[Federal Register Volume 76, Number 136 (Friday, July 15, 2011)]
[Proposed Rules]
[Pages 41865-41927]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-17610]



[[Page 41865]]

Vol. 76

Friday,

No. 136

July 15, 2011

Part II





Department of Health and Human Services





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45 CFR Parts 155 and 156





Patient Protection and Affordable Care Act; Establishment of Exchanges 
and Qualified Health Plans; Proposed Rule

Federal Register / Vol. 76 , No. 136 / Friday, July 15, 2011 / 
Proposed Rules

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

45 CFR Parts 155 and 156

[CMS-9989-P]
RIN 0938-AQ67


Patient Protection and Affordable Care Act; Establishment of 
Exchanges and Qualified Health Plans

AGENCY: Department of Health and Human Services.

ACTION: Proposed rule.

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SUMMARY: This proposed rule would implement the new Affordable 
Insurance Exchanges (``Exchanges''), consistent with title I of the 
Patient Protection and Affordable Care Act of 2010 (Pub. L. 111-148) as 
amended by the Health Care and Education Reconciliation Act of 2010 
(Pub. L. 111-152), referred to collectively as the Affordable Care Act. 
The Exchanges will provide competitive marketplaces for individuals and 
small employers to directly compare available private health insurance 
options on the basis of price, quality, and other factors. The 
Exchanges, which will become operational by January 1, 2014, will help 
enhance competition in the health insurance market, improve choice of 
affordable health insurance, and give small businesses the same 
purchasing clout as large businesses.
    A detailed Preliminary Regulatory Impact Analysis associated with 
this proposed rule is available at http://cciio.cms.gov under 
``Regulations and Guidance.'' A summary of the aforementioned analysis 
is included as part of this proposed rule.

DATES: To be assured consideration, comments must be received at one of 
the addresses provided below, no later than 5 p.m. Eastern Standard 
Time (EST) on September 28, 2011.

ADDRESSES: In commenting, please refer to file code CMS-9989-P. Because 
of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    You may submit comments in one of four ways (please choose only one 
of the ways listed):
    1. Electronically. You may submit electronic comments on this 
regulation to http://www.regulations.gov. Follow the instructions under 
the ``More Search Options'' tab.
    2. By regular mail. You may mail written comments to the following 
address ONLY: Centers for Medicare & Medicaid Services, Department of 
Health and Human Services, Attention: CMS-9989-P, P.O. Box 8010, 
Baltimore, MD 21244-8010.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By express or overnight mail. You may send written comments to 
the following address ONLY: Centers for Medicare & Medicaid Services, 
Department of Health and Human Services, Attention: CMS-9989-P, Mail 
Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
    4. By hand or courier. If you prefer, you may deliver (by hand or 
courier) your written comments before the close of the comment period 
to either of the following addresses:
    a. For delivery in Washington, DC--Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, Room 445-G, Hubert 
H. Humphrey Building, 200 Independence Avenue, SW., Washington, DC 
20201.
    (Because access to the interior of the Hubert H. Humphrey Building 
is not readily available to persons without Federal government 
identification, commenters are encouraged to leave their comments in 
the CMS drop slots located in the main lobby of the building. A stamp-
in clock is available for persons wishing to retain a proof of filing 
by stamping in and retaining an extra copy of the comments being 
filed.)
    b. For delivery in Baltimore, MD--Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, 7500 Security 
Boulevard, Baltimore, MD 21244-1850.
    If you intend to deliver your comments to the Baltimore address, 
please call telephone number (410) 786-9994 in advance to schedule your 
arrival with one of our staff members.
    Comments mailed to the addresses indicated as appropriate for hand 
or courier delivery may be delayed and received after the comment 
period.
    Submission of comments on paperwork requirements. You may submit 
comments on this document's paperwork requirements by following the 
instructions at the end of the ``Collection of Information 
Requirements'' section in this document. For information on viewing 
public comments, see the beginning of the ``SUPPLEMENTARY INFORMATION'' 
section.

FOR FURTHER INFORMATION CONTACT:
Laurie McWright at (301) 492-4372 for general information matters.
Alissa DeBoy at (301) 492-4428 for general information and matters 
related to part 155.
Michelle Strollo at (301) 492-4429 for matters related to enrollment.
Pete Nakahata at (202) 680-9049 for matters related to part 156.

SUPPLEMENTARY INFORMATION:

Abbreviations

    Affordable Care Act--The Affordable Care Act of 2010 (which is 
the collective term for the Patient Protection and Affordable Care 
Act (Pub. L. 111-148) and the Health Care and Education 
Reconciliation Act (Pub. L. 111-152))

BHP Basic Health Program
CAHPS Consumer Assessment of Healthcare Providers and Systems
CHIP Children's Health Insurance Program
CMS Centers for Medicare & Medicaid Services
DOL U.S. Department of Labor
ERISA Employee Retirement Income Security Act (29 U.S.C. section 
1001, et seq.)
FEHBP Federal Employees Health Benefits Program
HEDIS Healthcare Effectiveness Data and Information Set
HHS U.S. Department of Health and Human Services
HIPAA Health Insurance Portability and Accountability Act of 1996 
(Pub. L. 104-191)
HMO Health Maintenance Organization
IHS Indian Health Service
IRS Internal Revenue Service
NAIC National Association of Insurance Commissioners
NCQA National Committee for Quality Assurance
OMB Office of Management and Budget
OPM Office of Personnel Management
PBM Pharmacy Benefit Manager
PHS Act Public Health Service Act
PPO Preferred Provider Organization
QHP Qualified Health Plan
SHOP Small Business Health Options Program
SSA Social Security Administration
The Act Social Security Act
The Code Internal Revenue Code of 1986

    Executive Summary: Starting in 2014, individuals and small 
businesses will be able to purchase private health insurance through 
State-based competitive marketplaces called Affordable Insurance 
Exchanges, or ``Exchanges.'' Exchanges will offer Americans 
competition, choice, and clout. Insurance companies will compete for 
business on a level playing field, driving down costs. Consumers will 
have a choice of health plans to fit their needs. And Exchanges will 
give individuals and small businesses the same purchasing clout as big 
businesses. The Departments of Health and Human Services, Labor, and 
the Treasury (the Departments) are working in close coordination to 
release guidance related to Exchanges in several phases. The first in 
this series was a Request for Comment relating to Exchanges, published 
in the Federal Register on August 3, 2010 (75 FR 45584). Second,

[[Page 41867]]

Initial Guidance to States on Exchanges was issued on November 18, 
2010. Third, a proposed rule for the application, review, and reporting 
process for waivers for State innovation was published in the Federal 
Register on March 14, 2011 (76 FR 13553). Fourth, two proposed 
regulations, including this one, are published in this issue of the 
Federal Register to implement components of the Exchange and health 
insurance premium stabilization policies in the Affordable Care Act.
    This proposed rule: (1) Sets forth the Federal requirements that 
States must meet if they elect to establish and operate an Exchange; 
(2) outlines minimum requirements that health insurance issuers must 
meet to participate in an Exchange and offer qualified health plans 
(QHPs); and (3) provides basic standards that employers must meet to 
participate in the Small Business Health Options Program (SHOP). The 
intent of this proposed rule is to afford States substantial discretion 
in the design and operation of an Exchange. Greater standardization is 
proposed where required by the statute or where there are compelling 
practical, efficiency or consumer protection reasons. This proposed 
rule does not address all of the Exchange provisions in the Affordable 
Care Act; additional guidance on the establishment and operation of 
Exchanges will be provided in forthcoming proposed rules.
    Submitting Comments: We welcome comments from the public on all 
issues set forth in this proposed rule to assist us in fully 
considering issues and developing policies. Comments will be most 
useful if they are organized by the section of the proposed rule to 
which they apply. You can assist us by referencing the file code [CMS-
9989-P] and the specific ``issue identifier'' that precedes the section 
on which you choose to comment.
    Inspection of Public Comments: All comments received before the 
close of the comment period are available for viewing by the public, 
including any personally identifiable or confidential business 
information that is included in a comment. We post all electronic 
comments received before the close of the comment period on the 
following public Web site as soon as possible after they have been 
received: http://www.regulations.gov. Follow the search instructions on 
that Web site to view public comments. Comments received timely will be 
available for public inspection as they are received, generally 
beginning approximately 3 weeks after publication of a document, at 
Room 445-G, Department of Health and Human Services, Hubert H. Humphrey 
Building, 200 Independence Avenue, SW., Washington, DC 20201, Monday 
through Friday of each week from 8:30 a.m. to 4 p.m. to schedule an 
appointment to view public comments, call 1-800-743-3951.

Table of Contents

I. Background
    A. Legislative Overview
    1. Legislative Requirements for Establishing Exchanges
    2. Legislative Requirements for Related Provisions
    B. Request for Comment
    C. Structure of the Proposed Rule
II. Provisions of the Proposed Regulation
    A. Part 155--Exchange Establishment Standards and Other Related 
Standards Under the Affordable Care Act
    1. Subpart A--General Provisions
    2. Subpart B--General Standards Related to the Establishment of 
an Exchange by a State
    3. Subpart C--General Functions of an Exchange
    4. Subpart D--Reserved
    5. Subpart E--Exchange Functions in the Individual Market: 
Enrollment in Qualified Health Plans
    6. Subpart F--Reserved
    7. Subpart G--Reserved
    8. Subpart H--Exchange Functions: Small Business Health Options 
Program (SHOP)
    9. Subpart I--Reserved
    10. Subpart J--Reserved
    11. Subpart K--Exchange Functions: Certification of Qualified 
Health Plans
    B. Part 156--Health Insurance Issuer Standards Under the 
Affordable Care Act, Including Standards Related to Exchanges
    1. Subpart A--General Provisions
    2. Subpart B--Reserved
    3. Subpart C--Qualified Health Plan Minimum Certification 
Standards
III. Collection of Information Requirements
IV. Summary of Regulatory Impact Analysis
V. Regulatory Flexibility Act
VI. Unfunded Mandates
VII. Federalism
VIII. Regulations Text

I. Background

A. Legislative Overview

1. Legislative Requirements for Establishing Exchanges
    Section 1311(b) and section 1321(b) of the Affordable Care Act 
provide that each State has the opportunity to establish an Exchange(s) 
that: (1) Facilitates the purchase of insurance coverage by qualified 
individuals through qualified health plans (QHPs); (2) assists 
qualified employers in the enrollment of their employees in QHPs; and 
(3) meets other requirements specified in the Affordable Care Act.
    Section 1321 of the Affordable Care Act discusses State flexibility 
in the operation and enforcement of Exchanges and related requirements. 
In this proposed rule, we aim to encourage State flexibility within the 
boundaries of the law. Each State electing to establish an Exchange 
must adopt the Federal standards contained in this law and in this 
proposed rule, or have in effect a State law or regulation that 
implements these Federal standards. Section 1311(k) further specifies 
that Exchanges may not establish rules that conflict with or prevent 
the application of regulations promulgated by the Secretary. Section 
1311(d) describes the minimum functions of an Exchange, including the 
certification of QHPs.
    Section 1321(c)(1) requires the Secretary to establish and operate 
such Exchange within States that either: (1) Do not elect to establish 
an Exchange, or (2) as determined by the Secretary on or before January 
1, 2013, will not have an Exchange operable by January 1, 2014. Section 
1321(a) also 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 
Affordable Care Act.
    Unless otherwise specified, the provisions in this proposed rule 
related to the establishment of minimum functions of an Exchange are 
based on the general authority of the Secretary under section 
1321(a)(1) of the Affordable Care Act. Section 1321(a)(2) requires the 
Secretary to engage in consultation to ensure balanced representation 
among interested parties. We describe the consultation activities the 
Secretary has undertaken later in this introduction.
2. Legislative Requirements for Related Provisions
    Subtitle K of title II of the Affordable Care Act, Protections for 
American Indians and Alaska Natives, section 2901, extends special 
benefits and protections to Indians including limits on cost sharing 
and payer of last resort requirements for health programs operated by 
the Indian Health Service (IHS), Indian tribes, tribal organizations, 
and urban Indian organizations. We propose some provisions under this 
authority in subpart C of part 156, and we expect to address others in 
future rulemaking.
    Section 6005 of the Affordable Care Act creates new section 1150A 
of the Act, which requires QHP issuers, and sponsors of certain plans 
offered under part D or title XVIII of the Act, to provide data on the 
cost and distribution of prescription drugs covered by the plan. We 
propose to

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codify these requirements under this authority in part 156, subpart C.

B. Stakeholder Consultation and Input

    On August 3, 2010, HHS published a Request for Comment (the RFC) 
inviting the public to provide input regarding the rules that will 
govern the Exchanges. In particular, HHS asked States, tribal 
representatives, consumer advocates, employers, insurers, and other 
interested stakeholders to comment on the types of standards Exchanges 
should be required to meet. The comment period closed on October 4, 
2010. This proposed rule does not directly respond to comments from the 
RFC; however, the comments received are described at the beginning of 
each subpart and referred to, where applicable, when discussing 
specific regulatory proposals.
    The public response to the RFC yielded comment submissions from 
consumer advocacy organizations, medical and health care professional 
trade associations and societies, medical and health care professional 
entities, health insurers, insurance trade associations, members of the 
general public, and employer organizations. The majority of the 
comments were related to the general functions and requirements for 
Exchanges, QHPs, eligibility and enrollment, and coordination with 
Medicaid. We intend to respond to comments from the RFC, along with 
comments received on this proposed rule, as part of the final rule.
    In addition to the RFC, HHS has consulted with stakeholders through 
weekly meetings with the National Association of Insurance 
Commissioners (NAIC), regular contact with States through the Exchange 
grant process, and meetings with tribal representatives, health 
insurance issuers, trade groups, consumer advocates, employers, and 
other interested parties. This consultation will continue throughout 
the development of Exchange guidance.

C. Structure of the Proposed Rule

    The regulations outlined in this notice of proposed rulemaking will 
be codified in the new 45 CFR parts 155 and 156. Part 155 outlines the 
proposed standards for States relative to the establishment of 
Exchanges and outlines the proposed standards required of Exchanges 
related to minimum Exchange functions. Part 156 outlines the proposed 
standards for health insurance issuers with respect to participation in 
an Exchange, including the minimum certification requirements for QHPs. 
Many provisions in part 155 have parallel requirements under part 156 
because the Affordable Care Act creates complementary responsibilities 
for Exchanges and QHP issuers. Where possible, there are cross-
references between parts 155 and 156 to avoid redundancy.
    Subjects included in the Affordable Care Act to be addressed in 
separate rulemaking include but are not limited to: (1) Standards for 
individual eligibility for participation in the Exchange, advance 
payments of the premium tax credit, cost-sharing reductions, and 
related health programs and appeals of eligibility determinations; (2) 
standards outlining the Exchange process for issuing certificates of 
exemption from the individual responsibility requirement and payment 
under section 1411(a)(4); (3) defining essential health benefits, 
actuarial value and other benefit design standards; and (4) standards 
for Exchanges and QHP issuers related to quality.
    We note that the health plan standards set forth under this 
proposed rule are, for the most part, strictly related to QHPs offered 
through the Exchange and not the entire individual and small group 
market. Various sections added to the Public Health Service (PHS) Act, 
and incorporated by reference into ERISA and the Code, by the 
Affordable Care Act extend some of the requirements in this proposed 
rule to the non-QHP market. Such requirements for the entire individual 
and small and large group markets already have been, and will continue 
to be, addressed in separate rulemaking issued by HHS, and the 
Departments of Labor and the Treasury.

II. Provisions of the Proposed Regulation

A. Part 155--Exchange Establishment Standards and Other Related 
Standards Under the Affordable Care Act

1. Subpart A--General Provisions
a. Basis and Scope (Sec.  155.10)
    Section 155.10 of subpart A specifies the general statutory 
authority for and scope of standards proposed in part 155 that 
establish minimum requirements for the State option to establish an 
Exchange, minimum Exchange functions, enrollment periods, minimum SHOP 
functions, and certification of QHPs. In general, this NPRM is based on 
the broad rulemaking authority of 1321(a)(1) as well as other specific 
statutory provisions identified in the preamble where appropriate.
b. Definitions (Sec.  155.20)
    Under Sec.  155.20, we set forth definitions for terms that are 
used throughout part 155. For the most part, the definitions presented 
in Sec.  155.20 are taken directly from the Affordable Care Act or from 
existing regulations, unless otherwise specified. Some new definitions 
were created for the purposes of carrying out regulations proposed in 
part 155. When a term is defined in part 155 other than in subpart A, 
the definition of the term is applicable only to the relevant subpart 
or section. The application of the terms defined in this section is 
limited to this proposed rule.
    Several terms are defined by the Affordable Care Act, including 
``individual market'' (section 1304(a)(2)), ``small group market'' 
(section 1304(b)(2)), ``qualified employer'' (section 1312(f)(2)), 
``qualified individual'' (section 1312(f)(1)), ``qualified health 
plan'' (section 1301(a)(1)), ``cost sharing'' (section 1302(c)(3)), 
``Navigator'' (section 1311(i)), ``plain language'' (section 
1311(e)(3)(B)), ``health plan'' (section 1301(b)(1)), ``eligible 
employer-sponsored plan'' and ``minimum essential coverage'' (section 
5000A(f)(1) of the Code, as added by section 1501(f)), ``large 
employer'' and ``small employer'' (section 1304(b)), and ``State'' 
(section 1304(d)). The term ``Code'' refers to the Internal Revenue 
Code of 1986.
    The definition for an ``Exchange'' in Sec.  155.20 is drawn from 
the statutory text in section 1311(d)(1) and 1311(d)(2)(A). We 
interpret section 1321(c) of the Affordable Care Act to mean that this 
definition includes an Exchange established or operated by the Federal 
government if a State does not establish an Exchange. Also, pursuant to 
section 1311(b)(1)(B), we interpret the term ``Exchange'' to be 
inclusive of the operation of a SHOP, which we define based on that 
section as well.
    Some definitions were taken from other interim final regulations 
issued previously pursuant to the Affordable Care Act, including the 
term ``lawfully present'' from Sec.  152.2 of this chapter and the term 
``grandfathered plan'' from Sec.  147.140 of this chapter. The 
definitions for the terms ``group health plan,'' ``health insurance 
issuer,'' and ``health insurance coverage'' are cross-referenced to the 
definitions established in Sec.  144.103. The definition for the term 
``employee'' is taken from the PHS Act, which refers to section 3(6) of 
ERISA. Under ERISA, the term employee means any individual employed by 
an employer. The definition of ``employer'' is taken as well from the 
PHS Act, which refers to section 3(5) of ERISA. We note that coverage 
for only a sole proprietor, certain owners of S corporations, and 
certain relatives of

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each of the above would not constitute a group health plan under ERISA 
section 732(a) (29 U.S.C. section 1191a(a)) and would not be entitled 
to purchase in the small group market under Federal law.
    We create several definitions regarding eligibility and enrollment 
for the purpose of this proposed rule, including ``advance payments of 
the premium tax credit,'' ``annual open enrollment period,'' 
``applicant,'' ``cost-sharing reductions,'' ``initial enrollment 
period,'' and ``special enrollment period.'' Several other definitions 
used throughout this proposed rule are established for various 
purposes, including the terms: ``agent or broker,'' ``benefit year,'' 
``enrollee,'' ``plan year,'' and ``Exchange service area.''
    In the following paragraphs, we discuss the proposed definitions 
where more clarity is warranted. We note that we interpret the term 
``cost sharing'' as defined in section 1302(c)(3) of the Affordable 
Care Act to apply to payments for deductibles, copayments, coinsurance 
or similar charges related to the essential health benefits only. This 
is consistent with the definition of actuarial value in section 
1302(d)(2) of the Affordable Care Act, which specifies that actuarial 
value shall apply only to the essential health benefits; section 
1402(c)(4), which applies cost-sharing reductions only to essential 
health benefits; and section 1302(c)(3)(ii), which applies any other 
payments only to essential health benefits.
    The term ``qualified employer'' is defined in section 1312(f)(2) of 
the Affordable Care Act as a small employer that elects to make, at a 
minimum, all full-time employees eligible for coverage in a qualified 
health plan. While the definition indicates that a qualified employer 
is a ``small employer,'' the Affordable Care Act provides that, 
beginning in 2017, States will have the option to allow issuers to 
offer QHPs in the large group market through the SHOP. The Affordable 
Care Act also defines a small employer, for the purposes of health 
coverage, as an employer with at least one but not more than 100 
employees. Pursuant to 1304(b)(3), each State has the option to limit 
small employers to having no more than 50 employees until 2016. We 
clarify that the scope of the term qualified employer is expected to 
vary among States and over time. The term ``qualified employee'' refers 
to employees offered coverage through a SHOP by a qualified employer.
    We propose several terms to define an individual's participation in 
an Exchange at different periods in the process for individuals, 
employers, or employees. The terms are ``applicant,'' ``qualified 
individual/qualified employer/qualified employee,'' and ``enrollee.'' 
An applicant is an individual who is seeking an eligibility 
determination to enroll in a QHP in the Exchange, to receive advance 
payments of the premium tax credit or cost-sharing reductions, or to 
receive benefits through other State health programs. In the context of 
a SHOP, the term applicant indicates an employer or employee. The term 
``qualified individual'' is based on section 1312(f)(1) of the 
Affordable Care Act. Although the Affordable Care Act does not 
specifically indicate in section 1312(f)(1) that a qualified individual 
is one who has been determined eligible to participate in an Exchange, 
we have interpreted it and propose to use the term to mean that the 
individual has been determined eligible based on the context in which 
the term is used in other provisions. For example, section 
1312(d)(3)(C) states that ``a qualified individual may enroll in any 
qualified health plan'' and section 1311(d)(2) states that ``an 
Exchange shall make available qualified health plans to qualified 
individuals and qualified employers.'' These provisions suggest that a 
qualified individual is one who is already determined eligible to 
participate in an Exchange. Similarly, ``qualified employee'' and 
``qualified employer'' are terms to indicate an employee or employer 
that has been determined eligible to participate in a SHOP.
    We propose to use the term ``enrollee'' to describe a qualified 
individual or qualified employee who has enrolled in a QHP. Although 
not a defined term, we use the word ``consumer'' throughout discussion 
in this NPRM. We generally use the term to mean qualified individuals, 
qualified employers, or qualified employees, as indicated by the 
context. In some places, the term may be used to generally describe any 
potential purchaser of health coverage.
    For the purposes of this proposed rule, any reference to the term 
``issuer,'' meaning a health insurance issuer, qualified health plan 
issuer, or QHP issuer, is used in making reference to requirements on 
or actions taken by the entity that offers health plans. A ``health 
plan,'' ``qualified health plan,'' or ``QHP'' is defined as a discrete 
combination of benefits and cost-sharing that is offered by a health 
insurance issuer and in which an individual or group can enroll.
    We propose to define ``health plan'' in accordance with section 
1301(b)(1) of the Affordable Care Act to encompass health insurance 
coverage and a group health plan. The Affordable Care Act specifies 
that, except to the extent specified, the term ``health plan'' shall 
not include a group health plan or multiple employer welfare 
arrangement (MEWA) to the extent the plan or arrangement is not subject 
to State insurance regulation under section 514 of ERISA. However, we 
recognize that section 514 of ERISA allows State regulations of MEWAs, 
provided that such regulation does not conflict with standards of 
ERISA. We request comment on how to reconcile this inconsistency. We 
have also received questions about whether Taft-Hartley plans and 
church plans can participate in the Exchange. We request comment on how 
such plans could potentially provide coverage opportunities through the 
Exchange.
    We recognize that the term health plan is sometimes used 
colloquially in a way that is interchangeable with health insurance 
issuer, but for the sake of clarity we refer to the entity offering 
coverage as the issuer and the coverage being purchased as the health 
plan within this proposed rule.
    For the purposes of this proposed rule, the term ``qualified health 
plan'' denotes a health plan that is certified to be offered through an 
Exchange as a QHP, while a ``qualified health plan issuer'' is an 
issuer that is subject to requirements in this proposed rule related to 
the offering of QHPs through the Exchange. We note that ``QHP issuer'' 
and ``health insurance issuer'' generally refer to the same entity, but 
the former is used to describe a health insurance issuer that is 
offering a QHP through an Exchange, and therefore, must meet the 
requirements set forth in this NPRM related to such offerings. As a 
general theme, we use the word ``qualified'' to denote an individual or 
an entity eligible to participate, where applicable, in an Exchange or 
a product eligible to be offered through the Exchange. In this proposed 
rule, ``qualified health plan'' only refers to those QHPs that are 
certified by and offered through an Exchange; however, a QHP issuer is 
not precluded from offering the certified QHP outside of an Exchange.
    We include two separate terms related to defining the time an 
individual or family is covered by health insurance: ``Benefit year'' 
and ``plan year.'' Benefit year refers to coverage that begins on 
January 1 and lasts for the duration of a calendar year. This is 
typically used to refer to coverage in the individual market. ``Plan 
year'' is used to refer to any rolling consecutive 12-month period of 
coverage. This is typically used when referring to coverage through

[[Page 41870]]

the small group market, which becomes effective on a rolling basis 
depending on when the small employer first offers or purchases the 
health plan.
    The terms ``eligible employer-sponsored plan'' and ``minimum 
essential coverage'' have the meaning provided in statute and 
applicable regulations. In accordance with section 36B(c)(2)(B) of the 
Code, as added by section 1401(a) of the Affordable Care Act, an 
individual is ineligible for advance payments of the premium tax credit 
if he or she is eligible for ``minimum essential coverage'' (other than 
coverage in the individual market), which includes coverage through an 
``eligible employer-sponsored plan.'' However, section 36B(c)(2)(C) of 
the Code specifies exceptions under which an individual who is eligible 
for an ``eligible employer-sponsored plan'' is eligible for advance 
payments of the premium tax credit; specifically, if such coverage is 
unaffordable or does not meet a minimum value requirement.
2. Subpart B--General Standards Related to the Establishment of an 
Exchange by a State
    The Affordable Care Act sets forth general standards related to the 
establishment of a State Exchange and provides a number of areas where 
States that choose to operate an Exchange may exercise discretion in 
making decisions about Exchange operations. Under the statute, States 
have choices regarding the structure and governance of their Exchanges. 
For example, a State may establish an Exchange as a State agency or as 
a non-profit organization, and may choose to contract with other 
eligible entities to carry out various functions of the Exchange. A 
State may also choose to partner with other States to form a regional 
Exchange, or may establish one or more subsidiary Exchanges within the 
State. This subpart sets forth approval standards for State Exchanges 
as well as the process by which HHS will determine whether a State 
Exchange meets those standards.
    HHS has pursued various forms of collaboration with the States to 
facilitate, streamline and simplify the establishment of an Exchange in 
every State. These efforts have made it clear that for a variety of 
reasons including reducing redundancy, promoting efficiency, and 
addressing the tight implementation timelines authorized under the 
Affordable Care Act, States may find it advantageous to draw on a 
combination of their own work plus business services developed by other 
States and the Federal government as they move toward certification. 
Some States have expressed a preference for a flexible State 
partnership model combining State-designed and operated business 
functions with Federally-designed and operated business functions. 
Examples of such shared business functions might include eligibility 
and enrollment, financial management, and health plan management 
systems and services. We note that States have the option to operate an 
exclusively State-based Exchange. HHS is exploring different 
partnership models that would meet the needs of States and Exchanges.
    In response to the RFC, we received numerous comments related to 
the establishment of State Exchanges. In general, the comments focused 
on how to balance the need for State flexibility against the need for 
consistency. We also received numerous comments related to the 
governance structure of the Exchanges and the establishment of regional 
or subsidiary Exchanges. We considered these comments as we developed 
the proposed rule.
a. Establishment of a State Exchange (Sec.  155.100)
    Sections 1311(b) and 1321(b) of the Affordable Care Act provide 
each State with the option to elect to establish an Exchange for the 
individual and small group markets. We propose to codify this option in 
paragraph (a).
    In paragraph (b), we propose to codify section 1311(d)(1) of the 
Affordable Care Act that an Exchange must be a governmental agency or 
non-profit entity established by the State. We also propose that the 
governance structure of the Exchange must be established and operated 
consistent with the requirements in Sec.  155.110. A governmental 
agency could be an existing State executive branch agency or an 
independent public agency. When reviewing the types of governmental 
agencies that could serve as an Exchange, States should consider the 
costs and benefits of utilizing the accountability structure within an 
existing agency versus the need to establish a governing body for an 
independent public agency. Additionally, each State will need to follow 
its own laws related to the establishment of non-profit organizations. 
A State could operate an Exchange through an existing non-profit that 
was established by a State, or by establishing a new non-profit 
organization or corporation. Under any scenario, the management 
structure of the Exchange must be accountable for Exchange oversight 
and performance.
    While a number of commenters on the RFC expressed concern over the 
operation of Exchanges by non-profit entities, we do not propose to 
limit the States' discretion to choose this type of entity beyond the 
minimum standards proposed in Sec.  155.110. However, we note that 
States should consider the relative merits of operating an Exchange 
through a non-profit entity. Non-profit entities may be able to operate 
without some of the restrictions that can limit the flexibility of 
governmental agencies; however, non-profit entities may face 
limitations performing functions that are typically governmental in 
nature. In light of these concerns, we note suggestions by some 
commenters that States consider establishing independent public/
governmental agencies with flexible hiring and operational practices or 
establishing non-profit entities with governing bodies that are 
appointed and overseen by States.
b. Approval of a State Exchange (Sec.  155.105)
    In paragraph (a) of proposed Sec.  155.105, we propose to codify 
section 1321(c)(1)(B) of the Affordable Care Act that directs the 
Secretary to determine by January 1, 2013 whether a State's Exchange 
will be fully operational by January 1, 2014. We believe that ``fully 
operational'' means that an Exchange is capable of beginning operations 
by October 1, 2013 to support the initial open enrollment period 
proposed in Sec.  155.410. HHS will make this determination through 
applying the State Exchange approval standards and process established 
in this section.
    In paragraph (b), we outline the standards upon which HHS will 
approve a State Exchange. First, an Exchange must be established 
consistent with this subpart and be capable of carrying out the 
required functions of an Exchange consistent with the subparts 
contained within this part, including: subpart C related to minimum 
Exchange functions; subpart E related to enrollment; subpart H related 
to the operation of a SHOP; and subpart K related to certification of 
QHPs. Second, an Exchange must be able to comply with the information 
requirements established pursuant to section 36B of the Code with 
respect to advance payments of the premium tax credit and in accordance 
with future rulemaking. Third, a State seeking approval of an Exchange 
must agree to perform its responsibilities related to the operation of 
a reinsurance program, set forth in the proposed rule, the Affordable 
Care Act; Standards Related to Reinsurance, Risk Corridors and Risk 
Adjustment published in this issue of the Federal Register. According 
to section 1341 of the Affordable Care Act, each State must

[[Page 41871]]

include in the standards it adopts under section 1321(b) related to the 
election to operate a State Exchange the Federal requirements for State 
reinsurance programs, and must also establish or enter into a contract 
with one or more applicable reinsurance entities to carry out the 
reinsurance program.
    Finally, the entire geographic area of a State must be covered by 
one or more Exchanges. A State could meet this requirement by having a 
combination of a regional Exchange and one or more subsidiary Exchanges 
although to minimize consumer confusion, only one Exchange may operate 
in each geographically distinct area. To the extent that more than one 
Exchange is established in a State, we encourage each Exchange to 
ensure that consumers understand which Exchange they should utilize to 
access health insurance coverage.
    In paragraph (c), we outline the process through which HHS will 
approve a State Exchange. In paragraph (c)(1), we propose that to 
initiate the State Exchange approval process, a State must elect to 
establish an Exchange by submitting an Exchange Plan to HHS, which 
constitutes the State's application for approval of its Exchange. The 
Exchange Plan will be submitted through a procedure to be described in 
additional guidance. As part of the Exchange Plan, the State will be 
asked to provide detailed information on how it will meet each of the 
standards described in paragraph (b) of this section. We expect that 
the Exchange Plan will include copies of any agreements into which the 
Exchange has entered to carry out one or more of the Exchange's 
responsibilities in accordance with Sec.  155.110, as well as 
additional supporting documentation. We plan to issue a template 
outlining the required components of the Exchange Plan, subject to the 
notice and comment process under the Paperwork Reduction Act. States 
are encouraged to leverage the implementation plans that are required 
as part of reporting on State Exchange grant awards when preparing to 
submit an Exchange Plan.
    In paragraph (c)(2), we propose that each State applying for 
approval of its Exchange be subject to an assessment to be carried out 
by HHS to evaluate a State's operational readiness to execute its 
Exchange Plan. HHS will coordinate the readiness assessment process 
with the grants monitoring process under the State planning and 
establishment grants. This process may include meetings with State and 
Exchange officials as well as conference calls and on-site visits. HHS 
will issue additional guidance on the structure for and schedule of 
these assessments.
    In paragraph (d), we propose that each State must receive written 
approval or conditional approval of its Exchange Plan in order to be 
approved to operate. If approved, the Exchange Plan will constitute an 
agreement between HHS and the Exchange to adhere to the contents of the 
Exchange Plan. We also note that, although the statute requires HHS to 
approve State Exchanges no later than January 1, 2013, there will be 
systems development and contracting activities that continue to occur 
in 2013 after the statutory deadline for approval. In order to 
accommodate States that are making progress towards the operational 
date of January 1, 2014, HHS may issue a conditional approval. The 
conditional approval would presume that the State's Exchange would be 
operational by January 1, 2014 even if it cannot demonstrate complete 
readiness on January 1, 2013. HHS would continue to work with and 
monitor the progress of States with conditional approval until a 
determination of full approval is made, or until the conditional 
approval is revoked.
    We also note that we are considering establishment of a review 
process for the Exchange Plan that is similar to Medicaid and CHIP for 
which there would be 90 days to review the plan for either approval or 
denial, or to request comment. If additional information is requested 
and received from the State, HHS would have 90 days to either approve 
or disapprove the plan. We seek comments on the appropriateness of this 
process and timeline.
    In paragraph (e), we propose that a State must notify HHS before 
significant changes are made to the Exchange Plan and that an Exchange 
must receive written approval of significant changes from HHS before 
they may be effective. We are considering utilizing the State Plan 
Amendment process in place for Medicaid and CHIP. We seek comment on 
this approach. By establishing an ongoing dialogue with each State, HHS 
will be able to provide technical assistance and support to ensure that 
each Exchange is operating in compliance with Federal requirements. 
Significant changes could include altering a key function of the 
Exchange operations, changing a crucial timeframe for certain 
functions, or other changes to the Exchange Plan that would have an 
impact on the operation of the Exchange. While not exhaustive, changes 
within this scope could also include changes to: (1) Exchange 
governance structure, (2) State laws or regulations, (3) IT systems or 
functionality, (4) the QHP certification process, and (5) the process 
for enrollment into a QHP. We expect to issue further guidance on this 
process.
    In paragraph (f), we propose to codify the statutory requirement in 
section 1321(c)(1) of the Affordable Care Act that if a State elects 
not to establish an Exchange, or if the State's Exchange is not 
approved, HHS, either directly or through agreement with a non-profit 
entity, must establish and operate an Exchange in that State. We also 
identify the standards in this proposed regulation that would apply to 
a Federally-facilitated Exchange, which generally include all 
requirements of this part except for Exchange approval requirements and 
other specific State Exchange requirements.
c. Election To Operate an Exchange After 2014 (Sec.  155.106)
    In paragraph (a), we propose an approval process for a State that 
does not have in place an approved or conditionally approved Exchange 
Plan and operational readiness assessment by January 1, 2013. We 
propose to allow States the flexibility of seeking approval to operate 
an Exchange even if a State is not approved to operate by January 1, 
2013. We propose in paragraph (a)(1) that a State electing to seek 
initial approval of its Exchange after January 1, 2013 must comply with 
the standards and process set forth in Sec.  155.105. We propose in 
paragraph (a)(2) that a State electing to operate an Exchange after 
2014 must have in effect an approved or conditionally approved Exchange 
Plan at least 12 months prior to the first effective date of coverage. 
We assume that the first effective date of coverage will fall on 
January 1 of any given year because of the standardized annual open 
enrollment periods, so the approval or conditional approval would have 
to be in effect by January 1 of the prior year; these dates would align 
future Exchange Plan approvals with the initial approval timeline set 
forth in statute. We note that we expect that an Exchange would have an 
open enrollment period prior to the first effective date of coverage.
    In paragraph (a)(3), we propose that such a State must work with 
HHS to develop a plan to transition from a Federally-facilitated 
Exchange to a State Exchange. We anticipate that this would include the 
smooth transition of operational functions from the Federally-
facilitated Exchange to the State Exchange, including transitioning 
enrollees from QHPs certified by the Federally-facilitated Exchange to 
QHPs certified by a State Exchange, which may or may not differ.

