensively captures the rate of premium growth in
the United States. With the reduced impact over time of any individual
year of premium growth, continuing to exclude individual market
premiums from this measure because they may be impacted by States'
approved section 1332 waivers or other policy actions could result in
parameters that are indexed inaccurately relative to the actual rate of
premium growth in the United States, contrary to the intent of
Congress.
With respect to the comment requesting we use a different benchmark
year, we did not propose and are not finalizing the use of a different
benchmark year for individual market premiums. Moreover, the applicable
statute, section 1302(c)(4) of the ACA, requires the Secretary to
establish a premium adjustment percentage that measures premium growth
between the preceding calendar year (2025, in this case) and 2013.
Without legislative action, it is not permissible to change the
benchmark year to any year other than 2013.
Comment: One commenter expressed concern about the evidence we
presented in the proposed rule to support the assertion that individual
market premiums remained stable during the COVID-19 PHE due to the
commenter's perception that the predictions regarding the anticipated
[[Page 27174]]
impacts of the COVID-19 PHE premiums were inaccurate.
Response: The analysis of the trends in premium growth during the
COVID-19 PHE that we presented in the proposed rule were not based on
predicted values but were based on the CMS Office of the Actuary's NHEA
historical data,\237\ which included data through the 2023 calendar
year, encompassing the entirety of the COVID-19 PHE.\238\ As described
in the methodology documents for the NHEA historical data,\239\ major
data sources for the historical data include annual and quarterly
Census Bureau surveys and annual American Hospital Association surveys.
As such, these data represent point-in-time estimates (rather than
projections) from calendar years impacted by the COVID-19 PHE. Given
this, we are confident that the NHEA historical data accurately reflect
the growth in premiums in the individual and employer-sponsored markets
during the COVID-19 PHE and that employer-sponsored market premiums
grew more rapidly than individual market premiums during this period.
---------------------------------------------------------------------------
\237\ Available at: https://www.cms.gov/data-research/statistics-trends-and-reports/national-health-expenditure-data/historical.
\238\ See ``National Health Expenditure Accounts: Methodology
Paper, 2023: Definitions, Sources, and Methods'' available at
https://www.hhs.gov/coronavirus/covid-19-public-health-emergency/index.html.
\239\ See https://www.cms.gov/files/document/definitions-sources-and-methods.pdf.
---------------------------------------------------------------------------
Comment: A few commenters suggested that HHS delay adoption of this
change to the premium adjustment percentage methodology until PY 2027
due to issuer and various States' timing constraints for rate setting.
A few commenters recommended that HHS consider a more delayed or
gradual phase-in of individual market premiums over several years.
Response: In finalizing these values for PY 2026, we recognize that
some States have rate filing deadlines in April and May and that this
rule may not be finalized in time for issuers in these States to adjust
plan parameters and rates to take advantage of the additional
flexibility afforded by the increased maximum annual limitation on cost
sharing and reduced maximum annual limitations on cost sharing.
However, because the values finalized in this final rule resulted in a
higher maximum annual limitation on cost sharing than was previously
released in guidance,\240\ the vast majority of plans that met maximum
annual limitation on cost sharing requirements under the previously
released PY 2026 premium adjustment percentage methodology will also
meet the maximum annual limitation on cost sharing requirements under
the premium adjustment percentage methodology for PY 2026 as finalized
in this rule. Therefore, issuers would not be required to modify all of
their plans as a result of the methodology finalized in this final rule
if those plans were already compliant with the values previously
released in guidance.\241\ Additionally, to aid in rate setting for
issuers, CMS released an updated version of the AV calculator in March
2025 that reflected the proposed higher maximum annual limitation on
cost sharing.\242\
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\240\ 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.
\241\ Id.
\242\ Available at https://www.cms.gov/files/document/revised-final-2026-av-calculator.xlsm.
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Lastly, we note that we did not propose, and are not finalizing, a
phased-in approach to using private health insurance premiums
(excluding Medigap and property and casualty insurance) in defining the
premium adjustment methodology for PY 2026. We do not believe that
further delay meets the statutory and regulatory goals of using a
comprehensive measure of premium growth. Additionally, as stated in the
proposed rule (90 FR 12987 through 12991), we believe that the
individual market is now sufficiently stable to justify the immediate
inclusion of individual market premium growth in the indexing measure
going forward. As such, we believe it is appropriate to prioritize
better achieving the goals of comprehensiveness and accuracy of the
premium adjustment percentage methodology over the limited effect on
mitigating impacts that implementing our proposal using a phased-in
approach would be likely to have. This also aligns with our previous
approaches to implementing changes to the premium adjustment percentage
methodology where we have not implemented a phased-in approach
regardless of the premium adjustment percentage amount and whether the
rate was increasing or decreasing.\243\
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\243\ See the 2020 Payment Notice (84 FR 17537 through 17541)
and part 2 of the 2022 Payment Notice (86 FR 24233 through 24237).
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3. Levels of Coverage (Actuarial Value) (Sec. Sec. 156.140, 156.200,
156.400)
In the 2025 Marketplace Integrity and Affordability proposed rule
(90 FR 12995 through 12997), we proposed 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
actuarial value (AV) requirements under the EHB package, other than for
expanded bronze plans, for which we proposed a de minimis range of +5/-
4 percentage points. We also proposed 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
proposed 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.
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 AV, is determined based on its coverage of the EHB for a
standard population. Section 1302(d)(1)(A)-(D) 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 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.\244\ In that final
rule (82 FR
[[Page 27175]]
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 would provide the flexibility necessary for issuers
to design new plans while ensuring comparability of plans within each
metal level.
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\244\ 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,
available at: https://www.cms.gov/cciio/resources/files/downloads/av-csr-bulletin.pdf, 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.
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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 plans 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
second lowest cost silver plan (SLCSP), the benchmark plan for
calculating PTC and APTC.
In the proposed rule (90 FR 12996), we explained that 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. We noted that 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. We further noted that due to these effects, issuers have
also voiced concern about their ability to continue to participate in
the market generally. We stated that sustained, robust issuer
participation in the market is key to ensuring overall market stability
and keeping costs down.
Based on this feedback, we proposed 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,\245\ for which we
proposed a de minimis range of +5/-4 percentage points. We stated that
we believe 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 noted 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. We stated that
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.
---------------------------------------------------------------------------
\245\ 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 proposed, 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. We stated that 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 stated 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 stated that we believe 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 the 2012 Exchange Establishment 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. We noted in the proposed rule (90 FR
12996 through 12997) that 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 affordability for
unsubsidized consumers. We stated that 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 stated
that we believe premiums for all consumers in the risk pool may be
lower.
As explained in the proposed rule (90 FR 12997), maximizing PTC
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 stated that 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. We explained that
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 stated that 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. We noted that 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
stated that 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.
[[Page 27176]]
Finally, we proposed 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. We
explained that 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 did 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 noted 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 sought comment on these proposals.
After consideration of comments and for the reasons outlined in the
proposed rule and this final rule, including our responses to comments,
we are finalizing these policies as proposed. We summarize and respond
to public comments received on the proposed changes to the de minimis
ranges below.
Comment: Many commenters supported the proposal, noting that they
agreed with the rationale provided in the proposed rule that wider de
minimis ranges would improve issuer flexibility in plan design. These
commenters explained that increased flexibility would allow issuers to
better design plans that meet the needs of their enrollees.
Response: We agree that wider de minimis ranges will significantly
improve issuer flexibility in plan design and are finalizing this
proposal as proposed. As we noted in the proposed rule, issuers have
indicated that narrower de minimis ranges substantially reduce issuer
flexibility in establishing plan cost sharing, and that any benefits
from improved comparability between coverage levels due to wider
variation in metal levels are outweighed by the reduced flexibility in
setting non-standardized cost-sharing parameters.
The wider de minimis ranges of +2/-4 percentage points (and +5/-4
percentage points for expanded bronze plans) offer several important
benefits to the market.
First, these expanded ranges allow issuers to design plans that
better promote competition in the market. With greater flexibility in
adjusting actuarial values, issuers can create more differentiated
combinations of premiums and cost-sharing structures. This enables
issuers to develop innovative plan designs targeting specific consumer
needs and respond more dynamically to competitor offerings without
being constrained by overly narrow AV requirements.
Second, the wider ranges provide flexibility for issuers to make
adjustments to their plans within the same metal level. This practical
benefit allows issuers to implement year-to-year modifications based on
changing healthcare costs, utilization patterns, and claims experience
while maintaining their metal tier classification. Issuers can respond
to provider network changes or drug formulary updates without
disrupting their established metal level offerings, ensuring greater
continuity for consumers.
Third, these expanded ranges help maintain robust issuer
participation, which is important for overall market stability. By
reducing compliance burdens that might otherwise drive issuers to exit
markets, particularly those with challenging risk profiles, the wider
ranges make market participation more attractive to a broader range of
issuers. This helps prevent overly restrictive pricing and ensures
consumers have multiple options to choose from, which is fundamental to
a healthy, competitive marketplace. This is a particularly important
considering that several issuers have publicly announced their intent
to end participation in the Exchange in PY 2026.
We note that this increased flexibility does not prevent issuers
from designing plans with AVs closer to the middle of the applicable de
minimis ranges. Issuers will retain the ability to offer plans with
higher AVs if they believe such designs would better attract
enrollment.
Comment: Some commenters supported the proposal because it would
maintain uniform AV standards for plans on- and off-Exchange.
Response: We agree that standardizing the de minimis ranges for
plans on- and off-Exchange is important. As we stated in the proposed
rule (90 FR 12997), while specifying different de minimis ranges for
individual market silver QHPs pushed for increased subsidies in the
very short term, it was a short-sighted approach to regulating the AV
de minimis ranges that damaged the overall health of the risk pool
long-term. Subjecting on- and off-Exchange plans to the same de minimis
ranges will correct this short-sighted approach because it will help to
ensure better balance between access and affordability for all
consumers, particularly for those enrolling in off-Exchange plans.
Comment: Many commenters, both those in support of and in
opposition to the proposal, recommended that, if the proposed de
minimis variations are finalized, implementation of the proposal be
delayed until PY 2027 instead of PY 2026. These commenters noted that
it may be difficult for some issuers to take advantage of wider de
minimis ranges for PY 2026 given the timing of the proposal and State
rate submission deadlines.
Response: We decline to delay implementation of these wider de
minimis ranges until PY 2027. By definition, wider de minimis ranges do
not require issuers or States to take any additional action to revise
existing plan designs. Issuers may choose not to take any action to
revise their existing plan designs for PY 2026 and will still be
compliant with these wider de minimis ranges. We recognize that some
issuers in some States will not be able to modify plan designs in time
to meet State-specific filing deadlines. However, making these wider de
minimis ranges available as soon as possible will maximize the extent
to which issuers are able to take advantage of them to create a wider
array of benefit designs that appeal to a wider array of consumers. We
therefore believe that finalizing these wider de minimis ranges
beginning in PY 2026 is justified.
Comment: Many commenters did not support the proposal. These
commenters primarily expressed concern that wider de minimis ranges
would result in lower overall plan AVs. These commenters explained that
this would lead to increased out-of-pocket consumer costs as plan cost-
sharing generosity decreases and higher overall premiums for some
consumers given a potential impact on the generosity of the SLCSP, the
benchmark plan used to determine an individual's PTC.
Response: We acknowledge commenters' concerns regarding a decrease
in plan cost-sharing generosity to the extent that plans utilize the
lower end of the wider de minimis ranges, the impact on PTCs if the AV
of the applicable SLCSP is lower than in previous years, and the burden
that increased cost-sharing and decreased PTCs may have on enrollees in
the short-term. However, this change is essential to restoring greater
balance between access and affordability in the long term. As we
explained in the proposed rule (90 FR 12997), we believe
[[Page 27177]]
that the overall benefits to the risk pool as a result of this change
will better incentivize unsubsidized enrollees to enroll in coverage,
which we expect to lower overall costs and further drive down premiums
as the risk pool improves.
Comment: Other commenters opposing the proposal expressed concern
that wider de minimis ranges would undermine the ability of consumers
to meaningfully compare plans. These commenters were concerned that a
silver plan at the lower end of the de minimis range (with a 66 percent
AV) could be closer in AV to a bronze plan at the higher end of the
expanded de minimis range (with a 65 percent AV) than it would be to
another silver plan at the higher end of the de minimis range (with a
72 percent AV).
Response: We do not agree with the premise that consumers currently
typically rely on material differences in AV percentages to compare
plans. Communicating material differences between plan cost-sharing for
plans of the same metal tier and plans of different metal tiers has
always been essential to ensure that consumers make informed decisions
about their plan selections, which includes deprioritizing AV as a
comparison tool. This was the case with narrower de minimis ranges as
well, when a bronze plan could have an AV at the higher end of the
expanded de minimis range (with a 65 percent AV) and a silver plan
could have an AV at the lower end of a -2 percentage point de minimis
range (with a 68 percent AV). To consumers comparing plans, the
difference in cost sharing is immaterial for a 3-percentage point
separation between a 65 percent AV bronze plan and a 68 percent AV
silver plan or a 1 percentage point separation between a 65 percent AV
bronze plan and a 66 percent AV silver plan. Exchanges use an array of
strategies to effectively communicate the meaningful differences
between plans in terms that consumers--in addition to agents, brokers,
web-brokers, Navigators, and other assisters--can understand and
appreciate. Therefore, we are not concerned about material changes in
the comparability between plan AVs with this change.
Comment: A few commenters noted the proposal's impact on silver
loading. These commenters explained that if the relativity between the
standard QHP silver plan and the CSR plan variations expands, there is
potential for the ``silver load'' to increase. Commenters stated that
where the ``silver load'' is applied only to silver QHPs, this would
offset some portion of the potential silver premium decrease.
Commenters also stated that where the ``silver load'' is applied to all
plans, it would similarly offset premium decreases for other metal
tiers as well.
Response: We acknowledge the commenters' observations regarding the
potential impact of wider de minimis ranges on silver loading. The
relationship between standard silver QHP AVs and CSR plan variation AVs
could affect the magnitude of silver loading. The wider de minimis
range (+2/-4 percentage points) for standard silver QHPs, combined with
the +1/-1 percentage point range for CSR variations, could increase the
relative difference between standard silver plans and CSR variations.
This increased differential could result in higher silver loading
amounts to account for the cost of CSR benefits.
We expect any impact on premiums would manifest differently
depending on how issuers implement their loading strategy. In markets
where silver loading is applied exclusively to silver QHPs, any
potential premium decreases from lower AVs in silver plans may be
partially offset by the increased loading amount. In markets where
broad loading is implemented across all metal levels, the loading
effects could moderate premium decreases throughout the entire market.
Despite these potential effects, we maintain that the wider de
minimis ranges represent a necessary rebalancing of market dynamics.
While silver loading may partially counteract some premium reductions,
the broader benefits of this policy--including enhanced issuer
flexibility, improved market stability, and potential risk pool
improvements--remain compelling factors in our decision-making process.
Comment: A few commenters asserted that the proposal could weaken
the risk pool because healthier people are more likely to drop coverage
when net premiums rise. Other commenters asserted the proposal can help
bring more stability to the risk pool by attracting more unsubsidized
individuals who otherwise might choose to go uninsured.
Response: We acknowledge the differing viewpoints regarding the
proposal's potential impacts on the risk pool. As explained above,
after careful consideration of the evidence and interested parties'
feedback, we believe that while there may be some initial weakening of
the risk pool as some commenters note, the long-term benefits of wider
de minimis ranges are likely to strengthen overall market stability.
Comment: A few commenters requested clarification on the
applicability of uniform modification standards under Sec. 147.106(e)
to the proposal to widen the de minimis ranges.
Response: Under the exceptions to guaranteed renewability for
uniform modification of coverage under Sec. 147.106(e), an issuer may,
only at the time of coverage renewal, modify the health insurance
coverage for a product offered in the individual market or small group
market if the modification is consistent with State law and is
effective uniformly for all individuals or group health plans with that
product. To be considered a uniform modification of coverage, among
other things, each plan within the product that has been modified must
have the same cost-sharing structure as before the modification, except
for any variation in cost sharing solely related to changes in cost and
utilization of medical care or to maintain the same metal tier level
described in sections 1302(d) and (e) of the ACA. States have
flexibility to broaden what cost-sharing changes are considered within
the scope of a uniform modification of coverage and may, for example,
consider uniform cost-sharing changes that result in plans having the
same metal level based on the expanded de minimis range to be uniform
modifications.
We note that under Sec. 147.106(e)(2), modifications made
uniformly and solely pursuant to applicable Federal or State
requirements are considered uniform modifications if such modification
is directly related to the imposition or modification of the Federal or
State requirement and made within a reasonable time period after the
imposition or modification of the Federal or State requirement.
However, given that the de minimis ranges are being widened, an issuer
is not required to modify a plan's cost-sharing structure as a result
of this provision of the final rule. Therefore, changes to cost-sharing
to take advantage of the wider de minimis ranges under this final rule
would not be considered to have been ``made solely pursuant to a
Federal requirement.'' Such a modification would have to meet the other
criteria in Sec. 147.106(e)(3) to be considered a uniform modification
of coverage.\246\
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\246\ See Patient Protection and Affordable Care Act; Exchange
and Insurance Market Standards for 2015 and Beyond, Final rule (79
FR 30240, 30249) (``For example, if State legislation newly requires
a minimum level of benefits (for example, imposing a new minimum
visit limit on specific benefits) reducing covered benefits to meet
the minimum requirement would not be directly related to the new
requirement because the lesser coverage of the benefit coverage was
previously permissible, and the modification did not have to be made
in order for the issuer to comply with the State law. Accordingly,
the modification would not be considered to have been `made solely
pursuant to' the new requirement.'').
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[[Page 27178]]
Comment: Some commenters asserted that lower overall AVs could
result in a reduction in the quality of provider networks.
Response: We disagree with this claim. In the proposed rule, we
recognized that wider de minimis ranges may lower the generosity of
plan cost sharing, and that this would result in lower premiums.
However, plan cost sharing is only one of many factors involved with
plan rate setting. Provider network quality can also be reflected in
plan rate setting, and by allowing for lower AVs, plans can reallocate
funds to improving network quality.
Comment: Some commenters requested clarification on whether the
proposal would impact the standardized plan options finalized in the
2026 Payment Notice and whether issuers are required to offer these
plans for PY 2026.
Response: For PY 2024 and beyond, Sec. 156.201(b) requires QHP
issuers in a FFE or SBE-FP to offer at least one standardized QHP
option at every product network type, at every metal level (except the
non-expanded bronze metal level), and throughout every service area
that it also offers non-standardized QHP options (including, for silver
plans, for the income-based cost-sharing reduction plan variations, as
provided for at Sec. 156.420(a)). We finalized the standardized QHP
options required under Sec. 156.201(b) for PY 2026 in the 2026 Payment
Notice (90 FR 4493). We confirm that the widening of the de minimis
ranges finalized in this final rule does not impact the plan designs
for the standardized plan options finalized in the 2026 Payment Notice,
nor does it impact the broader requirement for issuers to offer these
plans for PY 2026 under Sec. 156.201(b).
For PY 2025 and beyond, Sec. 156.202(b) allows QHP issuers in an
FFE or SBE-FP to offer two non-standardized plan options per product
network type, metal level (excluding catastrophic plans), and inclusion
of adult dental benefit coverage, pediatric dental benefit coverage,
and adult vision benefit coverage (as defined in paragraphs Sec.
156.202(c)(1) through (3)), in any service area. We confirm that QHP
issuers in a FFE or SBE-FP may utilize the wider de minimis ranges
finalized in this final rule to adjust the cost sharing of their non-
standardized plan options under Sec. 156.202(b), subject to uniform
modification requirements at Sec. 147.106(e) and the requirements
under the definition of ``plan'' at Sec. 144.103.
D. Applicability Dates
In the 2025 Marketplace Integrity and Affordability proposed rule,
we proposed that some policies, if finalized, would become applicable
for plan years beginning on or after January 1, 2026. We noted that
these policies would include the proposed provisions requiring
Exchanges on the Federal platform 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
from covering sex-trait modification as EHB. We also noted that for
State Exchanges, the provisions requiring all Exchanges to conduct pre-
enrollment verification of eligibility for Exchange SEPs and to verify
at least 75 percent of new enrollments through SEPs would be applicable
starting PY 2027. Also, the policies to update the premium adjustment
percentage methodology and AV de minimis ranges would apply beginning
with PY 2026. We noted that the policy to prevent re-enrollees from
receiving APTC that fully covers their premium without taking an action
to confirm their eligibility information would be applicable for
Exchanges on the Federal platform starting with annual redeterminations
for PY 2026, and State Exchanges would be required to implement the
same policy or a comparable policy starting with annual
redeterminations for PY 2027. We noted in the proposed rule that we
believe these applicability dates provide issuers and Exchanges ample
time to prepare for these changes. However, we noted that we understand
that different States and issuers face different resource issues and
implementation hurdles. We therefore sought comment on whether
regulated entities would require additional time to comply with these
proposals. We also sought comment on any operational considerations or
other issues that may impede compliance with the proposed applicability
dates.
In the proposed rule, we discussed that the remaining policies in
that proposed rule would become applicable upon the effective date of
the final rule. We stated that these proposals included, among others,
the provision to pause the monthly SEP for APTC-eligible qualified
individuals with a projected annual household income at or below 150
percent of the FPL. We noted that our experience with this SEP suggests
it has substantially increased the level of improper enrollments, as
well as increased the risk for adverse selection. We further stated
that the remaining proposals in the proposed rule aimed to increase the
program integrity of the Exchange and protect Federal tax dollars. We
therefore stated in the proposed rule that we believed it would be
appropriate for these policies to become applicable immediately upon
the effective date of the final rule.
After consideration of comments and for the reasons outlined in the
proposed rule and this final rule, including our responses to comments,
we are finalizing the applicability dates with the following
modifications as provided in Table 7. We note that all rules are
effective 60 days after publication in the Federal Register, and we
provide further specificity where applicability dates of certain
provisions may vary.
Table 7--Applicability Dates of Finalized Provisions
----------------------------------------------------------------------------------------------------------------
Proposed Finalized
Provision applicability date applicability date Sunset at the end of PY 2026?
----------------------------------------------------------------------------------------------------------------
Coverage Denials for Failure to Pay Effective date of Effective date of No.
Premiums for Prior Coverage (Sec. this rule. this rule.
147.104(i)).
Deferred Action for Childhood Effective date of Effective date of No.
Arrivals (DACA) (Sec. 155.20). this rule. this rule.
Standards for Termination of an Effective date of Effective date of No.
Agent's, Broker's, or Web-broker's this rule. this rule.
Exchange Agreements for Cause (Sec.
155.220(g)(2)).
Failure to File Taxes and Reconcile PY 2026.............. PY 2026............. Yes.
APTC Process (Sec. 155.305(f)(4)).
60-Day Extension to Resolve Income Effective date of Effective date of No.
Inconsistency (Sec. 155.315). this rule. this rule.
[[Page 27179]]
Income Verification When Data Effective date of Effective date of Yes.
Sources Indicate Income Less Than this rule. this rule.
100 Percent Federal Poverty Level
(Sec. 155.320(c)(3)(iii)).
Income Verification When Tax Data is Effective date of Effective date of Yes.
Unavailable (Sec. 155.320(c)(5)). this rule. this rule.
Annual Eligibility Redetermination Exchanges on Federal Exchanges on Federal Yes.
(Sec. 155.335(a), (n)). Platform: PY 2026. Platform: PY 2026.
State Exchanges: PY State Exchanges:
2027. Not Finalized.
Annual Eligibility Redetermination PY 2026.............. PY 2026............. No.
(Automatic Re-enrollment Hierarchy)
(Sec. 155.335(j)).
Gross Premium Percentage-based and Effective date of Effective date of Yes.
Fixed-dollar Premium Payment this rule. this rule.
Thresholds (Sec. 155.400(g)).
Annual Open Enrollment Period (OEP) PY 2026 OEP.......... PY 2027 OEP......... No.
(Sec. 155.410).
Monthly Special Enrollment Period Effective date of Effective date of Yes.
for APTC-Eligible Qualified this rule. this rule.
Individuals with a Household Income
at or Below 150 Percent of the
Federal Poverty Level (Sec.
155.420).
All Exchanges Conducting Eligibility PY 2026.............. Exchanges on Federal Yes.
Verification for SEPs (Sec. Platform: PY 2026.
155.420(g)). State Exchanges:
Not finalized.
All Exchanges Conducting Eligibility PY 2026.............. Exchanges on Federal Yes.
Verification for 75 Percent of New Platform: PY 2026.
Enrollments through SEPs (Sec. State Exchanges:
155.420(g)). Not finalized.
Prohibition on Coverage of Specified PY 2026.............. PY 2026............. No.
Sex-Trait Modification Procedures
as an EHB (Sec. Sec. 156.115(d)
and 156.400).
Premium Adjustment Percentage Index PY 2026.............. PY 2026............. No.
(PAPI) (Sec. 156.130(e)).
Levels of Coverage (Actuarial Value) PY 2026.............. PY 2026............. No.
(Sec. Sec. 156.140, 156.200,
156.400).
----------------------------------------------------------------------------------------------------------------
We summarize and respond to public comments received on the
proposed applicability dates below. Public comments regarding the
applicability date of individual provisions as well as our responses to
these comments can be found in the respective provisions' sections of
this final rule.
Comment: Many commenters expressed concerns about the proposed
implementation timeline for the rule holistically. Some commenters
noted their concern about the proposed rule's immediate and near-term
changes adding to existing Exchange uncertainty in PY 2026, which
includes the scheduled expiration of expanded PTC under the ARPA and
IRA at the end of 2025 and possible Congressional action related to
health programs like Medicaid. Several commenters noted several
proposed policies (such as those that impact rates and plan designs
like the premium adjustment percentage methodology) may not be
compatible with existing processes and timelines, which creates
financial and operational burdens for regulators, State Exchanges,
issuers, agents, brokers, web-brokers and consumers. These commenters
specifically cited needing time to analyze impact, implement, and test
changes including administrative and IT operations, consumer education
and assistance, marketing and outreach, staffing, and other mitigation
strategies that address operational challenges, coverage loss, and
consumer confusion. One commenter cited that there could be a
disproportionate impact of uncertainty on safety-net or other smaller
plans that are unable to make sweeping changes in short order.
Moreover, these commenters noted that the implementation changes may
not have been budgeted for in calendar year 2025. Many commenters
recommended delaying implementation with the earliest applicability
date being PY 2027 to allow States to fully adopt and be compliant with
these changes. One commenter suggested effective dates should begin
with the following plan year, at minimum, instead of the effective date
of the final rule or mid-year. In consideration of provisions that
impact PY 2026 plan design or rates, many commenters supported delaying
implementation while a few recommended the final rule be published as
soon as possible (including within a few weeks of the public comment
deadline) to minimize regulatory uncertainty and timely finalize
products.