[[Page 41872]]

    In paragraph (b), we propose a process to allow a State-operated 
Exchange to cease its operations after January 1, 2014 and to elect to 
have the Federal government establish and operate an Exchange within 
the State. If a State determines that it will no longer operate an 
Exchange after January 1, 2014, we propose in paragraph (b)(1) that the 
State must notify HHS of this determination 12 months prior to ceasing 
its operations. Also, we propose in paragraph (b)(2) that the Exchange 
must collaborate with HHS on the development and execution of a 
transition plan and process to facilitate operation of a Federally-
facilitated Exchange. We estimate that we will need 12 months to 
establish a Federally-facilitated Exchange in a State due to the time 
required to set up the necessary information technology and QHP 
certification process.
d. Entities Eligible To Carry Out Exchange Functions (Sec.  155.110)
    Section 1311(f)(3) of the Affordable Care Act provides an Exchange 
with the authority to contract with eligible entities to carry out one 
or more of the responsibilities of an Exchange, which we propose to 
codify in paragraph (a) of Sec.  155.110. The minimum requirements set 
forth in the statute, and which are proposed in paragraph (a), specify 
that an eligible entity is one that: (1) Is incorporated under and 
subject to the laws of one or more States, (2) has demonstrated 
experience on a State or regional basis in the individual and small 
group markets and in benefits coverage, and (3) is not a health 
insurance issuer or treated as a health insurance issuer. An eligible 
entity also includes the State Medicaid agency. We also interpret this 
language as allowing an Exchange to contract with the State Medicaid 
agency through which the State Medicaid agency determines eligibility 
on behalf of the Exchange. This authority is also provided in section 
1413(d)(2) of the Affordable Care Act. We note that there may be ways 
in which an Exchange and the Federal government can work in partnership 
to carry out certain activities. Underlying this NPRM and the 
cooperative agreement funding opportunities provided to States is a 
philosophy of Federal and State partnership. As States, and the Federal 
government in connection with the Federally-facilitated Exchange, 
develop expertise and implement the infrastructure for Exchange 
operations, we anticipate sharing of information and ideas. We welcome 
comment on how to implement or construct a partnership model consistent 
with sections 1311(f)(3) and 1311(d)(5) of the Affordable Care Act.
    In paragraph (b), to the extent that the Exchange establishes 
contracting arrangements with outside entities, we propose that the 
Exchange remains responsible for meeting all Federal requirements 
related to contracted functions. Pursuant to these provisions, States 
have flexibility to determine appropriate contracting entities within 
legal limits. We invite comment on the extent to which we should place 
conflict of interest requirements on contracted entities.
    In paragraph (c), we propose that if the Exchange is an independent 
State agency or not-for-profit entity established by the State and not 
an existing State agency, it must have a clearly defined governing 
board that meets certain minimum requirements outlined in paragraphs 
(c)(1) through (4). Further, the Exchange must submit detailed 
information on its accountability structure in its Exchange Plan, as 
described in Sec.  155.105(c).
    In paragraph (c)(1), we propose that the Exchange accountability 
structure be administered under a formal, publicly-adopted operating 
charter or by-laws. This provision ensures transparency of the 
governing board structure for the public. In paragraph (c)(2), we 
propose that the Exchange board must hold regular public meetings for 
which the public is provided advance notice to provide them with 
opportunities to observe and comment on Exchange policies and 
procedures.
    In paragraphs (c)(3) and (c)(4), we propose standards on the 
membership of an Exchange governing board related to conflicts of 
interest and management qualifications. Exchanges are intended to 
support consumers, including small businesses, and as such, the 
majority of the voting members of governing boards should be 
individuals who represent their interests. We propose in paragraph 
(c)(3) that the voting members of an Exchange governing board represent 
consumer interests by ensuring that membership may not consist of a 
majority of representatives of health insurance issuers, agents, or 
brokers, or any other individual licensed to sell health insurance. We 
invite comment on the extent to which these categories of 
representatives with potential conflicts of interest should be further 
specified and on the types of representatives who have potential 
conflicts of interest. We propose these categories as a minimum Federal 
standard. A State may wish to adopt more stringent or specialized 
conflict of interest requirements than those used in connection with 
regular governmental operations.
    In paragraph (c)(4), we propose that the Exchange governing body 
ensure that a majority of members have relevant experience in health 
benefits administration, health care finance, health plan purchasing, 
health care delivery system administration, public health, or health 
policy issues related to the small group and individual markets and the 
uninsured. We invite comment on the types of representatives that 
should be on Exchange governing boards to ensure that consumer 
interests are well-represented and that the Exchange board as a whole 
has the necessary technical expertise to ensure successful operations.
    We considered additional options for regulating Exchange governance 
structures beyond the minimal requirements proposed herein. However, we 
propose to afford States discretion to select and appoint members of 
their Exchange boards. As such, a State may choose to include 
additional membership as long as composition of the board still meets 
the minimum Federal requirements.
    In paragraph (d), we propose two requirements related to governance 
principles of an Exchange. First, in paragraph (d)(1), we propose that 
each Exchange publish a set of guiding governance principles that 
includes ethical and conflict of interest standards and disclosure of 
financial interests that are posted for public consumption. In 
paragraph (d)(2), we propose to require that an Exchange have in place 
procedures for disclosure of financial interest by members of the 
governing body or governance structure of the Exchange. We invite 
comment on this proposal and whether additional detail should be 
proposed. We note that we received numerous comments in response to the 
RFC on Exchange governance. Some commenters suggested that we establish 
minimum standards because of the limited statutory requirements in this 
area. In contrast, other commenters suggested that HHS establish more 
restrictive standards, citing concerns over conflicts of interest and 
non-governmental entities carrying out activities that are inherently 
governmental.
    In paragraph (e), we acknowledge a State's option to elect to 
establish a separate governance and administrative structure for the 
SHOP. Section 1311(b)(2) of the Affordable Care Act provides each State 
with flexibility to merge its individual market Exchange and SHOP under 
a single administrative or governance structure. We interpret this 
provision to also allow a State to operate these functions under 
separate governance or administrative structures.

[[Page 41873]]

However, we believe that a single governance structure for both the 
individual market Exchange functions and SHOP will yield better policy 
coordination, increased operational efficiencies, and improved 
operational coordination. In paragraph (e)(1), we propose to allow a 
State to operate its individual market Exchange and SHOP under separate 
governance or administrative structures and also require that if it 
chooses to do so, it must, where applicable, coordinate and share 
relevant information between the two Exchange bodies. Then, we propose 
in paragraph (e)(2) to codify the requirement in section 1311(b)(2) of 
the Affordable Care Act that if a State does choose to operate its 
individual market Exchange and SHOP under a single governance or 
administrative structure, it must ensure that the Exchange has adequate 
resources to assist individuals and small employers.
    Finally, in paragraph (f), we propose that HHS may periodically 
review the accountability structure and governance principles of an 
Exchange. We request comment on recommended frequency of these reviews.
e. Non-Interference With Federal Law and Non-Discrimination Standards 
(Sec.  155.120)
    Section 1311(k) of the Affordable Care Act requires that an 
Exchange may not establish rules that conflict with or prevent the 
application of Exchange regulations promulgated by HHS, which we 
propose to codify in paragraph (a).
    Section 1321(d) of the Affordable Care Act establishes that nothing 
in title I may be construed to preempt any State law that does not 
prevent the application of the provisions set forth under title I of 
the Affordable Care Act, which we propose to codify and extend to this 
proposed rule in paragraph (b).
    In paragraph (c), we propose that a State must comply with any 
applicable non-discrimination statutes. Specifically, pursuant to the 
authority provided in 1321(a)(1)(A) to regulate the establishment and 
operation of an Exchange, we propose that an Exchange and a State, when 
fulfilling or carrying out the requirements of this part, must not 
operate an Exchange in such a way as to discriminate on the basis of 
race, color, national origin, disability, age, sex, gender identity, or 
sexual orientation. Examples of actions to which this standard applies 
include marketing, outreach, and enrollment.
f. Stakeholder Consultation (Sec.  155.130)
    According to section 1311(d)(6) of the Affordable Care Act, 
Exchanges are required to consult with certain groups of stakeholders 
as they establish their programs and throughout ongoing operations. We 
propose that the Exchange consult on an ongoing basis with key 
stakeholders, including:
    a. Educated health care consumers who are enrollees in QHPs; 
``educated'' is the term used in Section 1311(d)(6)(A) of the 
Affordable Care Act to describe consumers who must be consulted. We 
recommend that Exchanges include in these consultations individuals 
with disabilities;
    b. Individuals and entities with experience in facilitating 
enrollment in health coverage;
    c. Advocates for enrolling hard-to-reach populations, which 
includes individuals with a mental health or substance abuse disorder. 
We also encourage Exchanges to include advocates for individuals with 
disabilities and those who need culturally and linguistically 
appropriate services;
    d. Small businesses and self-employed individuals;
    e. State Medicaid and CHIP agencies. We also encourage Exchanges to 
consult with consumers who are Medicaid or CHIP beneficiaries;
    f. Federally-recognized tribe(s) as defined in the Federally 
Recognized Indian Tribe List Act of 1994, 25 U.S.C. 479a, located 
within the Exchange's geographic area;
    g. Public health experts;
    h. Health care providers;
    i. Large employers;
    j. Health insurance issuers; and
    k. Agents and brokers.
    We note that the first five groups are identified in the Affordable 
Care Act under section 1311(d)(6). We proposed additional groups in 
response to numerous comments that we received to the RFC indicating 
that the views of such types of organizations and entities should be 
considered, which we propose in (f) through (k). We believe that the 
inclusion of these additional groups will provide diverse input and 
will be informative of the viewpoints of the various groups impacted by 
the Exchange.
    Each Exchange that has one or more Federally-recognized tribes, as 
defined in the Federally Recognized Indian Tribe List Act of 1994, 25 
U.S.C. 479a, located within the Exchange's geographic area must engage 
in regular and meaningful consultation and collaboration with such 
tribes and their tribal officials on all Exchange policies that have 
tribal implications. We encourage Exchanges to also seek input from all 
tribal organizations and urban Indian organizations. While the 
Exchanges will be charged with the consultation, tribal consultation is 
a government-to-government process, and therefore the State should have 
a role in the process. We encourage States to develop a tribal 
consultation policy that is approved by the State, the Exchange, and 
tribe(s). We anticipate providing additional guidance to both the 
tribes and States on how the governments may collaborate and build a 
strong working relationship.
g. Establishment of a Regional Exchange or Subsidiary Exchange (Sec.  
155.140)
    Section 1311(f)(1) provides for the operation of an Exchange in 
more than one State if each State permits such operation and the 
Secretary approves such an Exchange. In paragraph (a) of Sec.  155.140, 
we propose criteria that the Secretary will use to approve a regional 
Exchange. Although the statute uses the phrase ``regional or interstate 
Exchange,'' we use only the term ``regional Exchange'' to mean an 
Exchange that operates in two or more States for purposes of clarity. 
In paragraph (a)(1), we propose that a State may participate in a 
regional Exchange if the Exchange spans two or more States, noting that 
the States need not be contiguous. In paragraph (a)(2), we propose that 
a regional Exchange submit a single Exchange Plan for the regional 
Exchange and receive approval consistent with Sec.  155.105 to 
demonstrate its readiness to operate an Exchange.
    We encourage States to consider how a regional Exchange would meet 
the Exchange requirements and achieve the cooperation that must occur 
between the regional Exchange and each participating State's department 
of insurance. States should also consider how to provide a consistent 
level of consumer protections across the States, procedures by which a 
State would withdraw from a regional Exchange, and how each State would 
contribute to the financing of the regional Exchange.
    Section 1311(f)(2) provides that a State may establish one or more 
subsidiary Exchanges, which we propose to codify in paragraph (b). In 
paragraph (b)(1), we propose to codify the statutory language in 
section 1311(f)(2)(A) that a State may establish one or more subsidiary 
Exchanges if each such Exchange serves a geographically distinct area. 
In paragraph (b)(2), we propose to codify the statutory requirement 
that the area served by a subsidiary Exchange must be at least as large 
as a rating area described in section 2701(a) of the PHS Act, and 
referenced in section 1311(f)(2)(B) of the Affordable Care Act.

[[Page 41874]]

We note that the Secretary will address the process for States 
requesting approval of rating areas in future rulemaking.
    We invite comment on operational or policy concerns about the idea 
of subsidiary Exchanges that cover areas across State lines. We also 
request comment on the extent to which we should allow more flexibility 
in the structure of a subsidiary Exchange, for example, related to the 
combination of subsidiary Exchanges that would be allowed to operate in 
a State.
    We note that several commenters suggested that we consider whether 
a tribal government could operate a regional or subsidiary Exchange or 
otherwise carry out some of the functions of an Exchange. Because an 
Exchange must be established by a State or by a Territory pursuant to 
sections 1311, 1321, and 1323 of the Affordable Care Act, or be 
operated by HHS consistent with 1321(c) of the Affordable Care Act, we 
do not believe that a tribal government itself could establish an 
Exchange. Instead, we believe that the tribal government could work 
with the State as the State establishes an Exchange.
    In paragraph (c), we propose basic standards for a regional or 
subsidiary Exchange. First, in paragraph (c)(1), we propose that a 
regional or subsidiary Exchange must meet all requirements within this 
part. In paragraph (c)(2), we propose that a regional or subsidiary 
Exchange perform the functions of a SHOP consistent with subpart H of 
this part. If a regional or subsidiary Exchange chooses to operate a 
SHOP through separate governance than the individual market Exchange, 
we propose in paragraph (c)(2)(ii) that the geographic areas served 
must be the same. For example, if a State chooses to participate in a 
regional Exchange, it would need to do so for both the individual 
market and the small group market. We propose this standard as means to 
maximize administrative efficiency for the SHOP and to provide 
consistency for consumers. This consistency would also reduce the 
burden on entities such as QHPs that would otherwise operate in 
different service areas depending on whether they offer plans in the 
individual market or the small group market.
h. Transition Process for Existing State Health Insurance Exchanges 
(Sec.  155.150)
    Some States have established operational health insurance exchanges 
that are currently providing access to health insurance coverage to 
certain individuals in their States. These State exchanges were 
established prior to passage of the Affordable Care Act and may not 
meet all the requirements set forth in the Affordable Care Act or this 
proposed rule. Section 1321(e) requires the establishment of a process 
for determining any areas in which the State may not be with Federal 
standards, which we propose in this section.
    Consistent with section 1321(e)(1) of the Affordable Care Act, in 
paragraph (a), we propose that, unless determined to be non-compliant 
through the process below, a State operating an exchange is presumed to 
be in compliance with the standards set forth in this part if: (1) The 
exchange was operating before January 1, 2010; and (2) the State has 
insured a percentage of its population not less than the percentage of 
the population projected to be covered nationally after the 
implementation of the Affordable Care Act.
    We are considering which data source to use to determine the 
applicable percentage of the national population projected to be 
insured after the implementation of the Affordable Care Act, which we 
propose to interpret to mean the year 2016. We consider 2016 to be the 
first full year after implementation of the Affordable Care Act in 
which health insurance coverage would achieve its steady state. We note 
that the CMS Office of the Actuary currently estimates that the 
coverage level of the U.S. population in 2016 will be 93.6 percent; the 
Congressional Budget Office estimates the coverage level at 95 
percent.\1\ We are considering the use of data from the CMS Office of 
the Actuary or the Congressional Budget Office to determine the 
applicable percentage. We invite comments on which proposed threshold 
should be used and on alternative numbers to be used.
---------------------------------------------------------------------------

    \1\ CMS Office of the Actuary, April 22, 2010: https://www.cms.gov/ActuarialStudies/Downloads/PPACA_2010-04-22.pdf (page 
24); Congressional Budget Office, March 18, 2011: http://www.cbo.gov/budget/factsheets/2011b/HealthInsuranceProvisions.pdf 
(excluding unauthorized immigrants).
---------------------------------------------------------------------------

    In paragraph (b), we propose that any State that is currently 
operating a health insurance exchange that meets the description of 
such a State under paragraph (a) must work with HHS to identify areas 
of non-compliance with the requirements of this part.
i. Financial Support for Continued Operations (Sec.  155.160)
    Section 1311(d)(5) of the Affordable Care Act provides that a State 
Exchange must be self-sustaining by January 1, 2015; the statute 
explicitly lists assessments and user fees on participating issuers as 
one potential means for a State to secure operational funding for 
Exchanges. In addition, section 1311(d)(5) places certain prohibitions 
on uses of the funds that are intended for Exchange administration and 
operations in order to prevent waste.
    In paragraph (a), we incorporate the definition of ``participating 
issuer'' provided in Sec.  156.50 to this section. In paragraph (b) of 
Sec.  155.160, we propose to codify the statutory requirement that a 
State ensure its Exchange has sufficient funding to support ongoing 
operations beginning January 1, 2015. In addition, we propose that 
States must develop a plan for ensuring funds will be available. We 
note that the funding plan is a requirement of Exchange approval under 
subpart B of this part.
    In paragraph (b)(1), we propose to codify the statutory flexibility 
in section 1311(d)(5)(A) of the Affordable Care Act that allows a State 
Exchange to fund its ongoing operations by charging user fees or 
assessments on participating issuers. In paragraph (b)(2), we propose 
that States may use other forms of funding for Exchange operations, 
consistent with the reference in section 1311(d)(5)(A) that allows 
States to ``otherwise generate funding.'' This language provides States 
with broad flexibility to generate funds beyond charging the 
``assessments or user fees'' identified in the statute. States may use 
broad-based funding (which may include general State revenues, provider 
taxes, or other funding that spreads costs beyond imposing assessments 
or user fees on participating issuers), as long as the use of such 
funding does not violate other State or Federal laws.
    In paragraph (b)(3), we propose to codify the implied statutory 
requirement established in section 1311(d)(5)(A) of the Affordable Care 
Act that a State Exchange must be self-sustaining starting on January 
1, 2015. Federal funds may not be provided after that time to support 
its continued operations. This direction is also articulated in section 
1311(a)(4)(B), which limits the duration of Federal grants to plan for 
and establish State Exchanges.
    In paragraph (b)(4), we propose that the State Exchange announce 
the assessment of any user fees on health insurance issuers in advance 
of the plan year. We invite comment on whether the final regulation 
should otherwise limit how and when user fees may be charged, and 
whether such fees should be assessed on an annual basis.

[[Page 41875]]

3. Subpart C--General Functions of an Exchange
    Subpart C outlines the minimum functions of an Exchange, with 
cross-references in some cases to more detailed standards that are 
described in subsequent subparts (E, H and K). The proposed minimum 
functions are designed to provide State flexibility. Uniform standards 
are proposed where required by the statute or where there are 
compelling practical, efficiency or consumer protection reasons.
a. Functions of an Exchange (Sec.  155.200)
    Proposed Sec.  155.200 identifies the minimum functions of an 
Exchange. These functions closely parallel sections 1311(d)(2), (4), 
and (6), and sections 1402 and 1411-13 of the Affordable Care Act.
    In paragraph (a), we propose a general standard that an Exchange 
must perform the required functions set forth in this subpart and in 
subparts E, H, and K of this part.
    In paragraph (b), we propose, consistent with our interpretation of 
section 1311(d)(4)(H) and section 1411 of the Affordable Care Act, that 
an Exchange must grant certifications of exemptions from the individual 
responsibility requirement and payment. The specific standards and 
eligibility criteria that apply to such certifications will be 
addressed in future rulemaking.
    In paragraph (c), we propose that the Exchange must perform 
eligibility determinations. We intend to provide specific standards and 
eligibility criteria for this Exchange function in future rulemaking to 
implement sections 1311, 1411, 1412, and 1413 of the Affordable Care 
Act. Further, it will support and complement rulemaking conducted by 
the Secretary of the Treasury with respect to section 36B of the Code, 
as added by section 1401(a) of the Affordable Care Act, and by the 
Secretary of HHS with respect to several sections of the Affordable 
Care Act that create new law and amend existing law regarding Medicaid 
and CHIP.
    We note that the aforementioned sections of the Affordable Care Act 
create a central role for the Exchange in the process of determining an 
individual's eligibility for enrollment in a QHP, advance payments of 
the premium tax credit, cost-sharing reductions, Medicaid, CHIP and the 
BHP, if a BHP is operating in the Exchange service area. We interpret 
Affordable Care Act sections 1311(d)(4)(F), and 1413, and section 1943 
of the Act, as added by section 2201 of the Affordable Care Act, to 
require the establishment of a system of streamlined and coordinated 
eligibility and enrollment through which an individual may apply for 
enrollment in a QHP, advance payments of the premium tax credit, cost-
sharing reductions, Medicaid, and CHIP and receive a determination of 
eligibility for any such program. We also note that we interpret 
section 1413(b)(2) to mean that the eligibility and enrollment function 
should be consumer-oriented, minimizing administrative hurdles and 
unnecessary paperwork for applicants.
    In paragraph (d), we propose that each Exchange establish a process 
for appeals of eligibility determinations. These requirements and the 
appeal process generally, including the requirements of section 1411(f) 
of the Affordable Care Act, will be addressed in future rulemaking.
    In paragraph (e), we propose that an Exchange must perform required 
functions related to oversight and financial integrity requirements in 
order to comply with section 1313 of the Affordable Care Act.
    In paragraph (f), we propose that the Exchange must evaluate 
quality improvement strategies and oversee implementation of enrollee 
satisfaction surveys, assessment and ratings of health care quality and 
outcomes, information disclosures, and data reporting pursuant to 
sections 1311(c)(1), 1311(c)(3), and 1311(c)(4) of the Affordable Care 
Act. We anticipate future rulemaking on these topics, but propose here 
the basic requirement that the Exchange will have a role in the 
implementation, oversight, and improvement of the quality and enrollee 
satisfaction initiatives required by the Affordable Care Act. This will 
include requirements for quality data collection, standards for 
assessing a QHP issuer's quality improvement strategies, and details on 
how Exchanges can assess and calculate ratings of health care quality 
and outcomes using methodologies made available by HHS or alternatives, 
if applicable.
    The functions of an Exchange listed in proposed Sec.  155.200 are 
important to the achievement of a more stable and accessible health 
insurance market for consumers and businesses and represent the minimum 
functions of an Exchange to meet that goal. We encourage States to 
consider supplemental standards or functionality for their Exchanges 
that benefit consumers and businesses, and we welcome comments 
regarding these and other functions that should be required of an 
Exchange.
b. Required Consumer Assistance Tools and Programs of an Exchange 
(Sec.  155.205)
    In Sec.  155.205, we outline the standards for a number of consumer 
assistance tools and activities that Exchanges must provide. In 
paragraph (a), we propose to codify section 1311(d)(4)(B) of the 
Affordable Care Act, which requires the Exchange to provide for the 
operation of a call center to respond to requests for assistance by 
consumers that is accessible via a toll-free telephone number.
    We note that an Exchange has significant latitude in how it 
structures the call center. To increase accessibility to the call 
center, we suggest that an Exchange consider operating it outside of 
normal business hours and adjusting staffing levels in anticipation of 
periods of higher call volumes (for example, the weeks leading up to 
and during open enrollment). We also believe that the Exchange call 
center should have the capability to provide assistance to consumers 
and businesses on a broad range of issues, including but not limited 
to:
    (1) The types of QHPs offered in the Exchange;
    (2) The premiums, benefits, cost-sharing, and quality ratings 
associated with the QHPs offered;
    (3) Categories of assistance available, including advance payments 
of the premium tax credit and cost-sharing reductions as well 
assistance available through Medicaid and CHIP;
    (4) The application process for enrollment in coverage through the 
Exchange and other programs (for example, Medicaid and CHIP).
    The Affordable Care Act includes several programs that aid 
consumers through the process of acquiring and using health insurance, 
including the State-based consumer assistance programs (for example, 
health insurance ombudsman programs created under Section 1002 of the 
Affordable Care Act) and the Navigator program, which we describe more 
fully in Sec.  155.210 below. We encourage Exchanges to use call 
centers as a conduit to these and any other State consumer programs, 
where appropriate. We also recognize there may be some instances where 
there is appropriate overlap between information provided by the 
Exchange call centers and information provided by customer service call 
centers operated by health insurance issuers, particularly in the area 
of health plan enrollment. We seek comments on ways to streamline and 
prevent duplication of effort by the Exchange call center and QHP 
issuers' customer call centers, but

[[Page 41876]]

ensure that consumers have a variety of ways to learn about their 
coverage options and receive assistance on other health insurance 
coverage issues.
    In paragraph (b), we propose to codify section 1311(d)(4)(C) of the 
Affordable Care Act, which requires an Exchange to maintain an Internet 
Web site. The Affordable Care Act provides two key provisions related 
to the establishment of an Exchange Web site. First, section 1103(b) of 
the Affordable Care Act requires the Secretary to establish a 
standardized format for presenting coverage option information, which 
is utilized to present comparative health plan information on the 
current HealthCare.gov Web site. Second, section 1311(c)(5) requires 
the Secretary to make available to all Exchanges a model Exchange Web 
site template developed by the Secretary. We are currently evaluating 
the extent to which the Exchange Web site may satisfy the need to 
provide plan comparison functionality using HealthCare.gov, and invite 
comments on this issue.
    Generally, we envision the Exchange Web site to be an easy-to-use 
access point that serves as a primary source of information about 
available QHPs, Exchange activities, and other sources of health 
coverage. We believe that the Exchange Web site is an appropriate venue 
to post QHP information as required by other sections of the Affordable 
Care Act that require disclosure of information that would be helpful 
for consumers in comparing QHPs, including the medical loss ratio 
(section 2718 of the PHS Act), transparency in coverage data (section 
1311(e)(3) of the Affordable Care Act), summary of benefits and 
coverage (section 2715 of the PHS Act) \2\ and levels of coverage 
(section 1302(d) of the Affordable Care Act).
---------------------------------------------------------------------------

    \2\ The proposal here to post the summary of benefits and 
coverage (SBC) on the Exchange Web site is in addition to, and not 
in lieu of, any requirements regarding the manner, timing, and 
format for the delivery of an SBC to individuals under PHS Act 
section 2715. The Departments of HHS, Labor, and the Treasury are 
developing proposed regulations to be issued in the near future that 
are expected to address section 2715.
---------------------------------------------------------------------------

    We specifically propose in Sec.  155.205(b)(1) through (6) that an 
Exchange must maintain an up-to-date Internet Web site that:
    1. Presents standardized comparative information on each available 
QHP. Such information must include:
    i. Premium and cost-sharing information;
    ii. The summary of benefits and coverage required by section 2715 
of the PHS Act. Exchanges may consider making this information 
available through a link from their Web site to each QHP's Web site or 
Exchanges could require QHPs to submit this information in a manner 
that supports a searchable format;
    iii. The level of coverage of a QHP (that is, bronze, silver, gold, 
platinum, or catastrophic coverage consistent with section 1302(d) and 
1302(e) of the Affordable Care Act);
    iv. The results of enrollee satisfaction surveys described in 
section 1311(c)(4) of the Affordable Care Act;
    v. Quality ratings assigned to QHPs described in section 1311(c)(3) 
of the Affordable Care Act;
    vi. The medical loss ratio as reported in accordance with interim 
final rule 75 FR 74921, December 1, 2010, amended 75 FR 82278, December 
30, 2010;
    vii. Transparency of coverage measures reported to the Exchange as 
required under Sec.  155.1040; and
    viii. The provider directory reported to the Exchange during 
certification pursuant to Sec.  156.230;
    2. Provides meaningful access to information for individuals with 
limited English proficiency. Such accessibility needs may be met by 
providing language assistance services, which may include translated 
information and ``tag lines'' directing individuals to translated 
materials and/or telephone numbers to call to reach interpreters for 
assistance. Web sites must also be accessible to people with 
disabilities in accordance with the Americans with Disabilities Act and 
section 504 of the Rehabilitation Act. HHS has issued guidance 
regarding the requirements of section 504 with respect to Web site 
accessibility.\3\ The guidance states that at this time, the Department 
will consider a recipient's Web sites, interactive kiosks, and other 
information systems addressed by section 508 standards as being in 
compliance with section 504 if such technologies meet those standards. 
We encourage States to follow either the 508 guidelines or guidelines 
that provide greater accessibility to individuals with disabilities. 
States may wish to consult the latest section 508 guidelines issued by 
the U.S. Access Board or W3C's Web Content Accessibility Guidelines 
(WCAG) 2.0; \4\
---------------------------------------------------------------------------

    \3\ http://cciio.cms.gov/resources/files/joint_cms_ociio_guidance.pdf.
    \4\ http://www.access-board.gov/sec508/guide/index.htm.
---------------------------------------------------------------------------

    3. Publishes the following financial information: the average cost 
of licensing required by the Exchange, any regulatory fees required by 
the Exchange, any other payments required by the Exchange, 
administrative costs of the Exchange, and monies lost to fraud, waste, 
and abuse in accordance with section 1311(d)(7) of the Affordable Care 
Act.
    4. Provides contact information for Navigators and other consumer 
assistance services, including the telephone number of the Exchange 
call center;
    5. Allows for an eligibility determination pursuant to the 
standards established in accordance with Sec.  155.200(c) of this 
subpart; and
    6. Allows for enrollment in coverage pursuant to subpart E of this 
part.
    We are considering a Web site requirement that would allow 
applicants and enrollees to store and access their personal account 
information and make changes, provided that the Web site complied with 
the standards developed by the Secretary pursuant to section 3021(b)(3) 
of the PHS Act, as added by section 1561 of the Affordable Care Act. 
The standards \5\ address electronic enrollment systems for Federal and 
State health and human services, provide for the submission and storage 
of electronic documents, and permit reuse of stored information. To 
minimize administrative burden, we would encourage Exchanges to develop 
a feature whereby eligibility and enrollment experts, caseworkers, 
Navigators, agents and brokers, and other application assisters are 
able to maintain records of individuals they have assisted with the 
application process. We request comment on this proposal.
---------------------------------------------------------------------------

    \5\ Standards accessible at: http://healthit.hhs.gov/portal/server.pt?open=512&mode=2&objID=3161.
---------------------------------------------------------------------------

    In paragraph (c), we propose to codify section 1311(d)(4)(G) of the 
Affordable Care Act that requires an Exchange to establish an 
electronic calculator to assist individuals in comparing the costs of 
coverage in available QHPs after the application of any advance 
payments of the premium tax credit and cost-sharing reductions. We 
invite comment on the extent to which States would benefit from a model 
calculator and suggestions on its design.
    In paragraph (d), we propose that the Exchange have a consumer 
assistance function (including but not limited to a Navigator program 
described more fully in Sec.  155.210) that provides assistance 
services to consumers. Exchanges will receive various types of requests 
for assistance from consumers, including assistance with eligibility 
and enrollment, appeals, and handling complaints, and must be able to 
direct consumers accordingly. We note that if an Exchange receives 
complaints of

[[Page 41877]]

race, color national origin, disability, age, or sex discrimination, it 
may refer these individuals to the HHS Office for Civil Rights (OCR).
    In paragraph (e), we propose that the Exchange conduct outreach and 
education activities to educate consumers about the Exchange and to 
encourage participation, separate from the implementation of a 
Navigator program described in Sec.  155.210. Exchanges should aim to 
maximize enrollment of eligible individuals into QHPs to increase QHP 
participation and competition which in turn increases consumer choice 
and purchasing clout. This will also reduce the number of individuals 
without health insurance coverage. We encourage Exchanges to conduct 
outreach broadly as well as in ways that are accessible to people with 
disabilities, individuals with low literacy, and those with limited 
English proficiency. In addition, we encourage Exchanges to target 
specific groups including hard to reach populations and populations 
that experience health disparities due to low literacy, race, color, 
national origin, or disability, including mental illnesses and 
substance use disorders.
c. Navigator Program Standards (Sec.  155.210)
    In Sec.  155.210, we propose the standards for the Navigator 
program, consistent with section 1311(i) of the Affordable Care Act. 
The Navigator standards apply to the Exchange including both the 
individual market and SHOP. In paragraph (a), we propose the general 
standard that Exchanges must award grant funds to public or private 
entities to serve as Navigators. In paragraph (b)(1), we propose the 
eligibility requirements for and the types of entities to which the 
Exchange may award Navigator grants. We propose that Navigators must be 
capable of carrying out those duties established in paragraph (d) of 
this subsection. In addition, a Navigator must demonstrate to the 
Exchange, as required by section 1311(i)(2)(A) of the Affordable Care 
Act, that the entity has existing relationships, or could readily 
establish relationships with employers and employees, consumers 
(including uninsured and underinsured consumers), or self-employed 
individuals likely to be eligible to enroll in a QHP through the 
Exchange. We note that an entity need not have the ability to form 
relationships with all relevant groups in order to be eligible for 
Navigator funding; for example, an entity that can effectively conduct 
outreach to rural areas may not be as effective in urban areas.
    We further propose in paragraph (b)(1)(iii) that a Navigator must 
meet any licensing, certification or other standards prescribed by the 
State or Exchange, as appropriate, consistent with section 
1311(i)(4)(A) of the Affordable Care Act. This will allow the State or 
Exchange to enforce existing licensure standards (such as verifying 
that agents who seek to be Navigators are licensed), certification 
standards, or regulations for selling or assisting with enrollment in 
health plans and to establish new standards or licensing requirements 
tailored to Navigators (such as participating in periodic trainings), 
as appropriate.
    We further propose in paragraph (b)(1)(iv) that any entity that 
serves as a Navigator may not have conflict of interest during the term 
as Navigator. We specify ``during the term as a Navigator'' because we 
want to ensure that an entity that might have formerly had a conflict 
would not be excluded from consideration if that conflict no longer 
exists. We clarify that these standards would not exclude, for example, 
a non-profit community organization that previously received grant 
funding from a health insurance issuer from serving as a Navigator. We 
seek comment on whether we should propose additional requirements on 
Exchanges to make determinations regarding conflicts of interest.
    Section 1311(i)(2)(B) of the Affordable Care Act identifies 
entities which may be eligible to serve as Navigators, including 
``other entities'' pursuant to section 1311(i)(2)(B) insofar as they 
meet the requirements of section 1311(i)(4). In paragraph (b)(2), we 
propose that the Exchange include at least two of the types of entities 
listed in Section 1311(i)(2)(B) as Navigators. We seek comment as to 
whether we should require that at least one of the two types of 
entities serving as Navigators include a community and consumer-focused 
non-profit organization, or whether we should require that Navigator 
grantees reflect a cross section of stakeholders. We note that Indian 
tribes, tribal organizations, and urban Indian organizations may be 
eligible, along with State or local human service agencies.
    In paragraph (c), we codify the statutory prohibitions on Navigator 
conduct in the Exchange. Consistent with 1311(i)(4) of the Affordable 
Care Act, health insurance issuers are prohibited from serving as 
Navigators and a Navigator must not receive any consideration directly 
or indirectly from any health insurance issuer in connection with the 
enrollment of any qualified individuals or qualified employees in a 
QHP. Such consideration includes, without limitation, any monetary or 
non-monetary commission, kick-back, salary, hourly-wage or payment made 
directly or indirectly to the entity or individual from the QHP issuer. 
These provisions would not preclude a Navigator from receiving 
compensation from health insurance issuers in connection with enrolling 
individuals, small employers or large employers in non-QHPs. We seek 
comment on this issue and whether there are ways to manage any 
potential conflict of interest that might arise.
    In paragraph (d), we set forth the minimum duties of a Navigator. 
The Exchange may require that a Navigator meet additional standards and 
carry out duties so long as such standards are consistent with 
requirements set forth herein. We clarify that as part of its 
obligation to establish the Navigator program and oversee the grants, 
the Exchange must ensure that Navigators are performing their duties as 
required. Duties include maintaining expertise in eligibility, 
enrollment, and program specifications and conducting public education 
activities to raise awareness of the availability of QHPs.
    We also propose that the information and services provided by the 
Navigator be fair, accurate, and impartial and acknowledge other health 
programs. The Affordable Care Act requires the Secretary to collaborate 
with the States to develop standards related to this requirement. We 
are considering standards related to content of information shared, 
referral strategies, and training requirements to include in grant 
award conditions. We welcome comment on potential standards to ensure 
that information made available by Navigators is fair, accurate, and 
impartial.
    The Navigator must also facilitate enrollment in a QHP through the 
Exchange and provide referrals to any applicable office of health 
insurance consumer assistance or health insurance ombudsman, or any 
other appropriate State agency or agencies for any enrollee with a 
grievance, complaint, or question regarding their health plan, 
coverage, or a determination under such plan or coverage. Further the 
Navigator must provide information in a manner that is culturally and 
linguistically appropriate to the needs of the population being served 
by the Exchange. We seek comment regarding any specific standards we 
might issue through future rulemaking or additional guidance on these 
proposed requirements that we might further develop.
    In paragraph (e), we codify the statutory restriction from section

[[Page 41878]]

1311(i)(5) of the Affordable Care Act that the Exchange is prohibited 
from supporting the Navigator program with Federal funds received by 
the State for the establishment of Exchanges. Thus, the Exchange must 
use operational funds generated through non-Federal sources (pursuant 
to section 1311(d)(5)) including general operating funds, to fund the 
Navigator program. If the State chooses to permit or require Navigator 
activities to address Medicaid and CHIP administrative functions, and 
such functions are performed under a contract or agreement that 
specifies a method for identifying costs or expenditures attributable 
to Medicaid and CHIP activities, the Medicaid or CHIP agencies may 
claim Federal funding for a share of expenditures incurred for such 
activities at the administrative Federal financial participation rate 
described in 42 CFR 433.15 for Medicaid and 42 CFR 457.618 for CHIP.
    Finally, we are considering a requirement that the Exchanges ensure 
that the Navigator program is operational with services available to 
consumers no later than the first day of the initial open enrollment 
period. Since consumers will likely require significant assistance to 
understand options and make informed choices when selecting health 
coverage, we believe it is important that Exchanges begin the process 
of establishing the Navigator program by awarding grants and training 
grantees in time to ensure that Navigators can assist consumers in 
obtaining coverage throughout the initial open enrollment period. We 
seek comment on this timeframe under consideration.
d. Ability of States to Permit Agents and Brokers to Assist Qualified 
Individuals, Qualified Employers, or Qualified Employees Enrolling in 
QHPs (Sec.  155.220)
    Section 1312(e) of the Affordable Care Act gives States the option 
to permit agents or brokers to assist individuals enrolling in QHPs 
through the Exchange. This includes allowing agents and brokers to 
enroll qualified individuals, qualified employers, or qualified 
employees in QHPs and to assist individuals with applications for 
advance payments of the premium tax credit and cost-sharing reductions. 
We propose to codify this option under paragraph (a) of Sec.  155.220.
    We note that the standards described in this section would not 
apply to agents and brokers acting as Navigators. Any entity serving as 
a Navigator, including an agent or broker, may not receive any 
financial compensation from an issuer for helping an individual or 
small group select a specific QHP, consistent with Sec.  155.210. We 
also clarify that the statute permits agents and brokers to assist with 
applications for advance payments of the premium tax credit and cost-
sharing reductions.
    To ensure that individuals and small groups have access to 
information about agents and brokers should they wish to use one, in 
paragraph (b) we propose to permit an Exchange to display information 
about agents and brokers on its Web site or in other publicly available 
materials.
    We recognize that there are web-based entities and other entities 
with experience in health plan enrollment that are seeking to assist in 
QHP enrollment in several ways, including: by contracting with an 
Exchange to carry out outreach and enrollment functions, or by acting 
independently of an Exchange to perform similar outreach and enrollment 
functions to the Exchange. To the extent that an Exchange contracts 
with such an entity, the Exchange would need to adhere to the 
requirements proposed for eligible contracting entities at Sec.  
155.110(a).
    In the event that the Exchange contracts with such web-based 
entities, the Exchange would remain responsible for ensuring that the 
statutory and regulatory requirements pertinent to the relevant 
contracted functions are met. We understand that such entities may 
provide an additional avenue for the public to become aware of and 
access QHPs, but we also note that advance payments of the premium tax 
credit and cost-sharing reductions may only be accessed through an 
Exchange. We seek comment on the functions that such entities could 
perform, the potential scope of how these entities would interact with 
the Exchanges and what standards should apply to an entity performing 
functions in place of, or on behalf of, an Exchange. We also seek 
comment on the practical implications, costs, and benefits to an 
Exchange that coordinates with such entities, as well as any security- 
or privacy-related implications of such an arrangement.
e. General Standards for Exchange Notices (Sec.  155.230)
    Notices are developed to ensure that applicants, qualified 
individuals, and enrollees understand their eligibility and enrollment 
status, including the reason for receipt of the notice and information 
about any subsequent action(s) they must take.
    In paragraph (a), we propose that any notice sent by an Exchange 
pursuant to this part must be in writing and include (1) contact 
information for customer service resources, which might include web-
based information, call center, Navigators, or consumer assistance 
programs; (2) an explanation of rights to appeal, if applicable; and 
(3) a citation to the specific regulation serving as the cause for 
notice.
    In paragraph (b), we propose all applications, forms, and notices 
must be provided in plain language. In addition, applications, forms 
and notices should be written in a manner that meets the needs of 
diverse populations by providing meaningful access to limited English 
proficient individuals and ensuring effective communication for people 
with disabilities. As such, there are a number of ways that the 
Exchange may provide such access including provision of information 
about the availability and steps to obtain oral interpretation 
services, information about the languages in which written materials 
are available, and the availability of materials in alternate formats 
for persons with disabilities. We seek comment regarding whether we 
should codify these examples as requirements in the final rule as well 
as any other requirements we might consider to provide meaningful 
access to limited English proficient individuals and to ensure 
effective communication for people with disabilities.
    In paragraph (c), we propose that the Exchange annually re-evaluate 
the appropriateness and usability of the applications, forms, and 
notices and in consultation with HHS in instances when changes are 
made. As the program evolves, we anticipate that the Exchange may be 
able to improve the tools used to collect information and inform 
individuals about their eligibility and coverage options.
f. Payment of Premiums (Sec.  155.240)
    The Affordable Care Act includes some references to payment of 
premiums through an Exchange. While we do not require or limit the 
methods of premium payment in connection with individual market 
coverage, we note that an Exchange generally has three options: (1) 
Take no part in payment of premiums, which means that enrollees must 
pay premiums directly to a QHP issuer; (2) facilitate the payment of 
premiums by enrollees by creating an electronic ``pass-through'' of 
premiums without directly retaining any of the payments; or (3) 
establish a payment option where the Exchange collects premiums from 
enrollees and pays an aggregated sum to the QHP issuers.
    Section 1312(b) of the Affordable Care Act states that a qualified 
individual enrolled in a QHP may pay any applicable premium directly to 
the

[[Page 41879]]

issuer. We propose to codify this Exchange requirement in paragraph (a) 
of Sec.  155.240. We interpret this to mean that while an Exchange may 
exercise any of the options listed above, pursuant to section 1312(b), 
it must always allow an individual to pay directly to the QHP issuer if 
he or she chooses, regardless of whether an Exchange has elected to 
establish another option for premium payment. This requirement does not 
preclude an Exchange from facilitating or aggregating premium payments, 
if it chooses to do so.
    In paragraph (b), we propose that an Exchange may permit Indian 
tribes, tribal organizations and urban Indian organizations to pay the 
QHP premiums on behalf of qualified individuals, subject to the terms 
and conditions determined by the Exchange. Comments in response to the 
November 12, 2010 HHS tribal consultation letter and the RFC suggest 
that premiums may present an obstacle for Indians and suggested that we 
consider implementation of a process for a tribe to pay premiums on 
behalf of its members since premiums cannot be waived for Indians.
    An Exchange may consider setting-up an upfront group payment 
mechanism similar to the mechanism currently used by some tribes to 
enroll members in the Medicare Prescription Drug Program. Under that 
program, tribes offer a selection of plans from which their members may 
choose, thus limiting the members' options. We seek comment on whether 
this approach would work in an Exchange and how such an approach might 
be tailored to fit the Exchange.
    We note that section 402 of the Indian Health Care Improvement Act 
(IHCIA) permits Indian tribes, tribal organizations, and urban Indian 
organizations to purchase health benefits coverage for IHS 
beneficiaries. As a result, the payment of premiums that we propose 
under this section is more inclusive than other Exchange provisions 
(special enrollment periods and cost-sharing rules) that pertain to 
Indians. We invite comment on how to distinguish between individuals 
eligible for assistance under the Affordable Care Act and those who are 
not in light of the different definitions of ``Indian'' that apply for 
other Exchange provisions.
    In paragraph (c), we propose that, in the operation of a SHOP, an 
Exchange must accept payment of an aggregate premium by a qualified 
employer pursuant to the standards set forth in Sec.  155.705(b)(4).
    In paragraph (d), we propose that an Exchange may facilitate 
through electronic means the collection and payment of premiums. This 
could include the Exchange acting as a simple pass-through or the 
Exchange collecting and distributing premiums to QHP issuers.
    Additionally, we propose in paragraph (e) that an Exchange choosing 
to offer enrollees payment through electronic means must conform to any 
standards and protocols (including privacy and security) required under 
Sec.  155.260 and Sec.  155.270.
    If an Exchange elects to facilitate the collection and payment of 
premiums, it must establish administrative protocols to ensure the 
integrity of the financial transactions. We clarify that premium 
collection by the Exchange does not make the Exchange liable for 
payment. For example, if an individual is late making a payment or 
misses a premium payment, the Exchange would not have to make a payment 
on behalf of the individual. We seek comments concerning Exchange 
flexibility in establishing the premium payment process and what 
standards would be appropriate for the Federal government to establish 
in regulations to ensure fiduciary accountability in the case of an 
Exchange that collects premiums.
g. Privacy and Security of Information (Sec.  155.260)
    In Sec.  155.260, we address the privacy and security standards 
Exchanges must establish and follow. Each Exchange will need to obtain 
applicants' personally identifiable information, such as names, social 
security numbers, addresses, dates of birth, and tax returns or other 
financial information during the application process discussed in Sec.  
155.405 as part of the eligibility determination process required by 
Sec.  155.200(c) of this subpart. In addition to the proposals in this 
part, part 156 requires QHP issuers to provide personally identifiable 
information to the Exchange on a regular basis. We propose to require 
that the Exchange apply appropriate security and privacy protections 
when collecting, using, disclosing or disposing of personally 
identifiable information it collects. In addition, we propose to 
require contractual terms that impose these standards on contractors or 
sub-contractors that fulfill Exchange functions or access information 
from or on behalf of the Exchange.
    In paragraph (a), we propose to define the term ``personally 
identifiable information'' in this context as information that, alone 
or when combined with other personal or identifying information which 
is linked or linkable to a specific individual, can reasonably be used 
to distinguish or trace an individual's identity. We propose that the 
term applies to information collected, received or used by the Exchange 
as part of its operations. Consistent with section 1411(g) of the 
Affordable Care Act, in paragraph (b), we propose limiting the 
collection, use, and disclosure of personally identifiable information 
to what is specifically required or permitted by Sec.  155.260, other 
applicable law, subpart E of this part, the standards established in 
accordance with Sec.  155.200(c) of this subpart, and section 1942(b) 
of the Act. We note that Exchanges may not collect, use, or disclose 
personally identifiable information if prohibited by another law. We 
invite comment as to whether and how we should restrict the method of 
disposal in this section as well.
    The Affordable Care Act provides specific privacy and security 
standards at sections 1411(g), 1413(c)(2), and 1414(a)(1) for some, but 
not all, types of information flowing to and from the Exchange. 
Furthermore, we recognize that some or all of the Exchanges may be 
HIPAA covered entities (health plans, health care clearinghouses and 
health care providers that conduct certain electronic transactions 
covered by HIPAA) or business associates of HIPAA covered entities; in 
such cases, some or all exchange privacy and security responsibilities 
regarding individuals' health information may be governed by HIPAA. 
Therefore, in addition to other standards mentioned directly by the 
Affordable Care Act, HIPAA may dictate the appropriate privacy and 
security standards for some Exchanges, and may serve as guidance on 
appropriate privacy and security practices for others. Each Exchange 
should engage in an analysis of its operations and functions and 
determine its HIPAA status based on the definitions in Sec.  160.103 in 
subchapter C of 45 CFR. That analysis will be fact-intensive and will 
depend heavily on the decisions of each State about how the Exchange 
will be set up and on the functions and services the Exchange performs, 
including those functions it performs with respect to QHPs, Medicaid 
and CHIP. Regardless of whether an Exchange is subject to HIPAA as a 
covered entity or as a business associate, we propose that the 
Exchanges implement safeguards to ensure that any and all personally 
identifiable information received, used, stored, transferred, or 
prepared for disposal by an Exchange is subject to adequate privacy and 
security protections. For an Exchange that is subject to HIPAA, the 
privacy and security standards imposed by HIPAA

[[Page 41880]]

must be followed with respect to information that is ``protected health 
information.''
    Because each Exchange may have different needs and structures and 
work in different capacities, it is difficult to create a uniform set 
of detailed privacy and security standards that we could propose to 
apply to all Exchanges. That said, we believe that HIPAA provides 
certain universally appropriate security standards. We therefore 
propose to require that the security standards of the Exchange (and 
which the Exchange must contractually impose on contractors and 
subcontractors) are consistent with HIPAA security rules described at 
45 CFR 164.306, 164.308, 164.310, 164.312, and 164.314. These rules 
provide tested and familiar guidelines that should ensure the proper 
handling of applicant and enrollee information. Again, and as explained 
below, we propose to require contractual requirements that apply these 
security standards to contractors or sub-contractors that receive 
information from the Exchange or fulfill Exchange functions.
    Privacy policies for the Exchanges will need to allow for the 
appropriate collection, receipt, use, disclosure and disposal of the 
various kinds of information including health, financial and other 
types of personally identifiable information. For Exchanges not subject 
to HIPAA as covered entities or as business associates, while HIPAA may 
provide an appropriate model for the protection of the privacy of 
health information, we are concerned about its applicability to all 
data passing through Exchanges--specifically, tax return information 
protected by 6103 of the Code. As such, we are not proposing to adopt a 
selection of HIPAA privacy standards as the minimum protections for 
data at all Exchanges. Rather, we propose to provide States with the 
flexibility to create a more appropriate and tailored standard. We are 
considering requiring each Exchange to adopt privacy policies that 
conform to the Fair Information Practice Principles (FIPPs). We believe 
that FIPPs will afford an appropriate baseline of privacy protections 
regarding the use, disclosure and disposal of personally identifiable 
information.\6\ The FIPPs have been incorporated into both the privacy 
laws of many States with regard to government-held records \7\ and 
numerous international frameworks, including the OECD's privacy 
guidelines, the EU Data Protection Directive, and the APEC Privacy 
Framework.\8\ Specifically, the principles include: (1) Individual 
Access; (2) Correction; (3) Openness and Transparency; (4) Individual 
Choice; and (5) Collection, Use, and Disclosure Limitations. We note 
that we plan to address collection limitations in the eligibility 
standards established pursuant to Sec.  155.200(c) of this part. We 
welcome comments on the appropriateness of the FIPPs in this context 
and the best means to integrate FIPPs into the privacy policies and 
operating procedures of individual Exchanges while allowing for 
adaptability to each Exchange's particular structure and operations. We 
also solicit comment on the aptness of adopting the HIPAA privacy model 
for Exchanges. Again, we note that an Exchange that is subject to HIPAA 
must comply with both the privacy and security standards imposed by 
HIPAA with respect to protected health information.
---------------------------------------------------------------------------

    \6\ In 1973, the Department of Health, Education, and Welfare 
(HEW) released its report, Records, Computers, and the Rights of 
Citizens, which outlined a Code of Fair Information Practices that 
would create ``safeguard requirements'' for certain ``automated 
personal data systems'' maintained by the Federal Government. This 
Code of Fair Information Practices is now commonly referred to as 
fair information practice principles (FIPPs) and established the 
framework on which much privacy policy would be built. There are 
many versions of the FIPPs; the principles described here are 
discussed in more detail in The Nationwide Privacy and Security 
Framework for Electronic Exchange of Individually Identifiable 
Health Information, December 15, 2008. http://healthit.hhs.gov/portal/server.pt/community/healthit_hhs_gov__privacy___security_framework/1173.
    \7\ Pritts, J.L., Altered States: State Health Privacy Laws and 
the Impact of the Federal Health Privacy Rule (Spring 2002), 2 Yale 
J. Health Pol'y L. & Ethics 325.
    \8\ See Department of Commerce, Internet Policy Task Force, 
Commercial Data Privacy, and Innovation in the Internet Economy: A 
Dynamic Policy Framework, (Washington, D.C.: 2010).
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    We also propose in paragraph (b) to adopt several additional 
requirements for the privacy and security policies and procedures of 
Exchanges. We propose requiring that the policies and procedures be in 
writing and available to the Secretary of HHS, and that this writing 
identify any applicable laws that the Exchange will need to follow. We 
also propose to require that the Exchange must, in any contract or 
agreement with a contractor, require that information provided to, 
created by, received by, and subsequently disposed of by the contractor 
or any of its subcontractors be protected by the same or higher privacy 
and security standards than are applicable to the Exchange. We believe 
that this will ensure that all contractors and subcontractors that 
fulfill Exchange functions are subject to adequate privacy and security 
standards. Last, we are considering imposing a requirement that each 
Exchange implement some form of authentication procedure for ensuring 
that all entities interacting with Exchanges are who they claim. We are 
currently working with other Federal agencies to determine the best 
methods of authentication to ensure the identities of parties accessing 
information in or furnishing information to Exchanges.
    In paragraph (c), we propose an additional requirement related to 
data matching arrangements that are made between the Exchange and 
agencies that administer Medicaid and CHIP in States for the exchange 
of eligibility information. The Exchange must participate in the data 
matching program required by section 1413(c)(2) of the Affordable Care 
Act consistent with the privacy and security standards described in 
section 1942(b) of the Act and in other applicable laws. We expect 
Exchanges and the Medicaid and CHIP agencies to execute data use 
agreements that prevent the unauthorized use or disclosure of 
personally identifiable information and prohibit the Exchange or State 
agency from seeking to obtain or provide information that it will not, 
or does not reasonably expect to, use. We propose to adopt these same 
requirements as data privacy and security requirements for Exchanges.
    In paragraph (d), we also propose to require Exchanges to adopt 
privacy and security policies and procedures that meet the standards in 
section 6103 of the Code that protect the confidentiality of tax 
returns and tax return information. Section 1414(a)(1) of the 
Affordable Care Act added section 6103(l)(2) to the Code to authorize 
the disclosure of certain tax return information to carry out 
eligibility determinations for advance payments of the premium tax 
credit and certain other government-sponsored health programs, subject 
to the confidentiality and safeguarding requirements of section 6103 of 
the Code. We are currently working with the Secretary of the Treasury 
and States to ensure that Treasury-required safeguards for tax 
information will be met across the information technology architecture.
    Finally, in paragraph (e), we propose to codify the requirement in 
section 1411(h)(2) of the Affordable Care Act that provides that any 
person that knowingly and willfully uses or discloses personally 
identifiable information in violation of section 1411(g) of the 
Affordable Care Act will be subject to a civil money penalty of not 
more than $25,000 per disclosure and be subject to any other applicable 
penalties that may be prescribed by law. We propose to interpret 
section 1411(h)

[[Page 41881]]

to apply the civil money penalty of $25,000 to each violation of 
section 1411(g).
h. Use of Standards and Protocols for Electronic Transactions (Sec.  
155.270)
    In this section, we propose to apply certain standards and 
protocols to the operation of Exchanges. We consider these requirements 
to be important considerations in the development and operation of 
Exchange information technology systems, and as such, propose them here 
as requirements for Exchanges.
    In paragraph (a), we propose to apply the HIPAA administrative 
simplification requirements. To the extent that the Exchange performs 
electronic transactions with a covered entity, including State Medicaid 
programs and QHP issuers, the Exchange must use standards and operating 
rules adopted by the Secretary pursuant to 45 CFR parts 160 and 162.
    In paragraph (b), we propose to codify the HIT enrollment standards 
and protocols that were developed pursuant to section 3021 of the PHS 
Act, which was added by section 1561 of the Affordable Care Act, and 
that were adopted by the Secretary.\9\ Such standards and protocols 
will be incorporated within Exchange information technology systems as 
required under the Exchange cooperative agreements awarded pursuant to 
section 1311(a) of the Affordable Care Act.
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    \9\ http://healthit.hhs.gov/portal/server.pt?open=512&mode=2&objID=3161.
---------------------------------------------------------------------------

4. Subpart E--Exchange Functions in the Individual Market: Enrollment 
in Qualified Health Plans
    In subpart E, we outline the initial, annual, and special 
enrollment periods as well as the enrollment process and the 
termination of coverage process. The standards established by the 
Exchange in accordance with this subpart will facilitate the enrollment 
of qualified individuals into QHPs and the transfer of enrollees from 
one QHP to another. For the purposes of this subpart, any reference to 
enrollee means a qualified individual who enrolls in a QHP through the 
Exchange.
    In response to the RFC, many commenters suggested that States 
should design systems for the Exchange by either building off of 
existing systems that are in place for Medicaid and CHIP or, 
alternatively, developing new systems that would serve the Exchange as 
well as advance payments of the premium tax credit, cost-sharing 
reductions, Medicaid and CHIP. Comments also focused on the importance 
of a streamlined enrollment process. In addition, many commenters 
recommended that the initial open enrollment period be longer and more 
flexible than subsequent annual open enrollment periods while others 
suggested enrollment periods be structured so as not to encourage 
migration in and out of the Exchange.
    Commenters also suggested that we follow HIPAA and Medicare 
guidelines when establishing qualifying events that trigger special 
enrollment periods. Some suggested that there should not be a single 
open enrollment period for all eligible individuals but instead, a 
staggered open enrollment so as not to place excessive administrative 
burdens on Exchanges, States, and QHP issuers. We also received 
comments supporting a lag between enrollment periods and effective 
dates to provide time for enrollment, billing, and other information to 
be processed, as well as to allow time for QHP issuers to produce and 
mail consumer identification cards and any necessary start-up 
communications.
a. Enrollment of Qualified Individuals into QHPs (Sec.  155.400).
    Section 155.400 addresses that the Exchange must: Accept a QHP 
selection from an applicant who is determined eligible for enrollment 
in a QHP, notify the issuer of the applicant's selected QHP, and 
transmit information necessary to enable the QHP issuer to enroll the 
applicant.
    In paragraph (b), we propose that the Exchange must send QHP 
issuers enrollment information on a timely basis; we anticipate issuing 
further guidance on this timing. In addition, the Exchange will be 
required to develop a process by which QHP issuers can verify and 
acknowledge the receipt of enrollment information. While it would be 
ideal for information sharing to occur on a real-time basis, we are not 
certain that all parties will have the necessary functionality for 
real-time information sharing by 2014. As such, we encourage real-time 
processing and acknowledgement of enrollment information; we seek 
comment as to whether we should consider codifying a requirement for a 
specific frequency for enrollment transactions such as in real time or 
daily in our final rule.
    To ensure that the Exchange and QHP issuers have identical plan 
enrollment records, we propose under paragraphs (c) and (d) that the 
Exchange maintain records of enrollment, submit enrollment information 
to HHS, and reconcile the enrollment files with the QHP issuers no less 
than on a monthly basis.
b. Single Streamlined Application (Sec.  155.405)
    Section 1413(b)(1)(A) of the Affordable Care Act requires that the 
Secretary develop and provide to each State a single, streamlined form 
that may be used to apply for advance payments of the premium tax 
credit, cost-sharing reductions, Medicaid, CHIP, and the BHP, if a BHP 
is operating in the Exchange service area, and that must be structured 
to maximize an applicant's ability to complete the form satisfactorily, 
taking into account the characteristics of individuals who qualify for 
the programs. Section 1311(c)(1)(F) of the Affordable Care Act states 
that an issuer shall use a uniform enrollment form for qualified 
individuals and employers to enroll in QHPs through the Exchange, and 
that the enrollment form must take into account criteria developed by 
the NAIC. In Sec.  155.405 we describe a single streamlined application 
and standards for any alternative application developed by the Exchange 
that incorporate both eligibility and enrollment, in order to 
facilitate an efficient process.
    In paragraph (a), we propose that the Exchange use a single 
streamlined application to collect information necessary for QHP 
enrollment, advance payments of the premium tax credit, cost-sharing 
reductions, and Medicaid, CHIP, and the BHP, if a BHP is operating in 
the Exchange service area. We propose use of a single streamlined 
application to limit the amount of information and number of times an 
individual must make submissions to receive an eligibility 
determination and complete the enrollment process. HHS plans to create 
both a paper-based and web-based dynamic application. We anticipate 
that the electronic application will enable many applicants to complete 
the eligibility and QHP selection process in a single online session.
    In paragraph (b), we propose that if the Exchange seeks to use an 
alternative application it must be approved by HHS. The alternative 
application should collect the information necessary to support an 
eligibility determination and to process enrollment through the 
programs described in paragraph (a). Our intent is to simplify the 
application process and reduce, if not eliminate, the collection of 
extraneous information. We seek comment regarding whether we should 
codify a requirement that applicants may not be required to answer 
questions that are not pertinent to the eligibility and enrollment 
process.

[[Page 41882]]

    In paragraph (c), we propose that the Exchange must accept 
applications from multiple sources, including the applicant; an 
authorized representative (we propose this to be defined by State law); 
or someone acting responsibly for the applicant. In addition, section 
1413(b)(1)(A)(ii) of the Affordable Care Act sets forth requirements 
regarding mechanisms by which an individual may file an application. In 
paragraph (c)(2), we propose that an individual must be able to file an 
application online, by telephone, by mail, or in person. We solicit 
comments on the requirement that an individual must be able to file an 
application in person.
    We reserve paragraphs (d) and (e) for future rulemaking.
    In regard to requests for personally identifiable information that 
the Exchange will collect during the application process, we are 
contemplating standards for the final rule for information collection 
based on the Fair Information Practices Principles (FIPPs) framework. 
For a more detailed discussion on FIPPs, see the preamble to 155.260. 
According to FIPPs, applicants should be given notice of an entity's 
information practices before any personal information is collected from 
them so that they are able to make an informed decision about whether 
and to what extent to disclose their personal information.
c. Initial and Annual Open Enrollment Periods (Sec.  155.410)
    Section 1311(c)(6) of the Affordable Care Act directs the Secretary 
to establish an initial open enrollment period and an annual open 
enrollment period. In Sec.  155.410, we propose standards for Exchanges 
related to the initial and annual open enrollment periods. Our proposed 
timeframes are informed by both the experience implementing Medicare 
Advantage and the Medicare Prescription Drug Benefit Program, as well 
as information from FEHBP.
    In paragraph (a)(1), we propose that the Exchange adhere to the 
initial and annual open enrollment periods set forth in this section 
and indicate that qualified individuals and enrollees may begin or 
change coverage in a QHP at such times. In paragraph (a)(2), we propose 
that the Exchange may only permit a qualified individual to enroll in a 
QHP or an enrollee to change QHPs during the initial open enrollment 
period specified in paragraph (b), the annual open enrollment period 
specified in paragraph (e), or a special enrollment period described in 
Sec.  155.420 for which the qualified individual or enrollee has been 
determined eligible.
    In paragraph (b), we propose an initial open enrollment period that 
allows a qualified individual to enroll in a QHP from October 1, 2013 
through February 28, 2014. We want to ensure that qualified individuals 
have sufficient time to learn about Exchange coverage, compare options, 
and ultimately enroll. In addition, we seek to provide the maximum 
flexibility for the information management system of the Exchange to be 
designed, built, tested, and ready for January 1, 2014 coverage in 
addition to the time needed to certify QHPs.
    We believe that consumers should have an initial open enrollment 
period that extends beyond January 1, 2014 to allow for outreach and 
education beyond the first potential date of coverage. We recognize 
that extending the initial open enrollment period into 2014 will 
require flexibility on the part of QHPs because some enrollees will 
have fewer than 12 months of coverage in the first year. As such, we 
seek to balance the needs of consumers with the interest of QHPs to 
have individuals enrolled for as close to a full coverage year as 
possible. We seek comment on the duration of the initial open 
enrollment period.
    In paragraph (c), we propose rules regarding the effective date of 
coverage for the initial open enrollment period based on the date on 
which the Exchange receives a QHP selection from an individual, in 
order to allow appropriate time for QHP issuers to process QHP 
selections. In paragraph (c)(1), we propose that for a QHP selection 
received by the Exchange on or before December 22, 2013, the Exchange 
must ensure an effective date of January 1, 2014. In paragraph (c)(2), 
we propose that for a QHP selection received by the Exchange between 
the first and twenty-second day of any subsequent month during the 
initial open enrollment period, the Exchange must ensure an effective 
date on the first day of the following month. In paragraph (c)(3), we 
propose that for a QHP selection received by the Exchange between the 
twenty-third and last day of the month for any month between December, 
2013 and February 28, 2014, the Exchange must ensure an effective date 
of either the first day of the following month or the first day of the 
second following month.
    In general, we propose to apply this approach to effective dates 
for the annual open enrollment period and for special enrollment 
periods as well. This proposal is designed to minimize the time between 
enrollment and coverage effective dates, while leaving sufficient time 
to ensure that QHP selections can be fully processed by QHP issuers. In 
addition, the proposal provides the Exchange with flexibility to work 
with QHP issuers to implement selections received between the twenty-
third and last day of the month on either the first of the following 
month or the first of the second following month, which allows the 
Exchange and QHP issuers to choose to process enrollments more quickly 
to the extent possible.
    We note that the coverage effective date may not be set or 
enrollment information sent from the Exchange to the QHP until the 
individual is determined eligible to purchase coverage through the 
Exchange. Section 36B(c)(2)(A)(i) of the Affordable Care Act specifies 
that advance payments of the premium tax credit may only be provided 
for an enrollee who is enrolled in a QHP on the first of the month. As 
such, in order to coordinate coverage in a QHP with the advance 
payments of the premium tax credit that support the purchase such 
coverage, we propose to establish that coverage in a QHP may only begin 
on the first of the month. However, we seek comment as to whether we 
should consider allowing at least twice-monthly effective dates of 
coverage or complete flexibility to allow for coverage to begin any day 
for individuals who forego receipt of such credit for their first 
partial month or who are not eligible to receive advance payments of 
the premium tax credit.
    In paragraph (d), we propose that the Exchange must send written 
notification to enrollees about the annual open enrollment period. We 
are considering codifying the requirement that such notice must be sent 
no later than 30 days before the start of the annual open enrollment 
period in our final rule. Further, we believe the notice may require 
inclusion of specific information and we seek comment regarding whether 
we should codify such requirements for information pertaining to: (1) 
The date annual open enrollment begins and ends, (2) where individuals 
may obtain information about available QHPs, including the Web site, 
call center, and through Navigator assistance, and (3) other relevant 
information.
    In paragraph (e), we propose an annual open enrollment period from 
October 15 through December 7 of each year, starting in October 2014 
for coverage beginning January 1, 2015. As an alternative annual open 
enrollment period, we considered November 1 through December 15 of each 
year to provide a 45-day window close to the end of the year that would 
be easy to remember. We welcome comments

[[Page 41883]]

regarding our proposed and alternative approach for the annual open 
enrollment period.
    In paragraph (f), we propose that the Exchange must ensure coverage 
is effective as of the first day of the following benefit year for a 
qualified individual who has made a QHP selection during the annual 
open enrollment period.
    We seek comment regarding whether we should require Exchanges to 
automatically enroll individuals who received advance payments of the 
premium tax credit and are then disenrolled from a QHP because the QHP 
is no longer offered if such individual does not make a new QHP 
selection. We also seek comment regarding whether we should codify 
requirements in the final rule regarding automatic enrollment of 
individuals into new QHPs when there are mergers between issuers or 
when one QHP offered through a specific issuer is no longer offered but 
there are other options available to the individual through the same 
issuer. Further, if we were to provide for automatic enrollment, we 
seek comment as to how far such automatic enrollment should extend.
    We reserve paragraph (g) for future rulemaking.
d. Special Enrollment Periods (Sec.  155.420)
    In accordance with section 1311(c)(6)(C) of the Affordable Care 
Act, the Secretary must establish special enrollment periods. The 
statute requires use of the special enrollment periods in section 9801 
of the Code and, where relevant, special enrollment periods similar to 
those in the Medicare Prescription Drug Program. In Sec.  155.420, we 
propose standards to address this statutory requirement. In paragraph 
(a) of this section, we specify that the Exchange must allow a 
qualified individual or enrollee to enroll in a QHP or change from one 
QHP to another outside of the annual open enrollment period, if such 
individual qualifies for a special enrollment period.
    In paragraph (b), we propose that, in general, the effective dates 
for QHP selections based on special enrollment periods follow the 
proposed effective dates for QHP selections during the initial or 
annual open enrollment periods described in Sec.  155.410(c) of this 
subpart. First, in paragraph (b)(1), we propose that once determined 
eligible for a special enrollment period, the Exchange must ensure that 
a qualified individual or enrollee's effective date is on the first day 
of the following month for all QHP selections made by the 22nd of the 
previous month, and on either the first day of the following month or 
the first day of the second following month for all QHP selections made 
between the 23rd and last day of a given month. We provide an exception 
in the case of birth, adoption or placement for adoption, for which 
coverage must be effective on the date of birth, adoption, or placement 
for adoption.
    In paragraph (c), we propose a standard length of 60 days for each 
special enrollment period from the date of the triggering event unless 
the applicable regulation provides otherwise. We believe that having a 
standardized length for special enrollment periods will simplify 
administrative processes and accommodate the needs of individuals 
undergoing significant life changes, although we note that we raise 
alternatives for the special enrollment periods proposed in paragraphs 
(d)(6) and (d)(7) of this section in the preamble associated with those 
paragraphs. We request comment on the alternatives raised for the 
special enrollment periods described in paragraphs (d)(6) and (d)(7) 
and whether others, such as (d)(4), should have an alternate start 
date.
    In paragraph (d), we propose specific special enrollment periods. 
We note that all requests for special enrollment periods must be 
evaluated by the Exchange as part of the eligibility determination 
process established pursuant to Sec.  155.200(c) of this part. For 
purposes of special enrollment periods provided herein, we interpret 
dependent to mean any individual who is or may become eligible for 
coverage under the terms of a QHP because of a relationship to an 
enrollee (including the enrollee's spouse). In paragraph (d)(1), we 
propose that the Exchange permit a qualified individual and any 
dependents to enroll in a QHP due to loss of other minimum essential 
coverage. We interpret loss of coverage to include any event that 
triggers a loss of eligibility for other minimum essential coverage. We 
further propose that a dependent of a current enrollee in a QHP and the 
enrollee are each eligible for a special enrollment period if the 
dependent loses other minimum essential coverage. Examples of loss of 
coverage include decertification of a QHP that occurs outside of the 
annual open enrollment period. In such cases, an enrollee would be 
allowed to select and enroll in a new QHP upon notification of plan 
decertification. If the enrollee does not select a new QHP before the 
effective date of plan termination, he or she would be provided 60 days 
from the date of plan termination, which is the triggering event, to 
select a new QHP.
    Other examples of events that would qualify as loss of coverage 
include but are not limited to the following: legal separation or 
divorce ending eligibility of a spouse or step-child enrolled in other 
minimum essential coverage as a dependent; end of dependent status 
(such as attaining the maximum age to be eligible as a dependent child 
under the plan); death of an individual enrolled in minimum essential 
coverage ending eligibility for covered dependents; termination of 
employment or reduction in the number of hours of employment necessary 
to maintain coverage; or relocation outside of the service area of the 
QHP. Examples of relocation include relocation to the United States 
(US) in the case of a US citizen, national, or lawfully present 
individual who was not previously eligible for Exchange participation 
while residing outside of the US; release from incarceration; moving 
from the jurisdiction of one Exchange to another; or relocating outside 
of the individual's QHP's service area.
    In accordance with section 9801(f) of the Code, we propose that 
loss of coverage also include: termination of employer contributions 
for a qualified individual or dependent who has coverage that is not 
COBRA continuation coverage by any current or former employee, 
exhaustion of COBRA continuation coverage, reaching a lifetime limit on 
all benefits in a grandfathered plan, and termination of Medicaid or 
CHIP. We vary from the Code for this first special enrollment period by 
specifying only loss of minimum essential coverage rather than loss of 
any coverage because of the requirement in section 5000A of the 
Affordable Care Act that qualified individuals and their dependents 
must maintain essential coverage. If otherwise qualified individuals 
who maintained less than minimum essential coverage were granted a 
special enrollment period based on termination of such coverage, such 
individuals might wait until experiencing a significant health care 
need to enroll in a QHP through the Exchange by using a special 
enrollment period. Such allowance could create a problem of adverse 
selection; we solicit comment on this provision.
    Similar to the provisions outlined in section 9801 of the Code, we 
propose in paragraph (d)(2) a special enrollment period for a qualified 
individual who gains a dependent or becomes a dependent through 
marriage, birth, adoption or placement for adoption. We welcome comment 
as to whether States might consider expanding the special

[[Page 41884]]

enrollment period to include gaining dependents through other life 
events.
    Similar to when an individual is newly eligible for Medicare and 
has a period of time to begin coverage in Medicare and to select a 
Medicare Prescription Drug Plan, we propose in paragraph (d)(3) that 
upon gaining status as a citizen, national, or lawfully present 
individual in the US, a qualified individual qualifies for a special 
enrollment period because the individual is newly eligible to purchase 
coverage. We view this initial enrollment period as the functional 
equivalent of a special enrollment period since it occurs outside of 
the annual open enrollment period and provides an opportunity for 
eligible individuals to gain access to coverage through a QHP.
    The special enrollment periods that are proposed in paragraphs 
(d)(4) through (d)(7) are also patterned on the Medicare Prescription 
Drug Program. In paragraph (d)(4), we propose that qualified 
individuals who experience an error in enrollment receive a special 
enrollment period. This applies in any case where the Exchange finds 
that a qualified individual's enrollment or non-enrollment in a QHP is 
unintentional, inadvertent, or erroneous and is the result of the 
error, misrepresentation, or inaction of an officer, employee, or agent 
of the Exchange or HHS, or its instrumentalities as evaluated and 
determined by the Exchange.
    In paragraph (d)(5), we propose a special enrollment period for an 
individual enrolled in a QHP who adequately demonstrates to the 
Exchange that the QHP in which he or she is enrolled substantially 
violated a material provision of its contract in relation to such 
individual and their dependents. One example of such a violation is 
material misrepresentation by the QHP issuer (or its agent, 
representative, or plan provider) when marketing the plan to the 
individual.
    In paragraph (d)(6), we propose a special enrollment period for 
individuals who are newly eligible or newly ineligible for advance 
payments of the premium tax credit or have a change in eligibility for 
cost-sharing reductions. This proposal allows new enrollment or 
movement from one QHP to another. This special enrollment period would 
be granted for individuals who receive an eligibility determination for 
the first time for coverage through the Exchange or for individuals who 
experience a mid-year change in circumstance that changes their 
eligibility, including a change that ends their eligibility for advance 
payments of the premium tax credit. We propose this special enrollment 
period because we anticipate that individuals will decide whether to 
enroll in a QHP and choose a specific plan based in part on financial 
status and how financial status impacts eligibility. Additionally, 
qualified individuals and enrollees may wish to enroll in or change 
plans to take advantage of different benefit designs and plan cost 
structures as their eligibility changes. We seek comment as to whether 
the start of the 60 day special enrollment period, as discussed in 
155.420(c), should be based on the date on which an individual 
experiences a change in eligibility or based upon the date of the 
eligibility determination.
    In addition, sections 36B(c)(2)(C)(i) and (ii) of the Code specify 
that an individual may be determined eligible for advance payments of 
the premium tax credit or cost-sharing reductions in situations in 
which minimum essential coverage offered through an eligible employer-
sponsored plan, as defined in section 5000A(f)(2) of the Code, is 
determined to no longer meet the minimum value requirement or be 
affordable for the upcoming plan year. We note that even if there is a 
special enrollment period, advance payments of the premium tax credit 
only apply if the individual is not enrolled in employer coverage. The 
proposal in paragraph (d)(6) would allow an individual in this 
situation to be determined eligible for this special enrollment period 
during the open enrollment period for the employer-sponsored health 
coverage or when the employee learns of the change in his or her 
eligible employer-sponsored plan, even if he or she is still covered by 
the eligible employer-sponsored plan at the time of eligibility 
determination. This is designed to ensure that such individuals will 
not be required to be uninsured prior to receiving a determination of 
eligibility for a special enrollment period. We request comment on the 
timing of the special enrollment period in this situation and whether 
the 60 day period should begin when the employee learns of the 
change(s) in the employer-sponsored coverage or when the employee 
terminates coverage by the employer-sponsored plan.
    In paragraph (d)(7), we propose that if new QHPs offered through 
the Exchange are available to a qualified individual or enrollee as a 
result of a permanent move, such enrollee receives a special enrollment 
period. We propose that the special enrollment period begin on either 
the date of the permanent move or on the date the individual provides 
notification of such move and request comment on these alternatives. 
Individuals who move and have new QHP available to them as a result of 
the move, but continue to reside in the current plan service area, may 
use this special enrollment period to enroll in any QHP for which they 
are newly eligible in their new place of residence. It is the 
individual's responsibility to notify the Exchange or QHP that he/she 
is permanently moving.
    We considered several options with respect to the start date for 
the special enrollment period proposed in paragraph (d)(7) regarding an 
individual or enrollee who gains access to new QHPs as a result of a 
permanent move. One option that we considered for the start date of 
this special enrollment period was either the date of the individual's 
permanent move, or the date on which the individual provides notice of 
the move, if an individual provides notice of his or her move within a 
reasonable timeframe. Under this option, we could establish the length 
of this special enrollment period either as 60 days from the start date 
or as 60 days from the date of the move or his or her notice of the 
move, whichever is later. We solicit comments on these options.
    In paragraph (d)(8), we propose to codify the statutory special 
enrollment period that Indians receive a monthly special enrollment 
period as specified in section 1311(c)(6)(D) of the Affordable Care 
Act. We interpret the monthly special enrollment period to allow for an 
Indian to join or change plans one time per month. For purposes of this 
special enrollment period, section 1311(c)(6)(D) defines an Indian as 
specified in section 4 of the Indian Health Care Improvement Act 
(IHCIA). Section 4 of the IHCIA defines ``Indian'' as a member of a 
Federally-recognized tribe. We solicit comment on the potential 
implications on the process for verifying Indian status.
    In paragraph (d)(9) we propose a special enrollment period for 
exceptional circumstances, as determined by the Exchange or HHS. This 
special enrollment period could be used for a variety of situations, 
including natural disasters such as hurricanes or floods. Exceptional 
circumstances include circumstances that would impede an individual's 
ability to enroll on a timely basis, through no fault of his or her 
own.
    In paragraph (e), similar to section 9801 of the Code, we propose 
that loss of coverage does not include failure to pay premiums on a 
timely basis, including COBRA premiums prior to expiration of COBRA 
coverage, or situations allowing for a rescission as specified in 45 
CFR Sec.  147.128.