Response: While we acknowledge the commenters' feedback regarding
the general implementation timeline of the final rule and the issues
associated with meeting the applicability dates of various provisions
finalized as part of this final rule, we are generally finalizing the
applicability dates as proposed. Specifically, the provisions in this
rulemaking are intended to promote program integrity and prevent
improper Exchange enrollments and given the pervasiveness of this
issue,\247\ we do not believe that a delay in implementation of these
provisions is appropriate. That said, we acknowledge the concerns
raised by commenters about the need to consider the effects of the
expiring expanded subsidies. As such, we are finalizing a number of the
policies associated with the improper enrollments associated with
fully-subsidized plans through PY 2026, which provides the policies
with enough time to work to shed improper enrollments without burdening
the Exchanges over the long term. Further, where appropriate in this
final rule, we are changing the implementation dates of certain
provisions, as described in Table 7 in this section.
---------------------------------------------------------------------------
\247\ As documented in a CMS press release from 2024, we
received and resolved over 180,000 unauthorized enrollment
complaints from January to August 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.
---------------------------------------------------------------------------
[[Page 27180]]
E. Comments Regarding Public Comment Period
Many commenters expressed concerns about the 2025 Marketplace
Integrity and Affordability proposed rule's 30-day public comment
period. We summarize and respond to the public comments received
regarding the length of the public comment period below.
Comment: Several commenters expressed concerns about the comment
period being shorter than 30 days given that the rule was issued in the
Federal Register on March 19, 2025 (90 FR 12942) and the comment period
closed on April 11, 2025. These commenters suggested that such a window
limits public comment and prevents interested parties from fully
engaging with the proposed rule's reasoning in violation of the APA.
Several commenters also expressed concerns about the scope and
complexity of the proposed rule and requested the comment period be
extended to 60 or 90 days to allow interested parties (including
issuers, State Exchanges, providers, and consumers) additional time to
analyze and respond to the impact of the proposed rule. These
commenters cited the ruling in National Lifeline Ass'n v. FCC, 921 F.3d
1102, 1117-18 (D.C. Cir. 2019), which noted that a 30-day comment
period is generally considered the shortest time period for interested
persons to ``meaningfully review a proposed rule and provide informed
comment.''
A commenter cited that HHS historically has provided substantially
more time for public comments, stating that the comment periods for the
2025 and 2024 Payment Notice proposed rules were 45 and 41 days,
respectively.
Response: We disagree with commenters that stated that we did not
provide a 30-day comment period on the proposed rule, in violation of
the APA. The proposed rule was displayed for public inspection at the
Federal Register on March 12, 2025, with an opportunity to submit
public comment electronically on https://www.regulations.gov or by
regular, express, or overnight mail. Under 44 U.S.C. 1507, unless
otherwise specifically provided by statute, filing of a document
required or authorized to be published by 44 U.S.C. 1505,\248\ except
in cases where notice by publication is insufficient in law, is
sufficient to give notice of the contents of the document to a person
subject to or affected by it. Thus, consistent with 44 U.S.C. 1507,
display of the proposed rule at the Federal Register on March 12, 2025
constituted public notice of the proposed rule on that date, and the
30-day comment period was held between March 12, 2025 and April 11,
2025. We note that we did in fact receive public comments between March
12, 2025 and March 19, 2025 (the date the proposed rule appeared in the
Federal Register), demonstrating that the public had notice of the
proposed rule on March 12, 2025.
---------------------------------------------------------------------------
\248\ See 44 U.S.C. 1505(a) (providing that there shall be
published in the Federal Register--(1) Presidential proclamations
and Executive orders, except those not having general applicability
and legal effect or effective only against Federal agencies or
persons in their capacity as officers, agents, or employees thereof;
(2) documents or classes of documents that the President may
determine from time to time have general applicability and legal
effect; and (3) documents or classes of documents that may be
required so to be published by Act of Congress) and 44 U.S.C.
1505(b) (providing that, in addition to the foregoing there shall
also be published in the Federal Register other documents or classes
of documents authorized to be published by regulations prescribed
under this chapter with the approval of the President, but comments
or news items of any character may not be published in the Federal
Register).
---------------------------------------------------------------------------
We also disagree with the comments requesting that we extend the
comment period to 60 or 90 days. If we were to do this, the publication
of the final rule would be delayed, which would impact rate setting and
plan finalization for PY 2026 that depend on the finalization of the
policies set forth in this final rule (such as the changes to the
premium adjustment percentage and the AV de minimis ranges). To provide
individual and small group market issuers sufficient time to develop
and price plan offerings for PY 2026, we will not be extending the
comment period to 60 or 90 days.
F. Severability
As demonstrated by the number of distinct programs addressed in
this rulemaking and the structure of this final rule in addressing them
independently, HHS generally intends the rule's provisions as finalized
to be severable from each other. For example, the final rule refines
the interpretation of ``lawfully present'' for purposes of determining
eligibility to enroll in a QHP offered on an Exchange or a BHP in
States that elect to operate a BHP and eligibility for PTC, APTC, and
CSRs. It also outlines the discontinuation of the SEP for individuals
with an income less than 150 percent of the FPL and makes a change in
the calculation of the premium adjustment percentage. It also updates
the Exchange automatic re-enrollment hierarchy and changes the process
of income verification where tax return data is unavailable. We believe
that these provisions are generally capable of functioning sensibly on
an independent basis. It is our intent that if any provision of this
final rule is held to be invalid or unenforceable by its terms, or as
applied to any person or circumstance, the other provisions in the
final 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 is found to be
utterly invalid or unenforceable, we intend that provision to be
severable.
We sought comment on the severability of these provisions in the
proposed rule.
After consideration of comments and for the reasons outlined in the
proposed rule and this final rule, including our responses to comments,
we are finalizing the severability provision as proposed. We summarize
and respond to public comments received on this provision below.
Comment: A few commenters supported the severability approach
discussed in the proposed rule.
Response: We thank commenters for their support and are finalizing
this approach as proposed such that it is HHS' position if any
provision of this final rule is held to be invalid or unenforceable by
its terms, or as applied to any person or circumstance, the other
provisions in the final 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
is found to be utterly invalid or unenforceable, that provision is
severable.
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.
Recommendations to minimize the information collection
burden on the
[[Page 27181]]
affected public, including automated collection techniques.
We solicited public comment on each of these issues for the
following sections of this document that contain information collection
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.\249\ Table 8 presents the median
hourly wage, the cost of fringe benefits and overhead, and the adjusted
hourly wage. These estimates were updated from the estimates used in
the 2025 Marketplace Integrity and Affordability proposed rule due to
the availability of more recent data between the publication of the
proposed and final rules. The proposed rule estimates may be found at
90 FR 12998.
---------------------------------------------------------------------------
\249\ See U.S. Bureau of Labor Statistics (n.d.). Occupational
Employment and Wage Statistics, May 2024 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.
Table 8--Adjusted Hourly Wages Used in Burden Estimates
----------------------------------------------------------------------------------------------------------------
Fringe benefits Adjusted
Occupation title Occupational Median hourly and overhead ($/ hourly wage
code wage ($/hr.) hr.) ($/hr.)
----------------------------------------------------------------------------------------------------------------
Database and Network Administrators and 15-1240 51.67 51.67 103.34
Architects...................................
Computer Programmers.......................... 15-1251 47.44 47.44 94.88
Eligibility Interviewers, Government Programs. 43-4061 24.76 24.76 49.52
----------------------------------------------------------------------------------------------------------------
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.'' \250\ We started
with a measurement of the usual weekly earnings of wage and salary
workers of $1,159.\251\ We divided this weekly rate by 40 hours to
calculate an hourly pre-tax wage rate of approximately $28.98. 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 $24.05. We adopt this as our
estimate of the hourly value of time for changes in time use for unpaid
activities.
---------------------------------------------------------------------------
\250\ 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.
\251\ 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.
---------------------------------------------------------------------------
We sought comment on the estimates and assumptions in the proposed
rule.
We did not receive any comments in response to the proposed rule
estimates and assumptions. We are using revised estimates as presented
above as a result of more recent data being available at the time of
this final rule.
B. ICRs Regarding Deferred Action for Childhood Arrivals
1. Basic Health Program (42 CFR 600.5)
The following changes will be submitted for review under OMB
Control Number 0938-1218 (CMS-10510).
The changes in this final rule to 42 CFR 600.5 will 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. A discussion of the proposed ICRs
for this policy may be found in the 2025 Marketplace Integrity and
Affordability proposed rule (90 FR 12998). We are updating the ICRs for
this policy in this final rule to account for updated wage rates
available after the publication of the proposed rule.
The impact of this change will 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 will 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 final 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 will take a database and network
administrator and architect 25 hours at $103.34 per hour and a computer
programmer 75 hours at $94.88 per hour.\252\ In the aggregate, we
estimate a one-time burden of 200 hours (2 States x 100 hours) at a
cost of $19,399 (2 States x [(25 hours x $103.34 per hour) + (75 hours
x $94.88 per hour)]) for completing the necessary system updates to the
application for BHP coverage, including any associated terminations for
DACA recipients currently enrolled in BHP coverage.
---------------------------------------------------------------------------
\252\ See U.S. Bureau of Labor Statistics (n.d.). Occupational
Employment and Wage Statistics, May 2024 Occupation Profiles. Dep't.
of Labor. https://www.bls.gov/oes/current/oes_stru.htm.
---------------------------------------------------------------------------
These changes will reduce costs on States related to the decrease
in applications for individuals who would have applied for coverage if
not for this change. Those impacts are accounted for under OMB Control
Number 0938-1191 (Data 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
final rule, which pertains to the streamlined application.
[[Page 27182]]
We sought comment on the estimates and assumptions in the proposed
rule.
We did not receive any comments in response to the proposed burden
estimates for this policy. For the reasons outlined in this final rule,
we are finalizing these estimates, with updated wage rates, as
proposed.
2. Exchanges and Processing Streamlined Applications (Sec. 155.20)
The following changes will be submitted for review under OMB
Control Number 0938-1191 (CMS-10440).
As discussed previously, we are finalizing modifications to 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 change will apply to the 20 State Exchanges, as well as
Exchanges on the Federal platform. A discussion of the proposed ICRs
for this policy may be found in the 2025 Marketplace Integrity and
Affordability proposed rule (90 FR 12999 through 13000). We are
updating the ICRs for this policy in this final rule to account for
updated wage rates available after the publication of the proposed
rule.
On December 9, 2024, the United States District Court for the
District of North Dakota issued a preliminary injunction in Kansas v.
United States, Case No. 1:24-cv-00150, 2024 WL 5220178 (D.N.D. Dec. 9,
2024). 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 final rule, but that are currently blocked in these
three State Exchanges due to the court's injunction. We estimate that
it will 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
final rule. This estimate is informed by the FFE's prior experience
implementing similar system changes. Of those 1,000 hours, we estimate
it will take a database and network administrator and architect 250
hours at $103.34 per hour and a computer programmer 750 hours at $94.88
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
$1,939,900 (20 States x [(250 hours x $103.34 per hour) + (750 hours x
$94.88 per hour)]) for completing the necessary updates to State
Exchange eligibility systems.\253\ For the Federal Government, we
estimate a one-time burden in 2025 of 1,000 hours at a cost of $96,995
([250 hours x $103.34 per hour] + [750 hours x $94.88 per hour]). In
total, the burden associated with all system updates will be 21,000
hours at a cost of $2,036,895.
---------------------------------------------------------------------------
\253\ On December 9, 2024, the United States District Court for
the District of North Dakota issued a preliminary injunction in
Kansas v. United States, Case No. 1:24-cv-00150, 2024 WL 5220178
(D.N.D. Dec. 9, 2024). 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 will need to be done by the Federal Government, which will
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 will 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 States have already undertaken the work necessary to
end coverage for DACA recipients and therefore will not need to perform
additional work as a result of this rule.
We estimate that it will take the Federal Government and each of
the 17 State Exchanges 1,000 hours in 2025 to terminate Exchange
coverage for DACA recipients.\254\ \255\ This estimate is informed by
the FFE's prior experience implementing similar system changes. Of
those 1,000 hours, we estimate it will take a database and network
administrator and architect 250 hours at $103.34 per hour and a
computer programmer 750 hours at $94.88 per hour. In aggregate for the
States, we estimate a one-time burden in 2025 of 17,000 hours at a cost
of $1,648,915 (17 States x [(250 hours x $103.34 per hour) + (750 hours
x $94.88 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 $96,995 ([250 hours x $103.34 per hour] + [750 hours
x $94.88 per hour]). Collectively, we estimate that it will take the
Federal Government and each of the State Exchanges 18,000 hours at an
associated cost of $1,745,910 to end coverage for DACA recipients. We
sought comments on these burden estimates, including regarding
additional costs and benefits anticipated as a result of this proposal.
---------------------------------------------------------------------------
\254\ Section 155.310(g).
\255\ On December 9, 2024, the United States District Court for
the District of North Dakota issued a preliminary injunction in
Kansas v. United States, Case No. 1:24-cv-00150, 2024 WL 5220178
(D.N.D. Dec. 9, 2024). 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.
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``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 final rule.
For assisting eligible enrollees and processing their applications,
we estimate this will take a government programs eligibility
interviewer 10 minutes (0.17 hours) per application at a rate of $49.52
per hour, for a cost of approximately $8.42 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
change will complete the application annually. Therefore, the total
application processing burden associated with this policy will be
reduced by 1,870 hours
[[Page 27183]]
(0.17 hours x 11,000 applications) for a total cost savings of $92,602
(1,870 hours x $49.52 per hour). As discussed further in this section,
we anticipate an overall reduction in application processing burden for
States and the Federal Government.
As outlined in section VI.C.1. of this final rule, we estimate that
as a result of this policy, 10,000 fewer individuals will enroll in QHP
coverage and 1,000 fewer individuals will 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.\256\ As such, we assume 100 percent of the BHP application
processing savings will fall on these two States. Using the per-
application processing burden of 10 minutes (0.17 hours) per
application at a rate of $49.52 per hour, and the estimate that 1,000
fewer individuals will apply for BHP, we anticipate a burden reduction
of 170 hours with an associated cost savings of $8,418, for States to
process BHP applications.
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\256\ 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.
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For the Exchanges, we use data from the 2024 OEP 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.\257\ As such, we anticipate
that 49 percent of Exchange application processing savings will be
attributed to the Federal Government and 51 percent of Exchange
application processing savings will be attributed to States using their
own eligibility and enrollment platforms.
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\257\ 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.
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For the Exchanges, if we estimate 10,000 fewer applications will be
processed, 51 percent of those (5,100) will no longer be processed by
State Exchanges and 49 percent (4,900) will 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 $49.52 per hour,
we anticipate cost savings of $42,934 or a reduction by 867 hours for
State Exchanges to process applications. Additionally, we estimate cost
savings of $41,250 or a reduction by 833 hours for the Federal
Government to process applications at a rate of $49.52 per hour.
Therefore, the total burden on State Exchanges to assist eligible
beneficiaries and process their applications will 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 $51,352. The total burden
on the Federal Government will be reduced by 833 hours annually
beginning in 2025 (entirely for Exchanges), with a net cost reduction
of $41,250.
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.\258\ 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.
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\258\ 45 CFR 155.315(f).
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Of the 10,000 fewer DACA recipients who will apply for Exchange
coverage as a result of this rule, we estimate that 20 percent, or
2,000, will have generated an immigration status inconsistency.\259\ Of
these 2,000 inconsistencies, we assume that 51 percent of those (1,020)
will no longer be processed by State Exchanges and 49 percent (980)
will no longer be processed by the Federal Government.\260\ 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 $49.52 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 $10,102 (204 hours x $49.52 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 $9,706 (196 hours x $49.52 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 $19,808 (400 hours x $49.52 per hour).
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\259\ 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.
\260\ 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.
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We sought comment on the estimates and the methodology and
assumptions used to calculate them in the proposed rule. We are using
revised estimates as presented above as a result of more recent data
being available at the time of this final rule.
Comment: Many commenters are concerned that the finalization of
this rule would require considerable burden on State Exchanges, States
that operate a BHP, and FFE States, including requiring them to reverse
current processes and change their systems in the middle of the year in
order to terminate coverage for existing enrollees and halt future
enrollment for DACA recipients. Commenters stated that estimates
included in the proposed rule regarding the impact on all the States
and Exchanges do not take into account expenditures related to customer
outreach and education, changing call center scripts and website copy,
and training for call center workers and consumer assisters.
Response: We appreciate these commenters' concerns. The burden
estimates included in this section are informed by the FFE's past
experience conducting similar systems changes. We believe these
estimates should allow Exchanges and States that operate a BHP to plan
for any additional expenditures caused by the finalization of this
rule. We note that due to differing State systems and processes, we
cannot include estimates related to customer outreach, education, and
website updates.
Comment: Many State Exchanges, BHP agencies, and SBE-FPs, and other
commenters noted concerns about being able to implement these changes
upon finalization of the rule. A few commenters requested a detailed
implementation plan to assist impacted Exchanges.
Response: We understand that State Exchanges, States that elect to
operate a BHP, SBE-FPs, and the FFE will need to make changes to their
eligibility and enrollment systems to correctly determine eligibility
for DACA recipients as of the applicability date. We are committed to
providing all Exchanges and State agencies that
[[Page 27184]]
operate a BHP with technical assistance and any additional support
needed to ensure that States are able to correctly determine
eligibility for DACA recipients impacted by this final rule's effective
date. We are also committed to working with all Exchanges and State
agencies that operate a BHP to identify any potential manual
workarounds that may be needed to correctly determine eligibility prior
to full systems changes being in place. For the reasons outlined in
this final rule, we are finalizing these estimates as they appear in
this section.
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.\261\ We note that we
proposed 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.\262\ A discussion of the
proposed ICRs for this policy may be found in the 2025 Marketplace
Integrity and Affordability proposed rule (90 FR 13000 through 13001).
We are updating the ICRs for this policy in this final rule and
removing the potential cost savings associated with these ICRs upon
further analysis and reflection in finalizing these provisions.
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\261\ 42 U.S.C. 18083.
\262\ We assume that the burden of completing an application is
essentially the same regardless of whether the individual applies
directly with the State agency responsible for administering the BHP
or with an Exchange.
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We sought comment on the estimates and assumptions in the proposed
rule.
We did not receive any comments in response to the burden estimates
for this policy in the proposed rule. We are using revised assumptions
as presented above as a result of additional analysis conducted at the
time of this final rule. For the reasons outlined in the final rule, we
are finalizing these assumptions as presented earlier in this section.
C. ICRs Regarding Failure To File and Reconcile (Sec. 155.305(f)(4))
We are finalizing an amendment to the 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 2
consecutive tax years, to increase the program integrity of the
Exchange. We are finalizing the requirement for Exchanges to find
enrollees ineligible for APTC after they or their tax filer has failed
to file and reconcile their APTC for 1-tax year for coverage year 2026.
However, the 1-year policy would sunset on December 31, 2026 and
Exchanges would revert back to the current 2-year policy in coverage
year 2027 that allows an Exchange to not find an enrollee eligible for
APTC when an enrollee or their tax filer has failed to file a Federal
income tax return reconciling their APTC for 2 consecutive tax years.
This allows Exchanges to collect data on the 1-year policy. We will
consider these data to determine whether to make permanent the 1-year
FTR policy or to revert back to the 2-year FTR policy that was in place
in coverage year 2025. For Exchanges on the Federal platform, the FTR
process will otherwise be conducted similarly to the previous
iterations of FTR prior to the 2024 Payment Notice, except that those
identified as being in a 1-tax year FTR status will be at risk for
removal of APTC and there will no longer be a 2-tax year FTR status
population. Minimal changes to the language of the Exchange application
questions will be necessary to obtain relevant information; as such, we
anticipate that the amendment finalized in this rule will not impact
the information collection burden for consumers. We anticipate that
there will no longer be a 2 year FTR population for coverage year 2026,
and thus the notices sent to the FTR population will be similar to the
current 2-tax year FTR notices in inciting an urgency to act, but that
all consumers with an FTR status will be in a 1-tax year FTR status for
coverage year 2026. Due to this, we do not anticipate PRA impacts
related to noticing requirements.
We sought comment on the proposed assumptions and any information
collection burdens not identified in this section.
We did not receive any comments in response to the proposed
assumptions for this policy. For the reasons outlined in the final
rule, we are finalizing these assumptions as proposed.
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 changes will be submitted for review under OMB
Control Number 0938-1191 (CMS-10440).
We are finalizing 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 would qualify the taxpayer
as an applicable taxpayer according to 26 CFR 1.36B-2(b) and trusted
data sources indicate that projected income is under 100 percent of the
FPL. This policy will be effective upon the effective date of this
rule, but with a modification under which the policy and related
requirements will be sunset for all Exchanges at the end of PY 2026.
Thereafter, this policy will no longer be effective. A discussion of
the proposed ICRs for this policy may be found in the proposed rule (90
FR 13001 through 13002). We are updating the ICRs for this policy in
this final rule to account for updated wage rates available after the
publication of the proposed rule.
We anticipate that adding this income verification requirement will
result in approximately 1 hour of time spent by consumers to complete
associated questions in the application, or to submit supporting
documentation. Based on historical data from the FFE, we estimate that
approximately 340,000 inconsistencies will be generated at the
household level for the Exchanges on the Federal platform. On the State
Exchanges, we estimate this figure to be 208,000 inconsistencies.
Therefore, adding these inconsistencies will increase burden on
consumers by approximately 548,000 hours across all Exchanges. Using
the estimate of the hourly value of time for changes in time use for
unpaid activities calculated at $24.05 per hour in section IV.A. of
this final rule, we estimate that the increase in cost for each
consumer in 2026 will be approximately $24.05, and the cost increase
for all consumers who will generate this income inconsistency in 2026
will be approximately $13,179,400 (548,000 hours x $24.05 cost of
unpaid activities).
Additionally, we estimate that adding this income verification
requirement will result in an increase in burden on the Exchanges on
the Federal platform. Based on historical FFE data, we anticipate that
approximately 340,000 inconsistencies will be generated at the
household level for Exchanges using the Federal platform, and 208,000
in State
[[Page 27185]]
Exchanges. Once households have submitted the required verification
documents, we estimate that it will 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 $49.52, to receive, review, and verify submitted
verification documents as well as conduct outreach and determine DMI
outcomes. Therefore, adding these inconsistencies will result in an
increase in burden on the Federal Government of 408,000 hours (340,000
verifications x 1.2 hours per verification) at a cost of $20,204,160
(408,000 hours x $49.52 per hour) in 2026, and an increase in burden on
the State Exchanges of 249,600 hours (208,000 verifications x 1.2 hours
per verification) at a cost of $12,360,192 in 2026.
Finally, we estimate that adding this income requirement will
require costs related to updating the technical systems, including the
eligibility system. We estimate that it will take the Exchanges on the
Federal platform and each State Exchange 8,000 hours in 2025 to make
these updates. Of those 8,000 hours, we estimate it will take a
database and network administrator and architect 2,000 hours at $103.34
per hour and a computer programmer 6,000 hours at $94.88 per hour.
Given this, we estimate that Exchanges on the Federal platform will
incur a one-time burden in 2025 of $775,960 (2,000 x $103.34 + 6,000 x
$94.88) to make these eligibility system updates. State Exchanges will
incur a one-time burden of $14,743,240 (2,000 x $103.34 + 6,000 x
$94.88 x 19). We also estimate that the Exchanges would incur the same
burdens in 2026 in order to sunset the policy at the end of that year.
Therefore, we estimate that Exchanges on the Federal platform will
incur a one-time burden in 2026 of $775,960 (2,000 x $103.34 + 6,000 x
$94.88) to make these eligibility system updates. State Exchanges will
incur a one-time burden of $14,743,240 (2,000 x $103.34 + 6,000 x
$94.88 x 19).
We sought comment on the proposed estimates and assumptions.
After consideration of comments and for the reasons outlined in the
proposed rule and this final rule, including our responses to comments,
we are finalizing these burden estimates for this policy with
modifications to account for updated general occupational cost
estimations and the sunsetting of this policy following the completion
of PY 2026. These updated estimates are reflected in the cost estimates
already laid out in this section of the final rule. We summarize and
respond to public comments received on the original proposed estimates
below.
Comment: Some providers and provider groups and organizations
expressed concern that it could take vulnerable enrollees longer than 1
hour to submit documentation related to this income verification
requirement.
Response: We acknowledge commenters' concerns and emphasize that 1
hour is an average. These consumers will still have 90 days to submit
documentation to verify their annual household income. We provide a
robust list of acceptable documents that households can submit to
resolve their Income DMIs, and this list is included in multiple
consumer notices and on the CMS website. We recommend that consumers
for whom more common documents like paystubs and tax forms are either
not available or are inaccurate submit other suggested income documents
that may be more available and accurate.
E. ICRs Regarding Income Verification When Tax Data Is Unavailable
(Sec. 155.320(c)(5))
The following changes will be submitted for review under OMB
Control Number 0938-1191 (CMS-10440).
We are finalizing 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. We are finalizing this with
a modification under Sec. 155.320(c)(5): this final provision removes
this policy upon the effective date of this rule and will be reinstated
for all Exchanges at the end of PY 2026. A discussion of the proposed
ICRs for this policy may be found in the 2025 Marketplace Integrity and
Affordability proposed rule (90 FR 13002). We are updating the ICRs for
this policy in this final rule to account for updated wage rates
available after the publication of the proposed rule.
Based on internal historical DMI data, we estimate that
approximately 1,722,000 inconsistencies will be generated at the
household level for Exchanges using the Federal platform, and 1,056,000
will be generated at the household level for State Exchanges due to
this final policy. Once households have submitted the required
verification documents, we estimate that it will take approximately 1
hour and 12 minutes for an eligibility support staff person (BLS
occupation code 43-4061), at an hourly cost of $49.52, 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) will result in an increase in burden for the Federal
Government of 2,066,400 hours (1,722,000 verifications x 1.2 hours per
verification) at a cost of $102,328,128 (2,066,400 hours x $49.52 per
hour) in 2026 and an increase in burden on State Exchanges of 1,267,200
hours (1,056,000 verifications x 1.2 hours per verification) at a cost
of $62,751,744 (1,267,200 hours x $49.52 per hour) in 2026.
In addition to the increased administrative burden on Exchanges,
this change will increase the number of consumers who are required to
submit documentation to verify their income. We estimate that consumers
will each spend 1 hour to answer the associated question, or to submit
documentation. Based on historical data from the FFE, we estimate that
approximately 2,777,000 inconsistencies will 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 $24.05 per hour in section IV.A. of this final rule, we estimate
that the increase in cost for each consumer in 2026 will be
approximately $24.05 and that the proposed change will increase burden
on consumers by 2,777,000 hours per year at an associated cost of
$66,786,850 (2,777,000 hours x $24.05 per hour).