[[Page 41885]]

    In paragraph (f) we propose that upon qualifying for a special 
enrollment period, the Exchange may only allow an existing enrollee of 
a QHP to change plans within levels of coverage as defined by 1302(d) 
of the Affordable Care Act. As an example, if an enrollee is in a 
silver level plan and gives birth to a child outside of the annual open 
enrollment period, the enrollee may add the child to her existing plan 
or change from one silver level plan to another; however, she may not 
move to a gold level plan. We propose this limitation to maintain a 
single level of coverage throughout the year to avoid adverse 
selection. We propose a single exception for new eligibility for 
advance payments of the premium tax credit or change in eligibility for 
cost-sharing reductions. We recognize that limiting enrollees such that 
they must stay within a specific coverage level during a special 
enrollment period could pose a challenge for an enrollee in a 
catastrophic plan that becomes pregnant. We request comment as to 
whether we should provide an exception for such circumstances.
    We clarify that the Exchange will provide information, accept 
applications, perform eligibility determinations, and accept 
enrollments and send enrollment information to QHPs for individuals 
year round to accommodate special enrollment periods, and coverage 
through Medicaid and CHIP. Although most individuals will likely 
approach the Exchange during initial and annual open enrollment 
periods, individuals may approach the Exchange at all times. Further, 
the special enrollment periods that are required and set forth in Sec.  
155.420 are not the only applicable enrollment requirements. To the 
extent other law applies to require a special enrollment right from 
issuers, such law continues to apply. The Exchange special enrollment 
periods are a minimum requirement for the Exchange to permit enrollment 
outside of the initial and annual open enrollment periods.
e. Termination of Coverage (Sec.  155.430)
    Pursuant to section 1321(a)(1) of the Affordable Care Act, in 
paragraph (a), we propose that the Exchange must determine the form and 
manner in which coverage in a QHP may be terminated.
    In paragraph (b), we propose a set of events that would cause an 
enrollee's coverage in a QHP to be terminated. In paragraph (b)(1), we 
propose that the Exchange must permit an enrollee to terminate his or 
her coverage in a QHP with appropriate notice to the Exchange or the 
QHP. We anticipate that these voluntary termination requests will 
generally occur in situations in which an enrollee in a QHP has 
obtained other minimum essential coverage. In paragraph (b)(2), we 
propose that the Exchange may terminate an enrollee's coverage in a 
QHP, and must permit a QHP issuer to terminate such coverage in the 
following circumstances: (1) The enrollee is no longer eligible for 
coverage in a QHP through the Exchange; (2) the enrollee becomes 
covered in other minimum essential coverage; (3) payments of premiums 
for coverage of the enrollee cease, provided that the grace period for 
enrollees receiving advance payments of the premium tax credit, as 
specified in Sec.  156.270(d) of this chapter, has elapsed; (4) the 
enrollee's coverage is rescinded in accordance with Sec.  147.128 of 
this chapter; (5) the QHP terminates or is decertified by the Exchange 
as described in Sec.  155.1080; or (6) the enrollee changes from one 
QHP to another during the annual open enrollment period, or a special 
enrollment period in accordance with Sec.  155.410 or Sec.  155.420.
    To ensure the Exchange oversees the actions related to termination 
of coverage undertaken by QHPs, in paragraph (c), we propose that the 
Exchange must establish maintenance of records procedures for 
termination of coverage, track the number of individuals for whom 
coverage has been terminated and submit that information to HHS on a 
monthly basis, establish terms for reasonable accommodations, and 
retain records in order to facilitate audit functions.
    In paragraph (d), we propose standards for the effective dates for 
termination of coverage. In paragraph (d)(1), we propose that in the 
case of a termination requested by an enrollee, the last day of 
coverage for an enrollee is the termination date specified by the 
enrollee, if the Exchange and QHP have a reasonable amount of time from 
the date on which the enrollee provides notice to terminate his or her 
coverage. We also propose that if the Exchange or the QHP do not have a 
reasonable amount of time from the date on which the enrollee provides 
notice to terminate his or her coverage, the last day of coverage is 
the first day after such reasonable amount of time has passed.
    In paragraph (d)(2), we propose that in the case of a termination 
by the Exchange or a QHP as a result of an enrollee obtaining new 
minimum essential coverage, the last day of coverage is the day before 
the effective date of the new coverage. We solicit comments regarding 
how Exchanges can work with QHP issuers to implement this proposal, 
which is intended to ensure that an enrollee is not covered under two 
forms of minimum essential coverage simultaneously. Among the concerns 
about double coverage is that it makes an individual ineligible for the 
premium tax credit in accordance with section 36B(c)(2)(B) of the Code. 
We also note that as the Exchange establishes procedures for 
termination of coverage notification to enrollees, it should consider 
how it will also notify the issuer about effective dates of coverage 
termination.
    In paragraph (d)(3), we propose that in the case of a termination 
by the Exchange or a QHP as a result of an enrollee changing QHPs, the 
last day of coverage in the enrollee's prior QHP is the day before the 
effective date of coverage in his or her new QHP. Lastly, in paragraph 
(d)(4), we propose that for a termination that is not described in 
paragraphs (d)(1)-(3), the last day of coverage is the fourteenth day 
of the month if the notice of termination is sent by the Exchange or 
termination is initiated by the QHP no later than the fourteenth day of 
the previous month or, the last day of the month if the notice of 
termination is sent by the Exchange or termination is initiated by the 
QHP no later than the last day of the previous month. As an example, if 
the Exchange notifies an enrollee of his or her termination on 
September 12, his or her coverage will terminate on October 14.
f. Reserved (Sec.  155.440)
5. Subpart H--Exchange Functions: Small Business Health Options Program 
(SHOP)
    Section 1311(b)(1)(B) of the Affordable Care Act directs each State 
that chooses to operate an Exchange to establish insurance options for 
small businesses through a Small Business Health Options Program 
(SHOP). This program will enable small employers to offer affordable 
health plans to their employees. Subpart H of this part contains the 
proposed standards for Exchanges with respect to a SHOP. States that 
choose to operate an Exchange may also merge SHOP with the individual 
market Exchange.
    We note that participation in a SHOP is strictly voluntary for 
small employers. Like the Exchange generally, the SHOP will improve 
access to information about plan benefits, quality, and premiums. It 
gives small businesses the types of choices and purchasing power that 
large businesses typically enjoy. Purchasing employer-sponsored 
coverage through the SHOP will also qualify certain small employers to 
receive a small business tax credit for

[[Page 41886]]

up to 50 percent of the employer's premium contributions toward 
employee coverage pursuant to section 45R of the Code. The requirements 
for the small business tax credit applicable for calendar years 2014 
and beyond are not within the scope of this rule, but will be addressed 
in separate rulemaking by the Secretary of the Treasury.
a. Standards for the Establishment of a SHOP (Sec.  155.700)
    In Sec.  155.700, we propose that an Exchange must provide for the 
establishment of a SHOP that meets the requirements of this subpart, 
and is designed to assist qualified employers and facilitate the 
enrollment of qualified employees into qualified health plans.
b. Functions of a SHOP (Sec.  155.705)
    In Sec.  155.705, we propose the required functions of a SHOP. In 
paragraph (a), we propose that the SHOP must carry out all the required 
functions of an Exchange described in this subpart and in subparts C, 
E, H, and K of this part. As some of the requirements contained in 
those subparts are specific to the individual market, we propose the 
SHOP exceptions from those requirements in (a)(1) through (a)(5).
    In paragraph (a)(1), we propose that the SHOP does not need to meet 
the requirements related to individual eligibility determinations 
described in Sec.  155.200(c) and the appeals of such determinations 
described in Sec.  155.200(d). In paragraph (a)(2) we clarify that the 
SHOP does not need to comply with the requirements related to 
enrollment of qualified individuals into QHPs, as described in subpart 
E. The enrollment requirements specific to SHOP are outlined in Sec.  
155.720 of this subpart.
    In paragraph (a)(3), we propose that the SHOP does not need to 
include the calculator described in Sec.  155.205(c) given that 
individuals eligible for affordable employer sponsored coverage are not 
eligible for advance payments of the premium tax credit. Because of the 
employee choice provisions of the Affordable Care Act, we encourage a 
SHOP to consider options to calculate and display the net employee 
contribution to the premium for different plans and different family 
compositions, after any employer contribution has been subtracted from 
the full premium amount. Because conveying net premium to the employee 
for coverage is current market practice and is important to informed 
employee choice, we encourage SHOPs to use this practice.
    In paragraph (a)(4), we clarify that the SHOP does not need to 
certify exemptions from the individual coverage requirement as 
described in Sec.  155.200(b), as the Exchange will fulfill this 
requirement. In paragraph (a)(5), we clarify that requirements related 
to the payment of premiums by individuals, Indian tribes, tribal 
organizations and urban Indian organizations under Sec.  155.240 do not 
apply to the SHOP.
    In paragraph (b), we propose unique functions of the SHOP. In 
paragraph (b)(1), we clarify that a SHOP must adhere to unique 
enrollment and eligibility requirements that are further described in 
Sec. Sec.  155.710, 155.715, 155.720, 155.725, and 155.730. In 
addition, the SHOP must at a minimum facilitate the special enrollment 
periods described in Sec.  156.285(b)(2). We note that in the context 
of a SHOP, a special enrollment period allows a qualified employee to 
join or change plans in certain circumstances during a period other 
than the employer's annual open enrollment period. In paragraph Sec.  
156.285(b)(2), we propose that all of the special enrollment periods 
that apply in the Exchange in connection with individual market 
coverage apply in the SHOP, with two exceptions:
    (1) Because non-lawfully present individuals employed by a small 
business are not eligible for the SHOP, there would be no special 
enrollment period associated with becoming a new citizen, national, or 
lawfully present individual for the SHOP;
    (2) There would be no special enrollment period in the SHOP to 
reflect a change in eligibility or new eligibility for advance payments 
of the premium tax credit or cost-sharing reductions since neither is 
available to qualified employees in the SHOP.
    We recognize that other laws (including, but not limited to HIPAA 
(Pub.L. 104-191)) may require additional special enrollment periods and 
this proposed rule in no way eliminates those requirements. We also 
clarify that the two exceptions described above also apply to qualified 
employees in a SHOP with merged risk pools. We invite comment on 
special enrollment periods for the SHOP and how they might differ from 
those that would apply to the Exchange for the individual market.
    In paragraph (b)(2) of this section, we propose to codify section 
1312(a)(2) of the Affordable Care Act, which specifically provides that 
a qualified employer may choose a level of coverage under 1302(b), 
under which a qualified employee may choose an available plan at that 
level of coverage. We interpret the statute as requiring a SHOP to 
offer this specific consumer choice option to qualified employers and 
qualified employees.
    In paragraph (b)(3), we provide flexibility for Exchanges and their 
SHOPs to choose additional ways for qualified employers to offer one or 
more plans to their employees. For example, an Exchange may (1) allow 
employees to choose any QHP offered in the SHOP at any level; (2) allow 
employers to select specific levels from which an employee may choose a 
QHP; (3) allow employers to select specific QHPs from different levels 
of coverage from which an employee may choose a QHP; or (4) allow 
employers to select a single QHP to offer employees. With respect to 
the fourth potential option, we believe that section 1312(f)(2)(B) of 
the Affordable Care Act may allow a qualified employer to select only a 
single QHP to make available to qualified employees. We welcome 
comments on the statutory interpretation of section 1312(a)(2)(A), 
which speaks to employer specification of a level of coverage and 
section 1312(f)(2)(B), which may permit a single QHP selection by an 
employer.
    We note that allowing a qualified employee to purchase any plan 
across levels raises some potential for risk selection. A portion of 
any risk selection among plans and issuers due to employee choice of 
QHPs as defined in Sec.  155.705(b)(2) may be mitigated through the 
risk adjustment program established pursuant to section 1343 of the 
Affordable Care Act. We also address this by only proposing a 
requirement for employee choice within a level of cost sharing, while 
providing SHOPs the option to offer broader employee choices among 
plans. We invite comment on this proposed flexibility.
    A common practice in the small group market is the issuers' use of 
minimum participation rules, as defined in 42 U.S.C. 300gg-11(e)(2). 
The purpose of minimum participation rules is to protect the issuer 
against adverse selection related to healthy employees either remaining 
uninsured or obtaining coverage in the individual market. The first 
concern is mitigated by the coverage expansion provisions in the 
Affordable Care Act, and the second is mitigated by the market reform 
provisions of the Act. Nonetheless, there may still be advantages to 
establishing a minimum participation rule for participation in the 
SHOP. Methods for calculating the participation rate may vary across 
States. For example, in some States, carriers may exclude certain non-
participating qualified employees from the calculation if they have 
certain types of coverage, such as Medicare,

[[Page 41887]]

Medicaid, or employer-sponsored health insurance obtained through a 
spouse. We invite comment about whether QHPs offered in the SHOP should 
be required to waive application of minimum participation rules at the 
level of the QHP or issuer; whether a minimum participation rule 
applied at the SHOP level is desirable; and if so, how the rate should 
be calculated, what the rate should be, and whether the minimum 
participation rate should be established in Federal regulation.
    In paragraph (b)(4), we propose standards related to premium 
aggregation by the SHOP. To simplify the administration of health 
benefits among small employers, we propose that the SHOP allow 
qualified employers to receive a single monthly bill for all QHPs in 
which their employees are enrolled and to pay a single monthly amount 
to the SHOP. If this option were not available, a qualified employer 
may have to pay multiple bills from different QHP issuers each month. 
Therefore, we propose in paragraph (b)(4)(i) to require that the SHOP 
provide a monthly bill to a qualified employer that identifies the 
total premiums owed. We anticipate that most SHOPs will also include 
the employer and employee contribution for the QHP selected by each 
employee as a service to employers. Employers will have selected their 
contribution at the time of initial enrollment or renewal, and 
employees will have based their plan choices in part on the net cost of 
the QHPs they select. In paragraph (b)(4)(ii), we propose that the SHOP 
collect from employers offering multiple coverage options a single 
cumulative premium payment for all of a qualified employer's qualified 
employees enrolled through the employer in the SHOP. We note that the 
SHOP, itself, may aggregate these premium payments from employers and 
distribute these payments to the appropriate QHP issuers or contract 
with a third party to perform this function.
    In paragraph (b)(5), we clarify that with respect to QHP 
certification, QHPs must meet the requirements described in Sec.  
156.285. As described further in subpart C of part 156, the minimum 
Federal certification criteria for health plans participating in the 
SHOP are nearly identical to the certification criteria for the 
Exchange. However, QHP certification criteria for the SHOP do not 
include adherence to requirements related to the administration of 
advance payments of the premium tax credit and cost-sharing reductions, 
which are specific to the Exchange for the individual market. 
Additionally, there are a few certification criteria that are specific 
to the SHOP, including:
     Health plan rate setting and premium payment standards for 
the SHOP,
     Enrollment period requirements for the SHOP, and
     Enrollment process requirements for the SHOP.
    In paragraph (b)(6), we propose standards for rates and rate 
changes. In paragraph (b)(6)(i), we propose that the SHOP require all 
QHPs to make any change to rates at a uniform time that is either 
quarterly, monthly, or annually. As described in Sec.  155.725, we 
propose to permit rolling enrollment in a SHOP, which allows qualified 
employers to purchase coverage in QHPs at any point during the year. 
Because employers will purchase coverage through the SHOP at different 
times during the year, employers will be subject to different rates 
based on the month or quarter during which they purchase coverage. 
Although QHPs may change rates during the year, those rates only apply 
to new coverage and to annual renewals. Additionally, such rate changes 
are still subject to rate increase consideration as described in Sec.  
155.1020. Paragraph (b)(6)(ii) proposes to require that the rate for a 
given employer not change during the employer's plan year. By providing 
uniform intervals for rate setting, SHOPs will experience less 
administrative burden and qualified employers and qualified employees 
will have more useful rate comparison information. We note that if an 
employee is hired during the plan year or changes coverage during the 
plan year during a special enrollment period, the rates set at the 
beginning of the plan year must be the rates quoted to the employee. We 
invite comment on whether we should allow a more permissive or 
restrictive timeframe than monthly, quarterly, or annually. We also 
invite comment on what rates should be used to determine premiums 
during the plan year.
    In paragraph (b)(7), we propose that if a State merges the 
individual and small group risk pools, the Exchange may only offer 
employers and employees QHPs that meet the SHOP requirements for QHPs, 
such as the deductible maximums described in section 1302(c) of the 
Affordable Care Act and the employer choice requirements described in 
Sec.  155.705(b)(2) of the Affordable Care Act. QHPs sold in a merged 
market must still meet the general standards defined in Sec.  156.20. 
Similarly, employee choices among QHPs within and across levels may be 
limited or expanded by policies of the Exchange or by choices made by 
the employer.
    In paragraph (b)(8), we propose that if a State does not merge the 
individual and small group risk pools described in (b)(7), a SHOP may 
only make small group QHPs available to qualified employees. We note 
that if risk pools are not merged, allowing those in the SHOP to 
purchase health plans outside of the small group risk pool could result 
in adverse selection.
    In paragraph (b)(9), we propose to codify section 1312(f)(2)(B) of 
the Affordable Care Act, which permits States to allow insurers in the 
large group market to offer health plans inside of the SHOP beginning 
in 2017. In States that elect this option, large employers could make 
an employee eligible for the SHOP if it provides all full-time 
employees with the opportunity to enter the SHOP. Section 2794(b)(2)(B) 
of the PHS Act requires the State to consider excess premium growth 
outside of the SHOP when considering whether to allow large employers 
to purchase coverage inside of the SHOP.
c. Eligibility Standards for SHOP (Sec.  155.710)
    In Sec.  155.710, we propose the eligibility standards for 
qualified employers and qualified employees seeking to purchase 
coverage through a SHOP. In paragraph (a), we propose to codify section 
1311(d)(2) of the Affordable Care Act, which specifies that the SHOP 
make QHPs available to qualified employers. Paragraph (b) describes the 
eligibility criteria for qualified employers. We limit the scope of 
these standards to maximize the accessibility of the SHOP, streamline 
the enrollment process, and to minimize the burden on employers and 
employees.
    In paragraph (b)(1), we propose that the SHOP ensure that an entity 
is a small employer. Specifically, the employer must employ no more 
than 100 employees, with the exception that a State may elect to limit 
enrollment in the small group market to employers with no more than 50 
employees until January 1, 2016.
    Section 1304 of the Affordable Care Act defines the calculation of 
an employer's size based upon the average number of employees employed 
on business days during the preceding calendar year. The terms 
``employer,'' ``small employer,'' and ``large employer'' are defined in 
Sec.  155.20, and are based on the definitions from the PHS Act. The 
PHS Act determines employer size by counting all employees, including 
part-time and seasonal employees, to determine an employer's size. 
Part-time workers

[[Page 41888]]

would be counted in the same manner as full-time workers, while 
seasonal employees would be counted proportionately to the number of 
days they work in a year, as discussed in more detail later in this 
preamble. The PHS Act is in turn consistent with the definition of an 
employee in section 3(6) of ERISA. Because the PHS Act definition of 
employer and ERISA definition of group health plan refer to at least 1 
employee, they exclude sole proprietors, certain owners of S 
corporations, and certain relatives of each of the above. The 
definition of ``employer'' in Sec.  155.20 also requires that all 
persons treated as a single employer under subsections (b), (c), (m) or 
(o) of section 414 of the Code must be treated as one employer when 
determining employer size. We note that States use a variety of methods 
to determine employer size with regard to eligibility for participation 
in the small group market, and that these State methods may, in turn, 
add a level of specificity not described in this method of determining 
employer size. We solicit comment on this approach.
    In paragraph (b)(2), pursuant to section 1312(f)(2)(A) of the 
Affordable Care Act, we propose to codify the requirement that the SHOP 
ensure a qualified employer provides an offer of coverage through a 
SHOP to all full-time employees. In paragraph (b)(3), we propose that 
the employer can elect to cover all employees through the SHOP serving 
the employer's principal business address. An employer with worksites 
in different SHOP service areas can elect to offer each eligible 
employee coverage through the SHOP serving the employee's primary 
worksite.
    In paragraph (c), we propose to require a SHOP to accept the 
application of an employer to provide coverage to eligible employees 
whose worksite is in the SHOP service area, if the employer elects to 
cover all employees through the SHOPs serving their worksites. This 
standard provides qualified employers with the flexibility to cover 
qualified employees in areas in which such employees work, and provides 
those employees with access to local QHPs that may best meet their 
needs. If a qualified employer opts to provide coverage through SHOPs 
in different service areas, SHOPs could establish a participation rule 
with respect to the number of employees employed by the employer within 
the service area of the SHOP.
    In paragraph (d), we propose to codify section 1304(b)(4)(D) of the 
Affordable Care Act which allows an employer participating in the SHOP 
to continue participating in the SHOP if the number of workers employed 
exceeds the level specified by the definition of a qualified employer 
after the employer's initial eligibility determination. This provision 
seeks to minimize potential disruption to qualified employees who work 
for growing employers. However, this provision would not apply to an 
employer that otherwise fails to meet the eligibility criteria for 
participation in the SHOP.
    In paragraph (e), we propose eligibility criteria for a qualified 
employee. Only employees that receive an offer of coverage through the 
SHOP from a qualified employer may be a qualified employee.
d. Eligibility Determination Process for SHOP (Sec.  155.715)
    In paragraph (a), we propose the eligibility determination process 
for employers seeking to offer qualified employees health coverage 
through a SHOP. We propose that a SHOP determine eligibility consistent 
with the standards described in Sec.  155.710. For both employers and 
employees, the information proposed to be collected is limited to the 
minimum information needed to determine eligibility to participate in 
the SHOP. One way for SHOPs to determine the size of the employer is to 
allow employers to self-report the size of its workforce and attest to 
the report's accuracy; however, SHOPs are permitted to require a more 
stringent determination of employer size and may require other 
information.
    In addition to verifying the size of an employer, we propose that a 
SHOP must verify that a qualified employer has fulfilled all of the 
standards specified in Sec.  155.710, including offering all full-time 
employees access to health coverage through the SHOP, as well as 
verifying that at least one employee employed by the employer works in 
the SHOP's service area. We believe that a self-reported address and an 
attestation by the employer that it is offering coverage should be 
considered sufficient for verification purposes.
    In paragraph (b), we propose that the SHOP use only two application 
forms: one for qualified employers and one for qualified employees; 
this is based on our interpretation of section 1413(b)(1)(A), which 
requires that the Secretary develop and provide to each State a single, 
streamlined form, and section 1311(c)(1)(F), which provides that an 
issuer shall use a uniform enrollment form for qualified individuals 
and employers to enroll in QHPs through the Exchange.
    In paragraph (c), we propose that for the purpose of determining 
eligibility in the SHOP, the SHOP may use the information attested to 
by the employer or employee on the applicable application. However, the 
SHOP must, at a minimum, verify that an individual attempting to enter 
the SHOP as an employee is listed on the qualified employer's roster of 
employees to whom coverage is offered. Additionally, the SHOP may deny 
applications for which, through its verification process, it has reason 
to doubt the veracity of the information provided by the applicant. A 
SHOP may establish additional methods to verify information beyond 
reliance on the single employer application and the single employee 
application. Methods of additional verification that may lead to 
instances in which a SHOP may have a reason to doubt information 
provided by employers or employees include, but are not limited to: (1) 
Review of quarterly wage reports suggesting the employer does not meet 
the State's definition of a small employer; and (2) attempts by an 
employer to enroll a number of employees that is greater than allowed 
under the State's definition of small employer, contrary to 
attestations made on the application. Appeals related to this process 
will be addressed in future rulemaking.
    In paragraph (d), we propose that the SHOP have processes to 
resolve occasions when the SHOP has a reason to doubt the information 
provided through the employer and employee applications. In such cases, 
the employer or employee must be notified by the SHOP. Further, the 
SHOP must make a reasonable effort to identify and address the cause of 
the doubt; contact the employee or employer to confirm the accuracy of 
relevant information and provide the employee or employer with a 30-day 
period to correct the possible error. At the end of this period, the 
SHOP must notify the employee or employer of its eligibility 
determination and in the case of the employer, if the employer was 
enrolled in a plan before the completion of this verification process, 
discontinue the employer's participation in the SHOP (and the 
enrollment of any employees of that employer) at the end of the month 
following the month in which the notice was sent.
    In paragraph (e), we propose that the SHOP notify an employer of 
the SHOP's eligibility determination and the employer's right to 
appeal. In paragraph (f) we propose that the SHOP notify an employee of 
the SHOP's eligibility determination and the employee's right to 
appeal.
    In paragraph (g), we propose that if a qualified employer ceases to 
purchase

[[Page 41889]]

any coverage through the SHOP, the SHOP must ensure that: (1) Each QHP 
terminates the coverage of the employer's qualified employees enrolled 
in QHPs through the SHOP; and (2) each of the employer's qualified 
employees enrolled in a QHP through the SHOP is notified of the 
employer's withdrawal and their termination of coverage prior to such 
withdrawal and termination. We are considering whether this notice must 
inform the employee about his or her eligibility for special enrollment 
periods in the Exchange and about the process of being determined 
eligible for advance payments of the premium tax credit and cost-
sharing reductions, Medicaid and CHIP. We solicit comments regarding 
this eligibility and notification process.
e. Enrollment of Employees into QHPs Under SHOP (Sec.  155.720)
    In Sec.  155.720 we address enrollment of employees into QHPs under 
SHOPs. In paragraph (a), we propose a general standard that the SHOP 
must process applications for enrollment from employees and facilitate 
enrollment of qualified employees into QHPs.
    In paragraph (b), we propose that the SHOP establish a uniform 
enrollment timeline and process to be followed by all employers and 
QHPs in the SHOP. Such timeline is for the following activities: (1) 
Determination of employer eligibility to purchase coverage in the SHOP 
as described in Sec.  155.715; (2) qualified employer selection of QHPs 
offered through the SHOP to qualified employees, consistent with Sec.  
155.705(b)(2) and (3); (3) provision of a specific timeframe during 
which qualified employers may select the level of coverage or QHP 
offering, as appropriate; (4) provision of a specific timeframe for 
qualified employees to complete the employee application process; (5) 
determination and verification of employee eligibility for enrollment 
through the SHOP; (6) enrollment processing of qualified employees into 
selected QHPs; and (7) establishment of effective dates of qualified 
employee coverage. We note that, pursuant to the rolling enrollment 
requirements of Sec.  155.725(b), the timeframe for these activities 
should be standardized relative to a plan year as opposed to a calendar 
year; while the enrollment dates qualified for employers will differ 
depending on when they join, the period they have to complete the steps 
along this process will be consistent among all employers. Ultimately, 
we believe that to provide a competitive shopping experience for 
qualified employees, it is important to have similar enrollment 
processes across QHPs, so qualified employees are not excluded from 
some QHPs due to inconsistent timing requirements.
    In paragraph (c), we propose that the SHOP must process 
applications in accordance with the timeline described in paragraph (b) 
and adhere to the requirements specified in Sec.  155.400(b) regarding 
relevant standards for enrollment and timing of data exchange between 
the SHOP and QHPs. In paragraph (d), we propose that the SHOP must 
adhere to standards set forth in Sec.  155.705(b)(4) regarding payment 
administration.
    In paragraph (e), we propose that the SHOP must ensure that 
qualified employees who select a QHP are notified of the effective date 
of coverage. The SHOP may require QHPs to officially make such notice, 
but we propose to make the SHOP responsible for ensuring that such 
notification occurs.
    In paragraphs (f) and (g), we address maintenance of enrollment 
records and reconciliation of enrollment information with QHPs. We 
propose that information maintained must include records of qualified 
employer participation and qualified employee enrollment in the SHOP. 
Such information must also be reported to HHS, consistent with the 
standards of Sec.  155.400(d). We propose that reconciliation of 
enrollment information with QHPs occur at least monthly. We provide 
SHOPs with discretion to conduct enrollment reconciliation processes on 
a more frequent basis, depending upon the technical capabilities of the 
SHOP and participating QHPs. We welcome comments about whether we 
should establish target dates or guidelines so that multi-State 
qualified employers are subject to consistent rules.
    In paragraph (h), we propose that if a qualified employee 
voluntarily terminates coverage from a QHP, the SHOP must notify the 
individual's employer. This ensures that the employer has the proper 
information for administration of the benefits provided to its 
employees and the payment for those benefits. Terminations by qualified 
employees will also be subject to requirements and limitations 
identified in other laws and the employer's plan; for example, 
cafeteria plan restrictions on mid-year changes based on the Code will 
remain applicable.
f. Enrollment Periods Under SHOP (Sec.  155.725)
    In Sec.  155.725, we address enrollment periods under SHOPs 
consistent with section 1311(c)(6) of the Affordable Care Act. In 
paragraph (a), we propose that the SHOP: (1) Adhere to the start of the 
initial open enrollment period for the Exchange; and (2) ensure that 
enrollment transactions are sent to QHP issuers and that such issuers 
adhere to coverage effective dates in accordance with Sec.  156.260. We 
propose that the initial open enrollment for the SHOP begins on October 
1, 2013 for coverage effective January 1, 2014, which is the same as 
the Exchange serving the individual market. However, unlike the initial 
open enrollment period that closes after a certain date, in the SHOP, 
the initial open enrollment date represents the starting point for 
which qualified employers may begin participating in the SHOP.
    In paragraph (b), we propose a rolling enrollment process in the 
SHOP whereby qualified employers may begin participating in the SHOP at 
any time during the year. We are proposing a rolling enrollment process 
for the SHOP to match the enrollment process for the small group market 
outside of the SHOP. We believe that qualified employers will only join 
the SHOP if it is convenient to do so. Further, employers may be less 
likely to choose coverage through the SHOP if they can only enroll in 
the SHOP during a single annual open enrollment period.
    We clarify that while a qualified employer may enter the SHOP at 
any time, the qualified employees will only be able to enroll or change 
plans (to the extent multiple QHPs are available) once a year unless 
such employees qualify for a special enrollment period. Additionally, 
we note that, consistent with current market practice, an employer's 
plan year may not necessarily align with the calendar year. Instead, 
plan years inside the SHOP must consist of the twelve-month period 
beginning with the employer's effective date of coverage. This is 
different from the open enrollment period for the individual market, 
where a full plan year will always begin on January 1 and terminate on 
December 31. We invite comments on these provisions.
    In paragraph (c), we propose an annual employer election period in 
advance of the annual open enrollment period, during which time a 
qualified employer may, among other things, modify the employer 
contribution towards the premium cost of coverage and plan offerings. 
To ensure timely renewal, the qualified employer must work within the 
confines of the uniform enrollment timeline established by the SHOP and 
described in Sec.  155.720(b) to make such changes. This requires the 
employer to make its election before the conclusion of its current plan 
year and

[[Page 41890]]

before the annual employee enrollment period for the following plan 
year. Because of rolling enrollment and the non-alignment of plan years 
and calendar years in the SHOP, this annual election period may be 
specific to each qualified employer and therefore must occur at a fixed 
point in the plan year, for example two months before its completion, 
and not at a fixed point in the calendar year.
    In paragraph (d), we propose that the SHOP must notify 
participating employers that their annual election period is 
approaching. We are considering whether to require the participating 
employer receive 30 days advance notice that the election period is 
approaching. During this time, the participating employer will have the 
time to compare the options available and can then make any changes 
during the election period. We solicit comment on this notice 
requirement.
    In paragraph (e), we propose to require the SHOP to establish an 
annual employee open enrollment period for qualified employees. We note 
that if the SHOP were to allow a qualified employer to offer only one 
plan to its employees, a qualified employee will not be able to change 
plans during the annual open enrollment period, but could still change 
who is enrolled by adding and dropping dependents. As previously 
stated, small group markets are unique and we believe that the annual 
employee open enrollment period should be established by the SHOP in 
order to accommodate the markets that it serves. Such period must occur 
prior to the completion of the employer's plan year and after the 
employer's annual election period. Similar to the annual employer 
election period, because of rolling enrollment in the SHOP, the annual 
employee enrollment period should occur at a fixed point in the plan 
year and not at a fixed point in the calendar year. We solicit comment 
on this provision.
    In paragraph (f), we propose that the SHOP ensure a qualified 
employee who is hired outside of the initial or annual open enrollment 
period would have a specified window set by the SHOP to seek coverage 
in a QHP beginning on the first day of employment. Much like the 
Federal Employees Health Benefit program (which has a 60-day window), 
the coverage for such an employee would continue through the qualified 
employer's plan year. At the time of the annual open enrollment period, 
the employee would have the option to renew or change coverage on a 
similar basis as the other employees of that qualified employer covered 
through the SHOP. We solicit comments on these proposed notices and 
their interaction with existing law and regulation.
    In paragraph (g), we propose that the SHOP establish effective 
dates of coverage for qualified employees. In paragraph (h), we propose 
that if an enrollee remains eligible for coverage in a QHP through the 
SHOP, such individual will remain in the QHP selected during the 
previous plan year with limited exceptions. Exceptions would include: 
(1) Employee termination of coverage in accordance with the standards 
of Sec.  155.430 for the individual market: (2) enrollment in another 
QHP if such option exists: or, (3) the qualified health plan in which 
the enrollee was enrolled is no longer available to the enrollee. In 
all such cases, an individual would be disenrolled from the QHP in 
which he or she was enrolled at the end of the coverage year.
    We welcome comments about our approach in differentiating the 
individual and small group market enrollment as well as specific 
comments concerning the proposed structure for initial, rolling, and 
annual open enrollment through the SHOP.
g. Application Standards for SHOP (Sec.  155.730)
    Section 155.730 outlines the specific application-related standards 
for participation in the SHOP, consistent with the authority under 
section 1311(b)(1)(B) of the Affordable Care Act. In paragraph (a), we 
propose a general requirement that SHOP applications must adhere to the 
application standards set forth in this section. Many of the standards 
in this section are quite similar to the standards of Sec.  155.405 and 
in places we directly reference those standards. However, we do not 
require that the SHOP use the same, single streamlined application as 
the Exchange uses in the individual market, as the SHOP is not 
responsible for determining eligibility for advance payments of the 
premium tax credit, cost-sharing reductions, Medicaid or CHIP.
    In paragraph (b), we propose that the SHOP use a single employer 
application to determine employer eligibility and to collect the 
information necessary for the employer to purchase coverage through the 
SHOP. We also propose the minimum employer information that SHOPs must 
collect on the single employer application. This information includes 
(1) the employer name and address of employer's; (2) number of 
employees; (3) Employer Identification Number (EIN); and (4) a list of 
qualified employees and their social security numbers. Such application 
may be submitted by other individuals or organizations on behalf of the 
employer. We welcome comments regarding other employer information we 
should consider requiring a SHOP to collect.
    In paragraph (c), we propose that the SHOP must use a single 
employee application for each employee to collect eligibility and QHP 
selection and enrollment information from employees seeking to enroll 
in a QHP. The amount of information that will be collected about 
employees will be significantly less than that which is collected for 
applicants to the individual Exchange making the wholesale reuse of the 
individual application burdensome. However the single, streamlined 
application completed by an individual seeking to enroll in the 
individual market may be modified and reduced to meet the needs of an 
employee in the SHOP. A SHOP applicant applying online should only be 
asked questions relevant to an employee application. Similarly, an 
employee applying through the paper application should receive a paper 
application containing only the portion relevant to eligibility and 
enrollment of a qualified employee in the SHOP. Using the same 
application foundation for employees and individuals will further 
streamline processes of developing applications and information sharing 
among the individual Exchange, SHOP, QHP issuers, and HHS. Such 
application may be submitted by other individuals or organizations on 
behalf of the employee.
    In paragraph (d), we specify that SHOPs may use a model single 
employer application and model single employee application created by 
HHS. Model applications will be proposed by HHS, after consultation 
with the NAIC. This process mirrors the standards in the Exchange 
serving the individual market. In paragraph (e), we permit a SHOP to 
use an alternative employer application with approval by HHS. Such 
application should support the information described in paragraph (b) 
and information relevant to determine eligibility for the programs for 
which the employer is applying and plan selection, where relevant. The 
SHOP may also use an alternative employee application, the approval by 
HHS. Such application requests the information necessary to establish 
eligibility of the employee as a qualified employee and to complete the 
enrollment of a qualified employee, such as a plan selection and 
identification of dependents to be enrolled.
    In paragraph (f), we propose that the SHOP must allow employers and 
employees to submit their eligibility and enrollment information 
consistent with Sec.  155.405(c).

[[Page 41891]]

6. Subpart K--Exchange Functions: Certification of Qualified Health 
Plans
    This subpart codifies section 1311(d)(4)(A) of the Affordable Care 
Act, which requires that Exchanges, at a minimum, implement procedures 
for the certification, recertification, and decertification of health 
plans as QHPs, consistent with guidelines developed by HHS. This 
subpart also distinguishes the Exchanges' responsibility related to the 
inclusion in the Exchange of certain multi-State plans. Standards for 
health insurance issuers with respect to QHP certification are 
contained in subpart C of part 156 of this regulation, and we cross-
reference those standards where applicable in this subpart.
    When developing this subpart, we considered comments to the RFC 
recommending that Exchange certification of QHPs be structured in one 
of two ways: Establish QHP certification standards that would be 
uniform across Exchanges, or provide each Exchange the discretion to 
determine certification standards and whether or not a health plan 
should be certified. While we recognize the importance of setting 
consistent consumer protections which may ensure equitable treatment 
across States, we also acknowledge that an Exchange may be best 
positioned to identify whether a particular health plan should be 
certified as a QHP based on the needs of consumers within the State and 
local market conditions. In this subpart, we seek to strike a balance 
between the approaches suggested by RFC commenters. In some cases, we 
propose setting specific requirements to ensure QHPs in all Exchanges 
meet a consistent minimum standard of quality and value, and in other 
instances, we propose allowing each Exchange the discretion to set 
standards for QHPs tailored to local market conditions.
a. Certification Standards for QHPs (Sec.  155.1000)
    In Sec.  155.1000, we describe the overall responsibility and 
requirements of an Exchange to certify QHPs, and to ensure that only 
QHPs are offered. In paragraph (a), we define a multi-State plan. 
Section 1334(a) of the Affordable Care Act establishes multi-State 
plans; the Office of Personnel Management (OPM) will enter into 
contracts with health insurance issuers to offer at least two multi-
State QHPs through each Exchange in each State. Section 1334(c)(1) of 
the Affordable Care Act further specifies that multi-State QHP 
requirements are satisfied if the OPM Director determines the plan 
offers a benefits package that is uniform in each State and consists of 
the benefit design standards described in section 1302, meets all 
requirements for QHPs, and meets Federal rating requirements pursuant 
to section 2701 of the PHS Act, or a State's more restrictive rating 
requirements, if applicable.
    In paragraph (b), we propose to codify section 1311(d)(2)(B)(i) of 
the Affordable Care Act, which requires that an Exchange may not make 
available any health plan that is not a QHP. Offering only QHPs through 
an Exchange will assure consumers that the coverage options presented 
through the Exchange meet minimum standards. Also, consistent with the 
definition of QHP in Sec.  155.20, we propose to codify section 
1301(a)(1)(A) of the Affordable Care Act, in which QHPs must have in 
effect a certification issued or recognized by the Exchange as QHPs. 
Finally, we propose to codify section 1301(a)(2) of the Affordable Care 
Act, which requires any reference to QHPs to include the multi-State 
plans, unless specifically provided for otherwise.
    In paragraph (c), we propose to codify the two basic sets of 
requirements that an Exchange must ensure that a health plan meets to 
be certified as a QHP issuer by an Exchange pursuant to section 1311(e) 
of the Affordable Care Act. In paragraph (c)(1), we propose to codify 
section 1311(c)(1) of the Affordable Care Act, which provides for the 
minimum QHP certification requirements to be applied by an Exchange; 
these requirements are outlined in subpart C of part 156. In developing 
a process to certify QHPs, the Exchange should identify those standards 
from subpart C of part 156 with which a health insurance issuer should 
demonstrate compliance as a condition of certification of QHPs, as well 
as those standards with which a health insurance issuer should agree to 
comply as an ongoing condition of offering QHPs.
    In paragraph (c)(2), we propose to codify section 1311(e)(1)(B) of 
the Affordable Care Act, which allows an Exchange to certify a health 
plan if it determines it is in the interest of qualified individuals 
and qualified employers in the State. We received RFC comments 
regarding the extent to which Exchanges should implement an ``any-
willing plan'' model, or implement active purchasing approaches, such 
as selective contracting or price negotiation. Some commenters argued 
that active purchasing approaches would minimize costs, improve health 
outcomes, and increase enrollment and coordination with other programs. 
Of these comments, many recommended that at a minimum, HHS should not 
require the Exchanges to accept all eligible plans. In contrast, 
advocates of the any-willing plan approach noted that State insurance 
departments already review and approve rates and regulate insurer 
solvency, and that negotiation would result in de facto premium price 
controls for the entire market, reduce consumer choice and competition, 
and result in duplicative regulatory structures.
    We provide Exchanges with discretion on how to determine whether 
offering health plans is in the interest of individuals and employers. 
An Exchange may want to choose among one of several strategies for 
making this determination. An Exchange may choose to utilize an ``any 
qualified plan'' strategy for certifying QHPs in its Exchange. Under 
this approach, an Exchange would certify all health plans as QHPs 
solely on the basis that such plans meet and agree to comply with the 
minimum certification requirements in paragraph (c)(1) of this section.
    Alternatively, an Exchange could undertake a competitive bidding or 
selective contracting process, and limit QHP participation to only 
those plans that ranked highest in terms of certain Exchange criteria. 
With competitive bidding, an Exchange may be able to achieve additional 
value and quality objectives by limiting participation and through plan 
competition. Since many State Medicaid programs employ selective 
contracting models today and have experience negotiating with health 
insurance issuers on Medicaid managed care plans, some State Exchanges 
may want to pursue similar competitive strategies when certifying QHPs.
    An Exchange may also choose to negotiate with health insurance 
issuers on a case-by-case basis. Under this strategy, the Exchange 
would request a health insurance issuer, upon meeting the minimum 
certification standards, to amend one or more specific health plan 
offerings to further the interest of qualified individuals and 
qualified employers served by the Exchange. Unlike the previous 
options, the Exchange would not need to undertake a competitive bidding 
process to accomplish this negotiation. Rather, it could choose to 
negotiate with issuers on certain criteria based on the unique market 
conditions within the State or region served by that same Exchange.
    An Exchange may also implement selection criteria beyond the 
minimum certification standards in determining whether a plan is in the 
interests of the qualified individuals and employers. Some examples of 
such selection criteria include: (1) Reasonableness of the estimated 
costs supporting the

[[Page 41892]]

calculation of the health plan's premium and cost-sharing levels; (2) 
past performance of the health insurance issuer; (3) quality 
improvement activities; (4) enhancements of provider networks including 
the availability of network providers to new patients; (5) service area 
of the QHPs (the size of a service area and the amount of choice 
afforded to the consumers within that service area); and (6) premium 
rate increases from years preceding the Exchange operation and proposed 
rate increases, consistent with Sec.  155.1020.
    Some of these approaches are not mutually exclusive and may be 
implemented in combination. How an Exchange elects to implement the 
``interest'' determination may vary based upon a number of factors, 
including the size and risk profile of the Exchange's potential 
enrollees, concentration of the health insurance market in the area 
served by the Exchange, and the applicable State insurance rules. Each 
Exchange will likely need to assess these factors in selecting an 
approach that will promote value and quality for its enrollees.
    In paragraph (c)(2) we propose to codify section 1311(e)(1)(B) of 
the Affordable Care Act, which outlines the prohibitions on the 
Exchange when it is making the determination that a health plan is in 
the interest of qualified individuals and qualified employers. Under 
this authority, an Exchange is prohibited from excluding a plan: (1) On 
the basis that the plan is a fee-for-service plan; (2) through the 
imposition of premium price controls; or (3) on the basis that the 
health plan provides treatments necessary to prevent patients' deaths 
in circumstances the Exchange determines are inappropriate or too 
costly.
b. Certification Process for QHPs (Sec.  155.1010)
    In Sec.  155.1010, we propose the required process that Exchanges 
must use when certifying health plans, and identify which health plans 
are not subject to Exchange certification. Specifically, in paragraph 
(a) we propose to codify section 1311(d)(4)(A) of the Affordable Care 
Act, which requires the Exchange to establish procedures for the 
certification of QHPs. We further propose that the procedures must be 
consistent with the certification criteria outlined in Sec.  
155.1000(c).
    In paragraph (b), we propose to codify section 1334(d) of the 
Affordable Care Act which requires a multi-State plan offered through 
OPM to be deemed as certified by an Exchange for the purposes of 
section 1311(d)(4)(A). We note that, pursuant to section 1334(c)(1)(B), 
multi-State plans will need to meet all the requirements of a QHP, as 
determined by OPM. We believe that the intent of the statute is that 
each Exchange must accept multi-State plans as QHPs without applying an 
additional certification process to such plans. In paragraph (c), we 
propose that the Exchange complete the certification of QHPs prior to 
the open enrollment periods established in Sec.  155.410. We believe 
this is necessary to ensure that consumers will have a robust market 
from which to select QHPs when the open enrollment period begins.
    In paragraph (d), we propose that the Exchange must monitor the QHP 
issuers for demonstration of ongoing compliance with the certification 
requirements in Sec.  155.1000(c). If the QHP issuers or their QHPs 
cease to demonstrate ongoing compliance, the Exchange may be inclined 
to seek actions against the issuers or try to remedy the situation.
c. QHP Issuer Rate and Benefit Information (Sec.  155.1020)
    Section 1311(e)(2) of the Affordable Care Act establishes standards 
on Exchanges regarding the transparency of justifications for rate 
increases submitted by QHP issuers. In accordance with this section, in 
paragraph (a) of Sec.  155.1020, we propose that Exchanges must receive 
a QHP issuer's justification for a rate increase prior to the 
implementation of such an increase, and ensure that the QHP issuer 
posts the justification on its Web site. We recognize that QHP issuers 
may already submit rate increase justifications as part of the rate 
review process, and note that an Exchange may receive this information 
from the State department of insurance (or HHS, if applicable), to 
satisfy its obligation to receive such a justification.
    Section 1311(e)(2) of the Affordable Care Act also requires an 
Exchange to consider rate increases in determining whether to make a 
health plan available on the Exchange. Several comments in response to 
the RFC recommended a range of purposes for the Exchange consideration 
of rate increases, including adequacy of claims payment, reasonableness 
for benefits offered based upon actuarial analysis, discriminatory 
practices, and unsupported excessive rate increases. Other comments 
noted the interaction between the State rate review process and 
Exchange review of premiums for QHP certification purposes. Finally, 
some commenters recommended transparency in review of rate 
justifications as well as consistent criteria of ``reasonableness'' of 
increases inside and outside Exchanges.
    In paragraph (b) we propose to codify the statutory requirement 
that an Exchange must consider the following factors related to health 
plan rates when determining whether to certify QHPs: (1) The 
justification of a rate increase prior to the implementation of the 
increase; (2) the recommendations provided to the Exchange by the State 
under section 2794(b)(1)(B) of the PHS Act; and (3) any excess rate 
growth outside the Exchange as compared to the rate of growth inside 
the Exchange, including information reported by the States. We clarify 
that the obligation to consider rate increases justifications is an 
ongoing requirement, beginning with the plan year 2014.
    We seek to avoid duplicating the State rate review process in 
section 2794 of the PHS Act. We recognize that many States already 
operate an effective rate review program, collect information from 
issuers in the rate filing process and make a determination if the rate 
complies with State law. This process, when available, should be 
leveraged by the Exchange to avoid any duplication. For example, 
Exchanges may consider the preliminary justification already collected 
through the rate review process, and use the same format for the rate 
justification from health plans issuers under Sec.  154.215. 
Establishing consistency between the rate justification described in 
Sec.  154.215 and the justification required from QHP issuers by Sec.  
156.210 would reduce duplication of effort for issuers and Exchanges 
and promote greater transparency.
    We are considering a standard for the final rule in which there 
would be a bifurcated process for the rate increase justifications. 
Where section 2794 of the PHS Act applies (rates are subject to 
review), the Exchange may rely on the justification submitted pursuant 
to section 2794 of the PHS Act. Where section 2794 of the PHS Act does 
not apply, the Exchange could develop a less burdensome rate 
justification to satisfy section 1311(e)(2) of the Affordable Care Act. 
We are cognizant of existing State regulatory authorities; thus, we 
encourage the Exchange and the State department of insurance to 
collaborate in this process. Collaboration may include determining the 
form, manner, and timing of the submission of the rate justifications. 
We solicit comment on how to best align section 2794 of the PHS Act and 
section 1311(e)(2) of the Affordable Care Act.
    Separate and apart from the consideration of a rate increase

[[Page 41893]]

justification, Exchanges will need to receive rate and benefit 
information from QHP issuers for specific operational purposes. In 
paragraph (c) of Sec.  155.1020, we propose that the Exchange must at 
least annually receive the following information from the QHP issuers' 
for each QHP: Rates, covered benefits and cost-sharing requirements. 
HHS will provide the form and manner for the submission of this 
information. We note that the Exchange will need to receive rate 
information from QHP issuers in order to determine premium amounts for 
Exchange applicants as well as for the determination of the second 
lowest cost silver plan benchmark for advance payments of the premium 
tax credit. Additionally, benefit information is needed to determine 
whether a QHP complies with the benefit design standards defined in 
Sec.  156.20 and with the actuarial value requirements for cost-sharing 
reductions as well as to display plan options on the Exchange Web site. 
Furthermore, rate information is needed to support HHS' administration 
of the risk corridor program.
    In establishing the required rate and benefit data elements, HHS 
will seek to align this reporting requirement with information 
available through the State rate review process or through State rate 
filings, to the extent possible, so that an Exchange may consider 
leveraging already available sources.
d. Transparency in Coverage (Sec.  155.1040)
    In Sec.  155.1040, we propose to codify section 1311(e)(3) of the 
Affordable Care Act, which establishes that Exchanges must require 
health plans seeking certification as QHPs to submit transparency 
information to the Exchange, HHS, and other entities. In paragraph (a), 
we require Exchanges to collect information from QHP issuers relating 
to coverage transparency as described in Sec.  156.220(a).
    While the transparency reporting requirements in Sec.  156.220 
apply specifically to QHPs, we note that these same requirements will 
also apply to all group health plans and health insurance issuers in 
the individual and group markets under section 2715A of the PHS Act as 
amended by the Affordable Care Act. As section 2715A of the PHS Act is 
implemented, we anticipate working closely with the Department of Labor 
and the Department of the Treasury in order to ensure that these 
reporting standards are applied appropriately across the insurance 
market. In addition, HHS is soliciting comments under this proposed 
rule as part of the process of planning for the implementation of 
section 1311(e)(3)(D) of the Affordable Care Act. Any comments received 
related to section 1311(e)(3)(D) will be shared with the Department of 
Labor so that it can update and harmonize its rules for group health 
plan disclosures.
    In paragraph (b), we require the Exchange to monitor the use of 
plain language by QHP issuers when making available QHP transparency 
data pursuant to Sec.  156.220. Section 1311(e)(3)(B) requires the 
Secretary of HHS and the Secretary of Labor to jointly develop and 
issue guidance on best practices of plain language writing. Exchanges 
will need to ensure that QHP issuers' use of plain language is 
consistent with the definition provided in Sec.  155.20 and the 
guidance set forth as required by section 1311(e)(3)(B).
    In paragraph (c), we propose to codify section 1311(e)(3)(C) of the 
Affordable Care Act which specifies that the Exchange require QHP 
issuers make available cost-sharing information to enrollees. This 
requirement on QHP issuers is described in Sec.  156.220(c).
    We note that the information provided by QHP issuers pursuant to 
this section may be used by Exchanges during the certification process 
when determining if the health plan is in the interest of the qualified 
individuals served by the Exchange. Information reported under this 
section may inform Exchanges when considering the past performance of 
the health insurance issuers.
e. Accreditation Timeline (Sec.  155.1045)
    In Sec.  155.1045, we propose to codify the Exchange 
responsibility, required by section 1311(c)(1)(D)(ii) of the Affordable 
Care Act, to establish the time period within which any QHP issuer that 
is not already accredited must become accredited following 
certification of a QHP. Accreditation acts as a ``seal of approval'' to 
indicate to individuals and employers seeking coverage that a health 
insurance issuer meets minimum standards of quality and consumer 
protection. We note that, although section 1311(c)(1)(D)(i) of the 
Affordable Care Act requires a health plan to be accredited to be 
certified as a QHP, we interpret this to mean that QHP issuers must be 
accredited, because accrediting entities accredit issuers, not plans. 
In Sec.  156.275, we propose that all QHP issuers must be accredited 
with respect to their QHPs.
    The Affordable Care Act does not set the deadline by which a health 
insurance issuer must be accredited to have a health plan certified as 
a QHP, nor does it establish a time period after certification of a QHP 
during which a QHP issuer must become accredited if it is not already 
accredited. A grace period may be necessary since a typical 
accreditation process for a health insurance issuer may take twelve to 
eighteen months to complete, and could be even longer for health 
insurance issuers seeking accreditation for the first time. We 
encourage the Exchanges to establish a timeline for accreditation that 
accommodates the length of the accreditation process, particularly for 
issuers seeking first-time accreditation.
    We propose to require the Exchange to establish the length of time 
following initial certification of a QHP within which a QHP issuer must 
become accredited. The Exchange must establish a consistent deadline 
for accreditation with respect to each QHP issuer's initial 
participation in the Exchange; the deadline, for example, may be two 
years following certification of a QHP. This proposal is consistent 
with section 1311(c)(1)(D)(ii) of the Affordable Care Act which 
specifies that the time period established by the Exchange must be 
``applicable to all QHPs.'' We believe this interpretation, as opposed 
to a single date by which all QHP issuers must be accredited in order 
to participate or continue participating in the Exchange, will allow 
for inclusion of a wider variety of QHP issuers in the Exchange.
f. Establishment of Exchange Network Adequacy Standards (Sec.  
155.1050)
    The Exchanges will make health insurance available to a variety of 
consumers, including those who reside or work in rural or urban areas 
where it may be challenging to access health care providers. Network 
adequacy requirements will help ensure that QHP enrollees can readily 
obtain services. Under section 1311(c)(1)(B) of the Affordable Care 
Act, HHS is required to establish network adequacy requirements for 
health insurance issuers seeking certification of QHPs.
    We recognize that network adequacy standards should be appropriate 
to States' particular geography, demographics, local patterns of care, 
and market conditions. Therefore, to ensure that Exchange network 
adequacy requirements are appropriate for QHP issuers and reflect local 
patterns of care, we propose in Sec.  155.1050 that each Exchange 
ensure that enrollees of QHPs have a sufficient choice of providers. 
This broad standard affords the Exchange significant flexibility to 
apply this standard to QHPs in a manner appropriate to the State's 
existing patterns of care, establishing specific standards where 
necessary and leveraging existing State oversight and

[[Page 41894]]

enforcement mechanisms in this area. We propose at Sec.  156.230 that 
QHP issuers adhere to standards set by the Exchange, as well as several 
statutorily required standards that would apply to all QHP issuers.
    We solicit comment on additional minimum qualitative or 
quantitative standards for the Exchange to use in evaluating whether 
the QHP provider networks provide sufficient access to care. When 
considering our options for establishing network adequacy standards for 
QHP issuers, we examined typical standards employed in the existing 
insurance market by State departments of insurance, Medicare Advantage, 
TRICARE Prime and States that contract with Medicaid managed care 
organizations. We also examined the NAIC Managed Care Plan Network 
Adequacy Model Act, from which a number of States have drawn in 
developing their network adequacy standards for health insurance 
issuers. We have sought to develop a standard that balances the need 
for a uniform level of protection with the level of variation across 
States and local markets.
    In particular, we seek comment on a potential additional 
requirement that the Exchange establish specific standards under which 
QHP issuers would be required to maintain the following: (1) Sufficient 
numbers and types of providers to assure that services are accessible 
without unreasonable delay; (2) arrangements to ensure a reasonable 
proximity of participating providers to the residence or workplace of 
enrollees, including a reasonable proximity and accessibility of 
providers accepting new patients; (3) an ongoing monitoring process to 
ensure sufficiency of the network for enrollees; and (4) a process to 
ensure that an enrollee can obtain a covered benefit from an out-of-
network provider at no additional cost if no network provider is 
accessible for that benefit in a timely manner. These standards are 
based in part on the NAIC Managed Care Plan Network Adequacy Model Act. 
This set of standards would create a baseline that each Exchange could 
interpret and apply in a manner appropriate to local market conditions 
and patterns of care. Consistent with these basic standards, an 
Exchange would be able to set quantitative requirements where possible 
to establish clear expectations of access to care.
    We also seek comment on an additional standard that the Exchange 
ensure that QHPs' provider networks provide sufficient access to care 
for all enrollees, including those in medically underserved areas. Such 
a requirement would protect against a network design that does not 
serve all enrollees' medical needs.
    The standard proposed here would allow an Exchange to set standards 
appropriate to local patterns of care. We urge the Exchanges to 
consider the needs of enrollees in isolated geographic areas in 
particular; for example, an Exchange may want to consider the needs of 
American Indians and Alaska Natives residing in remote locations, given 
that they may often have a limited choice of providers from which to 
select. We also clarify that a QHP issuer's provider network must 
ensure reasonable access to care for all enrollees enrolled through the 
Exchange regardless of an enrollee's medical condition.
    We recognize that primary care access is a challenge in many 
communities nationally, and that more consumers may seek routine 
primary care services in 2014 given improved access to health insurance 
coverage. Consistent with the goals and policies of the Affordable Care 
Act in supporting primary care, in establishing provider networks that 
ensure broad access to care, we encourage States, Exchanges and health 
insurance issuers to consider broadly defining the types of providers 
that furnish primary care services (e.g., nurse practitioners).
g. Service Area of a QHP (Sec.  155.1055)
    In Sec.  155.1055, we propose that Exchanges have a process to 
establish or evaluate the service areas of QHPs. Under this proposed 
rule, an Exchange would maintain discretion to pre-determine service 
areas for plans to cover, permit plans to propose coverage of certain 
service areas, or negotiate with issuers over service areas during the 
certification process. This provision is intended to promote greater 
choice and competition as consistently as possible across a State, and 
to guard against discrimination, ``cherry picking,'' ``red-lining,'' or 
other similar efforts to offer health plans only in areas of low risk. 
We also seek to recognize that the capacity of health insurance issuers 
varies by region due to some factors that are outside of their control.
    In paragraph (a), we propose that an Exchange must ensure that the 
service area of a QHP covers at least a county, or a group of counties 
if the Exchange designates such a group, unless the QHP issuer 
demonstrates that serving a partial county is necessary, 
nondiscriminatory, and in the interest of qualified individuals and 
employers. The requirement outlined here parallels the ``county 
integrity rule'' established in Medicare Advantage, which also outlines 
examples for determining whether serving a partial county would fall 
under the ``necessary'' or ``nondiscriminatory'' standards.
    In paragraph (b), we propose that an Exchange must ensure that QHP 
service areas be established without regard to racial, ethnic, language 
and health status factors outlined in section 2705(a) of the PHS Act. 
This provision is intended to guard against redlining and other 
practices that would specifically exclude high-utilizing or high-cost 
populations.
h. Stand-Alone Dental Plans (Sec.  155.1065)
    In Sec.  155.1065(a), we propose to codify the requirement in 
section 1311(d)(2)(B)(ii) of the Affordable Care Act that an Exchange 
allow limited scope stand-alone dental plans to be offered provided 
that the plan furnishes at least the pediatric essential dental benefit 
required in section 1302(b)(1)(J) of the Affordable Care Act. We also 
propose to codify the requirement that the stand-alone dental plan 
comply with section 9832(c)(2)(A) of the Code and section 2791(c)(2)(A) 
of the PHS Act.
    In paragraph (b), we propose to codify the option for a dental plan 
to be offered as a stand-alone plan or in conjunction with a QHP. In 
paragraph (c), we propose to codify section 1302(b)(4)(F) of the 
Affordable Care Act that allows a health plan be certified as a QHP if 
it does not offer the pediatric essential dental benefit, provided that 
a stand-alone dental plan is offered through the Exchange. We also note 
that dental plan issuers would be considered participating issuers 
subject to any user fees specified by the Exchange, as established 
under Sec.  156.50 and Sec.  155.160.
    We are considering interpreting this provision such that an 
Exchange may require issuers of stand-alone dental plans to comply with 
any QHP certification requirements and consumer protections that the 
Exchange determines to be relevant and necessary. Potential QHP issuer 
standards that might be applied to stand-alone dental plans might 
include: Quality reporting, transparency measures, summary of coverage 
information, provider network standard, and standards regarding the 
consumer's experience in comparing and purchasing dental plans. While 
we provide significant latitude to Exchanges regarding requirements for 
stand-alone dental plans, we request comment on whether some of the 
requirements on QHP issuers should also apply to stand-alone dental 
plans as a Federal minimum and what limits Exchanges may face on 
placing

[[Page 41895]]

requirements on dental plans given that they are excepted benefits.
    We also request comment on whether we should set specific 
operational minimum standards. Substantial operational issues exist 
with allocating advance payments of the premium tax credit and 
calculating actuarial value (as defined by section 1302(d)(2) of the 
Affordable Care Act) when stand-alone dental plans segment coverage of 
the essential health benefits (as defined in 1302(b) of the Affordable 
Care Act). Also, a QHP issuer will have to know far enough in advance 
of the QHP certification process whether it needs to include pediatric 
dental coverage.
    Lastly, some commenters to the RFC requested that we require all 
dental benefits to be offered and priced separately from medical 
coverage, even when offered by the same issuer. Such a requirement 
would preclude QHP issuers from offering a ``bundled'' QHP that covers 
all essential health benefits, including the pediatric dental benefit, 
under one premium. While we recognize that requiring a QHP to price and 
offer dental benefits separately could promote comparison of dental 
coverage offerings, we have significant concerns about the 
administrative burden this could impose on Exchanges and QHP issuers. 
We request comment on whether either option should be required.
i. Recertification of QHPs (Sec.  155.1075)
    In Sec.  155.1075, we propose to codify section 1311(d)(4)(A) of 
the Affordable Care Act, which requires the Exchange to implement 
procedures for the recertification of health plans as QHPs. While the 
Exchange must continuously ensure that QHPs are in compliance with the 
certification standards, recertification provides a process for an 
Exchange to conduct a comprehensive review of its QHPs. This process 
also allows for QHPs and Exchanges to terminate their relationship if 
intended. In paragraph (a), we provide that the Exchange must establish 
a process for recertification of QHPs that includes a review of the 
general certification criteria outlined in Sec.  155.1000(c). We note 
that the recertification process for the QHPs should be less intensive 
than the initial certification process, given that the Exchange will 
have an established relationship with the QHP issuer. An Exchange may 
also consider using this process to make modifications to any 
agreements between the Exchange and its QHP issuers.
    We permit the Exchange to determine the frequency for recertifying 
QHPs. The Affordable Care Act does not require an Exchange to recertify 
QHPs on an annual basis. Therefore, an Exchange has the discretion to 
decide to recertify QHPs annually, or on a less frequent basis, such as 
every other year or every three years. Some Exchanges may choose to 
develop longer recertification periods to reduce the administrative 
costs associated with such an evaluation. By operation of Sec.  
156.200, each QHP must still adhere to the requirements listed in Sec.  
155.1000(c) on an ongoing basis. We invite comment as to whether we 
should require more specific requirements associated with the term 
length for recertification.
    We note that an Exchange that elects to conduct multi-year 
recertification will need to review certain information on a more 
frequent basis. For example, the Exchange will need to consider rate 
increase information and ensure compliance with benefit design 
standards annually, since issuers may alter rate and benefit design on 
an annual basis.
    We also propose that, after reviewing all relevant information and 
determining whether to recertify a QHP, the Exchange notify a QHP 
issuer of its recertification status. If the Exchange determines that a 
plan should be denied recertification, the Exchange would then proceed 
decertifying the plan as described in Sec.  155.1080.
    In paragraph (b), we propose that the Exchange must complete the 
recertification process on or before September 15 of the applicable 
calendar year. We chose this date so that the recertification process 
is completed in advance of the annual open enrollment period, which 
begins on October 15 of each year. By providing a September 15 
deadline, we allow the Exchanges discretion to determine a 
recertification timeframe that is most suitable for its consumers and 
QHPs. The Exchange may choose to complete its recertification process 
well in advance of the September 15 deadline. We solicit comments on 
the appropriateness of this recertification deadline.
j. Decertification of QHPs (Sec.  155.1080)
    In Sec.  155.1080, we propose to codify section 1311(d)(4)(A) of 
the Affordable Care Act, which requires the Exchange to implement 
procedures for the decertification of health plans as QHPs. In 
paragraph (a), we define decertification as the termination by the 
Exchange of the certification status and offering of a QHP. We note 
that decertification is an action taken by the Exchange in response to 
the most severe actions of a QHP, or as a result of a determination not 
to recertify a plan. In paragraph (b), we propose to codify section 
1311(d)(4)(A) of the Affordable Care Act, which requires the Exchange 
to implement procedures for the decertification of health plans as 
QHPs.
    In paragraph (c), we propose that the Exchange may at any time 
decertify a QHP if the Exchange determines that the QHP issuer or the 
QHP is no longer acting in accordance with the general certification 
criteria outlined in Sec.  155.1000(c), including that the QHP 
participation is no longer in the interest of its enrollees. Similar to 
the certification and recertification processes, the Exchange has the 
ability to tailor the decertification process, within the confines of 
the aforementioned standards, to meet the needs of the market it 
serves.
    The Exchange will have discretion in determining how to implement 
the decertification process. We recommend that Exchanges solicit input 
from a broad range of stakeholders, including issuers, when determining 
how to implement the decertification procedures. We request comments on 
the creation of the decertification process and what other authorities 
could be extended to the Exchange to make the process more efficient.
    In paragraph (d), we propose to require that the Exchange establish 
an appeals process for health plans that have been decertified by the 
Exchange. A health plan that has been decertified should have that 
ability to request a second evaluation if the issuer believes that its 
health plan has been unjustly decertified. This appeal process could be 
implemented in conjunction with the State department of insurance, by 
the Exchange on its own, or through a third party entity.
    In paragraph (e), we propose that if a QHP is decertified, the 
Exchange must provide notice of the decertification to parties who may 
be affected. The decertification of a QHP will have an impact on the 
Exchange market, including the QHP issuer, enrollees of the decertified 
QHP, who must receive information about a special enrollment period as 
described in Sec.  155.420, HHS, and the State department of insurance.

B. Part 156--Health Insurance Issuer Standards Under the Affordable 
Care Act, Including Standards Related to Exchanges

    The Exchanges should be an attractive market for health insurance 
issuers to achieve the goal of providing consumers and employers with 
access to a competitive choice of affordable, high quality QHPs. Part 
156 contains the proposed standards for QHPs and QHP issuers that are 
intended to promote robust and meaningful consumer

[[Page 41896]]

choice. Many provisions in this part have parallel standards in part 
155, because certain standards for States and Exchanges have 
complementary standards for health insurance issuers seeking to offer, 
or offering, QHPs through an Exchange. We cross-reference to minimize 
redundancy and avoid confusion with respect to certain proposed 
policies. To the extent possible, this approach to drafting is designed 
to avoid gaps between the minimum standards we propose for Exchanges 
and QHPs.
1. Subpart A--General Provisions
a. Basis and Scope (Sec.  156.10)
    Proposed Sec.  156.10 of subpart A specifies the general statutory 
authority for the ensuing proposed regulation and indicates that the 
scope of part 156 is to establish standards for health plans and health 
insurance issuers related to the benefit design standards and in regard 
to offering QHPs through an Exchange. Under Sec.  156.20, we propose 
definitions for terms used in part 156. Section 156.50 proposes the 
user fees that participating issuers may pay to contribute to the 
operations of a State Exchange, and Exchange-related operations.
b. Definitions (Sec.  156.20)
    Many definitions presented in Sec.  156.20 are taken directly from 
the Affordable Care Act or from existing regulations. The definitions 
set forth in subpart A reflect general meanings for the terms as they 
are used in part 156 unless otherwise indicated; the definitions apply 
strictly for the purposes of part 156. When a term is defined in part 
156 other than in subpart A, the definition of the term is limited to a 
specified purpose in the relevant subpart or section.
    Many of the terms defined in this section refer to those defined in 
Sec.  155.20, including ``applicant,'' ``benefit year,'' ``cost 
sharing,'' ``cost-sharing reductions,'' ``plan year,'' ``qualified 
employer,'' ``qualified individual,'' ``qualified health plan or QHP,'' 
and ``qualified health plan issuer or QHP issuer.'' We define ``benefit 
design standards'' for the purposes of the requirements related to the 
benefit packages outlined in the Affordable Care Act. The terms ``group 
health plan,'' ``health insurance coverage,'' and ``health insurance 
issuer'' are defined in section Sec.  144.103 of this chapter.
    We propose to use the term ``benefit design standards'' to mean the 
``essential health benefits package'' defined in section 1302(a) of the 
Affordable Care Act. To avoid confusion with the term ``essential 
health benefits,'' which refers only to the definition in section 
1302(b) of the Affordable Care Act, we instead refer to the set of 
health plan requirements as benefit design standards for the purposes 
of clarity within this proposed rule.
c. Financial Support (Sec.  156.50)
    Section 156.50 contains requirements on participating issuers to 
pay user fees to support ongoing operations of an Exchange, if a State 
chooses to impose fees. A State-operated Exchange must be self-
sustaining by January 1, 2015, under section 1311(d)(5)(A), which also 
allows State user fee assessments on participating health insurance 
issuers, or other methods of funding, to support State Exchange 
operations.
    In paragraph (a), we define the term ``participating issuer'' to 
mean an issuer offering plans that participate in the specific function 
that is funded by the user fee. Under this definition, a participating 
issuer would encompass different segments of issuers of health plans or 
other benefit plans depending on the Exchange function being funded by 
the user fee. As this term is used in section 1311(d)(5)(A), it 
provides an Exchange with the flexibility to collect user fees from 
issuers that benefit in some way from an Exchange and Exchange-related 
operations. We note that the term ``participating issuer,'' for the 
purposes of this section, may include: health insurance issuers, QHP 
issuers, issuers of multi-State plans (as defined in Sec.  
155.1000(a)), issuers of stand-alone dental plans (as described in 
Sec.  155.1065), or other issuers identified by an Exchange. In 
paragraph (b), we propose that participating issuers pay any fees 
assessed by a State Exchange, consistent with Exchange authority 
outlined in Sec.  155.160.
2. Subpart C--Qualified Health Plan Minimum Certification Standards
    Section 1311(c)(1) authorizes the Secretary, by regulation, to 
establish criteria for the certification of health plans as QHPs, which 
are described in this subpart. The statute outlines several minimum QHP 
standards to be established by the Secretary that will foster direct 
competition on the basis of price and quality and which will increase 
access to high quality, affordable health care for individuals and 
small employers. Each Exchange will be responsible for determining 
whether a health plan seeking to participate meets these minimum 
requirements to be a QHP and will have the discretion to set additional 
standards to ensure that offering the plan through that Exchange is in 
the best interest of consumers.
    We received many comments in response to the RFC on minimum QHP 
certification requirements, which we describe in the preamble to 
subpart K of part 155 and which we considered as we developed the 
proposed rule. We highlight that, unless otherwise noted, the standards 
for QHPs proposed in this subpart do not supersede existing State laws 
or regulations applicable to health insurance issuers. While this 
subpart addresses health plan standards that States traditionally set, 
either through the process of granting licensure or otherwise, the 
standards proposed here apply specifically to the certification of QHPs 
for participation in the Exchange and do not exempt health insurance 
issuers from any State laws or regulations that generally apply to 
health insurance issuers in that State. We note that if a State 
establishes a higher standard for licensure than what we outline here 
as a minimum Federal requirement for health plan certification, such 
standard would apply.
a. QHP Issuer Participation Standards (Sec.  156.200)
    Section 156.200 outlines the requirements on QHP issuers as a 
condition of participation in the Exchange. States may choose to 
establish additional conditions for participation beyond the minimum 
requirements established by the Secretary.
    In paragraph (a), we propose to codify section 1301(a)(1)(A) of the 
Affordable Care Act. To participate in an Exchange, a health insurance 
issuer must have in effect a certification issued or recognized by the 
Exchange to demonstrate that each health plan it offers in the Exchange 
is a QHP and that the issuer meets all requirements on QHP issuers. We 
clarify that some requirements in this proposed rule apply to the 
design of the specific QHPs offered. Other requirements are placed on 
the issuers related to the offering of QHPs.
    In paragraph (b), we outline the set of standards with which a QHP 
issuer must comply related to the offering of a QHP. We propose in 
paragraph (b)(1) that the QHP issuer must comply with the requirements 
set forth in this subpart on an ongoing basis. We expect the Exchange 
to take into account compliance with the requirements in this subpart 
not only when determining whether to initially certify a health plan as 
a QHP, but also when reviewing QHPs for recertification.