Finally, we estimate that removing the current process of verifying
income attestations when IRS returns no data will require costs related
to updating the eligibility system. We estimate that it will take
Exchanges on the Federal platform and each State Exchange 9,000 hours
in 2025 to make these updates. Of those 9,000 hours, we estimate it
will take a database and network administrator and architect 2,250
hours at $103.34 per hour and a computer programmer 6,750 hours at
$94.88 per hour. Given this, we estimate that the Federal Government
will incur a one-time burden of $872,955 (2,250 x $103.34 + 6,750 x
$94.88) to make these eligibility system updates. State Exchanges will
incur a one-time burden total in 2025 of $16,586,145 ($872,955 x 19)
associated with a total of 171,000 (9,000 x 19) burden hours. We also
estimate that the Exchanges would incur the same burdens in 2026 in
order to sunset the policy at the end of that year. Therefore, we
estimate that Exchanges on the Federal platform will incur a one-time
burden in 2026 of $872,955 (2,250 x $103.34 + 6,750 x $94.88) to make
these eligibility system updates.
[[Page 27186]]
State Exchanges will incur a one-time burden total in 2026 of
$16,586,145 ($872,955 x 19) associated with a total of 171,000 (9,000 x
19) burden hours.
We sought comment on the proposed impacts and assumptions.
After consideration of comments and for the reasons outlined in the
proposed rule and this final rule, including our responses to comments,
we are finalizing these burden estimates for this policy with
modifications to account for updated general occupational cost
estimations. These updated estimates are reflected in the cost
estimates already laid out in this section of the final rule. We
summarize and respond to public comments received on the original
proposed estimates below.
Comment: Some providers and provider groups and organizations
expressed concern that it could take vulnerable enrollees longer than 1
hour to submit documentation related to this income verification
requirement.
Response: We acknowledge commenters' concerns and emphasize that 1
hour is an average. These consumers will still have 90 days to submit
documentation to verify their annual household income, and may be
eligible for extensions granted by the Exchanges on the Federal
platform or State Exchanges under Sec. 155.315(f)(3). In order to
assist consumers in a wide variety of circumstances, we provide a
robust list of acceptable documents that households can submit to
resolve their Income DMIs, and this list is included in multiple
consumer notices and on the CMS website. We recommend that consumers
for whom more common documents like paystubs and tax forms are either
not available or are inaccurate submit other suggested income documents
that may be more available and accurate.
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.\263\ Under Sec. 156.1255, QHP issuers in
the individual market must include certain information in the
applicable renewal and discontinuation notices.\264\ 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.
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\263\ 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 45 CFR 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.
\264\ Section 156.1255(a) through (d).
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This final rule amends the automatic re-enrollment hierarchy by
removing Sec. 155.335(j)(4), which allowed 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
change, we remove language related to the bronze to silver crosswalk
from the Federal standard notices.
This final rule also requires enrollees who would otherwise be
automatically re-enrolled in a QHP with a zero-dollar premium after
application of APTC (``fully-subsidized'') by the Exchanges on the
Federal platform to instead be automatically re-enrolled with APTC
applied to the policy reduced such that the enrollee owes a $5 premium
in PY 2026. This policy sunsets after PY 2026 and reverts back to
current policy. We updated the Federal standard notices to include
language related to this requirement.
The burden to issuers related to sending the Federal standard
notices is currently approved under OMB Control Number 0938-1254 (CMS-
10527).\265\ The information collection has been revised to incorporate
the necessary language modifications in the Federal standard notices
due to the changes in this final rule. However, we do not anticipate
any change in burden to issuers.
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\265\ OMB Control Number 0938-1254 (CMS-10527, Annual
Eligibility Redetermination, Product Discontinuation and Renewal
Notices).
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G. ICRs Regarding Pre-Enrollment Verification for Special Enrollment
Periods (Sec. 155.420)
The following changes will be submitted for review under OMB
Control Number 0938-1191 (CMS-10440).
We are temporarily finalizing amendments to Sec. 155.420(g) to
require all Exchanges to conduct eligibility verification for SEPs.
Specifically, are finalizing removal of 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 are finalizing the requirement 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. At this time, we are finalizing this policy for PY
2026 only, with a reversion to the previous policy for PY 2027 and
beyond.
We are also temporarily finalizing that Exchanges must 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 finalizing that Exchanges must verify at least 75
percent of such new enrollments based on the current implementation of
SEP verification by Exchanges. At this time, we are finalizing this
policy for PY 2026 only, with a reversion to the previous policy for PY
2027 and beyond. A discussion of the proposed ICRs for this policy may
be found in the 2025 Marketplace Integrity and Affordability proposed
rule (90 FR 13003). We are updating the ICRs for this policy in this
final rule to account for updated wage rates available after the
publication of the proposed rule.
We anticipate that adding this expansion of pre-enrollment
verification for SEPs will 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 will
be generated at the household level for Exchanges on the Federal
platform. Therefore, adding these inconsistencies will 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 $24.05 per hour in section IV.A. of this final rule, we
estimate that the increase in cost for each consumer will be
[[Page 27187]]
approximately $24.05 in 2026, and the cost increase for all consumers
who generate this income inconsistency will be approximately $7,048,406
in 2026.
Additionally, we estimate that expanding pre-enrollment
verification for SEPs will 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 will be
generated at the household level for Exchanges using the Federal
platform, and 179,625 inconsistencies will 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 will take approximately 12 minutes for an eligibility
support staff person (BLS occupation code 43-4061), at an hourly cost
of $49.52, to review and verify submitted verification documents.
Therefore, expanding verification will result in an increase in burden
on Exchanges using the Federal platform of 58,615 hours (293,073
verifications x 0.2 hours per verification) at a cost of $2,902,615
(58,615 hours x $49.52 per hour) in 2026.
We sought comment on the proposed estimates and assumptions.
As discussed, after careful consideration of public comments, we
have decided to finalize and implement these policies with a
significant modification--for Exchanges on the Federal platform, each
of the rules outlined in this section will sunset by their terms after
the completion of one new coverage year, PY 2026, on December 31, 2026.
We are declining to finalize these proposals for State Exchanges. We
have also added the one-time development cost estimate to this section.
Comment: States, providers, actuaries, labor groups, general
advocacy groups, individuals, and one health insurance issuer raised
general concern about the administrative burden and cost on States of
implementing pre-enrollment SEP verification and expressed that States
do not experience the same level of fraud cited for Exchanges on the
Federal platform.
Response: We acknowledge commenters' concerns. However, after
careful consideration of public comments, we have decided to finalize
and implement the proposed policy with a significant modification--for
all Exchanges, each of the rules outlined in this section will sunset
by their terms after the completion of one new coverage year, PY 2026,
on December 31, 2026 with a reversion to the previous policy for PY
2027 and beyond. We will not be finalizing these proposals for State
Exchanges in an effort to address concerns around increased burdens and
costs.
H. Summary of Annual Burden Estimates for Finalized Requirements
Table 9--Finalized Annual Recordkeeping and Reporting Requirements
--------------------------------------------------------------------------------------------------------------------------------------------------------
Burden per
Regulation section(s) OMB control Number of Number of response Total annual Labor cost of Total cost
No. respondents responses (hours) burden (hours) reporting ($) ($)
--------------------------------------------------------------------------------------------------------------------------------------------------------
155.20 (Exchange)...................................... 0938-1191 -11,000 -11,000 0.17 -1,870 -$92,602 -$92,602
------------------------------------------------------------------------------------------------
Total.............................................. ........... ........... ........... ........... -1,870 .............. -92,602
--------------------------------------------------------------------------------------------------------------------------------------------------------
I. Submission of PRA-Related Comments
We have submitted a copy of this final rule to OMB for its review
of the rule's information collection and recordkeeping requirements.
These requirements are not effective until they have been approved by
OMB.
To obtain copies of the supporting statement and any related forms
for the collections discussed above, please visit CMS' website at
www.cms.hhs.gov/PaperworkReductionActof1995, or call the Reports
Clearance Office at 410-786-1326.
V. Regulatory Impact Analysis
A. Statement of Need
We are finalizing the exclusion of 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,
which will be applicable as of the effective date of this rule and
beyond. This rule also finalizes the policy contained in the proposed
rule to reverse the policy restricting an issuer from denying coverage
due to an individual's or employer's failure to pay premiums owed for
prior coverage, including by attributing payment of premium for new
coverage to past-due premiums from prior coverage, which will be
applicable as of the effective date of this rule and beyond.
Additionally, we are finalizing temporary revisions to 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. This policy is
effective for PY 2026, and we are sunsetting this policy at the end of
PY 2026 with a reversion to the previous policy for PY 2027 and beyond.
We also are finalizing policies to strengthen the verification process
around annual household income, which will be applicable as of the
effective date of this rule, and we are sunsetting these policies
pertaining to income verification when data sources indicate income
less than 100 percent of the FPL and income verification when tax data
is unavailable for State Exchanges at the end of PY 2026 with a
reversion to the previous policies for PY 2027 and beyond. We are
further finalizing a temporary requirement for Exchanges on the Federal
platform that enrollees who would otherwise be automatically re-
enrolled in a QHP with a zero dollar premium after application of APTC
(``fully-subsidized'') will instead be automatically re-enrolled with
APTC applied to the policy reduced such that the enrollees owe a 5-
dollar premium if they do not submit an application for an updated
eligibility determination to the Exchanges on the Federal platform.
This requirement is being finalized as effective for PY 2026 only, with
a reversion to the previous policy for PY 2027 and beyond. We also are
finalizing an amendment to 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 are finalizing this policy to be effective for
[[Page 27188]]
PY 2026 and beyond. We also are finalizing a temporary removal of the
fixed-dollar and gross percentage-based premium payment thresholds at
Sec. 155.400(g), which will be applicable as of the effective date of
this rule and we are sunsetting this policy at the end of PY 2026 with
a reversion to the previous policy for PY 2027 and beyond. We are
finalizing changing the annual OEP for coverage through all individual
market Exchanges beginning with the PY 2027 OEP. We are finalizing
flexibility for Exchanges to set their own OEP as long as: the start
date is no later than November 1, the end date is no later than
December 31, the OEP does not exceed 9 weeks, and all coverage pursuant
to enrollments during the OEP begins January 1. Additionally, we are
finalizing a pause of Sec. 155.420(d)(16) and making 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. This finalized policy will be applicable
as of the effective date of this rule, and we are sunsetting this
policy at the end of PY 2026 with a reversion to the previous policy
for PY 2027 and beyond. We also are finalizing an amendment to Sec.
155.420(g) to enable HHS to temporarily reinstate (with modifications)
pre-enrollment verification of eligibility of applicants for all
categories of individual market SEPs. This policy is effective for PY
2026, and we are sunsetting this policy at the end of PY 2026 with a
reversion to the previous policy for PY 2027 and beyond. Additionally,
we are finalizing a prohibition on covering specified sex-trait
modification procedures as an EHB and adding a definition of
``specified sex-trait modification procedure,'' which will be effective
for PY 2026 and beyond. Finally, we are finalizing a change to the
premium adjustment percentage methodology to establish a premium growth
measure that comprehensively reflects premium growth in all affected
markets, and we are finalizing revised AV de minimis ranges. These
finalized policies will be effective for PY 2026 and beyond.
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''; the Regulatory Flexibility Act (RFA) (Pub. L. 96-
354); section 1102(b) of the Social Security Act; section 202 of the
Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4); and the
Congressional Review Act (5 U.S.C. 804(2)).
Executive Orders 12866 and 13563 direct agencies to assess all
costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select those regulatory approaches that
maximize net benefits (including potential economic, environmental,
public health and safety, and other advantages; distributive impacts).
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 Executive Order 12866.
Based on our estimates, OMB's Office of Information and Regulatory
Affairs (OIRA) has determined this rulemaking is significant under
section 3(f)(1). Pursuant to Subtitle E of the Small Business
Regulatory Enforcement Fairness Act of 1996 (also known as the
Congressional Review Act), OIRA has also determined that this is a rule
as defined under 5 U.S.C. 804(2).
C. Impact Estimates of the Final Individual Market Program Integrity
Provisions and Accounting Table
Consistent with OMB Circular A-4,\266\ we have prepared an
accounting statement in Table 10 showing the classification of the
impact associated with the provisions of this final rule. We have
included the undiscounted annual impacts in Table 11.
---------------------------------------------------------------------------
\266\ Available at https://trumpwhitehouse.archives.gov/sites/whitehouse.gov/files/omb/circulars/A4/a-4.pdf.
---------------------------------------------------------------------------
This final rule implements standards for programs that will 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
final rule. The effects in Table 10 reflect qualitative assessment of
impacts and estimated direct monetary costs and transfers resulting
from the provisions of this final rule for Exchanges, health insurance
issuers, and consumers. The individual effects of each provision in
this final rule are presented separately in Table 10 and collectively
in Table 11, but we anticipate these estimates may overlap, as some
individuals could be impacted by multiple provisions. Therefore, in
section V.C.18. of this final rule, we present overall impact estimates
of all provisions considered jointly. Due to the sunsetting of certain
provisions, there is a risk that some improper enrollment returns with
an adverse impact on the risk pool. This level of risk is not certain
and difficult to estimate, but we have accounted for this uncertainty
by providing a range of estimates in this analysis.
---------------------------------------------------------------------------
\267\ Regarding references to APTC transfers from the Federal
Government to issuers in this table and Accounting Table 11 in the
proposed rule (90 FR 13006 through 13009), the Department notes that
some of these dollars ultimately flow from issuers to other entities
like providers and jurisdictions that reimburse uncompensated care,
as referenced earlier in this table where we discuss potential costs
to State governments and private hospitals in the form of charity
care for individuals who become uninsured as a result of policies in
this final rule.
Table 10--Accounting Table
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Estimate (million) Year dollar Discount rate Period
(percent) covered
----------------------------------------------------------------------------------------------------------------
Benefits:
Annualized Monetized ($/year) $0.2 2025 7 2025-2029
Annualized Monetized ($/year) $0.2 2025 3 2025-2029
----------------------------------------------------------------------------------------------------------------
Quantified:
[[Page 27189]]
Annual reduction in costs starting in 2025 of $41,250 in application processing savings for the
Federal Government and $51,352 total for State Exchanges and States that choose to operate BHPs as a result
of fewer individuals applying for coverage associated with the policy regarding the definition of
``lawfully present.''......................................................................................
Annual reduction in costs starting in 2025 of $10,102 total for State Exchanges and $9,706 for the
Federal Government as a result of fewer individuals generating immigration status inconsistencies
associated with the policy regarding the definition of ``lawfully present.''...............................
One-time reduction in costs in 2026 of $92,400 total for States and $292,000 for the Federal
Government as a result of not sending an additional 2-tax year notice to consumers found as failing to file
and reconcile..............................................................................................
----------------------------------------------------------------------------------------------------------------
Non-quantified:
Reduction in the risk of adverse selection associated with the policy to permit attribution of
payment for new coverage to past-due premium amounts.......................................................
Reduction in outstanding premium debt amount for enrollees resulting in potential improvement in
their financial standing over time and a reduced likelihood of any debt being placed into collections
associated with the policy to permit attribution of payment for new coverage to past-due premium amounts...
Improved continuous coverage for enrollees and premium collection rates and reduced administrative
costs for issuers associated with the policy to permit attribution of payment for new coverage to past-due
premium amounts............................................................................................
Increased transparency for agents, brokers, and web-brokers by establishing an evidentiary standard
to be used during investigations of agent, broker, or web-broker noncompliance under Sec. 155.220(g)(1)-
(3)........................................................................................................
Reduced potential for APTC recipients to incur large tax liabilities in 2026 as a result of the
policies regarding FTR and income verification in this final rule..........................................
Simplified operational processes for issuers and the Exchanges associated with the policy regarding
the annual OEP length......................................................................................
Improved continuous coverage for the full year and improved risk pool associated with the policy
regarding the annual OEP length............................................................................
Increased issuer participation and improved coverage options, resulting in an improved overall risk
pool and reduced overall costs associated with the policy to revise the AV de minimis ranges...............
Better matches between consumers' coverage preferences and available coverage offerings and a
reduction in financial burden due to improper enrollment associated with the policies in this rule.........
Reduction in improper enrollments of fully-subsidized enrollees by agents, brokers, and web-brokers
associated with the policies in this rule..................................................................
----------------------------------------------------------------------------------------------------------------
Estimate (million) Year dollar Discount rate Period
(percent) covered
----------------------------------------------------------------------------------------------------------------
Costs:
Annualized Monetized ($/year) $132.0 2025 7 2025-2029
Annualized Monetized ($/year) $125.6 2025 3 2025-2029
----------------------------------------------------------------------------------------------------------------
Quantified:
One-time costs in 2025 of $1,959,299 total for State Exchanges and States operating BHPs and
$96,995 for the Federal Government to make changes to eligibility systems regarding the definition of
``lawfully present'' finalized in this rule................................................................
One-time costs in 2025 of $1,648,915 total for State Exchanges and $96,995 for the Federal
Government to end QHP coverage for individuals no longer considered ``lawfully present'' due to policies in
this final rule............................................................................................
One-time costs in 2025 of $969,950 for the Federal Government and $19,399,000 total for State
Exchanges to develop and code changes to the eligibility systems to evaluate and verify FTR status under
the revised FTR process finalized in this rule, plus an additional cost of $1,939,900 for two additional
States that plan to transition to State Exchanges to complete system builds for FTR........................
One-time costs in 2026 of $969,950 for the Federal Government and $19,399,000 total for State
Exchanges to develop and code changes to the eligibility systems to evaluate and verify FTR status under
the 2-year process that this rule would sunset back to.....................................................
One-time costs in 2025 of approximately $14.7 million total for State Exchanges and $775,960 for
the Federal Government to complete the necessary system changes and other technical changes to implement
the policy regarding creating annual income DMIs when applicants attest to income that would qualify the
taxpayer as an applicable taxpayer per 26 CFR 1.36B-2(b) but trusted data sources show income below 100
percent of the FPL.........................................................................................
One-time costs in 2026 of approximately $14.7 million total for State Exchanges and $775,960 for
the Federal Government to complete the necessary system changes and other technical changes to sunset the
policy regarding creating annual income DMIs when applicants attest to income that would qualify the
taxpayer as an applicable taxpayer per 26 CFR 1.36B-2(b) but trusted data sources show income below 100
percent of the FPL.........................................................................................
One-time operating costs of approximately $20.2 million for the Federal Government and
approximately $12.4 million total for State Exchanges in 2026 to review and verify submitted documents,
communicate with consumers, and process DMIs for applicants with incomes below 100 percent of the FPL......
Increase in burden of $13,179,400 in 2026 for consumers with incomes below 100 percent of the FPL
to fulfill income verification requirements addressing DMIs................................................
One-time costs in 2025 of approximately $16.6 million total for State Exchanges and approximately
$873,000 for the Federal Government to complete the necessary system changes and other technical changes to
implement the policy to no longer permit Exchanges to accept an applicant's income attestation without
further verification when tax return data is unavailable...................................................
One-time costs in 2026 of approximately $16.6 million total for State Exchanges and approximately
$873,000 for the Federal Government to complete the necessary system changes and other technical changes to
reimplement the policy to require Exchanges to accept an applicant's income attestation without further
verification when tax return data is unavailable...........................................................
Increase in burden of approximately $102.3 million for the Federal Government and approximately
$62.8 million total for State Exchanges in 2026 to review and verify submitted documents, communicate with
consumers, and process DMIs for applicants whose tax return data is unavailable............................
Increase in burden of $66.8 million in 2026 for consumers whose tax return data is unavailable to
fulfill income verification requirements addressing DMIs...................................................
One-time costs in 2025 of approximately $9,500,000 total for State Exchanges and approximately
$500,000 for the Federal Government to complete the necessary changes to implement the policy to remove the
automatic 60-day extension to resolve income DMIs..........................................................
One-time costs in 2025 of $969,950 for the Federal Government to complete the necessary system
changes and other technical changes for Exchanges on the Federal platform associated with the temporary
amendment to the annual eligibility redetermination regulation.............................................
[[Page 27190]]
One-time costs in 2026 of $969,950 for the Federal Government to complete the necessary system
changes and other technical changes for Exchanges on the Federal platform associated with the sunsetting of
the temporary amendment to the annual eligibility redetermination regulation...............................
One-time costs in 2026 of $387,980 for the Federal Government and $7,371,620 total for State
Exchanges associated with the policy to shorten the OEP....................................................
One-time costs in 2025 of approximately $390,000 for the Federal Government and approximately $7
million total for State Exchanges to pause the functionality to grant the 150 percent FPL SEP and make any
necessary updates to Exchange eligibility logic systems....................................................
One-time cost in 2026 of approximately $390,000 for the Federal Government and approximately $7
million total for State Exchanges to re-add functionality to grant the 150 percent FPL SEP and make any
necessary updates to Exchange eligibility logic systems in accordance with sunsetting the policy to pause
this SEP until the end of 2026.............................................................................
One-time processing cost in 2026 of approximately $11,675,000 for Exchanges on the Federal platform
to comply with finalized pre-enrollment verification requirements..........................................
One-time labor cost increase for the Federal Government of $2,902,615 in 2026 associated with the
policies regarding SEP verification........................................................................
One-time cost increase for consumers of approximately $7,048,406 in 2026 associated with the
policies regarding SEP verification........................................................................
One-time cost in 2025 of $2,973,300 to the Federal Government to develop and code changes
associated with the policies regarding SEP verification....................................................
Regulatory review costs of $15,493,869 for interested parties to review and analyze this final rule
in 2025....................................................................................................
----------------------------------------------------------------------------------------------------------------
Non-quantified:
Total reduced annual enrollment between 725,000 and 1,800,000 individuals in PY 2026, including:...
[cir] Reduced annual QHP enrollment of 10,000 and annual BHP enrollment of 1,000 associated with the
policy to exclude DACA recipients from the definition of ``lawfully present'' used to determine
eligibility for enrollment in a QHP through an Exchange, for APTC and CSRs, and for a BHP in States
that operate BHPs......................................................................................
[cir] Potential increase in the number of people who owe past-due premiums who may be deterred from
enrolling in new coverage due to a higher initial premium payment associated with the policy to permit
attribution of payment for new coverage to past-due premium amounts....................................
[cir] Potential loss of coverage for PY 2026 only due to non-payment of premiums for some automatically
re-enrolled, fully-subsidized enrollees associated with the annual eligibility redetermination
provision, if these enrollees do not submit an application for an updated eligibility determination and
subsequently experience a decrease in the amount of APTC applied to their 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,
and fail to make payment of the premium amount due.....................................................
[cir] Reduced annual enrollment by 80,000 beginning in 2026 due to decreases in PTC subsidies for
enrollees, based on an assumption that the Department of the Treasury and the IRS will adopt the use of
the same premium measure finalized 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..................................................
Small negative impact on the individual market risk pool associated with the policy to exclude DACA
recipients from the definition of ``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 well as the return
to the FTR 1-year policy for QHPs offered on an Exchange, which is likely offset by the improvement in the
risk pool as a result of the reduced premiums anticipated to result from this final rule...................
Potential costs to the Federal Government and to States to provide limited Medicaid coverage for
the treatment of an emergency medical condition for DACA recipients who have an emergency medical condition
and meet all other Medicaid eligibility requirements in their State, applicable to those DACA recipients
who would become uninsured due to the policy regarding the definition of ``lawfully present.''.............
Potential increase in costs and medical debt for individuals who are deterred from enrolling due to
a higher initial premium payment, which could in turn lead to increased costs incurred by hospitals and
municipalities associated with the policy to permit attribution of payment for new coverage to past-due
premium amount.............................................................................................
Potential costs to State governments and private hospitals in the form of charity care for
individuals who become uninsured as a result of the policies in this final rule............................
Potential increase in Federal and State Medicaid expenditures by enrolling more people in Medicaid
who would otherwise have enrolled in APTC-subsidized QHP coverage due to the policy regarding income
verification for individuals with incomes below 100 percent of the FPL.....................................
Time costs to enrollees who would be automatically re-enrolled in their QHP with a $0 premium after
application of APTC to submit an application for an updated eligibility determination to the Exchanges on
the Federal platform associated with the annual eligibility redetermination provision for PY 2026 only.....
Costs to the Federal Government, State Exchanges, and issuers for outreach activities associated
with the shortened OEP.....................................................................................
Enrollment for 293,073 enrollees potentially delayed for 1-3 days for SEP verification.............
----------------------------------------------------------------------------------------------------------------
Low High Year dollar Discount rate Period
(billion) (billion) (percent) covered
----------------------------------------------------------------------------------------------------------------
Transfers:
Annualized Monetized ($/year) -$3.8 -$3.9 2025 7 2025-2029
Annualized Monetized ($/year) -$3.7 -$3.8 2025 3 2025-2029
----------------------------------------------------------------------------------------------------------------
Quantified:
Reduced annual transfers from the Federal Government to issuers \267\ of $34 million in APTC
payments and $3.2 million in BHP payments associated with the policy to exclude DACA recipients from the
definition of ``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, beginning in 2026........................
Reduced one-time APTC transfers from the Federal Government to issuers of up to $1.28 billion
associated with the policies regarding FTR in 2026.........................................................
Annual reduction in APTC transfers from the Federal Government to issuers of $266 million beginning
in 2025 for households across all Exchanges who receive fewer months of APTC due to no longer receiving an
automatic 60 days of additional time to resolve their income DMI...........................................
[[Page 27191]]
Reduction in APTC transfers from the Federal Government to issuers of $191 million in 2026 for
consumers across all Exchanges who receive fewer months of APTC due to reinstatement of DMIs where
households attest to income that would qualify the tax payer as an applicable taxpayer per 26 CFR 1.36B-
2(b) and data sources show income below 100 percent of the FPL.............................................
Reduction in APTC transfers from the Federal Government to issuers of $957 million in 2026 for
households across all Exchanges who receive fewer months of APTC due to reinstatement of DMIs when IRS data
is not available...........................................................................................
One-time reduction in APTC transfers from the Federal Government to issuers of $817,571,843 in 2026
associated with the policy regarding premium payment thresholds............................................
Reduction in APTC transfers from the Federal Government to issuers of approximately $3.4 billion in
2026 associated with the policy to pause the 150 percent FPL SEP, which is anticipated to reduce premiums
by 3 to 4 percent..........................................................................................
Reduction in APTC transfers from the Federal Government to issuers of approximately $105.4 million
in 2026 associated with the policy to revise pre-enrollment verification requirements for SEPs, associated
with a reduction in premiums of approximately 0.5-1.0 percent for PY.......................................
Reduced annual transfers from the Federal Government to issuers of between $1.27 billion and $1.55
billion in APTC payments beginning in 2026, assuming that the Department of the Treasury and the IRS will
adopt the use of the same premium measure finalized 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.............................................
Increased annual transfers from large employers to the Federal Government of between $3 million and
$20 million in Employer Shared Responsibility Payments annually over the period of 2028 to 2030, based on
an assumption that the Department of the Treasury and the IRS will adopt the use of the same premium
measure finalized 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....................................................................................
Reduced annual APTC transfers from the Federal Government to issuers of approximately $1.22 billion
in 2026, $1.28 billion in 2027, $1.33 billion in 2028, and $1.40 billion in 2029 associated with an
estimated 1 percent premium decrease on average for individuals eligible for PTC due to the policy to
require individual market silver QHPs to provide an AV between 66-72 percent and associated income-based
CSR plan variations to follow a de minimis range of +1/-1..................................................
----------------------------------------------------------------------------------------------------------------
Non-quantified:
Reduction in net Federal PTC spending associated with policy terminations during PY 2026 if
enrollees do not pay their portion of the premium and a reduction in improper enrollments occurs due to the
temporary annual eligibility redetermination provision.....................................................
Reduced premiums and APTC cost to the Federal Government associated with the policy regarding the
annual OEP length..........................................................................................
Decreased premiums for plans that do not cover specified sex-trait modification procedures as an
EHB as a result of this final rule.........................................................................
Reduction in commission payments from issuers to agents, brokers, and web-brokers associated with a
reduction in improper enrollments of fully-subsidized enrollees by agents, brokers, and web-brokers due to
the policies in this final rule............................................................................
----------------------------------------------------------------------------------------------------------------
Table 11--Summary of Undiscounted Annual Impacts Reported in Accounting Table
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2025 2026 2027 2028 2029
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Benefits........................... $0.1 million.................. $0.5 million.................. $0.1 million................. $0.1 million................. $0.1 million.
Costs.............................. $234.7 million................ $368.7 million................ $0........................... $0........................... $0.
Transfers--Low..................... $0............................ -$10.3 billion................ -$3.8 billion................ -$2.1 billion................ -$2.2 billion.
Transfers--High.................... $0............................ -$12.4 billion................ -$3.6 billion................ -$1.4 billion................ -$1.5 billion.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
1. Coverage Denials for Failure To Pay Premiums for Prior Coverage
(Sec. 147.104(i))
This final rule revises Sec. 147.104(i) to reverse the policy
prohibiting an issuer from denying coverage due to an individual's or
employer's failure to pay premiums owed for prior coverage, including
by attributing payment of premium for new coverage to past-due premiums
from prior coverage. The final rule allows an issuer, to the extent
permitted by applicable State law, to establish terms of coverage that
add past-due premium amounts owed to the issuer (or owed to another
issuer in the same controlled group) to the initial premium the
applicant 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. An issuer adopting this policy must apply its past-
due premium payment policy uniformly to all individuals or employers in
similar circumstances in the applicable market and State regardless of
health status, and consistent with applicable nondiscrimination
requirements, and not condition the effectuation of new coverage on
payment of past-due premiums by any individual other than the person
contractually responsible for the payment of premium. The amount of the
past-due premium an issuer may require for this purpose is subject to
any premium payment threshold the issuer has adopted pursuant to 45 CFR
155.400(g).
This policy aims to promote continuous coverage while providing
issuers with an additional mechanism for past-due premium collection.
The policy may help reduce outstanding premium debt amounts for
enrollees, potentially benefiting their financial standing over time
and reducing the likelihood of any debt being placed into collections.
Additionally, this final rule may potentially improve premium
collection rates and reduce administrative costs associated with
repeated enrollment-termination cycles and other collection methods.
The comments and our responses are summarized below.
Comment: Some commenters highlighted important operational
considerations, including the cost-benefit analysis issuers must
undertake when implementing collection practices, and noted that some
issuers may find that the implementation costs outweigh potential
revenue from collections, particularly for nominal amounts.
Response: We acknowledge and recognize that, should the State in
which an issuer operates allow issuers to collect past-due premiums to
effectuate coverage, the final business decision will remain at the
discretion of individual issuers and what they feel is in their best
interest.
Comment: Some commenters expressed their support for the proposed
[[Page 27192]]
policy. One commenter specifically identified positive aspects of the
policy, notably its potential to reduce administrative burden and
address adverse selection.
Response: We recognize that the ability to require past-due premium
payments to effectuate new coverage can assist in maintaining stable
risk pools by promoting continuous coverage and, consequently, help to
moderate premium costs for all enrollees.
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 taking advantage of
certain features in the insurance system, such as the regulatory grace
period provisions, and allowing coverage to lapse without addressing
premium obligations even when seeking to enroll in new coverage. By
addressing these circumstances, this policy encourages continuous
coverage and reduces the burden on issuers to collect past-due premiums
in other ways. This policy reduces the risk of adverse selection by
consumers.
Comment: Many commenters raised concerns about the potential
impacts on coverage access, particularly in markets with limited
competition where there may be a limited number of issuers serving that
geographic area, and noted the potential for varying effects in
different market contexts.
Response: We note that this policy provides States flexibility to
address adverse selection based on their specific market conditions and
allows for appropriate market-specific solutions that recognize the
differences between competitive and less competitive regions. We
believe this flexible approach strikes an appropriate balance between
preserving consumer access to coverage and accounting for varying
market conditions across regions.
This policy may also increase enrollment by encouraging enrollees
to maintain continuous coverage. These enrollment gains may be
partially offset by people who owe past-due premiums and who may be
deterred from enrolling in new coverage due to a higher initial premium
payment. Some enrollees, particularly those facing financial
constraints, may need to adjust their household budgets to maintain
coverage or, if they are not able to, become uninsured. Depending on
the circumstances, these enrollees, if they become uninsured, may face
higher costs for care and medical debt if care is needed. These costs
may, in turn, be incurred by hospitals and municipalities in the form
of uncompensated care. While some consumers may face challenges paying
past-due premiums and may become or remain uninsured, the longer-term
effects can include more stable risk pools and potentially more
moderate premium trends.
Comment: Many commenters expressed concerns about the potential
impacts on vulnerable populations and healthcare access, particularly
for low-income individuals, rural communities, and those facing
unexpected financial hardships. These commenters highlighted specific
challenges faced by individuals who miss payments due to unexpected
life circumstances, economic hardship, or administrative confusion.
Response: We acknowledge the range of concerns noted by commenters
related to barriers to coverage for those experiencing financial
difficulties, potential impacts on rural communities with limited
issuer competition, and effects on young and healthy enrollees who
contribute to a stable risk pool. However, after reviewing the
comments, we are finalizing this policy contained in the proposal by
codifying it in regulation text. This decision reflects our assessment
that the policy provides necessary tools for maintaining market
stability within the existing framework. This policy aims to balance
multiple objectives, including promoting continuous coverage,
maintaining stable risk pools, addressing concerns about adverse
selection, and respecting States' ability to regulate their insurance
markets. We recognize that some enrollees may face challenges in
maintaining continuous coverage or addressing past-due premium
obligations. However, this policy's flexible framework allows States
and issuers to make market-specific decisions about implementation
based on their understanding of local conditions and population needs.
This flexibility also enables issuers to balance past-due premium
practices with member retention goals and market stability
considerations.
There is some uncertainty regarding the net enrollment effects of
this policy--that is, whether the coverage gains from moderate premium
trends and promoting continuous coverage will be higher than coverage
losses due to allowing issuers to require payment of past-due premiums
to effectuate new coverage. We anticipate any discouragement from
enrolling will be minimal. As discussed earlier in this preamble, when
a similar 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 costs to issuers
related to the collection of those past-due premiums. We expect this
policy will result in similar benefits. While we lack data to quantify
these effects, we believe that these effects will collectively
contribute to more stable market conditions over time.
Comment: Several commenters noted their concern over the data
limitations and the empirical basis for the proposed policy on past-due
premium collection.
Response: We acknowledge commenters' concerns. While acknowledging
these data limitations, based on our understanding of market dynamics
and previous experience, we have decided to finalize the policy
contained in the proposal. Although we cannot definitively quantify all
effects, we have observed patterns suggesting that allowing issuers to
condition the sale of new coverage on payment of past-due premiums can
contribute to market stability. Additionally, as discussed in section
III.A.2 of this final rule, States may choose whether to allow issuers
to attribute the initial premium payment to past-due premiums and to
refuse to effectuate new coverage until both amounts are paid. We
believe States will make these determinations based on their specific
markets, demographics, and anticipated outcomes for their constituents.
Finally, in terms of PTCs, given that this policy aims to encourage
continuous coverage, we recognize that there could be varying effects
in net Federal PTC spending. While some individuals might have their
policies terminated due to non-payment, potentially reducing PTC
spending, others might be encouraged by this policy to maintain
coverage they would otherwise have dropped due to past-due premium
issues, resulting in increased PTC spending for those months the
individuals would otherwise not have maintained coverage. However, we
do not anticipate any significant impact on PTCs.
2. Definitions; Deferred Action for Childhood Arrivals (Sec. 155.20)
We are finalizing modifications to 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
[[Page 27193]]
enroll in a BHP in States that elect to operate a BHP. This change will
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 have
updated the RIA for this policy due to revised wage rates and other
data estimates available between the time of the proposed and final
rule publication dates. The proposed 2025 Marketplace Integrity and
Affordability RIA for this policy may be found at 90 FR 13010 through
13011.
We anticipate excluding DACA recipients from the definition of
``lawfully present'' will reduce annual QHP enrollment through the
Exchanges by 10,000 and annual BHP enrollment by 1,000 in 2025. We
project this decline in enrollment in QHP enrollment through the
Exchanges will reduce annual APTC expenditures by $34.0 million and the
decline in enrollment in BHP will 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 (USCIS)
\268\ 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.
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\268\ 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.
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Because DACA recipients are young,\269\ they generally tend to be
healthier. We therefore anticipate that excluding DACA recipients from
individual market QHP coverage offered through the Exchanges will 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 will 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.
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\269\ 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.
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We also anticipate that this change will result in costs to State
Exchanges and the Federal Government to update eligibility systems in
accordance with this policy. As discussed further in section IV.B. of
this final rule, in aggregate for the States, we estimate a one-time
cost in 2025 of $1,959,299 total ($1,939,900 for State Exchanges +
$19,399 for BHPs) total and $96,995 for the Federal Government. We also
estimate a one-time cost in 2025 for termination operations of
$1,648,915 total for State Exchanges and $96,995 for the Federal
Government, as discussed further in section IV.B.2. of this final rule.
In addition, we estimate cost savings annually beginning in 2025 for
State Exchanges and States that operate BHPs of $51,352 total and for
the Federal Government of $41,250 associated with assisting fewer
eligible beneficiaries and processing their applications as a result of
this policy. We also estimate cost savings annually beginning in 2025
for State Exchanges of $10,102 in total and for the Federal Government
of $9,706 associated with processing fewer immigration state
inconsistencies.
We sought comment on the proposed impact estimates and assumptions,
the details of which may be found in section IV.B. of the proposed
rule.
Comment: Many commenters stated that CMS underestimated how many
DACA recipients would apply in the next open enrollment. They stated
that DACA recipient enrollment would increase over time as awareness of
the coverage option grew. They further stated that enrollment was
limited for PY 2025 because we published the 2024 DACA rule (89 FR
39424) only 6 months before open enrollment creating a short window for
outreach campaigns, and because we cancelled 2025 enrollment for DACA
recipients in 19 States to comply with Kansas v. United States.
Furthermore, one commenter stated that the estimates in the 2025
Marketplace Integrity and Affordability proposed rule, or even the
estimates from the 2024 Final Rule (89 FR 39424) of 100,000 DACA
recipients enrolled in the Exchanges and 1,000 enrolled in BHPs, sum to
less than $345 million, which is far less than what DACA recipients
contribute annually to Federal programs in taxes which is estimated at
$2.1 billion. As such, this commenter believed DACA recipients should
continue to remain eligible for Exchange or BHP coverage.
Response: We appreciate these commenters' concerns regarding the
estimate of 11,000 DACA recipients enrolled in QHP plans or BHPs.
However, our estimate of 10,000 applicants enrolling in a QHP and 1,000
applicants enrolling in a BHP are based on data from the 2024 Open
Enrollment Period. We believe data from the 2024 OEP provides a
reasonable estimate of DACA recipient enrollees, as that is when the
majority of eligible consumers enroll in coverage. While consumers can
continue to enroll throughout the year, they will need to qualify for
an SEP to enroll in coverage outside of the Open Enrollment Period--
this results in fewer DACA recipients who are eligible to enroll
outside of OEP. As mentioned in Section IV.B.2. and outlined by
commenters, DACA recipients continue to be ineligible for coverage in
nineteen states due to a preliminary injunction in Kansas v. United
States,\270\ thus reducing the total number of DACA recipients enrolled
in Exchange or BHP coverage. Collectively, we believe these numbers
provide the most accurate representation of enrollment estimates for
DACA recipients. We acknowledge that DACA recipients have valid work
authorization and therefore pay taxes that fund Federal benefit
programs. However, this does not impact our position that the best
reading of the ACA compels us to exclude DACA
[[Page 27194]]
recipients from the definition of lawfully present used to determine
eligibility for QHP or BHP coverage.
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\270\ On December 9, 2024, the United States District Court for
the District of North Dakota issued a preliminary injunction in
Kansas v. United States, Case No. 1:24-cv-00150, 2024 WL 5220178
(D.N.D. Dec. 9, 2024). As a result, DACA recipients are ineligible
for Exchange or BHP coverage in nineteen states. These states are:
Alabama, Arkansas, Florida, Idaho, Indiana, Iowa, Kansas, Kentucky,
Missouri, Montana, Nebraska, New Hampshire, North Dakota, Ohio,
South Carolina, South Dakota, Tennessee, Texas, and Virginia. All of
those states except Idaho, Kentucky, and Virginia are served by the
Federal Marketplace platform.
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Comment: Additionally, commenters provided detailed analysis of the
negative impacts they expected this rule would have if finalized. These
impacts, discussed in detail in section II.B.1. of this final rule,
include decreased access to care, worsened health outcomes, increased
disparities, increased reliance on uncompensated care and emergency
department care, and worsened local economies. Many commenters pointed
out how the provisions of this rule may negatively impact not only DACA
recipients, but their families and communities as well. Commenters
further noted that this rule would worsen individual market Exchange
risk pools, due to DACA recipients' age and health status as compared
to current Exchange enrollees, and that a weaker risk pool could result
in cost increases for health insurance issuers, cost increases for
hospitals, and cost increases for individuals throughout the Exchanges
in the form of higher health insurance premiums.
Response: We acknowledge that these are potential negative impacts
of the policy finalized in this rule. We appreciate the insight from
commenters that the policy in this rule will also negatively impact the
families and communities of the DACA recipients impacted by the rule.
We agree that it is possible that this rule could weaken the Exchange
risk pools, which could result in cost increases for issuers and
individuals due to higher claims costs and premiums. We are not able to
quantify these potential impacts.
Comment: Commenters expressed concern that the burden estimates did
not account for the economic burden the 11,000 currently enrolled DACA
recipients will place on the health care system in the future without
having health insurance.
Response: We acknowledge these concerns, but are not able to
quantify these potential impacts.
After consideration of public comments, we are finalizing these
estimates using the methodology as proposed without modifications.
3. Standards for Termination for Cause From the FFE (Sec.
155.220(g)(2))
As discussed in the preamble to this proposal, we are finalizing
improvements to the 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 are finalizing the addition of
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 to make a
determination there was a specific finding or pattern of noncompliance
that is sufficiently severe. Our regulatory change will put all agents,
brokers, and web-brokers assisting consumers with enrollment on the
FFEs and SBE-FPs on notice of the evidentiary standard we will use in
leveraging our enforcement authority under Sec. 155.220(g)(1) through
(3). We believe this update will 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 change will have positive impacts on agents,
brokers, and web-brokers. Codifying the evidentiary standard will
provide agents, brokers, and web-brokers under investigation for
noncompliant behavior more 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. We anticipate agents, brokers, and web-
brokers will 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 policies as we did not expand the bases
under which HHS may find them noncompliant under Sec. 155.220(g)(1)
through (3) or otherwise require more from agents, brokers, and web-
brokers as part of this enforcement framework; rather, we finalized
clarifications to an evidentiary standard that is not explicit at
present.
We sought comment on these proposed impacts and assumptions.
We did not receive any comments in response to the proposed impact
estimates for this policy. For the reasons outlined in the proposed and
in this final rule, we are finalizing these estimates as proposed.
4. Annual Eligibility Redetermination (Sec. 155.335)
We are finalizing the temporary 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 for Exchanges on the Federal platform. Specifically, when
an enrollee does not submit an application for an updated eligibility
determination for the immediately forthcoming coverage year (2026) by
the last day to select a plan for January 1, 2026 coverage, in
accordance with the effective dates specified in Sec. 155.410(f), and
the enrollee's portion of the premium for the entire policy would be
zero dollars after application of APTC through the annual
redetermination process, Exchanges on the Federal platform must
decrease the amount of the APTC applied to the policy, consistent with
Sec. 155.340(f), 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 until the enrollee confirms or updates 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 will be able to update their Exchange
application at any point to confirm eligibility for APTC that covers
the entire monthly premium, if eligible, and re-confirm their plan to
thereby reinstate the full amount of APTC for which the enrollee is
eligible on a prospective basis.
We require that Exchanges on the Federal platform must implement
this change for annual redeterminations for benefit year 2026, with a
reversion to the previous policy for benefit year 2027 and beyond. We
are not finalizing this policy for State Exchanges for the reasons
discussed in section III.B.3 of this preamble.
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,\271\ we view this figure to be an upper-bound
estimate of the number of enrollees with coverage through Exchanges on
the Federal platform who may be affected by this temporary policy.
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\271\ Baseline enrollment projections are presented in Tables 15
and 16 in section V.C.18. of this final rule. 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.
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Regarding the benefits associated with this policy, we believe this
change may lead to increased price sensitivity to premiums and premium
changes among
[[Page 27195]]
enrollees whose premiums are fully subsidized and who would be
automatically re-enrolled. This is because these enrollees will now pay
$5 more in net premiums per month if they do not submit an application
for an updated eligibility determination from an Exchange. These
enrollees will 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 policy will lead
to better matches between consumers' coverage preferences and available
coverage offerings in the individual market.
Comment: We received many comments expressing strong support for
automatic re-enrollment as a valuable tool for maintaining continuous
coverage and market stability. One commenter specifically noted that
automatically re-enrolled consumers in the Washington Exchange maintain
their coverage for an average of 10.3 months, compared to 9.5 months
for new enrollees, demonstrating the policy's contribution to a stable
risk pool.
Response: We want to reiterate that this policy maintains automatic
re-enrollment while introducing a modest premium requirement to
encourage active consumer engagement and participation for a specific
population.
Comment: Several commenters expressed concerns about the policy's
effectiveness in preventing fraud and the possibility of third-party
premium payments.
Response: As noted earlier 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
policy, as finalized (with modification), will contribute to reducing
the financial stress that ineligible enrollees may experience by
protecting them from accumulating surprise tax liabilities.\272\
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\272\ 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.
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As described earlier in this rule, Sec. 155.220(j)(2)(iii) and (l)
requires agents, brokers, and web-brokers who are assisting with
consumer enrollments through the Exchanges on the Federal platform to
obtain and document consumer consent before making an application or
enrollment update on behalf of the consumer. Additionally, our
experience investigating fraudulent or improper enrollments by agents,
brokers, and web-brokers does not suggest that these entities
fraudulently enrolling consumers in non-zero premium plans by paying
premiums on behalf of enrollees is a common occurrence. Doing so would
reduce the profit available to the agent, broker, or web-broker for the
fraudulent activity, as well as increase the risk that it would be
identified as fraudulent activity (for example, because an issuer could
identify if payment was made using a check or credit card belonging to
the agent, broker, or web-broker). Rather, improper enrollments
typically involve agents, brokers, or web-brokers enrolling consumers
in fully-subsidized plans without their knowledge or consent.
Therefore, we believe it is appropriate to target this proposal to
fully-subsidized enrollments, where we know fraudulent activity by
agents, brokers, and web-brokers is most likely.
Comment: We received comments from several State Exchanges
reporting different experiences with improper enrollments compared to
the Exchanges on the Federal platform.
Response: We acknowledge that State Exchanges report varying
experiences with improper enrollments compared to the Exchanges on the
Federal platform. In recognition of these differences and the need for
State flexibility, as well as the appreciably smaller estimates of
improper enrollments on State Exchanges, we are not finalizing this
policy for State Exchanges.
Comment: One commenter noted that it is the consumer's
responsibility for managing duplicate coverage and associated tax
liabilities.
Response: We agree that consumers have a responsibility to report
coverage changes and to ensure they avoid excess tax liabilities upon
filing their annual taxes; however, we believe implementing measures
that encourage active eligibility confirmation serves both the consumer
protection and program integrity goals.
Comment: Many commenters expressed concerns about potential
coverage impacts and market stability.
Response: We believe the small premium requirement, combined with
clear communication about how to maintain full subsidies, if eligible,
will help mitigate these concerns while achieving the policy's
objectives of reducing improper enrollments and protecting consumers
from unexpected tax liabilities.
Regarding the potential costs associated with this policy, if some
enrollees with fully-subsidized premiums are unaware of the APTC
adjustments that will be made and the premium amounts that will 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 policy, as finalized, may lead some enrollees to have
their coverage terminated due to non-payment of premiums. This, in
turn, can lead to adverse health outcomes for those enrollees who
experience loss of coverage and a coverage gap. However, we expect the
number of fully-subsidized enrollees who ultimately have their coverage
terminated due to non-payment of premiums as a result of this policy
will 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.
Comment: Many commenters provided evidence about premium
sensitivity among Exchange enrollees, including research showing that
even nominal premium increases can affect enrollment decisions, with
one commenter citing a study that indicated a 14-percent attrition rate
when enrollees transition from zero-dollar to positive premiums. These
commenters stated that auto-enrollment plays a significant role in
maintaining a balanced risk pool. Another commenter referenced a study
by the National Bureau of Economic Research that found that eliminating
auto-enrollment reduced coverage by 33 percent, particularly among
young, healthy, and economically disadvantaged individuals. Another
commenter referenced research from the Massachusetts Exchange showing
that auto-enrolled individuals typically have medical costs 44 percent
below average.
Response: We acknowledge the research cited by commenters regarding
premium sensitivity and its potential impact on enrollment decisions.
While we previously determined that a $5 premium would be nominal
enough to minimize coverage disruption, we recognize and acknowledge
the evidence suggesting even small premium increases may affect
enrollment patterns and risk pool composition and the potential effects
this could have on enrollees and enrollment. We are finalizing the
policy, with modifications described in section III.B.3 of this
preamble, to achieve our program integrity objectives and believe the
$5 premium will prompt enrollees to act without being cost prohibitive
and balances debt consideration for low-income enrollees.
[[Page 27196]]
Comment: Some commenters expressed concerns regarding the potential
impact on uncompensated care in the healthcare system, noting that
coverage disruptions may result in increased uncompensated care,
particularly as individuals who lose coverage may still require medical
services but lack the means to pay for them.
Response: We acknowledge commenters' concerns. While we understand
these concerns, we believe the policy's design--including clear
communication about maintaining full subsidies and minimal premium
requirements--will help minimize coverage disruptions. Additionally,
the ability for consumers to reinstate full APTC, if still eligible, by
confirming eligibility at any time provides an important safeguard
against prolonged coverage gaps that could lead to uncompensated care.
Enrollees who otherwise would not have obtained an updated
eligibility determination will also incur time costs associated with
the need to submit an application to the Exchanges on the Federal
platform to obtain an updated eligibility determination notice and
confirm their plan in order to obtain a $0 premium, if they are still
eligible for one.
Comment: Some commenters noted the administrative burden and
potential barriers associated with requiring consumers to submit
updated eligibility determinations. These commenters raised concerns
about the practical challenges consumers may face in completing this
process. They noted specific barriers including limited access to
technology and internet services and consumer confusion, to name a few.
Response: We acknowledge commenters' concerns. However, we would
like to note that enrollees will continue to be able to update this
information through the call center for Exchanges on the Federal
platform. Because consumers have various ways in which they can update
their eligibility information, we believe this policy will balance
program integrity objectives with maintaining accessible coverage.
In the 2025 Marketplace Integrity and Affordability proposed rule,
we estimated that Exchanges would incur costs to comply with this
policy. Specifically, we estimated that Exchanges would need to make
changes to their IT systems to be able to identify enrollees who will
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 not submit an application for an updated
eligibility determination to the Exchange. We estimated that it would
take the Federal Government and each of the State Exchanges 10,000
hours to develop and code the changes to their IT systems. Of those
10,000 hours, we estimated it would take a database and network
administrator and architect 2,500 hours (at $103.34 per hour) and a
computer programmer 7,500 hours (at $94.88 per hour). These estimates
were based on past experience with similar system changes. However, as
noted earlier in this preamble, we are only finalizing this policy for
Exchanges on the Federal platform, and only for benefit year 2026.
We therefore estimate a burden to the Federal Government, in 2025,
of 10,000 hours with an estimated cost of $969,950 ((2,500 hours x
$103.34 per hour) + (7,500 hours x $94.88 per hour)). Because there
will be a reversion to the previous policy for PY 2027 and beyond, the
Federal Government will also incur a burden in 2026 to reverse the IT
systems changes and other technical changes made in support of this
temporary policy. We expect that the burden to reverse these changes
will be comparable to the burden to initiate them. Relying on the same
assumptions, we therefore estimate a burden to the Federal Government
in 2026 of 10,000 hours, with an estimated cost of $969,950.
We recognized the burden the proposed policy would place on State
Exchanges and sought comment on the impact of this burden estimated in
the proposed rule.
Comment: No comments were received specifically related to our cost
estimate above; however, many commenters identified several additional
implementation components to State Exchange IT systems as a result of
this policy. These include new APTC calculation logic development,
billing process modifications, batch auto-renewal coding changes, and
enrollment reconciliation system updates.
Response: As discussed previously in this preamble, we are not
finalizing this policy for State Exchanges.
Comment: We received numerous comments related to additional costs
associated with customer service, outreach, and education to implement
this policy. Many commenters raised concerns about operational impacts
across multiple interested parties and potential downstream effects on
consumer experience. Specifically, many commenters noted the potential
impacts to customer service, including the increased call center
volume, the need for enhanced customer service capacity, and additional
staffing and training requirements. Other commenters noted challenges
related to education and outreach, specifically the substantial
consumer education needs, resource constraints (especially regarding
Navigator funding), and complex messaging requirements across multiple
interested parties. Additional administrative burden concerns focused
on new notification requirements and process changes for issuers and
Exchanges.
Response: We acknowledge the commenters' concerns. As discussed
previously in this preamble, we are not finalizing this policy for
State Exchanges. We recognize that depending on the level of customer
service, outreach, and education efforts, this policy could result in
increased costs to Exchanges on the Federal platform.