[[Page 41897]]

    In paragraph (b)(2), we propose that QHP issuers must comply with 
any Exchange processes, procedures, and standards set forth under 
subpart K of part 155 and Sec.  155.705 for the small group market. We 
include the requirement to adhere to this certification process as a 
condition of participation so that the Exchange has the ability to 
conduct certification processes in a way that best meets the needs of 
the market it serves. This includes the process in which a health 
insurance issuer seeking initial certification of a QHP must 
demonstrate that it complies with the standards listed under paragraph 
Sec.  155.1000(c).
    In paragraph (b)(3), we propose to require that a QHP issuer 
ensures that each QHP it offers complies with the benefit design 
standards defined in Sec.  156.20. Benefit design standards relate to 
the requirement in section 1301(a)(1)(B) of the Affordable Care Act 
that requires that QHPs offer the essential health benefits, adhere to 
cost-sharing limits, and meet the levels of coverage described in 
1302(a) which will be the subject of future rulemaking.
    In paragraph (b)(4), we propose to codify the requirement in 
section 1301(a)(1)(C)(i) that a QHP issuer be licensed and in good 
standing to offer health insurance coverage in each State in which such 
issuer offers health insurance coverage. We interpret the term ``good 
standing'' to mean that the issuer has no outstanding sanctions imposed 
by a State's department of insurance. We seek comment on this 
interpretation. Licensure could also mean a ``certificate of 
authority,'' or any other State method of approving a health insurance 
issuer to offer health insurance coverage in the State.
    In paragraph (b)(5), we propose that QHP issuers comply with 
quality standards established in and pursuant to sections 1311(c)(1), 
1311(c)(3), 1311(c)(4), and 1311(g) of the Affordable Care Act. We 
intend to address specific requirements in future rulemaking, such as 
requirements for QHP issuers related to quality data reporting, quality 
improvement strategies, and enrollee satisfaction surveys described in 
these statutory provisions.
    In paragraph (b)(6) and (b)(7), we propose that QHP issuers adhere 
to additional proposed requirements including user fees described in 
subpart A of part 156, if applicable, and the risk adjustment 
participation requirements as described in 45 CFR part 153.
    In paragraph (c), we outline the requirements on QHP issuers 
related to the offering of QHPs. In paragraph (c)(1), we propose to 
codify section 1301(a)(1)(C)(ii), which requires that each QHP issuer 
offer at least one QHP in the silver coverage level and at least one 
QHP in the gold coverage level; the levels of coverage are defined in 
section 1302(d)(1) of the Affordable Care Act. In paragraph (c)(2), we 
propose to codify section 1302(f) of the Affordable Care Act, which 
specifies that any QHP issuer offering a non-catastrophic health plan 
in the Exchange must offer the identical plan as a child-only health 
plan. Child-only plans are only available to individuals under the age 
of 21. In paragraph (c)(3), we require the QHP issuer to offer a QHP at 
the same premium rate consistent with the requirements described in 
Sec.  156.255(b).
    In paragraph (d), we require that QHP issuers adhere to the 
requirements of this subpart and any additional participation standards 
that may be applied by the Exchange or the State.
    In paragraph (e), pursuant to the authority to set QHP standards in 
section 1321(a)(1)(B), we propose that QHP issuers must not 
discriminate based on race, color, national origin, disability, age, 
sex, gender identity and sexual orientation. Such practices would 
include, but not be limited to marketing, outreach, and enrollment.
b. QHP Rate and Benefit Information (Sec.  156.210)
    In Sec.  156.210, we propose the requirements for QHP issuers to 
submit QHP rate and benefit information to the Exchange, including rate 
justifications. The Exchange will be responsible for ensuring that 
issuers adhere to this requirement during initial certification and on 
an annual basis, as specified in Sec.  155.1020.
    In paragraph (a), we propose that a QHP's rates must be applicable 
for an entire benefit year or, for the SHOP, plan year. We propose this 
requirement since the Exchange will have an annual open enrollment 
period during which qualified individuals will be able to change their 
QHP selection. This requirement would shield consumers from rate 
increases during the benefit year or, for the SHOP, the plan year. For 
the SHOP, the timing of the rate changes will vary by employer, since 
the annual open enrollment periods differ by employer. We discuss this 
in greater detail in Sec.  156.285.
    In paragraph (b), we require the QHP issuer to submit rate and 
benefit information to the Exchange as described in Sec.  155.1020(c). 
As noted in Sec.  155.1020(c), to the extent possible, HHS seeks to 
align the required data elements with information already collected as 
part of the rate review program and State rate filing processes. This 
will allow both Exchanges and QHPs to leverage already existing 
information collections for this purpose.
    In paragraph (c), we propose to codify the general requirement that 
a QHP issuer submit a justification for a rate increase prior to 
implementation of the rate increase as required by section 1311(e)(2) 
of the Affordable Care Act. As noted in Sec.  155.1020, Exchanges may 
leverage the preliminary justification collected as part of the rate 
review process as described in 45 CFR part 154, and consider the rate 
justification, as appropriate. We are considering a standard in which 
the issuers will submit a rate justification in the form and manner 
determined by the Exchange.
    We also propose to codify the rate transparency requirement under 
section 1311(e)(2) of the Affordable Care Act, which requires that 
issuers post the rate increase justifications on their Web sites so 
they can be viewed by consumers, enrollees, and prospective enrollees. 
To promote consistency in how the rate increase justifications are 
posted on issuer Web sites, and to assist the consumers in 
understanding the rate increase justifications, we are considering 
whether we should develop standards for ``prominently posting'' rate 
increase justifications. Again, to avoid duplication of effort, we 
intend to leverage the rate increase justification provided by QHP 
issuers as part of the rate review process.
c. Transparency in Coverage (Sec.  156.220)
    In Sec.  156.220(a) and (b), we propose to codify section 
1311(e)(3)(A) of the Affordable Care Act, which establishes a 
transparency standard as a condition for certification of QHPs. To 
receive and maintain certification, health insurance issuers must make 
available to the public and submit to the Exchange, the Secretary, and 
the State insurance commissioner a broad range of information relevant 
to the plan's quality and cost. The statutorily required disclosures 
include: (1) Claims payment policies and practices; (2) periodic 
financial disclosures; (3) data on enrollment; (4) data on 
disenrollment; (5) data on the number of claims that are denied; (6) 
data on rating practices; (7) information on cost-sharing and payments 
with respect to any out-of-network coverage; and (8) information on 
enrollee rights under title I of the Affordable Care Act. We clarify 
that, while the statute refers to ``enrollee and participant rights,'' 
we believe our definition of enrollee is inclusive of those who may be 
considered ``participants.'' We seek comment on whether issuers should 
be required to submit this information to

[[Page 41898]]

the Exchange and other entities, or to make such information available 
to the Exchange and other entities.
    Under paragraph (c), we propose to require QHP issuers to provide 
the information described in paragraph (a) in plain language. Section 
1311(e)(3)(B) calls for the Secretary of HHS and the Secretary of Labor 
to jointly develop and issue guidance on best practices of plain 
language writing. QHP issuers' use of plain language should be 
consistent with the definition provided in Sec.  155.20 and the 
forthcoming guidance.
    In paragraph (d) and pursuant to section 1311(e)(3)(C), we propose 
that QHP issuers make available to the enrollee information on cost-
sharing responsibilities for a specific service by a participating 
provider under that enrollee's particular plan. The information must be 
provided upon request from the enrollee in a timely manner through a 
Web site or through other means for individuals without access to the 
internet.
d. Marketing of QHPs (Sec.  156.225)
    Section 1311(c)(1)(A) of the Affordable Care Act requires that the 
Secretary establish marketing requirements for QHP issuers seeking to 
participate in an Exchange, which we propose in Sec.  156.225.
    To ensure that an Exchange's oversight of marketing by QHP issuers 
is consistent with those standards applied in the non-Exchange market 
and leverages existing State oversight mechanisms, we propose in 
paragraph (a) to require QHP issuers to comply with any applicable 
State laws and regulations regarding marketing by health insurance 
issuers. Though QHP issuers are not exempt from otherwise applicable 
State law by participating in the Exchange, we propose to apply 
compliance with State law as a certification standard to reinforce the 
coordinated efforts of the Exchange and the State department of 
insurance and to ensure that the Exchange considers a QHP issuer's 
marketing practices in determining whether offering a QHP is in the 
best interest of consumers.
    In paragraph (b), we propose to codify section 1311(c)(1)(A), which 
prohibits QHP issuers from employing marketing practices that have the 
effect of discouraging enrollment of individuals with significant 
health needs. We seek comment on the best means for an Exchange to 
monitor QHP issuers' marketing practices to determine whether they have 
discouraged enrollment of individuals with significant health needs.
    We seek comment on also applying a broad prohibition against unfair 
or deceptive marketing practices by all QHP issuers and their 
officials, agents and representatives. Such a requirement would protect 
consumers from deceptive and misleading marketing practices and allow 
an Exchange to take action to address such practices if the State's 
department of insurance or applicable State agency did not have the 
authority or capacity to do so under applicable law.
    We considered setting detailed and uniform Federal standards 
prohibiting specific marketing practices across all QHP issuers, but 
were concerned about the interaction with current State marketing rules 
or unintentionally creating ``safe harbors'' that might allow issuers 
to technically comply with specific requirements without meeting the 
spirit of the broader marketing protections. We permit States and 
Exchanges to adopt additional requirements for the marketing of health 
plans that are most appropriate to the unique market dynamics in that 
State, both inside and outside the Exchange. Any Exchange that chooses 
to apply additional marketing requirements to QHP issuers should 
consider working closely with State insurance departments to ensure 
that all health insurance issuers in the State are subject to the same 
minimum marketing requirements in order to create a level playing field 
with equal consumer protections inside and outside the Exchange.
    One particular area of concern in regulating marketing practices of 
health insurance issuers is ensuring that individuals understand the 
coverage options made available under the Affordable Care Act. For 
those individuals already covered by Medicare or other third-party 
coverage, enrollment in a QHP could be duplicative and/or unnecessary. 
We are particularly concerned that QHPs may be marketed towards certain 
vulnerable populations, such as Medicare beneficiaries, for whom 
coverage from a QHP would not be necessary. We seek comment on a 
standard that QHP issuers do not misrepresent the benefits, advantages, 
conditions, exclusions, limitations or terms of a QHP.
e. Network Adequacy Standards (Sec.  156.230)
    In Sec.  156.230, we describe the minimum criteria for network 
adequacy that health plans must meet to be certified as QHPs, pursuant 
to section 1311(c)(1)(B) of the Affordable Care Act. We propose in 
paragraph (a)(1) of this section that QHP issuers must maintain 
networks for QHPs that include essential community providers in 
accordance with Sec.  156.235. We propose in paragraph (a)(2) that QHP 
issuers must maintain networks that comply with any network adequacy 
standards established by the Exchange consistent with Sec.  155.1050. 
We propose under paragraph (a)(3) that a QHP issuer must ensure that 
the provider network of its QHPs must be consistent with the provisions 
of 2702(c) of the PHS Act as amended by the Affordable Care Act, 
consistent with section 1311(c)(1)(B) of the Affordable Care Act. 
Section 2702(c) of the PHS Act requires that health insurance issuers 
furnish coverage to any individual who applies for a group, small group 
or individual health plan, with exceptions only if the individual 
resides outside the plan's service area or if the health insurance 
issuer does not have the capacity to serve the individual because of 
its existing obligations to enrollees. This allows QHP issuers an 
exception to the guaranteed issue requirement if their provider network 
would not be sufficient to serve additional potential enrollees. In 
such cases, an issuer must apply such an exception uniformly across all 
employees or individuals without regard to their claims experience or 
health status. We note that these standards would be applied to all QHP 
issuers along with any standards established by the Exchange.
    As a condition of certification of the QHP, a health insurance 
issuer must also provide information to potential enrollees on the 
availability of in-network and out-of-network providers. We propose in 
paragraph (b) that a QHP issuer must make its health plan provider 
directory available to the Exchange electronically and to potential 
enrollees and current enrollees in hard copy upon request. Exchanges 
will have discretion to determine the best way to give potential 
enrollees access to the provider directory for each QHP, including 
through a link from the Exchange's Web site to the issuer's Web site, 
or by establishing a consolidated provider directory through which a 
consumer may search for a provider across QHPs. Under paragraph (b), we 
also propose that the QHP issuer note providers in the directory that 
are no longer accepting new patients. We seek comment on standards we 
might set to ensure that QHP issuers maintain up-to-date provider 
directories.
f. Essential Community Providers (Sec.  156.235)
    In Sec.  156.235, we propose to codify section 1311(c)(1)(C) of the 
Affordable Care Act, which requires that a health plan's network 
include essential community providers who provide care

[[Page 41899]]

to predominantly low-income and medically-underserved populations to be 
certified as a QHP. As specified in section 1311(c)(1)(C), essential 
community providers include entities specified under section 340B(a)(4) 
of the PHS Act and section 1927(c)(1)(D)(i)(IV) of the Act as set forth 
by section 211 of Public Law 111-8.
    We received a number of comments in response to the RFC regarding 
essential community providers. In general, respondents to the RFC 
offered recommendations on the types of entities that might be included 
in the definition of an essential community provider, and essential 
community provider inclusion in QHP provider networks. We considered 
these comments in developing the standards related to essential 
community providers.
    In paragraph (a) of this section, we require that QHP issuers 
include in their provider networks a sufficient number of essential 
community providers, where available, that serve low-income, medically-
underserved individuals. We also propose to codify the provision that 
nothing in this requirement shall be construed to require any QHP to 
provide coverage for any specific medical procedure. We interpret this 
to mean that while a QHP issuer must contract with essential community 
providers, coverage of specific services or procedures performed by an 
essential community provider is not required.
    An important issue with respect to implementing section 
1311(c)(1)(C) is establishing a sufficient level of essential community 
provider participation in QHPs. Although the Affordable Care Act 
requires inclusion of essential community providers in QHP networks, 
the Act does not require QHP issuers to contract with or offer 
contracts to all essential community providers. The statute refers to 
``those essential community providers, where available,'' and ``that 
serve predominantly low-income and medically-underserved,'' which 
suggests a requirement that QHP issuers contract with a subset of 
essential community providers.
    We considered establishing broad contracting requirements where QHP 
issuers would have to offer a contract to all essential community 
providers in each QHP's service area, or establishing a requirement for 
issuers to contract with essential community providers on an any-
willing provider basis. Requiring issuers to offer contracts to all 
essential community providers would allow continuity of service for 
enrollees with existing relationships especially in communities where 
the essential community provider has been the only reliable source of 
care. However, such a requirement may inhibit attempts to use network 
design to incentivize higher quality, cost effective care by tiering 
networks and driving volume towards providers that meet certain quality 
and value goals.
    We note that ``sufficiency'' could be interpreted to mean that the 
QHP issuer would have to demonstrate to the Exchange that it has a 
sufficient number and geographic distribution of essential community 
providers to ensure timely access for low-income, medically underserved 
individuals in its health plan service area, pursuant to the Exchange's 
applicable network adequacy and access requirements.
    We solicit comment on how to define a sufficient number of 
essential community providers. We note that States may elect to 
establish more stringent participation requirements, including adoption 
of a blanket contracting requirement. Similarly, a potential safe-
harbor strategy for QHP issuers would be to offer contracts to all 
essential community providers or accept any-willing essential community 
provider in its service area.
    We are considering whether to provide separate consideration for 
integrated delivery network health plans where services are provided 
solely ``in-house.'' This could include plans where all providers are 
employees of the plan (``staff model'') and plans where the providers 
are part of an entity that furnishes all of the plan's services on an 
exclusive basis. We understand that the essential community provider 
requirements may not be compatible with the operating model of ``staff 
model'' plans and exclusive integrated delivery network plans. We seek 
comment on whether we should create an exemption to the essential 
community provider requirements for such plans. If such organizations 
were exempt from the essential community provider requirement, the 
exemption could be contingent upon the organizations meeting other 
criteria, such as: evidence of services provided to low-income 
populations; compliance with national standards for provision of 
culturally and linguistically appropriate services (CLAS); or 
implementation of a plan to address health disparities.
    In paragraph (b), we specify the types of providers included in the 
definition of an essential community provider. We include in the 
definition of essential community providers those providers 
specifically referenced in statute. In paragraphs (b)(1) and (b)(2) of 
this section, we define essential community providers to include all 
health care providers defined in section 340B(a)(4) of the PHS Act and 
providers described in section 1927(c)(1)(D)(i)(IV) of the Act. We 
continue to look at other types of providers that may be considered 
essential community providers to ensure that we are not overlooking 
providers that are critical to the care of the population that is 
intended to be covered by this provision. We solicit comment on the 
extent to which the definition should include other similar types of 
providers that serve predominantly low-income, medically-underserved 
populations and furnish the same services as the providers referenced 
in section 340B(a)(4) of the PHS Act.
    We acknowledge that two provisions of the Affordable Care Act 
regarding payment of essential community providers and payment of 
Federally Qualified Health Centers (FQHCs) may conflict. Section 
1311(c)(2) of the Affordable Care Act states that nothing shall be 
construed to require a QHP to contract with an essential community 
provider if such provider refuses to accept the generally applicable 
payment rates of the plan. This requirement may conflict with section 
1302(g) of the Affordable Care Act, which requires that a QHP issuer 
reimburse FQHCs at each facility's Medicaid prospective payment system 
(PPS) rate. The FQHC Medicaid PPS rates are facility specific rates 
paid on a per encounter basis, and they may be higher than the rates 
that a QHP issuer pays to other contracted providers for similar 
services.
    One approach to reconciling these provisions would be to require 
QHP issuers to pay at least the Medicaid PPS rate to each FQHC that 
participates in the issuer's QHP network. This approach would enable 
FQHCs to be paid their Medicaid PPS rates for services provided to QHP 
enrollees. However, if FQHC Medicaid PPS rates are greater than 
comparable amounts paid to other providers, and if many of the 
enrollees in a QHP receive care at FQHCs, the costs of these QHPs may 
be greater than the costs of QHPs that do not have many enrollees who 
are seen at the centers. Also, if Medicaid prospective payment rates 
exceed QHPs' generally applicable payment rates, requiring QHP issuers 
to pay the full FQHC Medicaid PPS rate could lead insurers to minimally 
contract with FQHCs.
    We note that there are other practical considerations regarding how 
issuers would pay the Medicaid PPS rate. For example, it is not clear 
how QHP issuers would administer the FQHC Medicaid PPS rate, since it 
is a facility specific rate paid on a per encounter basis for a

[[Page 41900]]

pre-determined set of covered services. Issuers would need to replicate 
each FQHC's Medicaid PPS rate, which may be complicated since Medicaid 
covered services vary by State and rates vary by FQHC.
    Another potential approach to reconciling these two payment 
provisions would be to permit issuers to negotiate mutually agreed-upon 
payment rates with FQHCs, as long as they are at least equal to the 
issuer's generally applicable payment rates. Such an interpretation may 
furnish FQHCs with a degree of negotiating leverage with issuers to 
obtain payment rates higher than the issuer's generally applicable 
payment rates but not tie issuers to the full Medicaid PPS rate for in-
network FQHCs. This approach would decrease the incentive to drive 
patients away from providers that may be best suited to their needs, 
while providing FQHCs with leverage to be able to negotiate payments 
that will allow them to continue providing the comprehensive services 
that are particularly valuable to the individuals they serve. However, 
this approach may result in FQHCs receiving less than their Medicaid 
PPS rates for in-network participation. We invite comment on the issue 
of FQHC payment and solicit other potential approaches for resolving 
these potentially conflicting provisions.
    We also invite comment on establishing requirements regarding 
reimbursement of Indian health providers qualifying under 340B(a)(4) of 
the PHS Act. Section 206 of the Indian Health Care Improvement Act 
(IHCIA) provides that all Indian health providers have the right to 
recover from third party payers, including insurance companies up to 
the reasonable charges billed for providing health services or, if 
higher, the highest amount the insurer would pay to other providers to 
the extent that the patient or another provider would be eligible for 
such recoveries. This section also states that no law of any State or 
provision of any contract shall prevent or hinder this right of 
recovery. Therefore, this requirement applies whether or not there is a 
contract between the insurance company and the Indian health provider. 
We believe that payment requirements under section 206 of IHCIA apply 
to QHP issuers, as well as to any insurer, employee benefit plan or 
other third party payer. We invite comment on the payment requirement 
under section 206 of IHCIA, and how it might be reconciled with the 
essential community provider payment requirement described in section 
1311(c)(2) of the Affordable Care Act.
    We also invite comment on other special accommodations that must be 
made when contracting with Indian health providers. Indian health 
providers operate under or are governed by numerous federal 
authorities, including but not limited to the Anti-Deficiency Act, the 
Indian Self-Determination and Education Assistance Act, the Indian 
Health Care Improvement Act, the Federal Tort Claims Act, and the 
Federal Medical Care Recovery Act. Indian health providers serve a 
specific population in accordance to these and other federal laws. Some 
RFC commenters recommended that we consider developing a standard 
contract addendum containing all conditions that would apply to QHP 
issuers when contracting with Indian health providers. Such an addendum 
may be similar to the special Indian Health Addendum currently used in 
the Medicare Prescription Drug Program, which CMS requires all plans to 
use when contracting with Indian Health Service, tribal organization, 
and urban Indian organization (I/T/U) pharmacies and serve as a safe-
harbor for all issuers contracting with Indian health providers, which 
would minimize potential disputes and legal challenges between Indian 
health providers and issuers. We invite comment on the applicability of 
these special requirements to QHP issuers, and the potential use of a 
standardized Indian heath provider contract addendum.
g. Treatment of Direct Primary Care Medical Home (Sec.  156.245)
    In Sec.  156.245, we propose to codify section 1301(a)(3) of the 
Affordable Care Act, which permits a QHP issuer to provide coverage 
through a direct primary care medical home that meets the requirements 
established by HHS, provided that the QHP meets all requirements 
otherwise applicable. We request comment on what standards HHS should 
establish under this section.
    Commenters to the RFC noted that the direct primary care medical 
home model in the State of Washington has benefited providers by 
providing predictable income without added administrative costs, while 
consumers gain access to an affordable and reliable source of primary 
services that decreases reliance on emergency rooms as a source of 
routine care.
    We interpret the phrase ``direct primary care medical home plan'' 
to mean an arrangement where a fee is paid by an individual, or on 
behalf of an individual, directly to a medical home for primary care 
services, consistent with the program established in Washington. We 
generally consider primary care services to mean routine health care 
services, including screening, assessment, diagnosis, and treatment for 
the purpose of promotion of health, and detection and management of 
disease or injury.
    We considered allowing an individual to purchase a direct primary 
care medical home plan and separately acquire wrap-around coverage. 
However, direct primary care medical homes are providers, not insurance 
companies, which would require the Exchange to develop an accreditation 
and certification process that is inherently different from certifying 
health plans and that would significantly depart from the role of an 
Exchange. Furthermore, allowing a separate offering would require 
consumers to make two payments for full medical coverage, adding 
complexity to the process of acquiring health insurance, ensuring 
enrollee have access to the full complement of the essential health 
benefits to which they are entitled, and complicating the allocation of 
advance payments of the premium tax credit.
h. Health Plan Applications and Notices (Sec.  156.250)
    In Sec.  156.250, we establish basic standards for the format of 
applications and notices provided by the QHP issuer to the enrollee. 
QHP issuers will be required to provide enrollees with a variety of 
applications and notices in accordance with the standards for 
enrollment and termination of coverage. Since these notices will be 
provided to all enrollees, it is important to ensure that those 
enrollees with limited English proficiency (LEP) have access to 
translated materials and enrollees with disabilities can obtain 
materials in alternate formats.
    We propose that QHP issuers must adhere to the standards 
established for notices in Sec.  155.230(b). The incorporated standard 
requires QHP issuers to provide meaningful access to LEP individuals 
and ensure effective communication for people with disabilities. This 
may include providing information about the availability and means to 
obtain oral interpretation services, languages in which written 
materials are available, and the availability of materials in alternate 
formats for persons with disabilities.
i. Rating Variation (Sec.  156.255)
    Section 2701(a)(1)(A) of the PHS Act, as revised by section 1201 of 
the Affordable Care Act, limits the variation in premium rating to four 
factors:

[[Page 41901]]

Whether the coverage is for an individual or family; rating area; age; 
and tobacco use. The specific rating rules will be issued through 
separate regulation, but this section discusses several rate-related 
provisions for QHPs.
    Consistent with the rating rules provision, section 1301(a)(4) of 
the Affordable Care Act allows QHP issuers to vary premiums by the 
rating areas established under section 2701(a)(2), which we propose to 
codify in Sec.  156.255(a). Section 2701(a)(2) of the PHS Act requires 
that States establish one or more rating areas within a State, subject 
to the Secretary's approval. Permitting premium variation by geographic 
rating area enables health insurance issuers to account for regional 
variation in health care costs. Because section 1302(a)(4) of the 
Affordable Care Act directly references the rating areas outlined in 
section 2701(a)(2) of the PHS Act, we interpret that the rating areas 
will be applied consistently inside and outside of the Exchange.
    In paragraph (b), we codify section 1301(a)(1)(C)(iii) of the 
Affordable Care Act, which specifies that each QHP issuer must offer a 
QHP at the same premium rate without regard to whether the plan is 
offered through an Exchange or whether the plan is offered directly 
from the issuer or through an agent. We interpret this provision to 
mean that an issuer must charge a premium that uses underlying rating 
assumptions that account for all expected enrollees of a QHP, including 
individuals that enroll in the QHP outside of an Exchange, and for all 
methods of enrollment, including through an Exchange, an agent or 
broker, or the issuer itself. Thus, the resulting premium for a QHP 
would vary only by the rating factors listed in 2701(a) of the PHS Act.
    We believe that the rating factor related to family size has 
significant implications for Exchanges. Pursuant to the Secretary's 
authority to regulate QHPs under section 1311(c)(1), we are considering 
options on how to structure family rating for QHPs that are offered in 
the Exchange. Offering uniform family rating categories will maximize 
competition between health plans based on price and quality. Our 
understanding is that issuers currently use multiple rating tiers in 
the individual market.
    In paragraph (c), we propose issuers vary premiums among no more 
than four different types of family composition that are commonly used 
among health insurance issuers currently: individual; two adults; adult 
plus child or children; and a catch-all ``family'' category for two-
adult families with a child or children and other family compositions 
that do not fit in the other categories. QHP issuers must cover all of 
these four groups, but in doing so may combine some of the identified 
categories; for example, a QHP issuer may combine the second and third 
categories to include both two-adult families and families with one 
adult plus child or children. We believe that such a rating structure 
would be beneficial to the market because it would limit premium 
variation within families of similar types.
    We recognize that section 2701(a)(4) of the PHS Act requires that 
any family premium using age or tobacco rating may only apply those 
rates to the portion of the premium that is attributable to each family 
member. As a result, calculating a family premium by determining the 
age and tobacco rated premium for one member of the family and applying 
a multiplier to set the rating for the entire family is not permitted. 
We seek comment on how we might structure family rating categories 
while adhering to Section 2701(a)(4) of the PHS Act. Additionally, we 
request comment on how to apply four family categories when performing 
risk adjustment. We also invite comment on alternatives to four 
categories for defining family composition. We seek comment on how to 
balance the number of categories offered by QHP issuers in order to 
reduce potential consumer confusion, while maintaining plan offerings 
and rating structures that are similar to those that are currently 
available in the health insurance market.
    We are also considering whether to require QHP issuers to cover an 
enrollee's tax household, including for purposes of applying individual 
and family rates. We are considering this approach because of the 
potential challenge of administering the premium tax credit, 
particularly for families filing with non-spousal adult dependents. We 
note that QHP issuers would not be required to cover dependents living 
outside of the Exchange service area. We recognize that such an 
approach would add non-spousal adult dependents to the family risk 
pool, but the impact of this configuration may be offset through risk 
adjustment. We seek comment on the potential considerations of this 
approach.
j. Enrollment Periods for Qualified Individuals (Sec.  156.260)
    In Sec.  156.260, we propose that QHP issuers comply with the 
enrollment periods as a condition of offering a QHP. In paragraph (a), 
we propose that QHP issuers accept and enroll qualified individuals in 
QHPs only during the enrollment periods described in Sec.  155.410 and 
Sec.  155.420.
    In paragraph (a)(1), we specify that QHP issuers must accept and 
enroll qualified individuals during the initial enrollment period, 
described in Sec.  156.410(b), and during the annual open enrollment 
period thereafter, described in Sec.  156.410(e). In paragraph (a)(2), 
we propose that QHP issuers accept and enroll qualified individuals in 
QHPs if they are granted a special enrollment period described in Sec.  
155.420. QHP issuers must also abide by all other State laws that may 
provide an individual with an enrollment period outside of those 
described in Sec.  155.410 and Sec.  155.420.
    For the initial, annual open, and special enrollment periods, we 
propose to require QHP issuers to adhere to the effective dates of 
coverage established in Sec.  155.410(c), Sec.  155.410(f), and Sec.  
155.420. We propose that qualified individuals who make QHP selections 
on or before December 22, 2013 would have a coverage effective date of 
January 1, 2014 and qualified individuals who make a QHP selection 
between the twenty-third and last day of the month for any month 
between December of 2013 and February 2014 would have coverage 
effective the first day of the month immediately following the next 
month.
    In paragraph (b) we propose to require QHP issuers to provide 
enrollees with notice of their effective date of coverage, and such 
notice must correspond with the effective dates established in Sec.  
155.410(c), Sec.  155.410(f) and Sec.  155.420(b) as applicable.
k. Enrollment Process for Qualified Individuals (Sec.  156.265)
    In Sec.  156.265, we propose that QHP issuers must accept and 
process enrollment of qualified individuals enrolling in a QHPs. In 
paragraph (a), we propose that QHP issuers must adhere to the 
Exchange's process for enrollment in QHPs, which includes standards for 
the collection and transmission of enrollment information. As a general 
principle, both the Exchange and the QHP issuer must use a common set 
of enrollment information for an enrollment to be successful.
    We propose in paragraph (b)(1) that QHP issuers use the application 
adopted pursuant to Sec.  155.405 when accepting applications from 
individuals seeking to enroll in a QHP through the Exchange enrollment 
process. We interpret section 1413(b)(1)(A), which requires that the 
Secretary develop and provide to each State a single, streamlined form, 
together with section 1311(c)(1)(F), which states that an issuer shall 
use a

[[Page 41902]]

uniform enrollment form for qualified individuals and employers to 
enroll in QHPs through the Exchange, to require that one single 
streamlined application developed by HHS with recommendations from the 
NAIC be used for enrollment in QHPs.
    In paragraph (b)(2), we propose that after collecting the uniform 
enrollment information from an applicant, the QHP issuer must send the 
information to the Exchange, in accordance with the standards 
established in Sec.  155.260 and, as applicable, Sec.  155.270. We 
clarify that the term ``applicant'' is used here as defined in Sec.  
155.20. In paragraph (b)(3), we permit the QHP issuer to enroll the 
individual in a QHP only after it has received confirmation from the 
Exchange that the eligibility determination is complete and the 
applicant is a qualified individual.
    We propose in paragraph (c) that QHP issuers receive enrollment 
information electronically from the Exchange in a format and manner 
that is consistent with the standards established pursuant to Sec.  
155.260 and in Sec.  155.270. We seek comment on the frequency with 
which plans should receive electronic enrollment information.
    In paragraph (d), we propose that QHP issuers abide by the premium 
payment process established by the Exchange and described in Sec.  
155.240.
    In paragraph (e), we propose to require QHP issuers provide 
enrollees in the Exchange with an enrollment packet. We plan to issue 
standards for the content of the enrollment information package, which 
may include an enrollment card, information on how to access care, the 
summary of benefit and coverage document, and information on how to 
access the provider directory and drug formulary and submit a request 
for a hard copy. We solicit comment on the appropriateness of these 
documents and any other documents or information that should be 
included in an enrollment information package.
    In paragraph (f), we propose to require QHP issuers provide the 
summary of benefits and coverage document to qualified individuals, 
similar to the requirement in section 2715 of the PHS Act. We note that 
all health insurance issuers must provide such document on several 
occasions to potential or current enrollees as required under section 
2715 of the PHS Act, for which HHS, the Department of Labor and the 
Treasury will issue implement regulations in the near future; this 
requirement is consistent with that PHS Act provision.
    In paragraph (g), we propose that QHP issuers reconcile enrollment 
files with the Exchange no less than once a month, consistent with the 
proposed standard in Sec.  155.400(d). In paragraph (h), we propose 
that QHP issuers acknowledge the receipt of enrollment information in 
accordance with Exchange standards established in Sec.  155.400(b)(2). 
These provisions will protect consumers from potential gaps in coverage 
that might occur due to errors in communication.
l. Termination of Coverage for Qualified Individuals (Sec.  156.270)
    A key function of an Exchange, described in Sec.  155.430, will be 
to verify a QHP issuer's standard operating procedures for the 
termination of coverage for enrollees enrolled in a QHP through the 
Exchange. In Sec.  156.270, we propose standards for QHP issuers 
regarding the termination of coverage of enrollees enrolled in QHPs 
through the Exchange. We propose in paragraph (a) that a QHP issuer may 
only terminate coverage as permitted by the Exchange in accordance with 
Sec.  155.430(b), which includes non-payment of premium, fraud and 
abuse, and relocation outside of the service area, among other 
situations.
    In paragraph (b), we propose that QHP issuers must provide a notice 
of termination of coverage to the enrollee and the Exchange that is 
consistent with the standards for effective dates in Sec.  155.430(d). 
We plan to issue standards for the termination of coverage notice which 
may include content such as reason for termination and termination 
effective date. We solicit comment on other information that should be 
included in the termination notice.
    In paragraph (c), we propose that QHP issuers develop a uniform 
policy as permitted by the Exchange for the termination of coverage due 
to non-payment of premium in accordance with Sec.  155.430(b)(2)(iii). 
Section 1412(c)(2)(B)(iv)(II) of the Affordable Care Act requires QHP 
issuers to provide enrollees receiving advance payments of the premium 
tax credit with a three-month grace period for non-payment of premium 
prior to coverage termination, which we propose to codify in paragraph 
(d). This standard applies only to those enrollees receiving advance 
payments of the premium tax credit. There is no Federal standard 
requiring QHP issuers to extend this grace period to enrollees who are 
not receiving advance payments of the premium tax credit, although the 
Exchange could choose to require QHP issuers to provide all enrollees 
with such a grace period, regardless of advance payment status. 
However, QHP issuers must apply non-payment of premium policies, 
irrespective of Exchange standards, uniformly to all enrollees in 
similar circumstances.
    In paragraph (d), we propose standards for the application of the 
three-month grace period for enrollees receiving advance payments of 
the premium tax credit. We interpret that the three-month grace period 
only applies to enrollees who have paid at least one month's worth of 
premiums to establish coverage to ensure that this period applies only 
when there is a lapse in an enrollee's payment.
    During the three-month grace period, we propose that the QHP issuer 
continue to pay all appropriate claims submitted on behalf of the 
enrollee. This standard ensures that providers will be reimbursed for 
care provided to such enrollees during the grace period. In addition, 
in paragraph (d)(2), we specify how payments received during the grace 
period would be applied. If an eligible enrollee is more than one month 
behind on payments, any payment paid to the QHP issuer will be applied 
to amounts associated with the first billing cycle in which the 
enrollee was delinquent. The grace period will reset only when the 
individual has fully paid all outstanding premiums. In paragraph 
(d)(3), we propose that, during the grace period, the issuer would 
continue to receive a portion of the premium payment from the advance 
payments of the premium tax credit from the Department of the Treasury.
    In paragraph (e), we propose QHP issuers to provide notice to all 
enrollees who are delinquent on premium payments. We plan to issue 
standards for content and timing of the notice. We seek comment on the 
potential required elements of such a notice, such as the total amount 
of delinquent payment, possible date of coverage termination and 
payment options, and the timing and frequency with which such a notice 
should be provided to enrollees, such as bi-weekly beginning with the 
first missed payment or more frequently.
    In paragraph (f), we propose that if an enrollee receiving advance 
payments of premium tax credit exhausts the grace period, as provided 
in paragraph (d), without submitting any premium payment, the QHP 
issuer may terminate coverage effective at the completion of the three-
month period. This termination must be preceded by the appropriate 
notice as referenced in paragraph (e).
    In paragraph (g), we propose to require QHP issuers to maintain 
records of termination of coverage in accordance with Exchange 
standards as established in Sec.  155.430(c). In paragraph (h), we 
propose that QHP issuers abide by the

[[Page 41903]]

effective dates for termination of coverage as described in Sec.  
155.430(d).
m. Accreditation of QHP Issuers (Sec.  156.275)
    In Sec.  156.275, we describe the accreditation standards for QHP 
issuers. In paragraph (a)(1), we propose to codify the statutory 
requirement that a QHP issuer be accredited on the basis of local 
performance in each of the nine categories listed under section 
1311(c)(1)(D)(i) of the Affordable Care Act. We clarify that we 
interpret ``local performance'' to mean the performance of the QHP 
issuer in the State in which it is licensed. We note that, although 
Section 1311(c)(1)(D)(i) of the Affordable Care Act requires a health 
plan to be accredited in order to be certified as a QHP, we interpret 
this to mean that QHP issuers must be accredited, since accrediting 
entities accredit issuers, not plans.
    We also further specify that a QHP issuer must be accredited by an 
entity recognized by HHS. We intend to provide the standards by which 
HHS will recognize accrediting entities in future rulemaking. Section 
1311(c)(1)(D)(i) of the Affordable Care Act requires that QHP issuers 
be accredited by entities recognized by the Secretary with 
``transparent and rigorous methodological and scoring criteria.'' We 
seek comment on the standards by which HHS should recognize accrediting 
bodies. We may model this process in part on a similar process used by 
CMS to identify accrediting organizations for Medicare Advantage plans; 
this process can be found at 42 CFR 422.157-422.158. We anticipate 
addressing this issue and identifying recognized accrediting entities 
as early as possible to give health insurance issuers seeking to 
participate in the Exchange the time necessary to seek accreditation 
from appropriate accrediting entities.
    In paragraph (a)(2), we propose to require a QHP issuer to 
authorize the accrediting entity to release certain materials related 
to the QHP issuer's accreditation (e.g., a copy of its most recent 
accreditation survey) to the Exchange and to HHS.
    In paragraph (b), we propose to codify the requirement that a QHP 
issuer must obtain its accreditation within a time period established 
by the Exchange under Sec.  155.1045. Allowing these issuers extra time 
to meet the standards proposed in this section may encourage a wider 
variety of health insurance issuers to seek to offer QHPs through the 
Exchange.
n. Segregation of Funds for Abortion Services (Sec.  156.280)
    Federal funds cannot be used for abortion services (except in the 
cases of rape or incest, or when the life of the woman would be 
endangered). The Affordable Care Act is fully consistent with this 
policy and includes additional provisions to enforce it. Section 
156.280 of this proposed rule codifies section 1303 of the Affordable 
Care Act. This codification includes the non-discrimination clause for 
providers and facilities, a voluntary choice clause for issuers with 
respect to abortion services, the standards for the segregation of 
funds for QHP issuers that elect to cover abortion services for which 
public funding is prohibited, and the associated communication 
requirements related to such services. In addition, the Office of 
Management and Budget and HHS jointly issued ``Pre-Regulatory Model 
Guidelines Under Section 1303 of the Affordable Care Act'' on September 
20, 2010.\10\ This pre-regulatory guidance furnishes potential 
standards to meet the segregation requirements of the Affordable Care 
Act. We are soliciting comment on the model guidelines; we intend that 
the model guidelines may serve as the basis for the final rule in 
connection with the provisions included in section 1303 of the 
Affordable Care Act.
---------------------------------------------------------------------------

    \10\ OMB and HHS Pre-Regulatory Guidance: http://www.whitehouse.gov/sites/default/files/omb/assets/financial_pdf/segregation_2010-09-20.pdf.
---------------------------------------------------------------------------

    We note that, to maintain consistency with the definitions and 
terminology used in this part, we have substituted the term ``QHP'' in 
the regulation where ``plan'' is used in the statute and ``QHP issuer'' 
in the regulation where ``issuer of a qualified health plan'' is used 
in the statute.
o. Additional Standards Specific to the SHOP (Sec.  156.285)
    In Sec.  156.285, we establish requirements for QHP issuers as a 
condition of participating in the SHOP. In general, QHP issuers must 
meet the same requirements for the SHOP as the Exchange, along with the 
additional requirements prescribed in this section.
    In paragraph (a), we propose rating and premium payment 
requirements for QHP issuers in the SHOP. In paragraph (a)(1), we 
specify that the QHP issuer must accept payment of premiums from the 
SHOP in accordance with Sec.  155.705(b)(4). We note that this proposed 
requirement reduces complexity by ensuring the issuer receives all 
payments from a single source. In paragraph (a)(2), we propose that QHP 
issuers abide by the rate setting timeline established by the SHOP in 
Sec.  155.705(b)(5). Since the SHOP allows qualified employers to enter 
the SHOP on a rolling basis, QHP issuers may establish new rates on a 
quarterly or monthly basis in accordance with SHOP standards. In 
paragraph (a)(3) we propose that QHP issuers charge the same contract 
rate for a plan year.
    In paragraph (b), we propose requirements for QHP issuers 
consistent with SHOP enrollment periods. QHP issuers must accept and 
enroll applicants during the rolling initial enrollment period, the 
qualified employer's annual employee open enrollment period, and 
special enrollment periods for a SHOP as established in Sec.  155.725 
and in Sec.  155.420 with the exception of (d)(3) and (d)(6). In 
addition to the enrollment periods, we propose that QHP issuers abide 
by the effective dates of coverage established in Sec.  155.410(c). We 
are considering whether to require QHPs in the SHOP to allow employers 
to offer dependent coverage. We solicit comment on this potential 
requirement.
    In paragraph (c), we propose QHP issuers abide by the SHOP 
enrollment process requirements and timeline, established pursuant to 
Sec.  155.720(b). In paragraph (c)(2), we propose that QHP issuers 
accept electronic transmission of enrollment information frequently 
from the SHOP in accordance with the requirements pursuant to Sec.  
155.260 and Sec.  155.270. In paragraph (c)(3), we propose that QHP 
issuers provide all new enrollees with the enrollment information 
package as described in Sec.  156.265(e). In paragraph (c)(4), we 
proposed to require QHP issuers to provide qualified employers and 
employees with the summary of cost and coverage document in accordance 
with the standards described in Sec.  156.265(f).
    In paragraph (c)(5), we propose QHP issuers reconcile enrollment 
files with the SHOP at least monthly. In paragraph (c)(6), we propose 
that the QHP issuers abide by the SHOP standards for acknowledgement of 
the receipt of enrollment information. In paragraph (c)(7), we propose 
that the QHP issuers must issue qualified employees a policy that 
aligns with the qualified employer's plan year and contract established 
in paragraph (a)(3). For example, if an employee is hired mid-plan 
year, the QHP issuer would issue an abbreviated policy for the duration 
of the employer's plan year so the enrollee will be eligible for an 
annual open enrollment period at the completion of the qualified 
employer's plan year.