Regarding the potential economic transfers associated with this
policy, this policy 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.\273\ The need for fully-subsidized
enrollees to actively re-enroll in QHP coverage to continue with fully-
subsidized coverage may 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 will also reduce net Federal PTC spending. These
reductions represent transfers from consumers or other payers (such as
providers of charity care) who would have directly or indirectly
received improper APTC from the Federal Government. Lastly, this policy
will 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. This
represents a transfer from agents, brokers, and web-brokers to issuers.
These transfer effects will be realized for PY 2026 only.
---------------------------------------------------------------------------
\273\ In the regulatory impact analysis, a transfer is a shift
in resources from one party (for example, the government) to another
(for example, individuals) for which the quantification does not
reflect a change in use of resources (such as goods or services).
---------------------------------------------------------------------------
Comment: One commenter noted that the implementation requirements
create additional connections between regulatory effects, as issuers
must redirect resources to cover system
[[Page 27197]]
updates, notification requirements, and premium collection processes.
These administrative costs represent an indirect link from issuers to
various service providers and operational entities, all of which must
be managed within existing MLR requirements. The commenter argues that
this effectively shifts resources from other issuer activities to
administrative functions. While the $5 premium appears to be a direct
transfer from PTC to direct consumer payment, the administrative costs
create a net negative effect for issuers, as they must redirect
resources to implement and maintain these new requirements without
receiving offsetting revenue, which may be offset by increased premiums
paid for by consumers (and potential APTC increases).
Response: We acknowledge the commenter's concerns. We understand
that administrative costs create additional financial implications for
issuers operating under MLR requirements. We believe that any potential
broad increases in premiums and PTCs will be minimal and will be offset
by the provisions of this final rule.
5. Annual Eligibility Redetermination (Sec. 155.335(j)(4))
We are finalizing an amendment to 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 will 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 would remove the re-enrollment hierarchy
standards at Sec. 155.335(j)(4) that 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 this
change will improve the consumer experience by retaining consumer
choice and reducing consumer confusion. In the 2025 Marketplace
Integrity and Affordability proposed rule, we explained that we believe
the removal of the bronze to silver crosswalk criteria in the Federal
hierarchy for re-enrollment will 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 will require
operational and system changes to reverse the policy including related
consumer outreach. We do not anticipate that these changes will 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 solicited comment on that
assumption.
By retaining consumer choice, we also anticipated that this policy
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 will reduce APTC expenditures. We are not able
to quantify the reduction in APTC expenditures because we do not expect
the current policy would have led 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 sought comment on the proposed impacts and assumptions, and we
received some comments citing concerns about persisting consumer
confusion, which are further discussed in the preamble. After
consideration of comments and for the reasons outlined in the proposed
rule and this final rule, including our responses to comments, we are
finalizing these impact estimates for this policy as proposed.
6. Failure To File and Reconcile (Sec. 155.305(f)(4))
We are finalizing the proposed amendments to the FTR process at
Sec. 155.305(f)(4) with a modification under which the amendments will
only be effective through PY 2026. Under this modified policy, all
Exchanges are required 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 for coverage year 2026 only.
For PY 2027 onward, the current rule that requires Exchanges to
disallow APTC eligibility when an enrollee or their tax filer has
failed to file a Federal income tax return reconciling their APTC for 2
consecutive tax years will apply. Putting the 1-year policy in place
through PY 2026 only will allow Exchanges to collect data on the 1-year
FTR policy. This policy will remove the current flexibility that gives
tax filers 2 consecutive tax years to file and reconcile before
removing APTC for coverage year 2026, while allowing for data
collection to determine the correct FTR policy for coverage year 2027
and beyond. To conform with this policy, we are finalizing amending 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 to 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 2-tax year FTR
status for coverage year 2026, while allowing for flexibility in
coverage years 2027 and beyond. We have updated the RIA for this policy
due to revised wage rate and other data estimates available between the
time of the 2025 Marketplace Integrity and Affordability proposed and
final rule publication dates. The proposed RIA for this policy may be
found at 90 FR 13011 through 13012.
Previously, we estimated the cost of giving enrollees 2 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
1 tax year and retain their APTC eligibility. In 2024, we 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 fact that
FTR notices 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
policy will have on APTC expenditures. While the current 2-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
[[Page 27198]]
mitigate unauthorized enrollments was implemented in PY 2024), the 2-
tax year FTR process will catch those fraudulently enrolled consumers
for PY 2026, as will this change to the FTR process. Therefore, it is
likely that the APTC savings resulting from this policy change will not
be derived from the enrollees who lose their APTC eligibility after
being found as failing to file their income taxes and reconcile their
APTC, but rather from the decrease in unauthorized enrollments that
will result from other provisions of this rule that we are finalizing.
Taking all of these considerations into account, we still anticipate
that APTC expenditures will 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 (both the 1-year
and 2-year notices) prior to OEP 2025, our run of FTR Recheck in March
2025 has reduced this number to approximately 670,000 households that
we provided notices to this spring.
Approximately 270,000 households had a 2-year FTR status after FTR
Recheck, which is a decrease from the OEP of approximately 85,000
households. In addition, the total 1-year FTR population of non-filers,
non-reconcilers, and extension tax-filers dropped from almost 1,500,000
prior to the OEP to less than 420,000 during FTR Recheck, a decline of
over seventy percent. While a significant percentage of that population
was due to the number of households whose extension to file their
Federal income tax expired, both 1-year non-filers and non-reconcilers
also saw significant drops in the number of households.
It is difficult to draw historically similar comparisons for
multiple reasons: FTR had been inactive for three consecutive plan
years prior to PY 2025 due to the COVID-19 PHE, the increase in
improper enrollments, and the newly implemented 2-tax year FTR process.
However, historically, between removal of APTC at OEP and the FTR
Recheck process, the overall population of enrollees that lose APTC has
ranged from 18 percent to 43 percent from 2016 to 2020. On average, 30
percent of enrollees lost their APTC due to FTR between OEP and FTR
Recheck. After accounting for a portion of the 420,000 households with
a 1- year FTR status during FTR Recheck this year whose extension to
file their Federal income tax has not expired, we estimate that
approximately 210,000 current households with a 1-year FTR status will
lose APTC due to FTR when Exchanges on the Federal platform revert back
to a 1-year FTR policy for the 2026 coverage year. 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, it is possible
that the average Federal APTC savings could be as much as $1.28 billion
in 2026 (210,000 x $548 x 1.4 x 8); however, this policy change is not
occurring on its own and this estimate is most likely an overstatement
of the possible savings available in future years. This is due to the
negative impact on enrollment of implementing the program integrity
measures in the Exchange in response to unauthorized enrollment as well
as the resumption of FTR noticing and termination of APTC eligibility
for PY 2025. There are also other sections of this rule that will
likely negatively impact the enrollment of the same population that is
affected by the finalized 1-year FTR policy for coverage year 2026, as
discussed further in section V.C.18. of this final rule.
This policy will support compliance with the filing and reconciling
requirement under 36B(f) of the Code and its implementing regulations
at 26 CFR 1.36B-4(a)(1)(i) and (a)(1)(ii)(A). By supporting greater
compliance, this policy will also minimize the potential for APTC
recipients to incur large tax liabilities for coverage year 2026.
Using the final notice policy for 2026 that is similar to our prior
notice procedure before FTR was paused, we anticipate eligible
enrollees will 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
the OEP as well as a notice at the time of FTR Recheck. The tax filer
(and enrollee if they are the same person) will also receive a direct
notice prior to the OEP 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 that have
complied with their requirement to file an income tax return and
reconcile APTC and, therefore, anticipate the proposal would continue
to avoid situations where eligible enrollees become uninsured when
their APTC is terminated. Because the policy will discontinue APTC for
a larger number of enrollees who are not eligible, we anticipate a
portion of those enrollees would drop coverage and become uninsured.
This may result in costs to State and county 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 1-
tax year FTR status and 2 tax years of FTR status. This policy conforms
the notice process to the finalized policy by eliminating the separate
notice for enrollees in their second year of FTR status for 2026.
Therefore, we anticipate this policy will also reduce the burden of
providing notice to enrollees with an FTR status in 2026. In the 2026
Payment Notice (90 FR 4524), we estimated that sending 2-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, we are 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 in 2026, we will remove at least some of
the associated noticing requirements and corresponding 2-tax year FTR
population, yielding a cost savings that will provide a benefit to the
Federal Government and State Exchanges for 2026.
We estimate that it will 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 1-
tax year of failing to file and reconcile their APTC. Of those
[[Page 27199]]
approximately 10,000 hours, we estimate it would take a database and
network administrator and architect 2,500 hours at $103.34 per hour and
a computer programmer 7,500 hours at $94.88 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 $19,399,000 (20 States x
[(50,000 hours x $103.34 per hour) + (150,000 hours x $94.88 per
hour)]) for completing the necessary updates to State Exchange
eligibility systems. We are aware of one additional State that is
planning to transition to a State Exchange in 2026. If they do finalize
their transition, we estimate that their cost would be an additional
$969,950 in 2025. For the Federal Government, we estimate a one-time
burden in 2025 of 10,000 hours at a cost of $969,950 ((2,500 hours x
$103.34 per hour) + (7,500 hours x $94.88 per hour)). However,
Exchanges would need to revert this cost in 2026 as the provision
sunsets for 2027, and we assume the same estimates as 2025 would also
apply in 2026.
We recognize the burden this policy may place on State Exchanges,
and sought comment in the proposed rule on the impact of this burden
and potential less burdensome alternatives that would still further the
program integrity goals of this policy. The majority of State Exchanges
expressed in comments that they could not make the technological
changes to revert back to a 1-year FTR policy in time for OEP 2026.
However, we are finalizing the effective date of the FTR policy so that
all Exchanges must impose a 1-year FTR requirement beginning for PY
2026 to gather data from this plan year.
After consideration of comments and for the reasons outlined in the
proposed rule and this final rule, including our responses to comments,
we are finalizing these impact estimates for this policy. We summarize
and respond to public comments received on the proposed estimates
below.
Comment: Many State Exchanges expressed concern that implementing
the 1-year policy after just switching to the 2-year policy would be
costly and burdensome. They also expressed the fact that their planning
for this year has already commenced, and it would be very hard to make
the technical changes needed at this point for PY 2026. In addition,
many State Exchanges noted that they have much lower incidences of
fraud as compared to Exchanges on the Federal platform, so the return
on their investment for the technical changes would not be as
impactful.
Response: We appreciate the concern from these commenters. While we
appreciate that State Exchanges do not currently have the levels of
fraudulent activity that Exchanges on the Federal platform do, we
believe that the 1-year FTR policy will also help to ensure that there
is less of a risk of fraud in coverage year 2026. As mentioned above,
we believe that the potential costs of paying APTC to those who have
not filed and reconciled for a second consecutive tax year outweigh the
benefits for State Exchanges.
7. 60-Day Extension To Resolve Income Inconsistency (Sec.
155.315(f)(7))
We are finalizing the removal of 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 will result in a one-time cost of
approximately $500,000 to Exchanges. For the 19 State Exchanges, we
anticipate this will be a total cost of approximately $9,500,000
($500,000 x 19). We recognize the burden this policy may place on State
Exchanges and sought comment in the 2025 Marketplace Integrity and
Affordability proposed rule on the impact of this burden and potential
less burdensome alternatives that would still further the program
integrity goals of this policy.
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 will result in approximately $266
million (140,000 x $588.07 x 2 + 86,000 x $588.07 x 2) less APTC
expenditures annually across all Exchanges.
In the proposed rule, we sought comments on whether this number may
be slightly less because of potential decreased enrollment if the
enhanced PTC are no longer in effect.
We did not receive any comments in response to the proposed impact
estimates for this policy. For the reasons outlined in the final rule,
we are finalizing these estimates as proposed.
8. Income Verification When Data Sources Indicate Income Less Than 100
Percent of the FPL (Sec. 155.320(c)(3)(iii))
This final rule amends Sec. 155.320(c)(3)(iii) to create annual
income DMIs when applicants attest to income that would qualify the
taxpayer as an applicable taxpayer per 26 CFR 1.36B-2(b), but trusted
data sources show income below 100 percent of the FPL. We are
finalizing this policy to become effective on the effective date of
this rule, but with a modification under which the policy and related
requirements will sunset for all Exchanges at the end of PY 2026.
Thereafter, this policy will no longer be effective. We have updated
the RIA for this policy due to revised wage rate and other data
estimates available between the time of the proposed and final rule
publication dates. The proposed 2025 Marketplace Integrity and
Affordability RIA for this policy may be found at 90 FR 13013.
As discussed further in section IV.D. of this proposed and the
final rule, we estimate an approximate increase in burden costs of
$20.2 million for the Federal Government and $12.4 million in 2026 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 in 2025 to update the eligibility systems and perform other
technical updates for this change of $775,960 for the Federal
Government and $14,743,240 for State Exchanges. Exchanges would incur
the same one-time costs at the time of sunsetting this policy at the
end of 2026, resulting in a one-time burden of $775,960 to the Federal
Government and $14,743,240 to State Exchanges in 2026 as well. Finally,
as also discussed further in section IV.D. of this final rule, we
estimate an increase in burden of $13,179,400 across all Exchanges in
2026 for consumers to submit documentation to fulfill income
verification requirements. We recognize the burden this policy may
place on State Exchanges and sought comment in the proposed rule on the
impact of this burden and potential less burdensome alternatives that
would still further the program integrity goals of this policy.
[[Page 27200]]
By reducing the number of applicants who inflate income to qualify
for APTC and the opportunities for improper enrollments, we anticipate
this policy will 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 will reduce the number of people who
receive APTC by 50,000 for Exchanges on the Federal platform. We
estimate the reduction of people who receive APTC in the State
Exchanges to be 31,000. Using an estimated average four months reduced
APTC and an average monthly APTC rate of $588.07 per person, we
estimate total APTC expenditures will be reduced by approximately $191
million in 2026 (50,000 x $588.07 x 4 + 31,000 x $588.07 x 4).
We also anticipate that stronger income verification standards will
increase Federal and State Medicaid expenditures by enrolling more
people in Medicaid who, by intentionally or unintentionally
overestimating their annual household income and being unable to verify
that overestimated income, 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 sought
comment in the proposed rule on the 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 sought comment on the proposed impacts and assumptions.
After consideration of comments and for the reasons outlined in the
proposed rule and this final rule, including our responses to comments,
we are finalizing this policy to become effective upon the effective
date of this rule, but with a modification under which the policy and
related requirements will be sunset for all Exchanges at the end of PY
2026. Thereafter, this policy will no longer be effective. We also made
modifications to account for general updated occupational costs in this
rule. We summarize and respond to public comments received on the
proposed estimates below.
Comment: Many State Exchanges, as well as other commenters,
expressed concerns with the burden this would place on their Exchanges.
They emphasized that the program integrity gains that may justify this
burden would be extremely minimal to non-existent, given that they have
identified improper income estimates to the same extent as Exchanges on
the Federal platform. Many State Exchanges pointed out that they
already have implemented robust additional income verification
processes, including leveraging additional income data sources, that
make real-time verification of income much more effective. Finally,
some State Exchanges stated they simply do not have the resources to
implement and maintain this policy currently. Given this, State
Exchanges and other commenters requested that we make this policy
optional for State Exchanges.
Response: We acknowledge the commenters' concerns. However, we
believe the program integrity concerns, which, while potentially less
in number, are still present in State Exchanges including those that
have expanded Medicaid, that this policy attempts to address outweigh
the cost and burdens to Exchanges. Additionally, because this policy
will sunset after PY 2026, the costs and benefits outlined in this rule
will only occur for the reminder of PY 2025 after this rule's effective
date and for PY 2026.
9. Income Verification When Tax Data Is Unavailable (Sec.
155.320(c)(5))
We are finalizing the removal of Sec. 155.320(c)(5) which requires
Exchanges to accept an applicant's income attestation without further
verification when tax return data is unavailable. We are finalizing
this with a modification under which Sec. 155.320(c)(5), which this
final policy is removing upon the effective date of this rule, will be
reinstated for all Exchanges at the end of PY 2026. As further
discussed in section IV.E. of the proposed and this final rule, we
estimate an increase in burden costs of approximately $102.3 million
for the Federal Government and approximately $62.8 million total for
State Exchanges in 2026 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
$872,955 for the Federal Government and approximately $16.6 million
total for State Exchanges in 2025. These costs would also be incurred
at the sunset of this program at the end of 2026, resulting in a one-
time burden of $872,955 to the Federal Government and approximately
$16.6 million total State Exchanges in 2026 as well. As also further
discussed in section IV.E. of this proposed and this final rule, we
also estimate an increase in burden of $66,778,850 for consumers in
2026 to submit documentation to fulfill income verification
requirements associated with this proposal. We recognize the burden
this policy may place on State Exchanges, and in the proposed rule
sought comment on the impact of this burden and potential less
burdensome alternatives that would still further the program integrity
goals of this policy.
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 will result in a
decrease in APTC, potentially to zero, for 252,000 enrollees for
Exchanges on the Federal platform and 155,000 enrollees on State
Exchanges. Using an estimated average 4 months reduced APTC and with an
average monthly APTC rate of $588.07 per person, we anticipate that
this change could result in a reduction of $957 million (252,000 x
$588.07 x 4 + 155,000 x $588.07 x 4) in APTC expenditures in 2026. We
accept comments on whether this number may be slightly less because of
potential decreased enrollment if the enhanced PTC are no longer in
effect.
Although reintroducing income verification for applicants with no
tax return data will increase the burden on some applicants, we do not
anticipate this burden will deter many eligible people from enrolling.
We sought comment on the proposed impacts and assumptions.
We did not receive any comments in response to the proposed impact
estimates for this policy. We are finalizing these estimates with
modifications as noted earlier in this section related to updated
general occupational estimated costs as well as reinstating the policy
as outlined in Sec. 155.320(c)(5) for all Exchanges after the
completion of PY 2026 on December 31, 2026.
[[Page 27201]]
10. Premium Payment Threshold (Sec. 155.400(g))
We are finalizing modifications to 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 Sec. 155.400(g) to reflect the removal
of paragraphs (2) and (3), with the following modification: the removal
of the fixed-dollar and gross-premium threshold flexibilities will
sunset after the completion of one new coverage year, PY 2026, on
December 31, 2026. Thereafter, the FFE and SBE-FPs will, and State
Exchanges may, offer issuers the flexibility to implement the premium
payment thresholds outlined in the 2026 Payment Notice (90 FR 4424).
Removing the options for issuers to implement either a fixed-dollar
and/or gross percentage will help address program integrity concerns by
ensuring that enrollees cannot remain enrolled in coverage for extended
periods of time without paying any premium, increasing the likelihood
that consumers who were improperly enrolled become aware of their
enrollment.
We anticipate that there will be some costs for issuers in PY 2026
who had already implemented a fixed-dollar or gross premium percentage-
based threshold and will 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 a one-time APTC payment of $817,571,843 in 2026
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 will
not be incurred in 2026 with the removal of the fixed-dollar and gross
premium percentage-based thresholds.
We sought comment on the proposed impacts and assumptions.
We did not receive any comments in response to the proposed impact
estimates for this policy. For the reasons outlined in the final rule,
we are finalizing these estimates as proposed.
11. Annual Open Enrollment Period (Sec. 155.410(e) and (f))
We are finalizing amendments to Sec. 155.410(e)(5) with a
modification to change the annual OEP for PY 2027 and beyond to begin
no later than November 1 and end no later than December 31 of the
calendar year preceding the benefit year. Additionally, paragraph
(e)(5)(ii) specifies that the Exchange OEP has a maximum length of 9
weeks. Newly added paragraph (f)(4) ensures that all OEP enrollees have
full year coverage effective January 1 of the plan year beginning in
benefit year 2027. 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 will 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.
While the final rule does provide flexibility for Exchanges, 19 of
20 of the State Exchanges would need to shorten their OEP because their
OEPs for PY 2025 either extended past December 31 or exceeded 9 weeks
in duration. We estimated in the 2025 Marketplace Integrity and
Affordability proposed rule that it would take the Federal Government
and each impacted State Exchange 4,000 hours to develop and code the
changes to their IT systems. Of those 4,000 hours, we estimated it
would take a database and network administrator and architect 1,000
hours and a computer programmer 3,000 hours. The median wage rates used
in the proposed rule were $101.66 per hour for a database and network
administrator and architect and $95.88 per hour for a computer
programmer. The median wage rates used for our estimates were updated
after the proposed rule was published to reflect the latest available
rates. In this final rule, we use the updated median wages of $103.34
per hour for a database and network administrator and architect and
$94.88 per hour for a computer programmer for the final rule as
discussed in section IV.A. of this final rule. We did not expect States
operating SBE-FPs to incur any implementation costs. These estimates
were based on past experience with similar system changes.
For the Federal Government, we estimate a one-time burden in 2026
of 4,000 hours at a cost of $387,980 (1,000 hours x $103.34 per hour) +
(3,000 hours x $94.88 per hour), which is a decrease from the proposed
rule's estimate of $389,300. In aggregate, for State Exchanges, we
estimate a one-time burden in 2026 of 76,000 hours (19 State Exchanges
x 4,000) at a cost of $7,371,620 (19 States x [(1,000 hours x $103.34
per hour) + (3,000 hours x $94.88 per hour)]), which is a decrease from
the proposed rule's estimate of $7,786,000. In total, the burden
associated with all system updates would be 80,000 hours at a cost of
$7,759,600, which is a decrease from the proposed rule's estimate of
$8,175,580. We recognized the burden that the proposed policy would
have placed on State Exchanges and modified the policy while keeping
intact its impact on program integrity.
We did not anticipate that the change to the OEP end date would
have a negative impact on enrollment or the consumer experience due to
the maturity of the enrollment systems. This change is expected to
simplify operational processes for 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 noted that there also may be administrative costs for issuers and
Exchanges associated with an increase in SEP casework. Consumers will
benefit from clearer enrollment rules that will encourage all annual
enrollment activities to be complete by a December OE end date and
therefore ensure coverage for the month of January. The Federal
Government, State Exchanges, and issuers may incur costs 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 sought comment on the proposed impacts and assumptions. After
consideration of comments and for the reasons outlined in the proposed
rule and this final rule, including our responses to comments, we are
finalizing these impact estimates for this policy with the following
modifications. As stated above, the new OEP dates will apply for PY
2027 instead of PY 2026, and we are allowing Exchanges to adopt their
preferred OEP dates subject to timing and durational parameters. This
delay and flexibility is aimed at
[[Page 27202]]
mitigating the operational burden and consumer experience and timeline
concerns expressed by commenters, including State Exchanges. Because
comments on these estimates were combined with general comments on this
policy, we summarize and respond to public comments received on the
proposed estimates in section III.B.7. of this final rule.
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 finalizing the removal of Sec. 155.420(d)(16) and pausing
the 150 percent FPL SEP for all Exchanges only until the end of PY
2026. 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 this final 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, Turner v.
Enhance Health, LLC, 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, and we
believe that these efforts necessitate repealing the 150 percent FPL
SEP. However, we acknowledge that it is challenging to predict the
level of improper enrollments in future years, 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 believe that pausing the 150 percent FPL SEP will 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 pausing this SEP could decrease
premiums by 3 to 4 percent compared to baseline premiums, and therefore
decrease annual APTC outlays by approximately $3.4 billion in 2026. In
the proposed rule, we sought comment on how this policy would impact
premiums and APTC/PTC outlays.
However, quantifying the impact of the 150 percent FPL SEP on
enrollment 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.
For these reasons, and for the reasons outlined in section III.B.8.
of this final rule, we are finalizing that this SEP will be paused
through the end of PY 2026.
To repeal the monthly 150 percent FPL SEP, we estimated a one-time
cost of approximately $387,980 to pause the functionality to grant the
150 percent FPL SEP and make any necessary updates to eligibility logic
systems for Exchanges on the Federal platform. This is based on our
estimate that it will take the Federal Government 4,000 hours in 2025
to remove the SEP. 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 $103.34) and 75 percent of
the work is being performed by a computer programmer (hourly wage of
$94.88). This estimate was informed by our experience with past system
changes.
We sought comment on this proposed impact.
Because we are sunsetting the repeal of the 150 FPL SEP after PY
2026, we estimate a new additional one-time cost of $387,980 for
Exchanges on the Federal platform to reinstate the 150 percent FPL SEP
for years after PY 2026. This is based on our estimate that it will
take the Federal Government 4,000 hours in 2026 to reinstate the SEP.
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 $103.34) and 75 percent of the work is
being performed by a computer programmer (hourly wage of $94.88). This
estimate was informed by our experience with past system changes.
We estimate a new one-time cost for State Exchanges that operate
their own eligibility and enrollment systems and currently offer the
150 percent FPL SEP to pause the SEP. Based on public comments
received, we believe that 18 State Exchanges are currently offering the
150 percent FPL SEP or other income-based SEPs that would need to be
discontinued. We estimate a one-time cost in 2025 of approximately
$387,980 for each of these 18 State Exchanges to pause the
functionality granting the 150 percent FPL SEP and make any necessary
updates to State Exchange eligibility logic systems. This results in a
total cost of $6,983,640 for State Exchanges to pause the 150 percent
FPL SEP in 2025. This is based on our estimate that it will take each
State Exchange 4,000 hours in 2025 to pause the SEP. 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 $103.34) and 75 percent of the work is being performed by a
computer programmer (hourly wage of $94.88). This estimate was informed
by our experience with past system changes.
We also estimate a new one-time cost for State Exchanges that
operate their own eligibility and enrollment systems and currently
offer the 150 percent FPL SEP to reinstate the SEP after PY 2026. We
assume that all 18 State Exchanges that currently offer the 150 percent
FPL SEP will elect to reinstate it once the pause of this SEP sunsets
at the end of 2026. We estimate a one-time cost in 2026 of
approximately $387,980 for each of the 18 State Exchanges currently
offering the SEP to reinstate their functionality to grant the 150
percent FPL SEP and make any necessary updates to State Exchange
eligibility logic systems. This results in a total cost of $6,983,640
for State Exchanges to reinstate the 150 percent FPL SEP. This
[[Page 27203]]
is based on our estimate that it will take each State Exchange 4,000
hours in 2026 to reinstate the SEP. 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
$103.34) and 75 percent of the work is being performed by a computer
programmer (hourly wage of $94.88). This estimate was informed by our
experience with past system changes.
After consideration of comments and for the reasons outlined in the
proposed rule and this final rule, including our responses to comments,
we are finalizing these impact estimates for this policy with the
addition of SEP reinstatement costs and State Exchange costs. We
summarize and respond to public comments received on our proposed
estimates below.
Comment: Commenters from local and State governments expressed that
nearly all State Exchanges currently offer the 150 percent FPL SEP or
income-based SEPs with higher income thresholds. The commenter
expressed concerns about the resources needed for IT and messaging
campaign changes for State Exchanges to dismantle these SEPs. They
stated that requiring State Exchanges to terminate the 150 percent FPL
SEP within 60 days of the final rule would impose major costs, and
failure to account for these costs makes the proposal arbitrary and
capricious under the APA.