[[Page 41904]]

    In paragraph (d)(1), we propose general standards related to 
termination of coverage in the SHOP that are largely similar to the 
standards for the Exchange with respect to their enrollees from the 
individual market. However, in paragraph (d)(1)(ii), we propose to 
require the QHP issuer to provide the qualified employers and employees 
with a notice of termination of coverage of enrollees and QHP non-
renewal, as described in Sec.  156.270(a) and Sec.  156.290(b). This 
will ensure that the qualified employer is aware of the changes in 
coverage for its employees and the availability of coverage in the 
SHOP.
    In paragraph (d)(2), we propose that a QHP issuer terminate all 
enrolled qualified employees of the withdrawing employer if the 
employer chooses to stop participating in the SHOP since the enrollee 
will no longer be eligible for SHOP coverage.
p. Non-Renewal and Decertification of QHPs (Sec.  156.290)
    In Sec.  156.290(a), we propose requirements on QHP issuers that 
elect to not seek recertification with the Exchange. In paragraph 
(a)(1), the QHP issuer must notify the Exchange of its decision prior 
to the beginning of the recertification process adopted by the Exchange 
pursuant to Sec.  155.1075. This notification will allow time for the 
Exchange to determine if it is in the best interest of the qualified 
individuals and employers to begin modifying the certification process 
to increase the number of QHPs offered in the Exchange. In paragraph 
(a)(2), we propose that QHP issuers must continue covering benefits for 
each enrollee until the completion of the benefit year or plan year for 
the SHOP. It is critical that enrollees' coverage remain unaffected 
during the benefit or plan year due to an issuer's decision to withdraw 
from the Exchange.
    In paragraph (a)(3), we propose that a QHP issuer must continue 
providing the Exchange with reporting information for the benefit or 
plan year even after withdrawing its QHP from the Exchange. We 
recognize that a time lag often exists in the collection of data and 
include this requirement to ensure the Exchange is able to compile a 
complete set of data records for the QHP.
    In paragraph (a)(4), we propose that a QHP issuer provide notice of 
the non-renewal to enrollees of the QHP, as described in paragraph (b) 
of this section. In paragraph (a)(5), we propose that a QHP issuer must 
terminate coverage for enrollees in accordance with the applicable 
requirements in Sec.  156.270.
    In paragraph (b), we propose to require QHP issuers that elect not 
to seek recertification to provide a written notice to each enrollee. 
HHS will issue future guidance on the timing and content of the notice. 
In developing this notice, we may adopt some of the concepts from the 
Medicare Advantage non-renewal notice, in which the issuer must provide 
notice at least 90 days prior to the effective date of non-renewal and 
include information on the enrollee transition process and alternatives 
for other coverage through the Exchange. We solicit comment on the 
potential content of the non-renewal notice and any other information 
we should consider including.
    In paragraph (c), we propose that if an Exchange decertifies a QHP, 
the QHP issuer must terminate coverage for the QHP enrollees only after 
the Exchange has notified the QHP's enrollees as described in Sec.  
155.1080 and enrollees have had the opportunity to enroll in other 
coverage. We seek comment on the extent to which enrollees should 
continue to receive coverage from a decertified plan, even if it is for 
only a short period of time.
q. Prescription Drug Distribution and Cost Reporting (Sec.  156.295)
    Section 6005 of the Affordable Care Act added section 1150A to the 
Act, which requires a QHP issuer to provide to HHS information on the 
distribution of prescription drugs, pharmacy benefit management 
activities, the collection of rebates and other monies in conducting 
these activities, and costs incurred to provide those drugs. We propose 
to codify the requirements contained in section 6005 here in Sec.  
156.295.
    In paragraph (a), we propose to codify the elements specified in 
section 1150A(b) of the Act that a QHP issuer must report to HHS in a 
form and manner to be determined by HHS. Specifically, we propose that 
the QHP issuer must provide the following information: (1) The 
percentage of all prescriptions that were provided under the contract 
through retail pharmacies compared to mail order pharmacies, and the 
percentage of prescriptions for which a generic drug was available and 
dispensed compared to all drugs dispensed, broken down by pharmacy 
type, that is paid by the QHP issuer or pharmacy benefit manager (PBM) 
under the contract; (2) the aggregate amount, and the type of rebates, 
discounts, or price concessions, with certain exceptions, that the PBM 
negotiates that are attributable to patient utilization under the plan, 
and the aggregate amount of the rebates, discounts, or price 
concessions that are passed through to the plan sponsor, and the total 
number of prescriptions that were dispensed; and (3) the aggregate 
amount of the difference between the amount the QHP issuer pays the PBM 
and the amounts that the PBM pays retail pharmacies, and mail order 
pharmacies, and the total number of prescriptions that were dispensed. 
We anticipate issuing guidance on these reporting requirements. We seek 
comment on how a QHP issuer whose contracted PBM operates its own mail 
order pharmacy can meaningfully report on the aggregate difference 
between what the QHP issuer pays the PBM and the PBM pays the mail 
order pharmacy.
    We clarify that, for the purposes of this section, we interpret 
``generic drug'' to have meaning given to the term in 42 CFR 423.4, 
which is used in the Medicare Prescription Drug Benefit Program. We 
seek comment on potential definitions for ``rebates,'' ``discounts'' 
and ``price concessions''; we are considering using the term ``direct 
and indirect remuneration,'' a term used in regulations related to the 
Medicare Prescription Drug Benefit Program, to encompass these various 
arrangements.
    The statute refers to PBMs, entities with which health insurance 
issuers often contract to perform activities such as prescription drug 
claims processing, negotiation with prescription drug manufacturers, 
the development and maintenance of pharmacy networks, or the 
distribution of prescription drugs on behalf of the health insurance 
issuer. We interpret the statutory references to PBMs to include any 
entity that performs such activities on behalf of a QHP issuer; we seek 
comment on this interpretation and whether we should define PBMs as 
such in this section. We seek comment on how to minimize the burden of 
these reporting requirements.
    In paragraph (c) we propose to codify the confidentiality 
requirements to ensure that this information is not disclosed by either 
HHS or the QHP issuer except under specific circumstances described in 
the Affordable Care Act. The exceptions allow HHS to de-identify and 
aggregate prescription drug pricing, rebate and distribution 
information to report it to the Comptroller General or the 
Congressional Budget Office.
    Finally, we propose under paragraph (c) to codify the penalties for 
noncompliance. Specifically, a QHP issuer that does not provide HHS the 
information required under paragraph (b) or knowingly provides false 
information would be subject to the provisions of subsection (b)(3)(C) 
of section 1927 of the Act. Under this subsection, if the information 
is not

[[Page 41905]]

provided at all, the QHP issuer would be subject to a fine that would 
increase $10,000 each day that the information is not provided. If the 
information is not reported within 90 days of the set deadline, the QHP 
issuer would lose its contract with the Exchange. If the QHP issuer 
provides false information, it would be subject to a fine not to exceed 
$100,000 for each piece of false information provided.

III. Collection of Information Requirements

    Under the Paperwork Reduction Act of 1995, we are required to 
provide 60-day notice in the Federal Register and solicit public 
comment before a collection of information requirement is submitted to 
the Office of Management and Budget (OMB) for review and approval. In 
order to fairly evaluate whether an information collection should be 
approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act 
of 1995 requires that we solicit comment on the following issues:
     The need for the information collection and its usefulness 
in carrying out the proper functions of our agency.
     The accuracy of our estimate of the information collection 
burden.
     The quality, utility, and clarity of the information to be 
collected.
     Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.
    Below is a partial summary of the proposed information collection 
requirements outlined in this regulation. Any information collection 
requirements in this regulation which are not outlined below will be 
subject to a separate notice and comment process under the Paperwork 
Reduction Act. We are soliciting public comment on each of these issues 
for the following sections of this document that contain information 
collection requirements (ICRs):

A. ICRs Regarding General Standards Related to the Establishment of an 
Exchange (Sec.  155.105 and Sec.  155.110)

    Within Part 155, subpart B of this proposed rule, we describe 
reporting requirements for a State to receive approval of its Exchange 
Plan by January 1, 2013. For purposes of presenting an estimate of 
paperwork burden in Part 155, we reflect full participation of all 
States and the District of Columbia in operating an Exchange. However, 
we recognize that not all States will elect to operate their own 
Exchanges, so these estimates should be considered an upper bound of 
burden estimates. These estimates may be adjusted proportionally in the 
final rule based upon additional information as States progress in 
their Exchange development processes.
    As discussed in Sec.  155.105, States are required to submit an 
Exchange plan to HHS. As noted above, we plan to issue a template 
outlining the required components of the Exchange Plan, subject to the 
notice and comment process under the Paperwork Reduction Act. We 
estimate that it will take a State approximately 160 hours 
(approximately one month) for the time and effort needed to develop the 
plan and submit to HHS. We estimate minimal burden requirements for 
developing the Exchange plan as States will be gathering most of the 
information needed for the plan through the planning grants provided by 
HHS. States are also required to make the governance principles 
available to the public. We estimate that it will take States 40 hours 
for the time and effort to develop these principles and disclose this 
information to the public. This estimate is similar to estimates 
provided for reporting requirements for Medicare Part D as described in 
Sec.  423.514.
    We estimate that all 50 States and the District of Columbia will 
establish an Exchange and will be subject to meeting these 
requirements. Again, this estimate should be considered an upper bound, 
and we may revise these estimates in the final rule based upon 
additional information as States progress in their Exchange development 
processes. We estimate that it will take 200 hours for a State to meet 
these provisions. The total burden for all States and the District of 
Columbia is 10,200 hours. For the purposes of this estimate, we assume 
that meeting these requirements will take a health policy analyst 120 
hours (at an average wage rate of $43 an hour) and a senior manager 80 
hours (at $77 an hour). The wage rate estimates include a 35% fringe 
benefit estimate for state employees, which is based on the March 2011 
Employer Costs for Employee Compensation report by U.S Bureau of Labor 
Statistics. This fringe benefit estimate will be used throughout this 
section for all presumed state personnel. The estimated cost burden for 
each State is $11,320 with a total estimated burden of $577,320.
    As described in Sec.  155.105, States must also notify CMS of any 
changes to its Exchange proposal. We estimate that 5 States submit 
changes and that it will take each state 12 hours to develop the 
notification and submit to CMS for a total burden of 60 hours. We 
presume that it will take a health policy analyst 12 hours (at $43 an 
hour) to meet this requirement. The estimated burden cost per State is 
$516 for a total cost burden estimate of $2,580 for five States.

B. ICRs Regarding General Functions of an Exchange (Sec.  155.205)

    In Part 155, subpart C we describe the information and reporting 
requirements that Exchanges are required to perform. According to 
provisions spelled out in this subpart, Exchanges are required to 
collect and populate the Web site they develop with information on 
qualified health plans, premium and cost-sharing information, benefits 
and coverage of qualified health plans, levels of plan coverage, 
medical loss ratio information, transparency of coverage, and a 
provider directory.
    The burden estimate related to the Web site reflects the time and 
effort needed to collect the information described above and disclose 
this information on a Web site; however, we understand that overall 
administrative burden and costs will be higher for Web site development 
and testing. These costs are reflected in the impact analysis for 
Exchanges. Assuming that all States and the District of Columbia 
establish Exchanges, an upper bound estimate, we estimate that it will 
take 320 hours (approximately 2 months) for each State to meet this 
requirement for a total estimate of 16,320 hours. We presume that it 
will take a health policy analyst 40 hours (at $43 an hour), a 
financial analyst 90 hours (at $62 an hour), a senior manager 50 hours 
(at $77 an hour), and various network/computer administrators or 
programmers 140 hours (at $54 an hour) to meet the reporting 
requirements for this subpart. We estimate the total cost burden for an 
Exchange to be $18,710 for a total estimated burden of $954,210 for all 
50 States and the District of Columbia.

C. ICRs Regarding Exchange Functions: Enrollment in Qualified Health 
Plans (Sec.  155.400-Sec.  155.430)

    Within Part 155 subpart E of this proposed rule, we describe the 
requirements of Exchanges in the enrollment of qualified individuals 
and disenrollment. As discussed in Sec.  155.400, Exchanges are 
required to maintain records of enrollment annually. We estimate that 
this will take an exchange 52 hours annually to maintain these records. 
This estimate is similar to Medicare Part D, where is was estimated 
that it will take 52 hours on an annual basis for plan sponsors to 
maintain books, records, and documents on accounting procedures and 
practices as described in Sec.  423.505. Estimates related specifically 
to the maintenance of records for enrollment were not provided in 
Medicare Part D.

[[Page 41906]]

    Exchanges are also required to submit enrollment information to HHS 
on a monthly basis, and reconcile enrollment information on at least a 
monthly basis. We estimate that it will take an Exchange 12 hours 
submit this information and 12 hours to reconcile this information on a 
monthly basis. Exchanges are also required submit the number of 
coverage terminations to HHS. We estimated that it will take 12 hours 
for an Exchange to submit this information. These estimates are similar 
to estimates provided in Medicare Part D rule for data submission. For 
example, Medicare Part D estimated that it would take plan sponsors 
approximately 10 hours annually for plan sponsors to submit data on 
aggregated negotiated drug pricing from pharmaceutical companies 
described in Sec.  423.104. We provide a slightly higher estimate for 
the submission of data due to the complexity of the Exchange program.
    Exchanges are also required to provide a notice of eligibility to 
the applicant and a notice of the annual open enrollment period to the 
applicant. Estimates related to notices in this subpart and throughout 
the proposed rule for Exchanges take into account the time and effort 
needed to develop the notice and make it an automated process to be 
sent out when appropriate. As such, we estimate that it will take 
approximately 16 hours annually for the time and effort to develop and 
submit a notice when appropriate. Again, this estimate is slightly 
higher than the 8 hours estimated for notices discussed in the Medicare 
Part D rule and reflects the overall complexity of the Exchange 
program.
    States are required to maintain records of termination coverage. 
Again, we estimate that this will take an exchange 52 hours annually to 
maintain these records. We estimate that all 50 States and the District 
of Columbia will establish an Exchange subject to these reporting 
requirements. This estimate is an upper bound of burden as a result of 
the reporting requirements in this subpart; we will revise these 
estimates in the final rule as States progress in their Exchange 
development. We estimate that it will take 436 hours for an Exchange to 
meet these reporting requirements for a total of 22,236 hours. We 
presume that it will take an operations analyst 224 hours (at $55 an 
hour), a health policy analyst 119 hours (at $43 an hour), and a senior 
manager 93 hours (at $77 an hour) to meet the reporting requirements 
for a burden cost estimate of $24,598 for an Exchange and total 
estimated burden costs of $1,254,498 for all 50 States and the District 
of Columbia.

D. ICRs Regarding Exchange Functions: Small Business Health Options 
Program (SHOP) (Sec.  155.715-Sec.  155.725)

    Part 155, subpart H of this proposed rule describes reporting 
requirements for SHOP. As described in Sec.  155.715 through Sec.  
155.725, the SHOP is required to provide the following notices:
     Notice to employer of reason to doubt information 
submitted;
     Notice to employer of non-resolution for reason to doubt;
     Notice to individual of inability to substantiate employee 
status;
     Notice of employer eligibility;
     Notice of employee eligibility;
     Notice of employer withdrawal from SHOP;
     Notification of effective date to employees;
     Notice of employee termination of coverage to employer;
     Notice of annual employer election period; and
     Notice to employee of open enrollment period.
    As discussed previously, we estimate that it will take 16 hours 
annually for a SHOP to provide each notice as described in this 
subpart. The SHOP is also required to maintain records for SHOP 
enrollment and reconcile SHOP enrollment files on a monthly basis. 
Again, we estimate that this will take 52 hours annually for a SHOP to 
maintain SHOP enrollment records. This estimate is similar to Medicare 
Part D, where it was estimated that it will take 52 hours on an annual 
basis for plan sponsors to maintain books, records, and documents on 
accounting procedures and practices as described in Sec.  423.505. 
Estimates related specifically to the maintenance of records for 
enrollment were not provided in Medicare Part D. We also estimate that 
it will take 12 hours for a SHOP to reconcile this information on a 
monthly basis.
    We estimate that that all 50 States and the District of Columbia 
will establish a SHOP subject to meeting these reporting requirements. 
This estimate is an upper bound of burden as a result of the reporting 
requirements in this subpart; we will revise these estimates in the 
final rule as States progress in their Exchange development. We 
estimate that it will take each SHOP 356 hours to meet these 
requirements for a total of 18,156 hours. We presume that it will a 
health policy analyst 132 hours (at $43 an hour), a senior manager 80 
hours (at $77 an hour), and an operations analyst 144 hours (at $55 an 
hour) to meet these reporting requirements for an estimated cost burden 
of $19,756 for each Exchange. The total estimated cost burden is 
$1,007,556 for all 50 States and the District of Columbia.

E. ICRs Regarding Exchange Functions: Certification of Qualified Health 
Plans (Sec.  155.1020, Sec.  155.1040, and Sec.  155.1080)

    Within Part 155, subpart K, we describe data collection and 
reporting requirements for Exchanges related to the certification of 
qualified health plans. As described in Sec.  155.1020, Sec.  155.1040, 
and Sec.  155.1080, Exchanges are required to collect qualified health 
plan issuer reports on covered benefits, rates, and cost-sharing 
requirements. We estimate that it will take 12 hours for an Exchange to 
collect this information from issuers annually. This estimate is 
similar to estimates for data collection described in the Medicare Part 
D rule. Exchanges are also required to collect information on coverage 
transparency from issuers. Again, we estimate that it will take 12 
hours for an Exchange to collect this information. Finally, Exchanges 
are required to provide a notice of the decertification, if applicable, 
of a QHP to the QHP issuer, Exchange enrollees, HHS, and the State 
insurance department. This burden was estimated at 16 hours for an 
Exchange to provide notice.
    For this burden exercise, we estimate that all 50 States and the 
District of Columbia will establish an Exchange subject to these 
reporting requirements, an upper bound estimate. We further estimate 
that it will take 40 hours for an Exchange to meet the provisions 
discussed, with a total burden estimate of 2,040 hours for all 50 
States and the District of Columbia. We presume that it will take an 
operations analyst 32 hours (at $55 an hour) and a senior manager 8 
hours (at $77 an hour) to carry out the requirements in this subpart. 
HHS estimates that the cost burden for an Exchange to meet the 
reporting requirements in subpart K to be $2,376 with a total cost 
burden estimate of $121,176 for all 50 States and the District of 
Columbia.

F. ICRs Regarding Qualified Health Plan Minimum Certification Standards 
(Sec.  156.210-Sec.  156.290)

    Part 156, subpart C describes reporting requirements for issuers. 
Each qualified health plan issuer is required to report annually to the 
Exchange information on benefits and rates, justification of rate 
increases, coverage transparency, and a summary of cost and coverage 
documents, including notice of coverage of abortion provided by a QHP 
plan. Issuers are also required to make available enrollee cost sharing 
information, provide information to applicants and enrollees, provide 
enrollment packages, collect enrollment information and submit this 
information

[[Page 41907]]

to the Exchange, reconcile enrollment files on a monthly basis, and 
maintain records related to termination of coverage. There are also 
several notices that issuers must provide to enrollees related to the 
effective date of coverage, non-renewal of coverage, termination of 
coverage, and payment delinquency; and to the Exchange for non-renewal 
of recertification.
    As described in Sec.  156.285, for the SHOP program, issuers must 
provide an enrollment package to SHOP enrollees and a summary of 
benefits and coverage to employers and employees; reconcile enrollment 
files for SHOP on a monthly basis; and provide notice to SHOP enrollees 
of termination of coverage. As discussed previously, estimates related 
the collection and submission of data; maintenance of records, notices 
are similar to estimates provided in the Medicare Part D rule.
    Qualified health plan issuers must also submit to the Exchange and 
HHS on an annual basis information on drug distribution and costs. We 
estimate that it will take an issuer 24 hours to submit this data. This 
estimate is a slight increase from the Medicare Advantage estimate of 
15 hours for submitting data for drug claims as described for Sec.  
423.329 for Medicare Part D and reflects the complexity of reporting 
this data for the Exchange program.
    For the purpose of this estimate and whenever we refer to burden 
requirements for issuers, we utilize estimates of the number of issuers 
provided by the Healthcare.gov Web site as this site provides the best 
estimate of possible issuers at this time. Based on preliminary 
findings there are approximately 1827 issuers in the individual and 
small group markets. While we recognize that not all issuers will offer 
QHPs, we use the estimate of 1827 issuers as the upper bound of 
participation and burden.
    We estimate that it will take an issuer 588 hours to meet these 
reporting requirements for a total burden estimate of 1,074,276 hours 
for all 1827 issuers. We presume that it will take at least two health 
policy analysts 80 hours (at an average private industry rate of $50 an 
hour), a financial analyst 124 hours (at $57 an hour), an operations 
analyst 352 hours (at $51 an hour), and a senior manager 32 hours (at 
$72 an hour) to meet these reporting requirements. These wage estimates 
include a 30% fringe benefit rate for the private sector as reported by 
the U.S. Bureau of Labor Statistics in the March 2011 Employer Costs 
for Employee Compensation report. The estimated burden cost for each 
issuer is $31,324. The total estimated burden cost for all issuers is 
$57.2 million.

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                              Burden per
           Regulation section(s)              Respondents      Responses       response      Total annual    Labor cost of       Total labor cost of
                                                                                (hours)     burden (hours)   reporting ($)          reporting ($)
--------------------------------------------------------------------------------------------------------------------------------------------------------
155.105-155.110...........................              51               1             200          10,200          11,320  577,320
155.105...................................               5               1              12              60             516  2,580
155.205...................................              51               1             320          16,320          18,710  954,210
155.400-155.430...........................              51               1             436          22,236          24,598  1,254,498
155.715-155.725...........................              51               1             356          18,156          19,756  1,007,556
                                                                Exception:
                                                               Monthly for
                                                                      SHOP
                                                                enrollment
                                                            reconciliation
155.1020-155.1080.........................              51               1              40           2,040           2,376  121,176
156.210-156.290...........................            1827               1             588       1,074,276          31,324  57.2 million
                                                                Exception:
                                                               monthly for
                                                            enrollment and
                                                                      SHOP
                                                                enrollment
                                                            reconciliation
--------------------------------------------------------------------------------------------------------------------------------------------------------
Salaries and fringe benefit estimates were taken from the Bureau of Labor Statistics Web site: (http://www.bls.gov/oco/ooh_index.htm).

    If you comment on these information collection and recordkeeping 
requirements, please do either of the following:
    1. Submit your comments electronically as specified in the 
ADDRESSES section of this proposed rule; or
    2. Submit your comments to the Office of Information and Regulatory 
Affairs, Office of Management and Budget,
    Attention: CMS Desk Officer, [CMS-9989-P],
    Fax: (202) 395-5806; or
    E-mail: OIRA_submission@omb.eop.gov.

IV. Summary of Preliminary Regulatory Impact Analysis

    The summary analysis of benefits and costs included in this 
proposed rule is drawn from the detailed Preliminary Regulatory Impact 
Analysis, available at http://cciio.cms.gov under ``Regulations and 
Guidance.'' That preliminary impact analysis evaluates the impacts of 
this proposed rule and a second proposed rule, ``Patient Protection and 
Affordable Care Act; Standards Related to Reinsurance, Risk Corridors 
and Risk Adjustment.'' The second proposed rule is published elsewhere 
in this Federal Register. The following summary focuses on the benefits 
and costs of this proposed rule.

A. Introduction

    HHS has examined the impacts of the proposed rule under Executive 
Orders 12866 and 13563, the Regulatory Flexibility Act (5 U.S.C. 601-
612), and the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4). 
Executive Orders 13563 and 12866 direct agencies to assess all costs 
and benefits (both quantitative and qualitative) of available 
regulatory alternatives and, if regulation is necessary, to select 
regulatory approaches that maximize net benefits (including potential 
economic, environmental, public health and safety effects, distributive 
impacts, and equity). Executive Order 13563 emphasizes the importance 
of quantifying both costs and benefits, of

[[Page 41908]]

reducing costs, of harmonizing rules, and of promoting flexibility. 
This rule has been designated an ``economically'' significant rule, 
under section 3(f)(1) of Executive Order 12866. Accordingly, the rule 
has been reviewed by the Office of Management and Budget.
    The Regulatory Flexibility Act requires agencies to analyze 
regulatory options that would minimize any significant impact of a rule 
on small entities. Using the Small Business Administration (SBA) 
definitions of small entities for agents and brokers, providers, and 
employers, HHS tentatively concludes that a significant number of firms 
affected by this proposed rule are not small businesses.
    Section 202(a) of the Unfunded Mandates Reform Act of 1995 requires 
that agencies prepare a written statement, which includes an assessment 
of anticipated costs and benefits, before proposing ``any rule that 
includes any Federal mandate that may result in the expenditure by 
State, local, and tribal governments, in the aggregate, or by the 
private sector, of $100,000,000 or more (adjusted annually for 
inflation) in any one year.'' The current threshold after adjustment 
for inflation is approximately $136 million, using the most current 
(2011) Implicit Price Deflator for the Gross Domestic Product. HHS does 
not expect this proposed rule to result in one-year expenditures that 
would meet or exceed this amount.

B. Need for This Regulation

    This proposed rule would implement standards for States related to 
the Establishment of Exchanges and Qualified Health Plans consistent 
with the Affordable Care Act. The Exchanges will provide competitive 
marketplaces for individuals and small employers to directly compare 
available private health insurance options on the basis of price, 
quality, and other factors. The Exchanges, which will become 
operational by January 1, 2014, will help enhance competition in the 
health insurance market, improve choice of affordable health insurance, 
and give small business the same purchasing power as large businesses.

C. Summary of Costs and Benefits of the Proposed Requirements

    Two proposed regulations are being published simultaneously to 
implement components of the Exchange and health insurance premium 
stabilization policies in the Affordable Care Act. The detailed PRIA, 
available at http://cciio.cms.gov under ``Regulations and Guidance,'' 
evaluates the impacts of both proposed rules, while this summary 
focuses on the benefits and costs of the proposed requirements in this 
Exchange NPRM.
    Benefits in response to the proposed regulation:
    Research has consistently noted that health insurance coverage 
improves health outcomes. For example, individuals without health 
insurance are significantly more likely to be at risk of mortality.\11\ 
Secondly, lack of health insurance significantly increases financial 
risk for individuals. Thirdly, increases in health insurance results in 
a decrease in uncompensated care costs. This proposed regulation is 
expected to decrease the level of uninsurance and therefore should 
produce a benefit in the form of improved health outcomes, decreased 
fiscal risk, and decrease in uncompensated care costs. In addition, we 
estimate that for individuals and some employers, risk pooling and 
economies of scale will reduce the administrative cost of health 
insurance, and competition may increase insurers' incentive to lower 
payments to health care providers, reducing premiums and potentially 
national health expenditures.
---------------------------------------------------------------------------

    \11\ Franks, Peter et al. ``Health Insurance and Mortality.'' 
Journal of American Medical Associates. 6(737-741) 1993.
---------------------------------------------------------------------------

    The Exchanges and policies associated with them, according to CBO, 
are expected to reduce premiums for the same benefits compared to prior 
law. It estimated that, in 2016, people purchasing non-group coverage 
through the Exchanges would pay 7 to 10 percent less due to the 
healthier risk pool that results from the coverage expansion. An 
additional 7 to 10 percent in savings would result from gains in 
economies of scale in purchasing insurance and lower administrative 
costs from elimination of underwriting, decreased marketing costs, and 
the Exchanges' simpler system for finding and enrolling individuals in 
health insurance plans.\12\
---------------------------------------------------------------------------

    \12\ Congressional Budget Office, ``Letter to the Honorable Evan 
Bayh: An Analysis of Health Insurance Premiums Under the Patient 
Protection and Affordable Care Act.'' (Washington2009).
---------------------------------------------------------------------------

Costs in Response to the Proposed Regulation
    Meeting the proposed requirements will have costs on Exchanges and 
on issuers of qualified health plans (QHPs). The administrative costs 
of operating an Exchange will almost certainly vary by the number of 
enrollees in the Exchange due to economies of scale, variation in the 
scope of the Exchange's activities, and variation in average premium in 
the Exchange service area. However, we believe major cost components 
for Exchanges will include: IT infrastructure, Navigators, 
notifications, enrollment standards, application process, SHOP, 
certification of QHPs, and quality reporting. The major costs on 
issuers of QHPs will include: Accreditation, network adequacy 
standards, and quality improvement strategy reporting. CBO estimates 
that the administrative costs to QHP issuers would be more than offset 
by savings resulting from lower overhead due to new policies to limit 
benefit variation, prohibit ``riders,'' and end under-writing.
Methods of Analysis
    This preliminary impact analysis references the estimates of the 
CMS Office of the Actuary (OACT) (CMS, April 22, 2010), but primarily 
uses the underlying assumptions and analysis done by the Congressional 
Budget Office (CBO) and the staff of the Joint Committee on Taxation. 
Their modeling effort accounts for all of the interactions among the 
interlocking pieces of the Affordable Care Act including its tax 
policies, and estimates premium effects that are important to assessing 
the benefits of the NPRM. A description of CBO's methods used to 
estimate budget and enrollment impacts is available.\13\ The CBO 
estimates are not significantly different than the comparable 
components produced by OACT. Based on our review, we expect that the 
requirements in these NPRMs will not substantially alter CBO's 
estimates of the budget impact of Exchanges or enrollment. The proposed 
requirements are well within the parameters used in the CBO modeling of 
the Affordable Care Act and do not diverge from assumptions embedded in 
the CBO model. Our review and analysis of the proposed requirements 
indicate that the impacts are within the model's margin of error.
---------------------------------------------------------------------------

    \13\ CBO, ``CBO's Health Insurance Simulation Model: A Technical 
Description.'' (2007, October).
---------------------------------------------------------------------------

Summary of Costs and Benefits
    CBO estimated program payments and receipts for outlays related to 
grants for Exchange startup. States' initial costs to the creation of 
Exchanges will be funded by these grants.

[[Page 41909]]



                Table 1--Estimated Outlays for the Affordable Insurance Exchanges FY 2012-FY 2016
                                            [In billions of dollars]
----------------------------------------------------------------------------------------------------------------
              Year                     2012            2013            2014            2015            2016
----------------------------------------------------------------------------------------------------------------
Grant Authority for Exchange                 0.6             0.8             0.4             0.2             0.0
 Start up.......................
----------------------------------------------------------------------------------------------------------------
Source: CBO.

Regulatory Options Considered
    In addition to a baseline, HHS has identified two regulatory 
options for this proposed rule as required by Executive Order 12866.
    (1) Have a uniform Standard for Operations of an Exchange.
    Under this alternative HHS would require a single standard for 
State operations of Exchanges. The proposed regulation offers States 
the choice of whether to establish an Exchange, how to structure 
governance of the Exchange, whether to join with other States to form a 
regional Exchange, and how much education and outreach to engage in, 
among other factors. This alternative model would restrict State 
flexibility to some extent, requiring a more uniform standard that 
States must enact in order to achieve approval of an Exchange.
    (2) Uniform Standard for Health Insurance Coverage.
    Under this alternative, there would be a single uniform standard 
for certifying QHPs. QHPs would need to meet a single standard in terms 
of benefit packages, network adequacy, premiums, etc. HHS would set 
these standards in advance of the certification process and QHPs would 
either meet those standards and thereby be certified or would fail to 
meet those standards and therefore would not be available to enrollees.
Summary of Costs for Each Option
    HHS notes that Option 1, which promotes uniformity, could produce a 
benefit of reduced Federal oversight cost; however this option would 
reduce innovation and therefore limit diffusion of successful policies 
and furthermore interfere with Exchange functions and needs. HHS also 
notes that while Option 2 could produce administrative burdens on 
Exchanges, this approach could reduce Exchanges' and QHP issuers' 
ability to innovate. These costs and benefits are discussed more fully 
in the detailed PRIA.

D. Accounting Statement

    For full documentation and discussion of these estimated costs and 
benefits, see the detailed PRIA, available at http://cciio.cms.gov 
under ``Regulations and Guidance.''

----------------------------------------------------------------------------------------------------------------
                                                                            Units discount
            Category               Primary estimate       Year dollar            rate           Period covered
----------------------------------------------------------------------------------------------------------------
            Benefits
----------------------------------------------------------------------------------------------------------------
Annualized Monetized ($millions/ Not estimated......                2011                  7%           2012-2016
 year).
                                 Not estimated......                2011                  3%           2012-2016
----------------------------------------------------------------------------------------------------------------
Qualitative....................      The Exchanges, combined with other actions being taken to implement the
                                    Affordable Care Act, will improve access to health insurance, with numerous
                                    positive effects, including earlier treatment and improved morbidity, fewer
                                   bankruptcies and decreased use of uncompensated care. The Exchange will also
                                  serve as a distribution channel for insurance reducing administrative costs as
                                    a part of premiums and providing comparable information on health plans to
                                                  allow for a more efficient shopping experience.
----------------------------------------------------------------------------------------------------------------
             Costs
----------------------------------------------------------------------------------------------------------------
Annualized Monetized ($millions/ 424................                2011                  7%           2012-2016
 year).
                                 410................                2011                  3%           2012-2016
----------------------------------------------------------------------------------------------------------------
Qualitative....................        These costs include grant outlays to States to establish Exchanges.
----------------------------------------------------------------------------------------------------------------

V. Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) (RFA) 
requires agencies to prepare an initial regulatory flexibility analysis 
to describe the impact of the proposed rule on small entities, unless 
the head of the agency can certify that the rule will not have a 
significant economic impact on a substantial number of small entities. 
The Act 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.'' HHS uses as its measure of significant economic 
impact on a substantial number of small entities a change in revenues 
of more than 3 to 5 percent.
    As discussed above, this proposed rule is necessary to implement 
standards related to the Establishment of Exchanges and Qualified 
Health Plans as authorized by the Affordable Care Act. For purposes of 
the Regulatory Flexibility Analysis, we expect the following types of 
entities to be affected by this proposed rule: (1) QHP issuers; (2) 
agents and brokers; and (3) employers. We believe that health insurers 
and agents and brokers would be classified under the North American 
Industry Classification System (NAICS) Codes 524114 (Direct Health and 
Medical Insurance Carriers) and 524210 (Insurance Agencies and 
Brokers). According to SBA size standards, entities with average annual 
receipts of $7 million or less would be considered small entities for 
both of these NAICS codes. Health issuers could possibly be classified 
in 621491 (HMO Medical Centers) and, if this is the case, the SBA size 
standard would be $10 million or less.
    As discussed in the Web Portal interim final rule (75 FR 24481), 
HHS examined the health insurance industry in depth in the Regulatory 
Impact

[[Page 41910]]

Analysis we prepared for the proposed rule on establishment of the 
Medicare Advantage program (69 FR 46866, August 3, 2004). In that 
analysis we determined that there were few, if any, insurance firms 
underwriting comprehensive health insurance policies (in contrast, for 
example, to travel insurance policies or dental discount policies) that 
fell below the size thresholds for ``small'' business established by 
the SBA (currently $7 million in annual receipts for health insurers, 
based on North American Industry Classification System Code 524114).\1\
---------------------------------------------------------------------------

    \1\ ``Table of Size Standards Matched to North American Industry 
Classification System Codes,'' effective November 5, 2010, U.S. 
Small Business Administration, available at http://www.sba.gov.
---------------------------------------------------------------------------

    Additionally, as discussed in the Medical Loss Ratio interim final 
rule (75 FR 74918), the Department used a data set created from 2009 
National Association of Insurance Commissioners (NAIC) Health and Life 
Blank annual financial statement data to develop an updated estimate of 
the number of small entities that offer comprehensive major medical 
coverage in the individual and group markets. For purposes of that 
analysis, the Department used total Accident and Health (A&H) earned 
premiums as a proxy for annual receipts. The Department estimated that 
there were 28 small entities with less than $7 million in accident and 
health earned premiums offering individual or group comprehensive major 
medical coverage; however, this estimate may overstate the actual 
number of small health insurance issuers offering such coverage, since 
it does not include receipts from these companies' other lines of 
business.
    As discussed earlier in this summary of the PRIA, the Department is 
seeking comments on the potential impacts of the requirements in this 
proposed regulation on issuers' administrative costs. The Department is 
also seeking comments relating to potential impacts on small issuers.
    This rule proposes Exchange standards related to offering the QHPs. 
These standards and the associated certification process will impose 
costs on issuers, but these costs will vary depending on a number of 
factors, including the operating model chosen by the Exchange, their 
current accreditation status, and the variation between the proposed 
standards and current practice. Some QHP issuers will be more prepared 
to meet the standards than others and will incur fewer costs. For 
example, if data reporting functions required for certification already 
exist at the QHP issuer, there would be no additional cost. Exchanges 
also have the flexibility in some cases to set requirements. For 
example, the rule proposes discretion for Exchanges in setting network 
adequacy standards for participating health insurance issuers. The cost 
to the issuer will depend on whether the Exchange determines that 
compliance with relevant State law and licensure requirements is 
sufficient for a QHP issuer to participate in the Exchange or whether 
they decide to set additional standards in accordance with current 
provider market characteristics and consumer needs.
    The cost of participating in an Exchange is an investment for QHP 
issuers, with benefits expected to accrue to QHP issuers. The Exchange 
will function as an important distribution channel for QHPs. QHP 
issuers currently fund their own sales and marketing efforts. As a 
centralized outlet to attract and enroll consumers, the Exchanges will 
supplement and reduce incremental health plan sales and marketing costs 
with their consumer assistance, education and outreach functions.
    We anticipate that the agent and broker industry, which is 
comprised of large brokerage organizations, small groups, and 
independent agents, will play a critical role in enrolling qualified 
individuals in QHPs. We are proposing to codify Section 1312(e) of the 
Affordable Care Act, which gives States the option to permit agents or 
brokers to assist individuals enrolling in QHPs through the Exchange. 
Agents and brokers must meet any condition imposed by the State and, as 
a result, could incur costs. In addition, agents and brokers who become 
Navigators will also agree to comply with associated requirements and 
are likely to incur some costs. Because the States and the Exchanges 
will make these determinations, we cannot provide an estimate of the 
potential number of small entities that will be affected or the costs 
associated with these decisions.
    This rule proposes requirements on employers that choose to 
participate in a SHOP. As discussed above, the SHOP is limited by 
statute to employers with at least one but not more than 100 employees. 
For this reason, we expect that many employers would meet the SBA 
Standard for Small entities. We do not believe that the proposed 
regulation imposes requirements on employers offering health insurance 
through SHOP that are more restrictive than the current requirements on 
employers offering employer sponsored health insurance. For this 
reason, we also believe the processes that we have proposed constitute 
the minimum amount of requirements necessary to implement statutory 
mandates and accomplish our policy goals, and that no appropriate 
regulatory alternatives could be developed to lessen the compliance 
burden. We also expect that for some employers, risk pooling and 
economies of scale will reduce the administrative cost of offering 
coverage through the SHOP and that they will, therefore, benefit from 
participation.
    We request comment on whether the small entities affected by this 
rule have been fully identified. We also request comment and 
information on potential costs for these entities and on any 
alternatives that we should consider.

VI. Unfunded Mandates

    Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) 
requires that agencies assess anticipated costs and benefits and take 
certain other actions before issuing proposed rule (and subsequent 
final rule) that includes any Federal mandate that may result in 
expenditures in any one year by a State, local, or tribal governments, 
in the aggregate, or by the private sector, of $100 million in 1995 
dollars, updated annually for inflation. In 2011, that threshold is 
approximately $136 million. Because States are not required to set up 
an Exchange, and because grants are available for funding of the 
establishment of an Exchange by a State, we anticipate that this 
proposed rule would not impose costs above that $136 million UMRA 
threshold on State, local, or tribal governments.