Response: We appreciate the commenters' concerns regarding the
repeal of the 150 percent FPL SEP and the timeline for Exchanges to
implement this policy change, however, we are finalizing to pause the
availability of 150 percent FPL SEP for PY 2026. We believe that this
policy change and timeline are critical to protect all Exchanges from
fraudulent activity and to ensure that only consumers who are eligible
to receive APTC continue to do so. We also wish to reiterate that we do
not consider having a low income to meet the definition of an
exceptional circumstance per Sec. 155.420(d)(9); therefore, State
Exchanges are not permitted to use exceptional circumstances SEP
authority to continue to offer a 150 percent FPL-like SEP, or any SEPs
based on income for that matter. In response to not accounting for the
full costs for State Exchanges, we have updated the estimates in this
proposal.
Comment: One commenter expressed specific concerns regarding the
methodology that HHS used to estimate the premium impacts of the
proposal to rescind the 150 percent FPL SEP. The commenter expressed
confusion about how HHS arrived at the assumption that removing the
current monthly SEP for people with incomes below 150 percent of the
FPL would reduce premiums by 3.4 percent. The commenter stated that in
the preamble of the proposed rule, HHS referenced a prior estimate that
the monthly SEP policy would result in premium increases of 3 to 4
percent in the absence of the IRA subsidies, then provided a revised
range of 0.5 to 3.6 percent based on more recent data. Then, however,
in the regulatory impact analysis, HHS reverted to the discarded 3 to 4
percent estimate, before adopting 3.4 percent as a point estimate. The
commenter asked for clarification as to how HHS arrived at this point
estimate.
Response: We appreciate the commenter bringing this discrepancy to
our attention, and we would like to clarify we believe pausing the
current monthly SEP for people with incomes below 150 percent of the
FPL will result in premiums being 3 to 4 percent lower than they would
be if the SEP were to remain in place. A point estimate of 3.4 percent
is used in the RIA. With the expiration of enhanced subsidies,
enrollees at this income level will see an increase in net premiums for
the same coverage they can receive currently at $0 net premium. The
ability to enroll in Exchange coverage every month creates an incentive
for healthy enrollees to forego health insurance coverage and wait to
enroll when they believe they will need coverage. We estimated the SEP
would decrease the average number of months of enrollment from 10
months to around 9 months with minimal reduction in program costs,
since these enrollees would be enrolled when they needed coverage.
Overall, the expected claims impact and shift in average months of
enrollment is estimated at 3.4 percent of premium. Pausing this
provision is expected to have the opposite impact and reduce premiums
by 3.4 percent for 2026. We believe this premium reduction will wear
off with the sunset of this provision and have accounted for this in
the RIA.
13. Pre-Enrollment Verification for Special Enrollment Periods (Sec.
155.420)
We are finalizing amendments to Sec. 155.420(g) to require
Exchanges on the Federal platform to conduct pre-enrollment eligibility
verification for SEPs. Specifically, we are finalizing the removal of
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 are finalizing
conducting 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 are also finalizing the requirement that Exchanges on the
Federal platform 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 finalizing
that Exchanges must verify at least 75 percent of such new enrollments
based on the current implementation of SEP verification by Exchanges.
We have updated the RIA for this policy due to revised wage rates and
other data estimates available between the time of the proposed and
final rule publication dates. The proposed RIA for this policy may be
found at 90 FR 13016 through 13017.
Both of the proposals outlined in this section will sunset by their
terms after the completion of one new coverage year, PY 2026, on
December 31, 2026. We are declining to finalize these provisions for
State Exchanges.
We anticipate that revisions to Sec. 155.420 will have a positive
impact on program integrity by verifying eligibility for SEPs.
Increasing program integrity through this policy will reduce improper
subsidy payments and could contribute to keeping premiums low and
therefore, further protecting taxpayer dollars. This policy may deter
enrollments among younger people at higher rates, which could worsen
the risk pool and increase premiums. However, we expect any such
deterrence will 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 will reduce
premiums by approximately 0.5-1.0 percent for PY 2026 and will reduce
APTC spending by approximately $105.4 million.\274\
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\274\ 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).
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We anticipate this policy will moderately increase the regulatory
burden on Exchanges using the Federal platform. 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
will result in an additional 293,073 individuals having their
enrollment delayed or ``pended'' annually until eligibility
verification is
[[Page 27204]]
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 final rule, we anticipate that the expansion of SEP verification
will result in increased income inconsistencies, with an associated
cost increase for consumers of approximately $7,048,406 in 2026. There
will also be an increase in ongoing costs for Exchanges on the Federal
platform 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
will be approximately $11.7 million for PY 2026. Furthermore, as
discussed in section IV.G. of this final rule, we anticipate that
expanding verification will result in an increase in annual burden in
labor costs on Exchanges using the Federal platform at a cost of
$2,902,615 for PY 2026.
Additionally, we anticipate that the expansion of SEP verification
will have a one-time development cost in 2025 for Exchanges using the
Federal platform of $2,973,300 (30,000 hours x $99.11). This assumes
that 25 percent of the hours needed to expand SEP verification are
being performed by a database and network administrator (hourly wage
$103.34) and 75 percent of the work is being performed by a computer
programmer (hourly wage $94.88). This allocation of work between
network administrator and computer programmer was informed by our
experience with past system changes. We do not anticipate this policy
will increase regulatory burden or costs on issuers. We sought comment
on the proposed impacts and assumptions.
After careful consideration of public comments, we have decided to
finalize and implement these policies with a significant modification--
for Exchanges on the Federal platform, each of the rules outlined in
this section will sunset by their terms after the completion of one new
coverage year, PY 2026, on December 31, 2026. We are declining to
finalize these provisions for State Exchanges. We summarize and respond
to public comments received on the proposed adjustments to pre-
enrollment SEP verification below.
Comment: States, providers, actuaries, labor groups, general
advocacy groups, individuals, and one health insurance issuer expressed
general concern about the burden and cost on States of implementing
pre-enrollment SEP verification and expressed that States do not
experience the same level of fraud cited for Exchanges on the Federal
platform.
Response: We acknowledge the commenters' concerns. After careful
consideration of public comments, for Exchanges on the Federal
platform, each of the rules outlined in this section will sunset by
their terms after the completion of one new coverage year, PY 2026, on
December 31, 2026. We are declining to finalize these provisions for
State Exchanges.
14. Prohibition on Covering Specified Sex-Trait Modification Procedures
as an EHB (Sec. Sec. 156.115(d) and 156.400)
We are finalizing an amendment to Sec. 156.115(d) to provide that
an issuer of a plan subject to EHB requirements may not provide
coverage for specified sex-trait modification procedures as an EHB
beginning with PY 2026 and are finalizing the addition of a definition
of ``specific sex-trait modification procedure'' at Sec. 156.400.
Finalization of this policy will mean that beginning with PY 2026,
issuers of plans subject to EHB requirements may not provide coverage
for specified sex-trait modification procedures that fall within the
definition at Sec. 156.400 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. As finalized,
the prohibition on annual and lifetime dollar limits and requirement to
accrue enrollee cost sharing towards the annual limitation on cost
sharing will not apply to specified sex-trait modification procedures
to the extent such care is included in health plans as non-EHB,
including in large group market and self-insured group health plans.
This includes a prohibition on covering specified sex-trait
modification procedures as an EHB in the five States that currently
include coverage for sex-trait modification services 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.\275\
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\275\ California, Colorado, New Mexico, Vermont, and Washington
EHB-benchmark plans specifically include coverage of some sex-trait
modification services. Six other States do not expressly include or
exclude coverage of sex-trait modification services in EHB-benchmark
plans. Forty States include language that excludes coverage of sex-
trait modification services in EHB-benchmark plans.
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As we noted in the 2025 Marketplace Integrity and Affordability
proposed rule, utilization of sex-trait modification services is low;
therefore, the impact of this policy will be limited. As we noted,
approximately 0.11 percent of enrollees in the EDGE data set gathered
from issuers as part of the HHS-operated risk adjustment program
utilized specified sex-trait modification procedures between PYs 2022
and 2023. In the aggregate, the total allowed cost of specified sex-
trait modification procedures 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, 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
expect an impact on the amount of available PTC. We believe, however,
that finalizing a definition of specified sex-trait modification
procedure at Sec. 156.400 will help to further minimize premium
impacts, since the definition adds needed clarity to what procedures
cannot be covered as EHB and there will therefore be less opportunity
for issuers to price for any uncertainty. Under our final policy, plans
that stop covering specified sex-trait modification procedures as EHB
will see premiums and PTC decrease as the generosity of plan benefit
coverage decreases. Plans that decide to cover specified sex-trait
modification procedures as non-EHB will see premiums rise or stay the
same to account for this benefit generosity, but will see any existing
PTC decrease as the benefits will no longer be covered as EHB. States
that choose to mandate such coverage as a benefit in addition to the
EHB will be required to defray its cost pursuant to Sec. 155.170; in
this circumstance, we expect premiums and PTCs to decrease to account
for the State's defrayal obligations.
We sought comment on these proposed impacts and assumptions.
After consideration of comments and for the reasons outlined in the
proposed rule and this final rule, including our responses to comments,
we are finalizing these impact estimates for this policy as proposed.
We summarize and respond to public comments received on the proposed
estimates below.
Comment: Some commenters supported a prohibition on coverage of
sex-trait modification services as an EHB because they stated it will
prevent tax credits from applying to medical procedures they believe
are dangerous or cosmetic in nature. One commenter incorrectly noted
that costs associated with sex-trait modification services would not be
borne by States if they mandate coverage. One commenter stated that an
issuer's ongoing implementation costs by virtue of, for
[[Page 27205]]
example, having to modify its claims processes and systems, will be
more costly than what the issuer would reimburse providers for the sex-
trait modification services themselves, if these services were covered
benefits, and that such implementation costs are not minuscule.
Response: This final rule will ensure that Federal tax credits are
not used to pay for services that fall under the definition of
``specified sex-trait modification procedure'' at Sec. 156.400. This
will better align the statutory requirement that EHB be equal in scope
to those benefits provided in a typical employer plan. If a State
mandates coverage of specified sex-trait modification procedures, then
it will need to defray that cost to the issuer or the enrollee pursuant
to Sec. 155.170(b). Though we recognize comments that stated costs
associated with specified sex-trait modification procedures are
relatively minor, which aligns with the data we provided in this rule,
we are not persuaded that costs associated with implementation of this
policy are costlier than paying for those services themselves. Issuers
offering QHPs are required to ensure that benefits that are not EHB are
appropriately designated as such in their plan filings as part of QHP
certification. Based on this, there is good indication issuers
internally have the capability of determining which benefits are not
EHB, as evidenced by current requirements for issuers to note which
benefits, if any, are not EHB, and will vary from issuer to issuer.
Regardless, we are required to adhere to the statute and believe
that the policy finalized in this rule better aligns with the plain
language of section 1302(b)(2)(A) of the ACA.
Comment: Several commenters opposing the proposal stated that it
will increase overall healthcare costs for States and local
governments, issuers, providers, and consumers as further detailed
below. One commenter noted increased out-of-pocket consumer costs due
to issuers dropping this coverage entirely as a result of this proposal
and therefore shifting the cost for care to consumers. Other commenters
noted that covering sex-trait modification services in insurance plans
is cost-neutral or cost-saving as there is no actuarial basis to price
sex-trait modification surgeries separately from any other type of
surgery. Commenters also expressed concerns that this proposal would
block consumers from accessing sex-trait modification services with the
same cost-sharing and benefit design protections as the same services
covered for non-sex-trait modification still included in the EHB
package. Commenters also expressed concern that costs would shift to
States or local governments if they want to continue to ensure sex-
trait modification services are covered. Another commenter expressed
concern that the proposal would increase overall costs by shifting
current treatment from the community to the hospital and uncompensated
care, with increased prevalence of more costly conditions, like severe
depression or osteoporosis. This commenter also stated concerns that
the proposal could lead to increased risk of psychiatric symptoms
leading to more utilization of psychiatric services, including
psychiatric hospitalizations for these patients if current treatments
were no longer affordable.
Response: We acknowledge commenters' concerns that smaller issuers
often have outsized costs when new requirements are put into place that
apply to all issuers, because they lack economies of scale that some of
their larger, nationwide counterparts may have. However, as we have
noted in other parts of the finalized rule, we believe that this final
rule does not require issuers to undergo complex system builds or
process changes to implement it and are not persuaded that the burden
of any changes to processes and systems is a basis for not finalizing
this proposal. Specifically, issuers are already required to ensure
that benefits that are not EHB are appropriately designated as such in
the Plans & Benefits Template completed as part of the QHP
certification application and that the percentage of premium
attributable to EHB is accurately reflected, so that APTC does not
erroneously subsidize non-EHB. Although under this final rule, there
could be services that can be covered as EHB or not as EHB depending on
diagnosis, we believe that issuers should already have the capability
to differentiate between these claims since they already have to make
these distinctions today. For example, currently issuers must ensure
that benefits that can never be EHB, such as routine non-pediatric eye
exam services or non-medically necessary orthodontia pursuant to Sec.
156.115(d), are not erroneously noted as EHB in plan filings and claims
processing. We believe that what an issuer is required to do under this
final policy to exclude coverage for specified sex-trait modification
procedures as EHB is similar to how issuers currently handle coverage
for other claims.
We do not believe that whether a benefit is neutral from an
actuarial perspective has bearing on whether it should be an EHB. A
benefits package is comprised of numerous benefits, some of which are
neutral or even cost-saving, and some of which are not. If issuers seek
to voluntarily cover specified sex-trait modification procedures as
non-EHB, they would need to price the services accordingly.
We agree with commenters that for those States that wish to mandate
coverage of specified sex-trait modification procedures, they will be
responsible for defraying this cost pursuant to Sec. 155.170(b). We
appreciate the concerns commenters, including States, raised. However,
there is nothing inherently unique about sex-trait modification
services as related to the overall defrayal policy; if a State wishes
to mandate a benefit that is not EHB, it must defray the cost of that
benefit, regardless of what that benefit is. This is longstanding EHB
policy and furthers State flexibility to regulate their own markets and
ensure coverage of benefits that are most critical in their State.
We also agree that there may be some people enrolled in plans that
must cover EHB who seek specified sex-trait modification procedures who
will now need to pay for the full cost out-of-pocket, unless the
coverage is State-mandated or an issuer voluntarily offers such
coverage. We understand that this is not what many commenters advocated
for. However, this is the case with any benefit that is not EHB. The
framework for EHB as established in section 1302(b)(2) of the ACA
requires EHB to be ``equal to the scope of benefits provided under a
typical employer plan.'' There will necessarily be some benefits that
are not EHB. This final rule better aligns coverage with the statutory
requirements. We understand commenters' concerns that people seeking
sex-trait modification services are often lower-income and more
economically vulnerable than the general population. In defining the
EHB, we have attempted to balance coverage generosity and
affordability, with the realization that what makes coverage more
affordable for some may in turn make certain benefits less affordable
for others
We also appreciate comments that expressed concerns about costs
being shifted to local governments and hospital uncompensated care.
Nothing in this final rule prohibits local governments or hospitals
from voluntarily funding specified sex-trait modification procedures.
However, nothing in this final rule requires States or hospitals to
develop programs to fund specified sex-trait modification procedures.
We think that additional uncompensated care for mental health services
will be minimal if any, and we
[[Page 27206]]
reiterate that mental health services will continue to be available,
including for persons with gender dysphoria and those seeking specified
sex-trait modification procedures.
Comment: Several commenters objecting to the proposal agreed that
utilization of sex-trait modification services procedures is low, given
the small size of the population with gender dysphoria and the fact
that individual medical needs will vary. Other commenters objecting to
the proposal agreed that the cost of providing sex-trait modification
services is minimal in light of such low utilization. One commenter
noted as evidence that some States added sex-trait modification
services to their EHB-benchmark plans without exceeding the actuarial
limitations imposed by HHS and that the addition of such services had
negligible impact on premiums. One supporting commenter stated that the
proposal would reduce overall coverage by issuers for sex-trait
modification procedures, reducing complications stemming from such
procedures that could still be covered as EHB, and that this would lead
to a small reduction in both premiums and premium tax credits and well
as improvements in the health of these enrollees.
Response: We agree with commenters that utilization of specified
sex-trait modification procedures is low. As we stated in the proposed
rule, less than 1 percent of the U.S. population seeks forms of sex-
trait modification \276\ and this low utilization is also apparent in
the EDGE limited data set.\277\ We agree with commenters that, as
result of this low utilization, we anticipate the premium impact of
this policy will be minimal. This includes only minimal cost effects to
the extent this policy results in decreased complications requiring
care due to fewer sex-trait modification procedures.
---------------------------------------------------------------------------
\276\ See, Hughes, L.; Charlton, B.; Berzansky, I.; et. al.
(2025, Jan. 6). Gender-Affirming Medications Among Transgender
Adolescents in the U.S., 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.
\277\ 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.
---------------------------------------------------------------------------
15. Premium Adjustment Percentage Index (Sec. 156.130(e))
We are finalizing a premium adjustment percentage of 1.6726771319
for PY 2026 based on the change to the premium measure for calculating
the premium adjustment percentage that we are finalizing in this rule.
Under Sec. 156.130(e), we are finalizing the use of 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 in the 2025 Marketplace Integrity and Affordability
proposed rule, our policy to use private health insurance premiums
(excluding Medigap and property and casualty insurance) in the premium
adjustment percentage calculation will result in a higher overall
premium growth rate measure than if we continued to use ESI premiums as
was used for prior plan years and in the October 2024 PAPI
Guidance.\278\ To further elaborate on the potential impacts of this
policy change, in Sec. 155.605(d)(2), we are finalizing a required
contribution of 8.05 percent for PY 2026 using the finalized premium
adjustment percentage in Sec. 156.130 to supersede the previous
required contribution of 7.70 percent for PY 2026 calculated from ESI
premiums previously published in the October 2024 PAPI Guidance.\279\
Pursuant to Sec. 156.130(a)(2), we are finalizing 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 ESI premiums
previously published in the October 2024 PAPI Guidance.\280\ The CMS
Office of the Actuary estimates that the change in methodology for the
calculation of the premium adjustment percentage may have the following
impacts between PY 2026 and PY 2030: \281\
---------------------------------------------------------------------------
\278\ 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.
\279\ Ibid.
\280\ Ibid.
\281\ 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, ESI, and individual insurance
choice models that ensure consistent estimates of coverage and
spending in considering legislative changes to current law.
Table 12--Impacts of Final Modifications to the Premium Adjustment Percentage Methodology, PYs 2026-2030
----------------------------------------------------------------------------------------------------------------
Calendar year 2026 2027 2028 2029 2030
----------------------------------------------------------------------------------------------------------------
Exchange Enrollment Impact -80 -80 -80 -80 -80
(enrollees, thousands).........
Premium Impacts:
Gross Premium Impact (%).... 0% 0% 0% 0% 0%
Net Premium Impact (%)...... 2% 2% 2% 2% 2%
Federal Impacts:
PTC (million, $)............ -1,270 -1,340 -1,410 -1,480 -1,550
Employer Shared 0 0 3 11 20
Responsibility Payment
(million, $)...............
-------------------------------------------------------------------------------
Total Federal Impact -1,270 -1,340 -1,413 -1,491 -1,570
(million, $) *.........
----------------------------------------------------------------------------------------------------------------
* Note: While the PTC impact figures are negative to signify reductions in Federal outlays, and the employer
shared responsibility payment figures are positive to signify increased revenue to the Federal Government,
they are totaled together to indicate savings for the Federal Government.
[[Page 27207]]
As noted in Table 12, we expect that the 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 will adopt
the use of the same premium measure finalized for the calculation of
the premium adjustment percentage in this final 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 will remain lower by 80,000 individuals in each
year between 2026 and 2030 than it would if there were no 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 will 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 premium measure will 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 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 will 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.\282\ 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.\283\ \284\ 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.\285\ We sought feedback from interested parties about
these impacts and the magnitude of these changes in the proposed rule.
---------------------------------------------------------------------------
\282\ 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.
\283\ 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.
\284\ 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/.
\285\ 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 final 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). Pursuant to Sec. 156.130(a)(2), we
finalized a maximum annual limitation on cost sharing of $10,600 for
self-only coverage for PY 2026. Additionally, we finalized reductions
in the maximum annual limitation on cost sharing for silver plan
variations (Table 5 in section III.C.2.b. of this final rule).
We sought comment on these proposed impact estimates and
assumptions related to the proposed change to the premium measure for
calculating the premium adjustment percentage for PY 2026 and beyond.
After consideration of comments and for the reasons outlined in the
proposed rule and this final rule, including our responses to comments,
we are finalizing these impact estimates for this policy as proposed.
Because comments on these estimates were combined with general comments
on this policy, we summarize and respond to public comments received on
these proposed estimates in section III.C.2. of this final rule.
16. Levels of Coverage (Actuarial Value) (Sec. Sec. 156.140, 156.200,
156.400)
We are finalizing changing 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,\286\ for
which we are finalizing a de minimis range of +5/-4 percentage points.
We are also finalizing revisions to 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 are also
finalizing amendments to 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.
---------------------------------------------------------------------------
\286\ 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.
---------------------------------------------------------------------------
As noted in the 2025 Marketplace Integrity and Affordability
proposed rule, we believe that changing the de minimis ranges for
standard metal level plans (except for individual market silver QHPs)
will not generate a transfer of costs for consumers overall. Wider de
minimis ranges will allow issuers to design plans with a lower AV than
is possible currently, which will reduce the generosity in health plan
coverage for out-of-pocket costs. However, we expect that issuers will,
in turn, lower overall premiums. We estimate the premiums could
decrease approximately 1.0 percent on average because of benefit
changes issuers will make with a wider de minimis range. Lower overall
premiums will have positive effects for consumers over the longer term
as issuer participation increases and coverage options improved, which
will attract more young and healthy enrollees into health plans,
improving the overall risk pool and reducing overall costs that could
[[Page 27208]]
mitigate any increase in consumer out-of-pocket costs.
As shown in Table 13, the policy to widen the de minimis range for
individual market silver QHPs to +2/-4 percentage points will 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 will see the generosity of their current
SLCSP decrease, resulting in a decrease in PTC.
Table 13--PTC Impact of +2/-4 Silver De Minimis Plan AVs, 2026-2029
----------------------------------------------------------------------------------------------------------------
Calendar year 2026 2027 2028 2029
----------------------------------------------------------------------------------------------------------------
Change in PTC................... -$1.22 billion.... -$1.28 billion.... -$1.33 billion.... -$1.40 billion.
----------------------------------------------------------------------------------------------------------------
Fiscal year 2026.............. 2027.............. 2028.............. 2029
----------------------------------------------------------------------------------------------------------------
Change in PTC................... -$0.92 billion.... -$1.27 billion.... -$1.32 billion.... -$1.38 billion.
----------------------------------------------------------------------------------------------------------------
This policy, 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 policy only expands the universe of
permissible plan AVs and will 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 will
attract more enrollment, they will remain free to do so under this
policy.
In addition, changing the de minimis range for standard silver
plans will 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 policy, as premiums decrease, an employer will 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 sought comment on the proposed impact estimates and assumptions,
as well as any timing considerations with its proposed implementation.
After consideration of comments and for the reasons outlined in the
proposed rule and this final rule, including our responses to comments,
we are finalizing these impact estimates for this policy as proposed.
We summarize and respond to public comments received on the proposed
estimates below.
Comment: A few commenters estimated that PTCs would decrease
between $327 and $714 per year for a typical family of four as a result
of this proposal.
Response: We thank these commenters for their estimates, and do not
find these estimates to be incomparable to the PTC impact estimates in
Table 13. Therefore, we have taken these estimates into account in
deciding to finalize the widened de minimis ranges as proposed.
17. Regulatory Review Cost Estimation
Due to the uncertainty involved with accurately quantifying the
number of entities that will review the rule, we assume that the total
number of unique commenters on the 2025 Marketplace Integrity and
Affordability proposed rule will be the number of reviewers of this
final rule. We acknowledge that this assumption may understate or
overstate the costs of reviewing this rule. It is possible that not all
commenters reviewed the proposed rule in detail, and it is also
possible that some reviewers chose not to comment on the proposed rule.
For these reasons, we believe that the number of commenters to the
proposed rule would be a fair estimate of the number of reviewers of
this rule. We welcomed any public comments on the approach in
estimating the number of entities that would review the proposed rule.
We did not receive any public comments specific to our solicitation.
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 50 percent of the rule. We sought public
comments on this assumption. We did not receive any public comments
specific to our solicitation.
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 $113.42 per hour, including overhead and fringe
benefits.\287\ Assuming an average reading speed of 250 words per
minute, we estimate that it would take approximately 5.25 hours for the
staff to review half of this final rule. For each entity that reviews
the rule, the estimated cost is approximately $595.46 (5.25 hours x
$113.42). Therefore, we estimate that the total cost of reviewing this
regulation is approximately $15,493,869 ($595.46 x 26,020 reviewers).
---------------------------------------------------------------------------
\287\ U.S. Bureau of Labor Statistics. (n.d.). Occupational
Employment and Wage Statistics. Dep't. of Labor. https://www.bls.gov/oes/current/oes_nat.htm.
---------------------------------------------------------------------------
We sought comment on the analysis in the proposed rule.
We did not receive any comments in response to the analysis in the
proposed rule. Therefore, we are finalizing this analysis as presented
in the preceding paragraphs.
18. Overall Impact of the Final Individual Market Program Integrity
Provisions
In the regulatory impact analysis of this final rule, we include
impact analyses and estimates for each policy separately, as we intend
for each provision to be severable from the rest. Please see section
III.F. of this final rule for a more detailed discussion on the
severability of the provisions of this rule. However, we anticipate
that the provisions of this final 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 final rule will 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
[[Page 27209]]
IRA on December 31, 2025, is generally accounted for separately from
these estimates, as such a reduction would not be due to the provisions
in this final rule. These estimates consider the enrollment, premium,
and APTC impact solely due to the provisions in this final rule,
compared to what would occur if these provisions were not finalized. We
have updated this analysis due to revised policies in this final rule
compared to the proposals in the 2025 Marketplace Integrity and
Affordability proposed rule. The proposed analysis may be found at 90
FR 13020 through 13026.
As this updated analysis shows, we expect the provisions of this
final rule that sunset after PY 2026 will work to more quickly remove
improper enrollments that exploited the availability of fully-
subsidized coverage. The Department acknowledges, however, that there
are numerous uncertainties regarding how the expiration of enhanced
subsidies and the policies in this final rule will affect market
conditions and coverage, especially following the sunset of certain
policies finalized in this rule. Although there is data available from
which we can draw reasonable conclusions regarding the causes of
improper enrollments over recent years, there are many unknowns. As the
Department and commenters agree, it is not possible to know with
certainty which $0 premium plan enrollments were for persons who
improperly took advantage of enhanced subsidies and the availability of
$0 premium plans, and which represent improper exploitation of those
benefits. The inability to trace the causes of potentially millions of
unauthorized enrollments is exacerbated by data collection challenges
and infrastructure gaps caused and identified after March 2020 when the
COVID-19 public health emergency started and today when various
temporary policies are still in the process of being ended and their
impact understood. For instance, under the Medicaid continuous coverage
requirements, States were required to maintain Medicaid enrollment for
beneficiaries (who may have been otherwise eligible for Exchange
coverage) and were prohibited from disenrolling consumers in limited
circumstances. This policy potentially increased dual enrollments in
both Medicaid and Exchanges in prior years while the continuous
coverage requirement was in place. The end of the continuous coverage
requirement reasonably could have caused spikes in enrollment in $0
premium plans. These circumstances have led the Department to conclude
that it is reasonable to codifying certain policies through the end of
PY 2026 in response to commenter concerns. The estimates presented in
this section consider the increased instability of the health care and
insurance markets that resulted from these changes and the massive
amounts of improper Exchange enrollments.
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 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 SEP and effectuated their enrollment between 2015 and 2017
with the ACS 5-year public-use microdata sample for 2013-2017.\288\
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.\289\
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. We have carefully considered both 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.
---------------------------------------------------------------------------
\288\ 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.
\289\ 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 14 below compares sign-ups during the OEP for
people with expected income between 100 and 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 and 150 percent of the FPL are from the CMS
Marketplace OEP PUFs data.\290\ 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 PYs 2023 and
2024, 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.\291\ The number of State
residents in the 100 to 150 percent of the 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.\292\ State
residents ages 19-64 with household incomes between 100 and 150 percent
of the 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,\293\ as well as adults ages 65 and
older who are likely eligible for Medicare.\294\ 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
[[Page 27210]]
2023 to 2024 from the United States Census Bureau to the 2023 ACS
estimates.\295\ This adjustment assumes that changes in population
within the 100 to 150 percent of the FPL range are similar to those
within the State and ignores any potential distributional changes.
Minnesota, New York,\296\ 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.\297\ 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.\298\
---------------------------------------------------------------------------
\290\ Marketplace Products. (n.d.). Retrieved from https://www.cms.gov/data-research/statistics-trends-and-reports/marketplace-products.
\291\ 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.
\292\ Ruggles, S., et al. (2023). IPUMS USA: Version 15.0
[dataset]. Retrieved from https://www.ipums.org/projects/ipums-usa/d010.V15.0.
\293\ 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/.
\294\ Blase, B. & Gonshorowski, D. (n.d.). The Great Obamacare
Enrollment Fraud. Retrieved from https://paragoninstitute.org/private-health/the-great-obamacare-enrollment-fraud/.
\295\ 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.
\296\ New York operated a BHP from April 1, 2015, through April
1, 2024. See https://www.medicaid.gov/basic-health-program.
\297\ Basic Health Program. (n.d.). Retrieved from https://www.medicaid.gov/basic-health-program/index.html.
\298\ 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.
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The comparisons presented in Table 14 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 to 150 percent
of the FPL criteria in each year but leads to less precise estimates
than the use of multi-year ACS samples with larger sample sizes.\299\
Second, it uses the Census definition of poverty to identify residents
with family incomes between 100 to 150 percent of the FPL, which
differs from the MAGI relative to poverty measure that is used to
determine eligibility for PTC on the Exchanges and reported in the OEP
PUFs.\300\ 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.\301\ In addition, the ACS is
fielded throughout the calendar year and asks about income during the
previous 12 months,\302\ 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.\303\ Fourth, the 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,\304\ those with Medicaid coverage that they did not
report on the survey,\305\ immigrants who are not lawfully
present,\306\ 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.\307\ We acknowledge these limitations and sought comment in
the proposed rule on ways to improve these analyses in the final rule.
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 PTC
eligibility determination.
---------------------------------------------------------------------------
\299\ Using 1-Year or 5-Year American Community Survey Data.
(2020). Retrieved from https://www.census.gov/programs-surveys/acs/guidance/estimates.html.
\300\ What's Included as Income. (n.d.). Retrieved from
www.healthcare.gov/income-and-household-information/income/.
\301\ 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.
\302\ 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.
\303\ About Income. (n.d.). Retrieved from https://www.census.gov/topics/income-poverty/income/about.htmlhttps://www.census.gov/content/dam/Census/library/working-papers/2015/demo/SEHSD-WP2015-01.pdf.
\304\ People with coverage through a job. (n.d.) Retrieved from
https://www.healthcare.gov/have-job-based-coverage/options/.
\305\ 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.
\306\ Coverage for lawfully present immigrants. (n.d.).
Retrieved from https://www.healthcare.gov/immigrants/lawfully-present-immigrants/.
\307\ 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/.
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Table 14 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 PY 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 PY 2024,
indicating that there are a larger number of Exchange enrollees
reporting incomes of between 100 and 150 percent of the 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 of the 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 to 150 percent of the 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.\308\ Medicaid eligibility for
[[Page 27211]]
non-elderly and non-disabled adults in these States is limited to
parents who meet a median income eligibility threshold of 27 percent of
the FPL.\309\ 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.\310\
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\308\ Status of State Medicaid Expansion Decisions. (2025,
February 12). Retrieved from https://www.kff.org/status-of-state-medicaid-expansion-decisions/.
\309\ 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
percent of the FPL in Alabama, 27 percent of the FPL in Florida, 30
percent of the FPL in Georgia, 27 percent of the FPL in Mississippi,
67 percent of the FPL in South Carolina, 105 percent of the FPL in
Tennessee, and 15 percent of the FPL in Texas. Other adults are not
eligible.
\310\ 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.
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One approach to estimate the possible reduction in erroneous and
improper enrollments under the changes in this rule is to sum the total
number of enrollments in 2024 that exceed 100 percent of potential
enrollees in Table 14. This calculation suggests that there are as many
as 4.4 million erroneous or improper enrollments. This is expected to
be an upper bound estimate of the scale of erroneous and improper
enrollments. PY 2024 Exchange enrollments occurred prior to recent HHS
actions to improve program integrity, which were expected to reduce the
number of improper and erroneous enrollments prior to the
implementation of the provisions in this final 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 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. However, despite HHS
actions to improve program integrity, there was still a substantial
increase in plan selections during the PY 2025 OEP, suggesting the
possibility that erroneous and improper enrollments may have increased
further this year. In addition, the excess enrollment estimate ignores
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 provisions. For all of these
reasons, there is uncertainty present regarding the estimate derived
from this analysis. We acknowledge this uncertainty and sought comment
in the proposed rule on how we may improve this estimate in final
rulemaking.
Table 14--Exchange Sign-Ups Compared to Potential Enrollees at 100-150 Percent of the FPL Income, by State and Year
--------------------------------------------------------------------------------------------------------------------------------------------------------
2019 2023 2024
----------------------------------------------------------------------------------------------------------------------
Exchange Potential Take-up rate Exchange Potential Take-up rate Exchange Potential Take-up
sign-ups enrollees (%) sign-ups enrollees (%) sign-ups enrollees rate (%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Alabama.......................... 70,951 162,156 43.8 119,737 161,318 74.2 228,883 162,580 140.8
Alaska........................... 1,896 16,161 11.7 2,050 11,860 17.3 2,317 11,918 19.4
Arizona.......................... 20,565 177,646 11.6 49,204 153,762 32.0 114,197 156,012 73.2
Arkansas......................... 11,893 106,418 11.2 23,680 90,011 26.3 56,640 90,565 62.5
California....................... 242,016 758,412 31.9 274,117 630,793 43.5 278,204 634,536 43.8
Colorado......................... 15,222 104,067 14.6 14,327 85,286 16.8 14,786 86,098 17.2
Connecticut...................... 8,292 51,747 16.0 8,315 46,834 17.8 12,991 47,246 27.5
Delaware......................... 2,886 16,730 17.3 3,584 13,723 26.1 8,374 13,928 60.1
Florida.......................... 981,323 742,425 132.2 1,961,049 608,549 322.2 2,718,501 620,966 437.8
Georgia.......................... 219,261 362,003 60.6 496,628 326,102 152.3 834,058 329,534 253.1
Hawaii........................... 2,352 20,557 11.4 2,571 24,026 10.7 3,006 24,105 12.5
Idaho............................ NR NR NR 4,768 43,826 10.9 8,193 44,504 18.4
Illinois......................... 52,000 255,798 20.3 78,590 198,726 39.5 111,131 199,793 55.6
Indiana.......................... 19,172 173,981 11.0 41,719 131,311 31.8 112,127 132,154 84.8
Iowa............................. 6,334 53,568 11.8 12,580 49,928 25.2 23,908 50,286 47.5
Kansas........................... 28,266 88,955 31.8 47,693 83,239 57.3 82,256 83,778 98.2
Kentucky......................... 10,401 94,295 11.0 4,748 83,064 5.7 8,534 83,754 10.2
Louisiana........................ 19,207 114,770 16.7 36,199 97,572 37.1 93,833 97,778 96.0
Maine............................ 15,854 28,318 56.0 4,312 22,190 19.4 4,581 22,275 20.6
Maryland......................... 19,450 77,124 25.2 18,522 89,654 20.7 21,599 90,320 23.9
Massachusetts.................... 37,759 66,807 56.5 17,045 67,287 25.3 30,595 67,950 45.0
Michigan......................... 43,286 201,320 21.5 64,618 171,546 37.7 122,597 172,517 71.1
Mississippi...................... 53,009 116,614 45.5 124,404 110,202 112.9 210,749 110,197 191.2
Missouri......................... 83,499 195,867 42.6 90,907 159,071 57.1 154,459 160,030 96.5
Montana.......................... 4,924 25,305 19.5 4,296 23,278 18.5 8,522 23,400 36.4
Nebraska......................... 22,677 53,748 42.2 15,563 36,846 42.2 25,158 37,172 67.7
Nevada........................... 15,548 85,249 18.2 21,208 76,288 27.8 22,471 77,548 29.0
New Hampshire.................... 5,077 19,425 26.1 5,238 13,681 38.3 8,484 13,748 61.7
New Jersey....................... 37,653 142,831 26.4 53,173 135,983 39.1 69,867 137,740 50.7
New Mexico....................... 5,744 42,939 13.4 4,016 45,821 8.8 6,747 46,017 14.7
North Carolina................... 186,358 357,623 52.1 347,551 278,562 124.8 507,098 282,782 179.3
North Dakota..................... 2,149 16,765 12.8 3,019 10,854 27.8 3,770 10,957 34.4
Ohio............................. 24,792 226,871 10.9 60,101 195,405 30.8 166,814 196,385 84.9
Oklahoma......................... 51,744 144,964 35.7 70,349 124,195 56.6 120,013 125,158 95.9
Pennsylvania..................... 63,304 213,444 29.7 62,303 187,117 33.3 81,714 187,994 43.5
Rhode Island..................... 6,449 14,631 44.1 4,453 14,798 30.1 6,117 14,917 41.0
South Carolina................... 79,543 163,892 48.5 168,217 156,016 107.8 301,553 158,651 190.1
South Dakota..................... 7,752 23,691 32.7 9,898 24,736 40.0 8,821 24,907 35.4
Tennessee........................ 73,392 215,288 34.1 158,033 180,654 87.5 310,781 182,662 170.1
Texas............................ 474,670 1,115,085 42.6 1,360,433 1,037,034 131.2 2,133,460 1,056,033 202.0
Utah............................. 56,561 92,491 61.2 87,196 74,704 116.7 133,065 76,014 175.1
[[Page 27212]]
Vermont.......................... 2,326 5,584 41.7 1,626 6,076 26.8 2,227 6,074 36.7
Virginia......................... 91,810 181,345 50.6 80,751 146,563 55.1 110,912 147,847 75.0
Washington....................... 20,704 122,440 16.9 16,092 112,052 14.4 21,588 113,490 19.0
West Virginia.................... 3,168 41,262 7.7 5,516 34,229 16.1 17,243 34,219 50.4
Wisconsin........................ 46,353 119,818 38.7 39,856 104,583 38.1 64,398 105,122 61.3
Wyoming.......................... 5,317 16,606 32.0 6,767 18,034 37.5 8,054 18,113 44.5
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Total (excluding Idaho)...... 3,252,909 7,427,036 43.8 6,082,254 6,453,563 94.2 9,387,203 6,525,270 143.9
--------------------------------------------------------------------------------------------------------------------------------------------------------
Sources: 2019, 2023, and 2024 CMS Marketplace Open Enrollment Period Public Use Files (OEP PUF); 2019 and 2023 1-year American Community Survey (ACS)
files from IPUMS USA. NR--Not reported.
Notes: Potential enrollees by State are estimated using the ACS as State residents ages 19-64 who are not enrolled in Medicaid or Medicare. The 2024
estimates are calculated by applying a State population growth rate to the 2023 estimates. Minnesota, New York, and Oregon are excluded due to the
presence of a BHP during at least some portion of the analysis period. The District of Columbia is excluded due to the unavailability of income
information in the OEP PUF.
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 exploited the availability of enhanced subsidies. That
reduction in improper enrollments is not attributable to the policies
in this rule, but rather by current law causing IRA subsidies to expire
after PY 2025. However, there is uncertainty regarding how many
improper enrollments will be reduced by the expiration of IRA subsidies
compared to the policies in this rule. Moreover, in response to
commenters' concerns, we finalize certain verification requirements to
sunset at the end of PY 2026, creating additional uncertainty related
to the level of improper enrollments in PY 2027 and beyond. We believe
that coverage in connection with the majority of improper enrollments
will end as a result of the enhanced subsidies; therefore, in the
proposed rule, we assumed a range of approximately 750,000 to 2,000,000
fewer individuals will enroll in QHP coverage in 2026 as a result of
the policies in the proposed rule. In the proposed rule, we sought
comment on the estimate and assumptions and respond to such comments
later in this analysis.
Based on comments and revised analysis resulting from some policy
changes between the proposed and final rules, as discussed previously
in this final rule, we now assume a range of approximately 725,000 to
1,800,000 fewer individuals will enroll in QHP coverage in 2026 as a
result of the policies in this final rule. We use this range moving
forward in this analysis. The full proposed rule analysis may be found
at 90 FR 13020 through 13026.
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 725,000 to 1,800,000 enrollees
compared to baseline estimates. Some enrollees dropping coverage will
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 725,000 reduced enrollment scenario and 0.9
percent for the 1,800,000 reduced enrollment scenario. The revised
premium was calculated assuming issuers will price to an average 84
percent loss ratio, yielding a revised PMPM of $626.37 for the 725,000
reduced enrollment scenario and $656.17 for the 1,800,000 reduced
enrollment scenario for 2026 as a result of these jointly finalized
policies. 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 = $582.68),
and APTC enrollment was estimated to be 90.6 percent of total
enrollment for 2026. For future years under this rule, we assume
premium growth of 3.9 percent for 2027 and 2028 and 1.9 percent for
2029. Enrollment growth is estimated at 1.1 percent for 2027, 1.5
percent for 2028, and 3 percent for 2029. We assume the enrollment and
claims impacts from the sunsetting policies wear off over 2027 and
2028, with 80 percent of the wear-off occurring in 2027 and 20 percent
occurring in 2028.
Using the methodology described in the preceding paragraphs, we
anticipate the provisions in this final rule, when considered jointly,
could reduce enrollment, premiums, and APTC each year beginning in
2026. We provide lower bound estimates in Table 15 and upper bound
estimates in Table 16.
[[Page 27213]]
Table 15--Overall Enrollment and APTC Impacts of the Program Integrity Rule--Lower Bound Estimates
----------------------------------------------------------------------------------------------------------------
Calendar year 2025 2026 2027 2028 2029
----------------------------------------------------------------------------------------------------------------
Baseline:
Total Enrollment (millions)................ 21.625 17.240 17.426 17.682 18.213
APTC Enrollment (millions)................. 20.061 15.614 15.635 15.741 15.798
Premiums ($ billions)...................... 159.448 136.980 143.822 151.597 159.043
APTC ($ billions).......................... 130.960 110.188 115.911 122.564 128.584
Policies in this rule:
Total Enrollment (millions)................ 21.625 16.515 17.273 17.672 18.203
APTC Enrollment (millions)................. 20.061 14.958 15.498 15.732 15.789
Premiums ($ billions)...................... 159.448 124.134 139.070 148.953 156.270
APTC ($ billions).......................... 130.960 99.854 112.081 120.427 126.342
Change:
Total Enrollment (millions)................ ........... -0.725 -0.153 -0.010 -0.010
APTC Enrollment (millions)................. ........... -0.656 -0.137 -0.009 -0.009
Premiums ($ billions)...................... ........... -12.846 -4.752 -2.643 -2.773
APTC ($ billions).......................... ........... -10.334 -3.830 -2.137 -2.242
----------------------------------------------------------------------------------------------------------------
Table 16--Overall Enrollment and APTC Impacts of the Program Integrity Rule--Upper Bound Estimates
----------------------------------------------------------------------------------------------------------------
Calendar year 2025 2026 2027 2028 2029
----------------------------------------------------------------------------------------------------------------
Baseline:
Total Enrollment (millions)................ 21.625 17.240 17.426 17.682 18.213
APTC Enrollment (millions)................. 20.061 15.614 15.635 15.741 15.798
Premiums ($ billions)...................... 159.448 136.980 143.822 151.597 159.043
APTC ($ billions).......................... 130.960 110.188 115.911 122.564 128.584
Policies in this rule:
Total Enrollment (millions)................ 21.625 15.440 17.046 17.657 18.187
APTC Enrollment (millions)................. 20.061 13.984 15.295 15.719 15.776
Premiums ($ billions)...................... 159.448 121.574 139.313 149.870 157.231
APTC ($ billions).......................... 130.960 97.795 112.277 121.168 127.119
Change:
Total Enrollment (millions)................ ........... -1.800 -0.380 -0.025 -0.026
APTC Enrollment (millions)................. ........... -1.630 -0.340 -0.022 -0.022
Premiums ($ billions)...................... ........... -15.406 -4.509 -1.727 -1.812
APTC ($ billions).......................... ........... -12.393 -3.634 -1.396 -1.465
----------------------------------------------------------------------------------------------------------------
Taken together, the provisions of this final rule are expected to
address errors and improper enrollments, which means that as presented
in the preceding paragraphs, we expect approximately 725,000 to
1,800,000 individuals to lose coverage as a result of the provisions in
this rule. 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 as 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, as explained by the Department in the proposed rule and
this final rule, as well by commenters, estimation of the number of
individuals impacted may likely be skewed due to the general difficulty
in assigning with certainty the causes of improper enrollments. 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 may
cause an overall reduction to labor productivity.
In contrast, if individuals who do not maintain coverage following
the finalization 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 (net of increased QHP-
related payments), thereby saving taxpayer dollars. As we explain
earlier in this final rule, the Department has strong reason to believe
many of the individuals who would lose coverage as a result of the
policies in this rule may represent improper enrollments.
While we acknowledge the finalization of this rule may impact
enrollment of self-employed individuals, some of whom may qualify for
subsidies, we anticipate that premiums will decrease as a result of
this final rule. We note that variables--including those impacting
enrollment, premiums, and APTC--have changed over time and may continue
to fluctuate. When considering the overall impact of the provisions in
this final rule, 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 final rule could be outside of the estimates provided in this
section.
We sought comment on the proposed impacts and assumptions.
[[Page 27214]]
After consideration of comments and for the reasons outlined in the
proposed rule and this final rule, including our responses to comments,
we are finalizing these impact estimates for this rule with the
modifications presented earlier in this section. We summarize and
respond to public comments received on the proposed estimates below.
Comment: Several commenters noted that a decrease in enrollment
would result in increased emergency care utilization and increased
costs of uncompensated care, Medicare, and State Medicaid expenditures.
These commenters also discussed how uninsurance leads to disrupted
continuity of care and poorer health outcomes. A few comments from
State entities provided estimates of enrollment reductions and premium
increases in their specific States.
Some commenters alleged that the proposed rule would negatively
impact market stability, discourage issuer participation, worsen the
risk pool, and increase premiums for all enrollees. A few of these
commenters stated that coverage losses would be concentrated in healthy
populations, resulting in premium increases that would especially
impact unsubsidized enrollees.
Response: We appreciate the additional data provided by States and
have considered it in the analysis in this final rule. As discussed
previously in this RIA, we acknowledge that a decrease in enrollment
may have the consequences noted by commenters. However, we anticipate
that most of this decrease in enrollment will be attributable to
improper enrollments that should never have enrolled in Exchange
coverage. As documented in a CMS press release from 2024, we received
and resolved over 180,000 unauthorized enrollment complaints from
January to August 2024.\311\ Therefore, we do not anticipate that the
decrease in enrollment estimated in this final rule will impact many
enrollees who are properly enrolled.
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\311\ 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.
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Furthermore, as discussed earlier in this final rule, we also
acknowledge that some enrollees dropping coverage will likely be
healthier than those remaining in the risk pool, but other enrollees
losing coverage due to improper enrollments could potentially be less
healthy as well. Earlier in this RIA, we discuss our methodology for
estimating a premium reduction resulting from the provisions in this
rule, which we anticipate will benefit all enrollees regardless of
subsidy receipt. We do not believe this rule will destabilize the
market or discourage issuer participation, as issuers expressed in
their comments their appreciation for the finalization of these program
integrity provisions. We did not receive issuer comments that the
proposed policy would discourage issuer participation.
Comment: One commenter stated that the RIA failed to account for
the expiration of enhanced subsidies in the IRA.
Response: As discussed earlier in this section, we account for the
expiration of enhanced subsidies in the IRA by assuming approximately
42 percent of recent enrollment growth will discontinue coverage and
will be healthier than enrollees maintaining coverage. We then use
higher overall premiums PMPM as a starting point for our analysis of
the impact of this rule.
Comment: A few commenters stated that the RIA only demonstrated
problems with improper enrollments in nine States, which are all on the
FFE, while the policies in this rule will impact all States regardless
of Exchange type. One commenter also stated that publicly available
State Exchange data directly contradicted the analysis in the proposed
rule. One commenter alleged that the majority of the enrollment losses
estimated in the proposed rule would not be attributable to improper
enrollments but did not provide evidence to support this statement.
Response: The provisions finalized in this rule were designed to
reduce improper enrollments while ensuring individuals who are eligible
to enroll in QHP coverage, and those who are also eligible to receive
subsidies, are able to demonstrate their eligibility appropriately. As
discussed previously in this analysis, we anticipate that many of the
individuals who may lose coverage as a result of this rule were
improperly enrolled. More importantly, we maintain that enrollees who
are eligible will still be able to enroll under the provisions in this
rulemaking. This would be true for both FFE and State Exchange States.
We also note that as discussed elsewhere in this final rule, we are
modifying the proposals regarding annual eligibility redeterminations,
the annual OEP, and SEP verification to finalize policies permitting
more State flexibility in recognition of these and other comments
expressing concerns about State burdens, the data provided by
commenters, and the results of our analysis.
Comment: A few commenters urged HHS to fully inform individuals
negatively impacted by the rule of alternative care options. Another
commenter stated that the proposed rule failed to consider additional
costs on States of customer service and education that would result
from the rule.
Response: We always conduct outreach and education campaigns around
open enrollment each year, and intend to fully inform consumers about
the changes finalized in this rule. Furthermore, we acknowledge that
States may face additional costs for outreach and education as noted in
the accounting table (Table 10 in the proposed rule and this final
rule) but are unable to estimate these costs, as each State conducts
such activities differently.
Comment: Some commenters stated that the proposed rule failed to
identify data for many proposals.
Response: As discussed throughout the proposed rule and in this
final rule, we provided data and analysis to the best of our ability
that was available to us and where possible, we do provide information
on the sources of data being used for the analysis. For example, in
this section of the final rule, we identify that we used the CMS OEP
PUFs as the basis of our analysis. Furthermore, in this final rule, we
have also updated the analyses to reflect newly available data to
support the provisions in this rule, which may be found in this RIA.
Comment: Several commenters alleged that the proposed rule relied
on unsound data from a 2024 paper by the Paragon Health Institute which
fails to mention or account for income misestimations and exaggerates
the extent of possible enrollment fraud. A few of these commenters
stated that the numerator of the enrollment reduction calculation uses
Exchange data, which includes children, while the denominator of the
calculation uses ACS data, which excludes children. These commenters
also noted that using 2023 ACS data in the denominator of the
calculation to estimate improper enrollments for 2024 fails to account
for the Medicaid continuous coverage requirement in place in 2023 that
was no longer in place for 2024, inflating the denominator.
Additionally, these commenters stated that the income estimate used in
Exchange data in the numerator of the calculation is for the year after
the current year, while the income estimate used in ACS data in the
denominator is for the current year, so they are not comparable
estimates.
[[Page 27215]]
Finally, a few of these commenters stated that the analysis did not
consider the agent/broker fraud prevention efforts CMS engaged in
starting with the 2024 OEP, which has decreased improper enrollments
since that time. All of these commenters alleged that these analysis
flaws overstated the extent of possible enrollment fraud.
Response: We noted these limitations in the proposed rule and
continue to reference them in this final rule. The Paragon report
analysis informed our analysis, but we also incorporated Exchange data
for a more fulsome analysis. There was a large variance between the
population observed in our data for the 100 to 150 percent of the FPL
income range and external survey data. This indicated a potential for a
large number of enrollments that were either unauthorized or people
misestimating or misrepresenting their income. Our range of enrollment
lost estimated in the proposed rule was between 750,000 and 2,000,000,
but we could not discern the amount of lost enrollments that were
fraudulent or due to misrepresented income from those lost to other
controls proposed in the proposed rule. We updated these estimates in
this final rule as a result of finalizing modifications of some
proposals based on these and other comments, as discussed previously in
this final rule.
D. Regulatory Alternatives Considered
We considered taking no action regarding our proposal to remove
Sec. 147.104(i), which currently prohibits an issuer from denying
coverage due to an individual's or employer's failure to pay premiums
owed for prior coverage, including by 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 adverse selection, we believe
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 policy will improve the
risk pool by promoting continuous coverage without imposing a
significant financial burden for most people who owe past-due premiums.
We also considered prohibiting issuers from collecting past due
premiums for periods of coverage dating back more than a specified time
period, requiring issuers to provide enrollees notice of the past due
premium policy, and other parameters. However, we decided to allow
States the discretion to require and define such parameters, as they
are most familiar with their markets, and to respect their traditional
role of regulating insurance.
At Sec. 155.20, we are finalizing adjustments to the definition of
``lawfully present'' used for purposes of determining eligibility to
enroll in a QHP offered through the Exchange, eligibility for PTC,
APTC, and CSR, or a BHP in States that elect 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,
eligibility for PTC, APTC, and CSR, and BHP coverage in States that
elect to operate a BHP.\312\ Other changes corrected unintentional
errors in the prior definition.\313\ 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.\314\ 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 did not propose to revert or amend these provisions
at this time.
---------------------------------------------------------------------------
\312\ 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.
\313\ 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.
\314\ 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.
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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 2 consecutive tax
years. However, due to concerns about improper enrollments, as well as
concerns related to the potential for increased tax liability for tax
filers, we are finalizing the proposed policy that Exchanges are
required to remove APTC after an enrollee or their tax filer has been
identified as failing to file and reconcile for 1 tax year, but with a
modification that the policy will sunset at the end of PY 2026.
Exchanges will revert back to the 2-year policy for PY 2027. We believe
that FTR serves as an important check on improper enrollments and will
help protect low-income consumers from larger than expected tax
liabilities. However, as the Department explains in Section III.B. of
this final rule, sunsetting the rule responds to commenter concerns
that the 2-year FTR policy we proposed would present an unreasonable
impediment to continuous coverage for vulnerable persons, especially
those who traditionally have not earned an amount sufficient to require
them to file annual Federal tax returns. The Department shares
commenter concerns that the Federal tax filing and APTC reconciliation
process may be confusing to consumers who have not previously been
required to file Federal tax returns. We also understand from comments
by State Exchanges that the 2-year FTR policy has potentially helped
avoid unnecessary gaps in some consumers' coverage. Still, the risk
remains that once the 2-year FTR policy returns after PY 2026, the risk
of increased consumer tax liability also returns, including for persons
who genuinely believed they were eligible for the APTC paid on their
behalf.
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
[[Page 27216]]
risk pool that were identified the 2024 Payment Notice.
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 would qualify the taxpayer as an applicable taxpayer
according to 26 CFR 1.36B-2(b) and trusted data sources indicate that
projected income is under 100 percent of the FPL. Due to concerns
related to applicants inflating their incomes or having applications
submitted on their behalf with inflated incomes, as outlined in this
final rule, the Department determined that immediate action is
necessary to protect consumers and Federal funds. must take immediate
action to we believe it is reasonable and necessary to carry out the
alternative income verification process in this scenario. However, in
response to commenter concerns and additional reasons we outline in
Section III.B. of this final rule, the Department is finalizing the
policy to be effective only through PY 2026. Exchanges may revert back
to not setting income DMIs when an applicant's annual household income
attestation would qualify the taxpayer as an applicable taxpayer
according to 26 CFR 1.36B-2(b) and trusted data sources indicate that
projected income is under 100 percent of the FPL for PY 2027. This will
help to 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, we believe that removing Sec. 155.320(c)(5) is
important for program integrity to address the level of improper
enrollments due in large part to the enhanced premium subsidies. We too
are cognizant of commenter concerns that this policy represents an
impediment to coverage. Given this, for those reasons we outline in
section III.B. of this final rule, we are finalizing this policy so
that it is effective only through the end of PY 2026. Exchanges will
revert back to requirements laid out in Sec. 155.320(c)(5) for PY
2027. This policy respects the Department's duty to safeguard Federal
funds, while allowing the Department, Exchanges, and other interested
parties to collect additional data on these newly generated income DMIs
and their impacts on consumers and coverage to support future policy
analysis.
We are finalizing 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, 2026 coverage and the enrollee's portion of the premium
for the entire policy would be zero dollars after application of APTC
through an Exchange on the Federal platform's annual redetermination
process, all Exchanges on the Federal platform 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. This amendment is being finalized for
benefit year 2026 only for Exchanges on the Federal platform, with a
reversion to the previous policy for benefit year 2027 and beyond. We
are not finalizing this amendment for State Exchanges.
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 over half of enrollees in the Exchanges on the Federal
platform 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 will prompt action from
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 Exchanges on the Federal platform. 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.
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
temporary 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 and proper enrollment 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 final rule, 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.
[[Page 27217]]
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 also considered finalizing the modifications at Sec. 155.400(g)
as proposed, instead of sunsetting the fixed-dollar and gross-premium
thresholds after PY 2026. However, for the reasons specified earlier in
this final rule, as well as the fact that this approach will enable
interested parties to collect data regarding the impact of the removal
of the fixed-dollar and gross-premium payment thresholds in order to
inform future policy direction, we are finalizing this provision such
that the fixed-dollar and gross-premium percentage-based thresholds
will be removed as a flexibility for all Exchanges until and after PY
2026.
We considered maintaining the length of the OEP, and we considered
designating November 1 to December 15 as the OEP for all Exchanges
without flexibility, as proposed. However, based on comments, we are of
the view that setting clear parameters for the date range and duration
of the annual OEP, instead of proscribing specific OEP start and end
dates, strikes the appropriate and best balance between providing
flexibility for states and reducing the potential for adverse
selection. Additionally, we considered moving the OEP to a different
period in the calendar year--such as 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 mandating such a
dramatic shift in the OEP would cause considerable disruption to the
market. Instead, our final rule does allow flexibility for Exchanges to
start their OEP at an earlier point in the calendar year, as long as
the OEP does not extend more than 9 weeks and all plan selections made
during the OEP are effective on January 1 of the plan year.
We also considered finalizing the 150 percent FPL SEP provision as
proposed, instead of pausing the SEP until the end of PY 2026. However,
for the reasons specified in section III.8. of this final rule, as well
as the fact that this approach will enable CMS to collect data
regarding the impact of the SEP discontinuation in order to inform
future policy direction, we are finalizing this provision such that
current regulations allowing the 150 percent FPL SEP will become
effective again after PY 2026.
We are finalizing amendments to Sec. 155.420(g) to require
Exchanges on the Federal platform to conduct pre-enrollment eligibility
verification for SEPs. Specifically, we are finalizing the removal of
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 are finalizing
conducting 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. This provision will sunset
after PY 2026 and we will return to previous policy for PY 2027 as
discussed in section III.B.9. of this final rule. 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 were greater than the potential benefits of reducing
administrative burden on consumers by only verifying loss of minimum
essential coverage. We also determined that consumers will benefit from
increased verification due to its potential to limit improper
enrollments occurring without their awareness and to bring down risk in
Exchanges on the Federal platform by ensuring that only qualified
individuals are enrolling through SEPs throughout the year.
We are also finalizing the requirement that Exchanges on the
Federal platform 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 finalizing
that Exchanges must verify at least 75 percent of such new enrollments
based on the current implementation of SEP verification by Exchanges.
This provision will sunset after PY 2026 and we will return to previous
policy for PY 2027 as discussed in section III.B.9. of this final rule.
We are declining to finalize this proposal for State Exchanges. We
considered finalizing the provision with a modification for State
Exchanges to implement SEP verification for PY 2027. After
consideration of comments received regarding State administrative and
financial burden and the assertion by many State Exchanges that they do
not have similar issues with fraud, we decline to finalize the
provision for State Exchanges.
We considered not finalizing the proposal to prohibit issuers of
plans subject to EHB requirements from providing coverage for sex-trait
modifications as EHB. We also considered finalizing the proposal but
without a definition of ``specified sex-trait modification procedure.''
We also considered finalizing the proposal with the addition of a
definition of ``specified sex-trait modification procedure'' but
delaying the effective date until PY 2027. Although public comments
overwhelmingly did not support the proposal, we are finalizing the
prohibition to more closely align with statutory requirements. We also
considered finalizing the proposal exactly as proposed, that is,
without a definition of ``specific sex-trait modification procedure.''
However, we were persuaded by comments that by finalizing a definition
that includes exceptions, affected parties will have greater certainty
from consumer knowledge, issuer pricing, and issuer compliance
perspectives. This will also minimize premium impacts, since there will
be less opportunity for issuers to price for any uncertainty. While we
appreciate concerns that the provision will require issuers to modify
claims and other systems at significant cost and effort, issuers should
already have processes in place to determine when a service is an EHB
and when it is not. Therefore, we are finalizing this policy, which
will be applicable for PY 2026 and beyond.
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 ESI premiums for purposes of
calculating the premium adjustment percentage for PY 2026. We are
finalizing the proposal to change this measure to instead use a private
health insurance premium
[[Page 27218]]
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 ESI, direct purchase insurance
(which includes Medigap insurance), and property and casualty
insurance. However, we are finalizing the inclusion of 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 is 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 are finalizing the use of a
measure that includes only premiums for ESI and direct purchase
insurance, but not premiums for property and casualty, or Medigap
insurance. We sought comment in the proposed rule on the source of
premium data we proposed to 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 should continue to use ESI premiums
for purposes of calculating the premium adjustment percentage for PY
2026.
We are finalizing changing the allowable de minimis ranges in Sec.
156.140 beginning in PY 2026 to +2/-4 percentage points for all
individual and small group markets subject to AV requirements under the
EHB package, other than for expanded bronze plans, for which we are
changing to a de minimis range of +5/-4 percentage points. We are also
finalizing a revision to 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 are also finalizing
amendments to 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. In
proposing these changes, we considered delaying the implementation
until PY 2027, which was recommended by some commenters who noted that
the timing of this rule's release would make it difficult for some
issuers to take advantage of wider de minimis ranges in PY 2026.
However, we maintain that the de minimis changes proposed do not
require issuers to take additional action to revise their plan designs.
Additionally, finalizing these changes earlier allows more time for
consumers to benefit from plan designs that are more appropriate for
their needs.
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 final 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.\315\ 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.\316\ We estimate that approximately 80 percent of these small
issuers belong to larger holding groups based on the MLR data, 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 sought comment on these estimates and did not receive any
comments on these estimates. We are providing additional detail in this
final rule that we assume approximately 20 percent, or 16, of the 84
potential small issuers are in fact small issuers for purposes of this
analysis. We believe this is an overestimate, as many if not all of
these small issuers are likely to have non-health lines of business
that result in their revenues exceeding $47 million, but we use 16
small issuers for purposes of this analysis.
---------------------------------------------------------------------------
\315\ SBA. (n.d.). Table of size standards. https://www.sba.gov/document/support--table-size-standards.
\316\ CMS. (n.d.). Medical Loss Ratio Data and System Resources.
https://www.cms.gov/CCIIO/Resources/Data-Resources/mlr.html.
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We anticipate that small issuers could be impacted by the
provisions in this final rule.
We are unable to quantify the impact of these 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 will not be a
significant change in revenue for issuers since a reduction in APTC
payments will 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 policies
in this rule, issuers may experience a reduction in premium revenue.
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. The alternative policies we
considered in developing the proposed and final rules are discussed in
section V.D. of this final rule. We considered not sunsetting certain
policies in this final rule that would impose burdens on small issuers
for operational and financial changes and therefore adopt them in
perpetuity, but we determined sunsetting these policies would aid in
understanding their impact on all issuers, including small issuers. We
are of the view that none of these alternatives would both achieve the
policy objectives and goals of this final rule as previously stated and
be less burdensome to small entities.
We sought comment in the 2025 Marketplace Integrity and
Affordability proposed rule on the proposed estimates
[[Page 27219]]
and assumptions. We did not receive any comments on the assumptions in
the proposed rule.
As discussed in section V.C.17 of this final rule, we anticipate
that entities such as issuers, including small issuers, will face
regulatory review costs as a result of needing to familiarize
themselves with this final rule. The cost per entity to review this
final rule is estimated to be $595.46. The total cost for 16 small
issuers to review this rule is estimated to be $9,527.36.
In addition, section 1102(b) of the Act requires us to prepare an
RIA if a rule may have a significant impact on the operations of a
substantial number of small rural hospitals. This analysis must conform
to the provisions of section 604 of the RFA. For 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 we acknowledge that this final rule may
increase uninsurance and therefore increase uncompensated care as
discussed previously in this RIA, this final rule is not subject to
section 1102 of the Act and therefore a fulsome analysis under section
1102(b) of the Act is not required.
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.
This final rule will not impose a mandate that will result in the
expenditure by State, local, and Tribal Governments, in the aggregate,
or by the private sector, of more than $187 million in any 1 year.
G. Tribal Government and Consultation
Executive Orders 12866 and 13175 directs that significant
regulatory actions avoid undue interference with Tribal governments
\317\ and that Agencies respect Indian Tribal self-government and
sovereignty, honor Tribal treaty and other rights, and strive to meet
the responsibilities that arise from the unique legal relationship
between the Federal Government and Indian Tribal governments Indian
Tribal governments.\318\ The Department does not believe that the final
rule would implicate the requirements of Executive Orders 12866 and
13175 with respect to Tribal sovereignty. Executive Order 13175 directs
agencies to consult with Tribal officials prior to the formal
promulgation of regulations having Tribal implications. Because many
Tribal members rely on Exchange coverage and benefits provided by other
HHS programs, HHS conducts monthly outreach to Tribal officials through
the CMS Tribal Technical Advisory Group to discuss Medicare, Medicaid,
CHIP, and Exchange policies and issues, and specifically engaged the
group in a discussion of the proposed rule. In doing so, HHS has met
the requirements of Executive Order 13175.
---------------------------------------------------------------------------
\317\ Executive Order 12866 at Sec. 6(a)(3)(B).
\318\ Executive Order 13175 at Sec. 2(a).
---------------------------------------------------------------------------
H. Federalism
Executive Order 13132 establishes certain requirements that an
agency must meet when it issues a proposed rule (and subsequent final
rule) that imposes substantial direct requirement costs on State and
local governments, preempts State law, or otherwise has Federalism
implications.
In compliance with the requirement of Executive Order 13132 that
agencies examine closely any policies that may have Federalism
implications or limit the policy making discretion of the States, we
have engaged in efforts to consult with and work cooperatively with
affected States, including participating in conference calls with and
attending conferences of the NAIC, and consulting with State insurance
officials on an individual basis.
While developing this final rule, we attempted to balance the
States' interests in regulating health insurance issuers with the need
to ensure market stability. By doing so, we complied with the
requirements of Executive Order 13132.
Because States have flexibility in designing their Exchange and
Exchange-related programs, State decisions will ultimately influence
both administrative expenses and overall premiums. States are not
required to establish an Exchange. 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, 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 will 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 policies will 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 final rule will start the OEP 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 OEP, 19 of 20
State Exchanges ended their OEP on or after January 15 of benefit year
and one began before November 1 of the benefit year. This has
Federalism implications because it will 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 this final rule will preempt State law only to the
extent such State law would prevent the application of these
rules.\319\
---------------------------------------------------------------------------
\319\ See section 1321(d) of the ACA.
---------------------------------------------------------------------------
This final rule also has Federalism implications as related to the
provision finalizing a prohibition on coverage of specified sex-trait
modification procedures as EHB. We understand that some States believe
sex-trait modification services must be covered pursuant to State
nondiscrimination laws, one State requires coverage of sex-trait
modification services as EHB by virtue of explicitly adding it to its
EHB-benchmark plan through the process described at Sec.
156.111(a)(1), and some States consider sex-trait modification services
to be covered as EHB because it is included in their State EHB-
benchmark plan, even though they did not update their EHB-benchmark
plan. If these States want to require coverage
[[Page 27220]]
of specified sex-trait modification procedures, as finalized in this
rule, they will need to mandate that coverage outside of the EHB-
benchmark update process at Sec. 156.111(a)(2) and defray the cost.
However, as noted earlier in this final rule, we believe that such
costs would be very small, as reflected by both low utilization and
comments made in response to the proposed rule that costs are at most
minuscule and may in fact be cost-neutral. Further, we note that
Colorado, when it updated its EHB-benchmark plan to include sex-trait
modification procedures, estimated that adding such benefits would have
a 0.04 percent cost impact.
This final regulation is subject to the Congressional Review Act
provisions of the Small Business Regulatory Enforcement Fairness Act of
1996 (5 U.S.C. 801 et seq.) and has been transmitted to the Congress
and the Comptroller General for review.
Mehmet Oz, Administrator of the Centers for Medicare & Medicaid
Services, approved this document on June 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 amends 45 CFR
subtitle A, subchapter B as set forth below.
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 paragraph (b)(2)(i)(G); and
0
c. Revising 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).
* * * * *
(i) Coverage denials for failure to pay premiums for prior
coverage. To the extent permitted by applicable State law, a health
insurance issuer may deny coverage to an individual or employer due to
the individual's or employer's failure to pay premiums owed under a
prior policy, certificate, or contract of insurance offered by the
issuer (or, if the issuer is a member of a controlled group (as defined
in Sec. 147.106(d)(4)), any other issuer that is member of such
controlled group), including by attributing payment of premium for a
new policy, certificate, or contract of insurance to the prior policy,
certificate, or contract of insurance, provided the issuer applies its
past-due premium payment policy uniformly to all individuals or
employers in similar circumstances in the applicable market and State
regardless of health status, and consistent with applicable
nondiscrimination requirements, and does not condition the effectuation
of new coverage on payment of past-due premiums by any individual other
than the person contractually responsible for the payment of premium.
The amount of the past-due premium an issuer may require for this
purpose is subject to any premium payment threshold the issuer has
adopted pursuant to Sec. 155.400(g) of this subchapter. The Secretary
may specify additional clarifications of acceptable parameters for
coverage denials for failure to pay premiums for prior coverage in
guidance.
* * * * *
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 additions 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.
* * * * *
[[Page 27221]]
(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 revising paragraph (f)(4) introductory
text and adding paragraph (f)(4)(iii) to read as follows:
Sec. 155.305 Eligibility standards.
* * * * *
(f) * * *
(4) Compliance with filing requirement. Except as set forth in
paragraph (f)(4)(iii) of this section, the Exchange may not determine a
tax filer eligible for advance payments of the premium tax credit
(APTC) 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 2-
consecutive years for which tax data would be utilized for verification
of household income and family size in accordance with Sec.
155.320(c)(1)(i), and the tax filer or the tax filer's spouse did not
comply with the requirement to file an income tax return for that year
and for the previous year as required by 26 U.S.C. 6011, 6012, and in
26 CFR chapter I, and reconcile APTC for that period.
* * * * *
(iii) For plan year 2026 only, an 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 payments 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.
(A) 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:
(1) 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
(2) 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 their enrollee, or the tax filer's
spouse, if the tax filer is married, has failed to file and reconcile.
(B) [Reserved]
* * * * *
Sec. 155.315 [Amended]
0
7. Section 155.315 is amended by removing paragraph (f)(7).
0
8. Section 155.320 is amended by revising paragraph (c)(3)(iii)(A),
adding paragraph (c)(3)(vi)(C)(2), and revising (c)(5) to read as
follows:
Sec. 155.320 Verification process related to eligibility for
insurance affordability programs.
* * * * *
(c) * * *
(3) * * *
(iii) * * *
(A) For plan years before plan year 2027, except as specified in
paragraphs (c)(3)(iii)(B), (C), and (D) of this section, if an
applicant's attestation to projected annual household income, as
described in paragraph (c)(3)(ii)(B) of this section, would qualify the
tax payer as an applicable taxpayer according to 26 CFR 1.36B-2(b) 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 of the 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) For plan years before plan year 2027, if the data described in
paragraph (c)(3)(vi)(A) of this section indicates that projected annual
household income is under 100 percent of the FPL and the applicant's
attestation to projected household income, as described in paragraph
(c)(3)(ii)(B) of this section, would qualify the tax payer as an
applicable taxpayer according to 26 CFR 1.36B-2(b) 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.
* * * * *
(5) Acceptance of attestation. For plan years 2027 and after,
notwithstanding any other requirement described in this paragraph (c)
to the contrary, when the Exchange requests tax return data and family
size from the Secretary of Treasury as described in paragraph
(c)(1)(i)(A) of this section but no such data is returned for an
applicant, the Exchange will accept that applicant's attestation of
income and family size without further verification.
* * * * *
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:
[[Page 27222]]
Sec. 155.335 Annual eligibility redetermination.
(a) * * *
(3) The annual redeterminations described in paragraph (a)(2)(ii)
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. For benefit year 2026 annual
redeterminations, if an enrollee does not submit an application for an
updated eligibility determination for the immediately forthcoming
coverage year (2026) on or before the last day on which a plan
selection must be made for coverage effective January 1, 2026, in
accordance with the effective dates specified in Sec. 155.410(f), and
the enrollee's portion of the premium for a policy after the
application of advance payments of the premium tax credit through the
annual redetermination process would be zero dollars, the Exchange on
the Federal platform must decrease the amount of the advance payment
applied to the policy such that the remaining monthly premium owed for
the policy equals $5.
0
10. Section 155.400 is amended by revising paragraph (g) introductory
text, paragraph (g)(2), and paragraph (g)(3) introductory text to read
as follows:
Sec. 155.400 Enrollment of qualified individuals into QHPs.
* * * * *
(g) Premium payment threshold. Except as otherwise provided in this
paragraph, Exchanges may, and the Federally-facilitated Exchanges and
State-Based Exchanges on the Federal platform will, until December 31,
2026, 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. Effective beginning January 1, 2027, an
Exchange may allow issuers to implement a percentage-based premium
payment threshold policy (which can be based on either the net premium
after application of advance payments of the premium tax credit or
gross premium) and/or a fixed-dollar premium payment threshold policy,
provided that the threshold and policy are applied in a uniform manner
to all applicants and enrollees.
* * * * *
(2) Effective beginning January 1, 2027, under a gross premium
percentage-based premium payment threshold policy, issuers can consider
enrollees to have paid all amounts due for the following purposes, if
the enrollees pay an amount sufficient to maintain a percentage of the
gross premium of the policy before the application of advance payments
of the premium tax credit that is equal to or greater than 98 percent
of the gross monthly premium owed by the enrollees. If an enrollee
satisfies the gross premium percentage-based premium payment threshold
policy, the issuer may:
(i) Avoid triggering a grace period for non-payment of premium, as
described by Sec. 156.270(d) of this subchapter or a grace period
governed by State rules.
(ii) Avoid terminating the enrollment for non-payment of premium
as, described by Sec. Sec. 156.270(g) of this subchapter and
155.430(b)(2)(ii)(A) and (B).
(3) Effective beginning January 1, 2027, under a fixed-dollar
premium payment threshold policy, issuers can consider enrollees to
have paid all amounts due for the following purposes, if the enrollees
pay an amount that is less than the total premium owed, the unpaid
remainder of which is equal to or less than a fixed-dollar amount of
$10 or less, adjusted for inflation, as prescribed by the issuer. If an
enrollee satisfies the fixed-dollar premium payment threshold policy,
the issuer may:
* * * * *
0
11. Section 155.410 is amended by--
0
a. Revising paragraph (e)(4) introductory text;
0
b. Adding paragraph (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, 2026--
* * * * *
(5) For benefit years beginning on or after January 1, 2027--
(i) The annual open enrollment period for all Exchanges must begin
no later than November 1 and must end no later than December 31 of the
calendar year preceding the benefit year.
(ii) The annual open enrollment period must not exceed 9 weeks in
duration.
(f) * * *
(3) For benefit years beginning on January 1, 2022, through January
1, 2026, the Exchange must ensure that coverage is effective--
* * * * *
(4) For benefit years beginning on or after January 1, 2027, the
Exchange must ensure that coverage is effective January 1, for QHP
selections received by the Exchange on or before December 31 of the
calendar year preceding the benefit year.
* * * * *
0
12. Section 155.420 is amended by revising paragraphs (a)(4)(ii)(D),
(a)(4)(iii) introductory text, (b)(2)(vii), (d)(16), and (g) to read as
follows:
Sec. 155.420 Special enrollment periods.
(a) * * *
(4) * * *
(ii) * * *
(D) Beginning plan year 2027, if an enrollee or his or her enrolled
dependents qualify for a special enrollment period in accordance with
paragraph (d)(16) of this section, the Exchange must allow the enrollee
and his or her enrolled dependents to change to any available silver-
level QHP if they elect to change their QHP enrollment. If a qualified
individual or a dependent who is not an enrollee qualifies for a
special enrollment period in accordance with paragraph (d)(16) of this
section and has one or more household members who are enrollees, the
Exchange must allow the enrollee to add the newly enrolling household
[[Page 27223]]
member to his or her current QHP; or, to change to a silver-level QHP
and add the newly enrolling household member to this silver-level QHP;
or, to change to a silver level QHP and enroll the newly enrolling
qualified individual or dependent in a separate QHP;
(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,
and beginning in plan year 2027, paragraph (d)(16) of this section:
* * * * *
(b) * * *
(2) * * *
(vii) Beginning plan year 2027, if a qualified individual or
enrollee, or the dependent of a qualified individual or enrollee, who
is eligible for advance payments of the premium tax credit, and whose
household income, as defined in 26 CFR 1.36B-1(e), is expected to be no
greater than 150 percent of the Federal poverty level, enrolls in a QHP
or changes from one QHP to another one time per month in accordance
with paragraph (d)(16) of this section, the Exchange must ensure that
coverage is effective in accordance with paragraph (b)(1) of this
section or on the first day of the month following plan selection, at
the option of the Exchange.
* * * * *
(d) * * *
(16) Beginning plan year 2027, at the option of the Exchange, a
qualified individual or enrollee, or the dependent of a qualified
individual or enrollee, who is eligible for advance payments of the
premium tax credit, and whose household income, as defined in 26 CFR
1.36B-1(e), is expected to be at or below 150 percent of the Federal
poverty level, may enroll in a QHP or change from one QHP to another
one time per month.
* * * * *
(g) Special enrollment period verification. Beginning January 1,
2026 unless a request for modification is granted in accordance with
Sec. 155.315(h), Exchanges on the Federal platform must conduct pre-
enrollment verification of applicants' eligibility for special
enrollment periods under this section. An Exchange meets this
requirement if it verifies eligibility each plan year for the number of
individuals newly enrolling in Exchange coverage through special
enrollment periods that equals at least 75 percent of all special
enrollments based on prior year 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. This requirement will apply through December
31st 2026, unless it is renewed through rulemaking prior to that date.
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 specified sex-trait modification procedures (as defined
at Sec. 156.400) 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 specified sex-trait
modification procedures (as defined at Sec. 156.400) as EHB.
0
15. 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
16. Section 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
17. Section 156.400 is amended by revising the definition of ``De
minimis variation for a silver plan variation'' and adding a definition
of ``Specified sex-trait modification procedure'' in alphabetical order
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.
* * * * *
Specified sex-trait modification procedure means any pharmaceutical
or surgical intervention that is provided for the purpose of attempting
to align an individual's physical appearance or body with an asserted
identity that differs from the individual's sex either by:
(1) Intentionally disrupting or suppressing the normal development
of natural biological functions, including primary or secondary sex-
based traits; or
(2) Intentionally altering an individual's physical appearance or
body, including amputating, minimizing or destroying primary or
secondary sex-based traits such as the sexual and reproductive organs.
(3) This term does not include procedures undertaken:
(i) To treat a person with a medically verifiable disorder of
sexual development; or
(ii) For purposes other than attempting to align an individual's
physical appearance or body with an
[[Page 27224]]
asserted identity that differs from the individual's sex.
* * * * *
Robert F. Kennedy, Jr.,
Secretary, Department of Health and Human Services.
[FR Doc. 2025-11606 Filed 6-23-25; 4:15 pm]
BILLING CODE 4120-01-P