VII. Federalism

    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
final rule) that imposes substantial direct costs on State and local 
governments, pre-empts State law, or otherwise has Federalism 
implications. Because States have flexibility in designing their 
Exchange, State decisions will ultimately influence both administrative 
expenses and overall premiums. States are not required to certify an 
Exchange. For States electing to create an Exchange, much of the 
initial costs to the creation of Exchanges will be funded by Exchange 
Planning and Establishment Grants. After this time, Exchanges will be 
financially self-sustaining with revenue sources at the discretion of 
the State. Current State Exchanges charge user fees to issuers.
    In the Department's view, while this proposed rule does not impose 
substantial direct requirement costs on State and local governments, 
this

[[Page 41911]]

proposed regulation has Federalism implications due to direct effects 
on the distribution of power and responsibilities among the State and 
Federal governments relating to determining standards relating to 
health insurance coverage (i.e., for QHPs) that is offered in the 
individual and small group markets. Each State electing to establish an 
Exchange must adopt the Federal standards contained in the Affordable 
Care Act and in this proposed rule, or have in effect a State law or 
regulation that implements these Federal standards. However, the 
Department anticipates that the Federalism implications (if any) are 
substantially mitigated because under the statute, States have choices 
regarding the structure and governance of their Exchanges. 
Additionally, the Affordable Care Act does not require States to 
certify an Exchange; if a State elects not to establish an Exchange or 
the State's Exchange is not approved, HHS, either directly or through 
agreement with a non-profit entity, must establish and operate an 
Exchange in that State.
    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, the 
Department has engaged in efforts to consult with and work 
cooperatively with affected States, including participating in 
conference calls with and attending conferences of the National 
Association of Insurance Commissioners, and consulting with State 
insurance officials on an individual basis.
    Throughout the process of developing this NPRM, the Department has 
attempted to balance the States' interests in regulating health 
insurance issuers, and Congress' intent to provide access to Affordable 
Insurance Exchanges for consumers in every State. By doing so, it is 
the Department's view that we have complied with the requirements of 
Executive Order 13132.
    Pursuant to the requirements set forth in section 8(a) of Executive 
Order 13132, and by the signatures affixed to this regulation, the 
Department certifies that CMS has complied with the requirements of 
Executive Order 13132 for the attached proposed regulation in a 
meaningful and timely manner.

List of Subjects

45 CFR Part 155

    Administrative practice and procedure, Advertising, Brokers, 
Conflict of interest, 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, Organization and 
functions (Government agencies), Medicaid, Public assistance programs, 
Reporting and recordkeeping requirements, Safety, State and local 
governments, Technical assistance, Women, and Youth.

45 CFR Part 156

    Administrative practice and procedure, Advertising, Advisory 
committees, Brokers, Conflict of interest, 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, 
Organization and functions (Government agencies), Medicaid, Public 
assistance programs, Reporting and recordkeeping requirements, Safety, 
State and local governments, Sunshine Act, Technical Assistance, Women, 
and Youth.
    For the reasons set forth in the preamble, the Department of Health 
and Human Services proposes to amend 45 CFR subtitle A, subchapter B, 
as set forth below:

SUBTITLE A--DEPARTMENT OF HEALTH AND HUMAN SERVICES

SUBCHAPTER B--REQUIREMENTS RELATING TO HEALTH CARE ACCESS

    1. Part 155 is added as follows:

PART 155--EXCHANGE ESTABLISHMENT STANDARDS AND OTHER RELATED 
STANDARDS UNDER THE AFFORDABLE CARE ACT

Subpart A--General Provisions
Sec.
155.10 Basis and scope.
155.20 Definitions.
Subpart B--General Standards Related to the Establishment of an 
Exchange by a State
155.100 Establishment of a State Exchange.
155.105 Approval of a State Exchange.
155.106 Election to operate an Exchange after 2014.
155.110 Entities eligible to carry out Exchange functions.
155.120 Non-interference with Federal law and non-discrimination 
standards.
155.130 Stakeholder consultation.
155.140 Establishment of a regional Exchange or subsidiary Exchange.
155.150 Transition process for existing State health insurance 
exchanges.
155.160 Financial support for continued operations.
Subpart C--General Functions of an Exchange
155.200 Functions of an Exchange.
155.205 Required consumer assistance tools and programs of an 
Exchange.
155.210 Navigator program standards.
155.220 Ability of States to permit agents and brokers to assist 
qualified individuals, qualified employers or qualified employees 
enrolling in QHPs.
155.230 General standards for Exchange notices.
155.240 Payment of premiums.
155.260 Privacy and security of information.
155.270 Use of standards and protocols for electronic transactions.
Subpart E--Exchange Functions in the Individual Market: Enrollment in 
Qualified Health Plans
155.400 Enrollment of qualified individuals into QHPs.
155.405 Single streamlined application.
155.410 Initial and annual open enrollment periods.
155.420 Special enrollment periods.
155.430 Termination of coverage.
155.440 [Reserved]
Subpart H--Exchange Functions: Small Business Health Options Program 
(SHOP)
155.700 Standards for the establishment of a SHOP.
155.705 Functions of a SHOP.
155.710 Eligibility standards for SHOP.
155.715 Eligibility determination process for SHOP.
155.720 Enrollment of employees into QHPs under SHOP.
155.725 Enrollment periods under SHOP.
155.730 Application standards for SHOP.
Subpart K--Exchange Functions: Certification of Qualified Health Plans
155.1000 Certification standards for QHPs.
155.1010 Certification process for QHPs.
155.1020 QHP issuer rate and benefit information.
155.1040 Transparency in coverage.
155.1045 Accreditation timeline.
155.1050 Establishment of Exchange network adequacy standards.
155.1055 Service area of a QHP.
155.1065 Stand-alone dental plans.
155.1075 Recertification of QHPs.
155.1080 Decertification of QHPs.

    Authority: Title I of the Affordable Care Act, sections 1301, 
1302, 1303, 1304, 1311, 1312, 1313, 1321, 1322, 1331, 1334, 1341, 
1342, 1343, 1402, 1411, 1412-1413.

Subpart A--General Provisions


Sec.  155.10  Basis and scope.

    (a) Basis. This part is based on the following sections of title I 
of the Affordable Care Act:
1301. Qualified health plan defined.
1302. Essential health benefits requirements
1303. Special rules
1304. Related definitions
1311. Affordable choices of health benefit plans.
1312. Consumer choice.

[[Page 41912]]

1313. Financial integrity.
1321. State flexibility in operation and enforcement of Exchanges 
and related requirements.
1322. Federal program to assist establishment and operation of 
nonprofit, member-run health insurance issuers.
1331. State flexibility to establish Basic Health Programs for low-
income individuals not eligible for Medicaid.
1334. Multi-State plans.
1342. Establishment of risk corridors for plans in individual and 
small group markets.
1343. Risk adjustment.
1402. Reduced cost-sharing for individuals enrolling in QHPs.
1411. Procedures for determining eligibility for Exchange 
participation, advance premium tax credits and reduced cost sharing, 
and individual responsibility exemptions.
1412. Advance determination and payment of premium tax credits and 
cost-sharing reductions.
1413. Streamlining of procedures for enrollment through an exchange 
and State Medicaid, CHIP, and health subsidy programs.
    (b) Scope. This part establishes minimum standards for the 
establishment of an Exchange, minimum Exchange functions, eligibility 
determinations, enrollment periods, minimum SHOP functions, 
certification of QHPs, and health plan quality improvement.


Sec.  155.20  Definitions.

    The following definitions apply to this part:
    Advance payments of the premium tax credit means payment of the tax 
credits specified in section 36B of the Code (as added by section 1401 
of the Affordable Care Act) which are provided on an advance basis to 
an eligible individual of a QHP through an Exchange pursuant to 
sections 1402 and 1412 of the Affordable Care Act.
    Affordable Care Act means the Patient Protection and Affordable 
Care Act of 2010 (Pub. L. 111-148), as amended by the Health Care and 
Education Reconciliation Act of 2010 (Pub. L. 111-152).
    Agent or broker means a person or entity licensed by the State as 
an agent, broker or insurance producer.
    Annual open enrollment period means the period each year during 
which a qualified individual may enroll or change coverage in a QHP 
through the Exchange.
    Applicant means:
    (1) An individual who is seeking eligibility through an application 
to the Exchange for at least one of the following:
    (i) Enrollment in a QHP through the Exchange;
    (ii) Advance payments of the premium tax credit and cost-sharing 
reductions; or
    (iii) Medicaid, CHIP, and the BHP, if applicable.
    (2) An employer or employee seeking eligibility for enrollment in a 
QHP through the SHOP, where applicable.
    Benefit year means a calendar year for which a health plan provides 
coverage for health benefits.
    Code means the Internal Revenue Code of 1986.
    Cost sharing means any expenditure required by or on behalf of an 
enrollee with respect to essential health benefits; such term includes 
deductibles, coinsurance, copayments, or similar charges, but excludes 
premiums, balance billing amounts for non-network providers, and 
spending for non-covered services.
    Cost-sharing reductions means reductions in cost sharing for an 
eligible individual enrolled in a silver level plan in the Exchange or 
for an individual who is an Indian who is enrolled in a QHP in the 
Exchange.
    Eligible employer-sponsored plan means, with respect to any 
employee, a group health plan or group health insurance coverage 
offered by an employer to the employee which is--
    (1) A governmental plan (within the meaning of section 2791(d)(8) 
of the PHS Act); or
    (2) Any other plan or coverage offered in the small or large group 
market within a State.
    Such term shall include a grandfathered health plan offered in the 
group market.
    Employee has the meaning given to the term in section 2791 of the 
PHS Act.
    Employer has the meaning given to the term in section 2791 of the 
PHS Act, except that such term must include employers with one or more 
employees. All persons treated as a single employer under subsection 
(b), (c), (m), or (o) of section 414 of the Code must be treated as one 
employer.
    Employer contributions means any financial contributions towards an 
employer sponsored health plan, or other eligible employer-sponsored 
benefit made by the employer including those made by salary reduction 
agreement that is excluded from gross income.
    Enrollee means a qualified individual or qualified employee 
enrolled in a QHP.
    Exchange means a governmental agency or non-profit entity that 
meets the applicable requirements of this part and makes QHPs available 
to qualified individuals and qualified employers. Unless otherwise 
identified, this term refers to State Exchanges, regional Exchanges, 
subsidiary Exchanges, and a Federally-facilitated Exchange.
    Exchange service area means the area in which the Exchange is 
certified to operate, in accordance with the requirements specified in 
subpart B of this part.
    Grandfathered health plan means coverage provided by a group health 
plan, or a health insurance issuer as provided in accordance with 
requirements under Sec.  147.140.
    Group health plan has the meaning given to the term in Sec.  
144.103.
    Health insurance coverage has the meaning given to the term in 
Sec.  144.103.
    Health insurance issuer or issuer has the meaning given to the term 
in Sec.  144.103.
    Health plan means health insurance coverage and a group health 
plan. It does not include a group health plan or multiple employer 
welfare arrangement to the extent the plan or arrangement is not 
subject to State insurance regulation under section 514 of the Employee 
Retirement Income Security Act of 1974.
    Individual market means the market for health insurance coverage 
offered to individuals other than in connection with a group health 
plan.
    Initial enrollment period means the period during which a qualified 
individual may enroll in coverage through the Exchange for coverage 
during the 2014 benefit year.
    Large employer means, in connection with a group health plan with 
respect to a calendar year and a plan year, an employer who employed an 
average of at least 101 employees on business days during the preceding 
calendar year and who employs at least 1 employee on the first day of 
the plan year. In the case of plan years beginning before January 1, 
2016, a State may elect to define large employer by substituting ``51 
employees'' for ``101 employees.''
    Lawfully present has the meaning given the term in Sec.  152.2 of 
this subtitle.
    Minimum essential coverage has the meaning given in section 
5000A(f) of the Code.
    Navigator means a private or public entity or individual that is 
qualified, and licensed, if appropriate, to engage in the activities 
and meet the requirements described in Sec.  155.210.
    Plain language means language that the intended audience, including 
individuals with limited English proficiency, can readily understand 
and use because that language is concise, well organized, and follows 
other best practices of plain language writing.
    Plan year means a consecutive 12 month period during which a health 
plan provides coverage for health

[[Page 41913]]

benefits. A plan year may be a calendar year or otherwise.
    Qualified employee means an individual employed by a qualified 
employer who has been offered health insurance coverage by such 
qualified employer through the SHOP.
    Qualified employer means a small employer that elects to make, at a 
minimum, all full-time employees of such employer eligible for one or 
more QHPs in the small group market offered through a SHOP. Beginning 
in 2017, if a State allows large employers to purchase coverage through 
the SHOP, the term ``qualified employer'' shall include a large 
employer that elects to make all full-time employees of such employer 
eligible for one or more QHPs in the large group market offered through 
the SHOP.
    Qualified health plan or QHP means a health plan that has in effect 
a certification that it meets the standards described in subpart C of 
part 156 issued or recognized by each Exchange through which such plan 
is offered pursuant to the process described in subpart K of part 155.
    Qualified health plan issuer or QHP issuer means a health insurance 
issuer that offers, pursuant to a certification from an Exchange, a 
QHP.
    Qualified individual means, with respect to an Exchange, an 
individual who has been determined eligible to enroll in a QHP in the 
individual market offered through the Exchange.
    SHOP means a Small Business Health Options Program operated by an 
Exchange through which a qualified employer can provide its employees 
and their dependents with access to one or more QHPs.
    Small employer means, in connection with a group health plan with 
respect to a calendar year and a plan year, an employer who employed an 
average of at least 1 but not more than 100 employees on business days 
during the preceding calendar year and who employs at least 1 employee 
on the first day of the plan year. In the case of plan years beginning 
before January 1, 2016, a State may elect to define small employer by 
substituting ``50 employees'' for ``100 employees.''
    Small group market means the health insurance market under which 
individuals obtain health insurance coverage (directly or through any 
arrangement) on behalf of themselves (and their dependents) through a 
group health plan maintained by a small employer (as defined in this 
section).
    Special enrollment period means a period during which a qualified 
individual or enrollee who experiences certain qualifying events may 
enroll in, or change enrollment in, a QHP through the Exchange outside 
of the initial and annual open enrollment periods.
    State means each of the 50 States and the District of Columbia.

Subpart B--General Standards Related to the Establishment of an 
Exchange by a State


Sec.  155.100  Establishment of a State Exchange.

    (a) General requirements. Each State may elect to establish an 
Exchange that facilitates the purchase of health insurance coverage in 
QHPs and provides for the establishment of a SHOP.
    (b) Eligible Exchange entities. The Exchange must be a governmental 
agency or non-profit entity established by a State, consistent with 
Sec.  155.110.


Sec.  155.105  Approval of a State Exchange.

    (a) State Exchange approval requirement. Each State Exchange must 
be approved by HHS by no later than January 1, 2013 in order to begin 
offering QHPs on January 1, 2014.
    (b) State Exchange approval standards. HHS will approve the 
operation of an Exchange established by a State provided that it meets 
the following standards:
    (1) The Exchange is able to carry out the required functions of an 
Exchange consistent with subparts C, E, H, and K of this part;
    (2) The Exchange is capable of carrying out the information 
requirements pursuant to section 36B of the Code;
    (3) The State agrees to perform the responsibilities related to the 
operation of a reinsurance program pursuant to standards set forth in 
part 153 of this chapter; and
    (4) The entire geographic area of the State is covered by one or 
more State Exchanges.
    (c) State Exchange approval process. In order to have its Exchange 
approved, a State must:
    (1) Elect to establish an Exchange by submitting, in a form and 
manner specified by HHS, an Exchange Plan that sets forth how the 
Exchange meets the standards outlined in paragraph (b) of this section; 
and
    (2) Demonstrate operational readiness to execute its Exchange Plan 
through a readiness assessment conducted by HHS.
    (d) State Exchange approval. Each Exchange must receive written 
approval or conditional approval of its Exchange Plan and its 
performance under the operational readiness assessment consistent with 
paragraph (c) of this section in order to be considered an approved 
Exchange.
    (e) Significant changes to Exchange Plan. The State must notify HHS 
in writing before making a significant change to its Exchange Plan; no 
significant change to an Exchange Plan may be effective until it is 
approved by HHS in writing.
    (f) HHS operation of an Exchange. If a State is not an electing 
State under Sec.  155.100(a) or an electing State does not have an 
approved or conditionally approved Exchange by January 1, 2013, HHS 
must (directly or through agreement with a not-for-profit entity) 
establish and operate such Exchange within the State. In the case of a 
Federally-facilitated Exchange, the requirements in Sec.  155.130 and 
subparts C, E, H, and K of this part will apply.


Sec.  155.106  Election to operate an Exchange after 2014.

    (a) Election to operate an Exchange after 2014. A State electing to 
seek initial approval of its Exchange later than January 1, 2013 must:
    (1) Comply with the State Exchange approval requirements and 
process set forth in Sec.  155.105;
    (2) Have in effect an approved, or conditionally approved, Exchange 
Plan and operational readiness assessment at least 12 months prior to 
the Exchange's first effective date of coverage; and
    (3) Develop a plan jointly with HHS to facilitate the transition 
from a Federally-facilitated Exchange to a State Exchange.
    (b) Transition process for State Exchanges that cease operations. A 
State that ceases operations of its Exchange after January 1, 2014 
must:
    (1) Notify HHS that it will no longer operate an Exchange at least 
12 months prior to ceasing operations; and
    (2) Coordinate with HHS on a transition plan to be developed 
jointly between HHS and the State.


Sec.  155.110  Entities eligible to carry out Exchange functions.

    (a) Eligible contracting entities. The State may elect to authorize 
an Exchange established by the State to enter into an agreement with an 
eligible entity to carry out one or more responsibilities of the 
Exchange. Eligible entities are:
    (1) An entity:
    (i) Incorporated under, and subject to the laws of, one or more 
States;
    (ii) That has demonstrated experience on a State or regional basis 
in the individual and small group health insurance markets and in 
benefits coverage; and
    (iii) Is not a health insurance issuer or treated as a health 
insurance issuer

[[Page 41914]]

under subsection (a) or (b) of section 52 of the Code of 1986 as a 
member of the same controlled group of corporations (or under common 
control with) as a health insurance issuer; or
    (2) The State Medicaid agency.
    (b) Responsibility. To the extent that an Exchange establishes such 
arrangements, the Exchange remains responsible for ensuring that all 
Federal requirements related to contracted functions are met.
    (c) Governing board structure. If the Exchange is an independent 
State agency or a non-profit entity established by the State, the State 
must ensure that the Exchange has in place a clearly-defined governing 
board that:
    (1) Is administered under a formal, publicly-adopted operating 
charter or by-laws;
    (2) Holds regular public governing board meetings that are 
announced in advance;
    (3) Represents consumer interests by ensuring that overall 
governing board membership is not made up of a majority of voting 
representatives with a conflict of interest, including representatives 
of health insurance issuers or agents or brokers, or any other 
individual licensed to sell health insurance; and
    (4) Ensures that a majority of the voting members on its governing 
board have relevant experience in health benefits administration, 
health care finance, health plan purchasing, health care delivery 
system administration, public health, or health policy issues related 
to the small group and individual markets and the uninsured.
    (d) Governance principles.
    (1) The Exchange must have in place and make publicly available a 
set of guiding governance principles that include ethics, conflict of 
interest standards, accountability and transparency standards, and 
disclosure of financial interest.
    (2) The Exchange must implement procedures for disclosure of 
financial interests by members of the Exchange board or governance 
structure.
    (e) SHOP independent governance.
    (1) A State may elect to create an independent governance and 
administrative structure for the SHOP, consistent with this section, if 
the State ensures that the SHOP coordinates and shares relevant 
information with the Exchange operating in the same service area.
    (2) If a State chooses to operate its Exchange and SHOP under a 
single governance or administrative structure, it must ensure that the 
Exchange has adequate resources to assist individuals and small 
employers in the Exchange.
    (f) HHS review. HHS may periodically review the accountability 
structure and governance principles of a State Exchange.


Sec.  155.120  Non-interference with Federal law and non-discrimination 
standards.

    (a) Non-interference with Federal law. An Exchange must not 
establish rules that conflict with or prevent the application of 
regulations promulgated by HHS under subtitle D of title I of the 
Affordable Care Act.
    (b) Non-interference with State law. Nothing in parts 155 or 156 of 
this subtitle shall be construed to preempt any State law that does not 
prevent the application of the provisions of title I of the Affordable 
Care Act.
    (c) Non-discrimination. In carrying out the requirements of this 
part, the State and the Exchange must:
    (1) Comply with applicable non-discrimination statutes; and
    (2) Not discriminate based on race, color, national origin, 
disability, age, sex, gender identity or sexual orientation.


Sec.  155.130  Stakeholder consultation.

    The Exchange must regularly consult on an ongoing basis with the 
following stakeholders:
    (a) Educated health care consumers who are enrollees in QHPs;
    (b) Individuals and entities with experience in facilitating 
enrollment in health coverage;
    (c) Advocates for enrolling hard to reach populations, which 
include individuals with a mental health or substance abuse disorder;
    (d) Small businesses and self-employed individuals;
    (e) State Medicaid and CHIP agencies;
    (f) Federally-recognized Tribes, as defined in the Federally 
Recognized Indian Tribe List Act of 1994, 25 U.S.C. 479a, that are 
located within such Exchange's geographic area;
    (g) Public health experts;
    (h) Health care providers;
    (i) Large employers;
    (j) Health insurance issuers; and
    (k) Agents and brokers.


Sec.  155.140  Establishment of a regional Exchange or subsidiary 
Exchange.

    (a) Regional Exchange. A State may participate in a regional 
Exchange if:
    (1) The Exchange spans two or more States, regardless of whether 
the States are contiguous; and
    (2) The regional Exchange submits a single Exchange Plan and is 
approved to operate consistent with Sec.  155.105(c).
    (b) Subsidiary Exchange. A State may establish one or more 
subsidiary Exchanges within the State if:
    (1) Each such Exchange serves a geographically distinct area; and
    (2) The area served by each subsidiary Exchange is at least as 
large as a rating area described in section 2701(a) of the PHS Act.
    (c) Exchange standards. Each regional or subsidiary Exchange must:
    (1) Otherwise meet the requirements of an Exchange consistent with 
this part; and
    (2) Meet the following standards for SHOP:
    (i) Perform the functions of a SHOP for its area in accordance with 
subpart H of this part; and
    (ii) If a State elects to operate its individual market Exchange 
and SHOP under two governance or administrative structures as described 
in Sec.  155.110(e), the SHOP must encompass a geographic area that 
matches the geographic area of the regional or subsidiary Exchange.


Sec.  155.150  Transition process for existing State health insurance 
exchanges.

    (a) Presumption. Unless an exchange is determined to be non-
compliant through the process in paragraph (b) of this section, HHS 
will otherwise presume that an existing State Exchange meets the 
standards under this part if:
    (1) The Exchange was in operation prior to January 1, 2010; and
    (2) The State has insured a percentage of its population not less 
than the percentage of the population projected to be covered 
nationally after the implementation of the Affordable Care Act.
    (b) Process for determining non-compliance. Any State described in 
paragraph (a) must work with HHS to identify areas of non-compliance 
with the standards under this part.


Sec.  155.160  Financial support for continued operations.

    (a) Definition. For purposes of this section, participating issuers 
has the meaning provided in Sec.  156.50.
    (b) Funding for ongoing operations. A State must ensure that its 
Exchange has sufficient funding in order to support its ongoing 
operations beginning January 1, 2015, as follows:
    (1) The State may fund Exchange operations by charging assessments 
or user fees on participating issuers;
    (2) States may otherwise generate funding for Exchange operations;
    (3) No Federal funds will be provided for State Exchange operations 
after January 1, 2015; and
    (4) The State Exchange must announce the user fees to participating 
issuers in advance of the plan year.

[[Page 41915]]

Subpart C--General Functions of an Exchange


Sec.  155.200  Functions of an Exchange.

    (a) General requirements. The Exchange must perform the minimum 
functions described in this subpart and in subparts E, H, and K of this 
part.
    (b) Certificates of exemption. The Exchange must issue certificates 
of exemption consistent with section 1311(d)(4)(H) and 1411 of the 
Affordable Care Act.
    (c) Eligibility determinations. The Exchange must perform 
eligibility determinations.
    (d) Appeals of individual eligibility determinations. The Exchange 
must establish an appeals process for eligibility determinations.
    (e) Oversight and financial integrity. The Exchange must perform 
required functions related to oversight and financial integrity 
requirements in accordance with section 1313 of the Affordable Care 
Act.
    (f) Quality Activities. The Exchange must evaluate quality 
improvement strategies and oversee implementation of enrollee 
satisfaction surveys, assessment and ratings of health care quality and 
outcomes, information disclosures, and data reporting pursuant to 
sections 1311(c)(1), 1311(c)(3), and 1311(c)(4) of the Affordable Care 
Act.


Sec.  155.205  Required consumer assistance tools and programs of an 
Exchange.

    (a) Call center. The Exchange must provide for operation of a toll-
free call center that addresses the needs of consumers requesting 
assistance.
    (b) Internet Web site. The Exchange must maintain an up-to-date 
Internet Web site that:
    (1) Provides standardized comparative information on each available 
QHP, including at a minimum:
    (i) Premium and cost-sharing information;
    (ii) The summary of benefits and coverage established under section 
2715 of the PHS Act;
    (iii) Identification of whether the QHP is a bronze, silver, gold, 
or platinum level plan as defined by section 1302(d) of the Affordable 
Care Act, or a catastrophic plan as defined by section 1302(e) of the 
Affordable Care Act;
    (iv) The results of enrollee satisfaction survey, described in 
section 1311(c)(4) of the Affordable Care Act;
    (v) Quality ratings assigned pursuant to section 1311(c)(3) of the 
Affordable Care Act;
    (vi) Medical loss ratio information as reported to HHS in 
accordance with 45 CFR 158;
    (vii) Transparency of coverage measures reported to the Exchange 
during certification in Sec.  155.1040; and
    (viii) The provider directory made available to the Exchange 
pursuant to Sec.  156.230.
    (2) Is accessible to people with disabilities in accordance with 
the Americans with Disabilities Act and section 504 of the 
Rehabilitation Act and provides meaningful access for persons with 
limited English proficiency.
    (3) Publishes the following financial information:
    (i) The average costs of licensing required by the Exchange;
    (ii) Any regulatory fees required by the Exchange;
    (iii) Any payments required by the Exchange in addition to fees 
under (i) and (ii) of this paragraph;
    (iv) Administrative costs of such Exchange; and
    (v) Monies lost to waste, fraud, and abuse.
    (4) Provides applicants with information about Navigators as 
described in Sec.  155.210 and other consumer assistance services, 
including the toll-free telephone number of the Exchange call center 
required in paragraph (a) of this section.
    (5) Allows for an eligibility determination to be made pursuant to 
Sec.  155.200(c) of this subpart.
    (6) Allows for enrollment in coverage in accordance with subpart E 
of this part.
    (c) Exchange calculator. The Exchange must establish and make 
available by electronic means a calculator to facilitate the comparison 
of available QHPs after the application of any advance payments of the 
premium tax credit and any cost-sharing reductions.
    (d) Consumer assistance. The Exchange must have a consumer 
assistance function, including the Navigator program described in Sec.  
155.210, and must refer consumers to consumer assistance programs in 
the State when available and appropriate.
    (e) Outreach and education. The Exchange must conduct outreach and 
education activities to educate consumers about the Exchange and to 
encourage participation.


Sec.  155.210  Navigator program standards.

    (a) General Requirements. The Exchange must establish a Navigator 
program consistent with this section through which it awards grants to 
eligible public or private entities described in paragraph (b) of this 
section.
    (b) Entities eligible to be a Navigator.
    (1) To receive a Navigator grant, an entity must--
    (i) Be capable of carrying out at least those duties described in 
paragraph (d) of this section;
    (ii) Demonstrate to the Exchange that the entity has existing 
relationships, or could readily establish relationships, with employers 
and employees, consumers (including uninsured and underinsured 
consumers), or self-employed individuals likely to be eligible for 
enrollment in a QHP;
    (iii) Meet any licensing, certification or other standards 
prescribed by the State or Exchange, if applicable; and
    (iv) Not have a conflict of interest during the term as Navigator.
    (2) The Exchange must include entities from at least two of the 
following categories for receipt of a Navigator grant:
    (i) Community and consumer-focused nonprofit groups;
    (ii) Trade, industry, and professional associations;
    (iii) Commercial fishing industry organizations, ranching and 
farming organizations;
    (iv) Chambers of commerce;
    (v) Unions;
    (vi) Resource partners of the Small Business Administration;
    (vii) Licensed agents and brokers; and
    (viii) Other public or private entities that meet the requirements 
of this section. Other entities may include but are not limited to 
Indian tribes, tribal organizations, urban Indian organizations, and 
State or local human service agencies.
    (c) Prohibition on Navigator conduct. The Exchange must ensure that 
a Navigator must not--
    (1) Be a health insurance issuer; or
    (2) Receive any consideration directly or indirectly from any 
health insurance issuer in connection with the enrollment of any 
qualified individuals or qualified employees in a QHP.
    (d) Duties of a Navigator. An entity that serves as a Navigator 
must carry out at least the following duties:
    (1) Maintain expertise in eligibility, enrollment, and program 
specifications and conduct public education activities to raise 
awareness about the Exchange;
    (2) Provide information and services in a fair, accurate and 
impartial manner. Such information must acknowledge other health 
programs;
    (3) Facilitate enrollment in QHPs;
    (4) Provide referrals to any applicable office of health insurance 
consumer assistance or health insurance ombudsman established under 
section 2793 of the PHS Act, or any other appropriate State agency or 
agencies, for any enrollee with a grievance,

[[Page 41916]]

complaint, or question regarding their health plan, coverage, or a 
determination under such plan or coverage; and
    (5) Provide information in a manner that is culturally and 
linguistically appropriate to the needs of the population being served 
by the Exchange, including individuals with limited English 
proficiency, and ensure accessibility and usability of Navigator tools 
and functions for individuals with disabilities in accordance with the 
Americans with Disabilities Act and section 504 of the Rehabilitation 
Act.
    (e) Funding for Navigator grants. Funding for Navigator grants may 
not be from Federal funds received by the State to establish the 
Exchange.


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

    (a) General rule. A State may choose to permit agents and brokers 
to--
    (1) Enroll qualified individuals, qualified employers or qualified 
employees in any QHPs in the individual or small group market as soon 
as the QHP is offered through an Exchange in the State; and
    (2) Assist individuals in applying for advance payments of the 
premium tax credit and cost-sharing reductions for QHPs.
    (b) Web site disclosure. The Exchange may elect to provide 
information regarding licensed agents and brokers on its Web site for 
the convenience of consumers seeking insurance through that Exchange.


Sec.  155.230  General standards for Exchange notices.

    (a) General requirement. Any notice required to be sent by an 
Exchange to applicants, qualified individuals, qualified employees, 
qualified employers, and enrollees must be in writing and include:
    (1) Contact information for available customer service resources;
    (2) An explanation of appeal rights, if applicable; and
    (3) A citation to or identification of the specific regulation 
supporting the action.
    (b) Accessibility and readability requirements. All applications, 
forms, and notices must be written in plain language and provided in a 
manner that:
    (1) Provides meaningful access to limited English proficient 
individuals; and
    (2) Ensures effective communication for people with disabilities.
    (c) Re-evaluation of appropriateness and usability. The Exchange 
must re-evaluate the appropriateness and usability of applications, 
forms, and notices on an annual basis and in consultation with HHS in 
instances when changes are made.


Sec.  155.240  Payment of premiums.

    (a) Payment by individuals. The Exchange must allow a qualified 
individual to pay any applicable premium owed by such individual 
directly to the QHP issuer.
    (b) Payment by tribes, tribal organizations, and urban Indian 
organizations. The Exchange may permit Indian tribes, tribal 
organizations and urban Indian organizations to pay QHP premiums on 
behalf of qualified individuals, subject to terms and conditions 
determined by the Exchange.
    (c) Payment by qualified employers. The Exchange must accept 
payment of an aggregate premium by a qualified employer pursuant to 
Sec.  155.705(b)(4).
    (d) Payment facilitation. The Exchange may establish a process to 
facilitate through electronic means the collection and payment of 
premiums.
    (e) Required standards. In conducting an electronic transaction 
with a QHP that involves the payment of premiums or an electronic funds 
transfer, the Exchange must use the standards and operating rules 
referenced in Sec.  155.260 and Sec.  155.270.


Sec.  155.260  Privacy and security of information.

    (a) Definitions. For purposes of this section, the following term 
has the following meaning:
    Personally identifiable information means information that there is 
a reasonable basis to believe, alone or when combined with other 
personal or identifying information which is linked or linkable to a 
specific individual, can be used to distinguish or trace an 
individual's identity. Specifically, the term applies to information 
collected, received or used by the Exchange as part of its operations.
    (b) Use and disclosure.
    (1) The Exchange must not collect, use, or disclose personally 
identifiable information unless:
    (i) The collection, use, or disclosure is specifically required or 
permitted by this section or by other applicable law; or
    (ii) The collection, use, or disclosure is made pursuant to subpart 
E of this part, while the Exchange is fulfilling its responsibilities 
in accordance with Sec.  155.200(c) of this subpart, or pursuant to 
section 1942(b) of the Act as described in paragraph (c) of this 
section.
    (2) Exchanges must establish and follow security standards for 
collection, use, disclosure and disposal of personally identifiable 
information that provide administrative, physical, and technical 
safeguards for the information that are consistent with the security 
standards required for covered entities by 45 CFR 164.306, 164.308, 
164.310, 164.312 and 164.314.
    (3) Exchanges must establish and follow privacy standards 
consistent with applicable law and that establish acceptable parameters 
for proper collection, use, disclosure and disposal of personally 
identifiable information.
    (4) Policies and procedures regarding the use, disclosure and 
disposal of personally identifiable information must, at minimum:
    (i) Be in writing, and available to the Secretary of HHS upon 
request;
    (ii) Identify applicable law governing use, disclosure and disposal 
of personally identifiable information; and
    (5) In any contract or agreement with a contractor, require that 
personally identifiable information provided to, created by, received 
by, used by, or subsequently disposed of by a contractor of the 
Exchange or any of its subcontractors, pursuant to an agreement with 
the Exchange or on behalf of the Exchange, be protected by privacy and 
security standards that are the same as or more stringent than those 
described in this section.
    (c) Other applicable law. Data matching and sharing arrangements 
made between the Exchange and agencies administering Medicaid, CHIP or 
the BHP for the exchange of eligibility information must be consistent 
with other applicable laws, including section 1942 of the Act.
    (d) Compliance with the Code. Tax returns and return information 
must be kept confidential and disclosed only in accordance with section 
6103(l)(21) of the Code.
    (e) Improper use and disclosure of information. Any person who 
knowingly and willfully uses or discloses information in violation of 
section 1411(g) of the Affordable Care Act will be subject to a civil 
penalty of not more than $25,000 per person or entity, per disclosure, 
in addition to other penalties that may be prescribed by law.


Sec.  155.270  Use of standards and protocols for electronic 
transactions.

    (a) HIPAA administrative simplification. To the extent that the 
Exchange performs electronic transactions with a covered entity, the 
Exchange must use standards, implementation specifications and code 
sets adopted by the Secretary in 45 CFR parts 160 and 162.

[[Page 41917]]

    (b) HIT enrollment standards and protocols. The Exchange must 
incorporate interoperable and secure standards and protocols developed 
by the Secretary pursuant to section 3021 of the PHS Act. Such 
standards and protocols must be incorporated within Exchange 
information technology systems.

Subpart E--Exchange Functions in the Individual Market: Enrollment 
in Qualified Health Plans


Sec.  155.400  Enrollment of qualified individuals into QHPs.

    (a) General requirements. The Exchange must accept a QHP selection 
from an applicant who is determined eligible for enrollment in a QHP in 
accordance with the standards established in accordance with Sec.  
155.200(c) of this subpart, and must--
    (1) Notify the issuer of the applicant's selected QHP; and
    (2) Transmit information necessary to enable the QHP issuer to 
enroll the applicant.
    (b) Timing of data exchange. The Exchange must:
    (1) Send eligibility and enrollment information to QHP issuers on a 
timely basis; and
    (2) Establish a process by which a QHP issuer verifies and 
acknowledges the receipt of such information.
    (c) Records. The Exchange must maintain records of all enrollments 
in QHPs through the Exchange and submit enrollment information to HHS 
on a monthly basis.
    (d) Reconcile files. The Exchange must reconcile enrollment 
information with QHP issuers no less than on a monthly basis.


Sec.  155.405  Single streamlined application.

    (a) The application. The Exchange must use a single streamlined 
application to determine eligibility and to collect information 
necessary for enrollment for--
    (1) QHPs;
    (2) Advance payments of the premium tax credit;
    (3) Cost-sharing reductions; and
    (4) Medicaid, CHIP, or the BHP, where applicable.
    (b) Alternative application. If the Exchange seeks to use an 
alternative application, such application, as approved by HHS, must 
request the minimum information necessary for the purposes identified 
in paragraph (a) of this section.
    (c) Filing the single streamlined application. The Exchange must--
    (1) Accept the single streamlined application from
    (i) An applicant;
    (ii) An authorized representative; or,
    (iii) Someone acting responsibly for the applicant.
    (2) Provide the tools to allow for an applicant to file an 
application--
    (i) Via an Internet portal;
    (ii) By telephone through a call center;
    (iii) By mail; and
    (iv) In person.
    (d) [Reserved]
    (e) [Reserved]


Sec.  155.410  Initial and annual open enrollment periods.

    (a) General requirements.
    (1) The Exchange must provide an initial open enrollment period and 
annual open enrollment periods consistent with this section, during 
which qualified individuals may enroll in a QHP or enrollees may change 
QHPs.
    (2) The Exchange may only permit a qualified individual to enroll 
in a QHP or an enrollee to change QHPs during the initial open 
enrollment period specified in paragraph (b) of this section, the 
annual open enrollment period specified in paragraph (e) of this 
section, or a special enrollment period described in Sec.  155.420 of 
this subpart for which the qualified individual or enrollee has been 
determined eligible.
    (b) Initial open enrollment period. The initial open enrollment 
period begins October 1, 2013 and extends through February 28, 2014.
    (c) Effective coverage dates for initial open enrollment period. 
For QHP selections received by the Exchange from a qualified 
individual--
    (1) On or before December 22, 2013, the Exchange must ensure a 
coverage effective date of January 1, 2014; and
    (2) Between the first and twenty-second day of any subsequent month 
during the initial open enrollment period, the Exchange must ensure a 
coverage effective date of the first day of the following month; and
    (3) Between the twenty-third and last day of the month for any 
month between December 2013 and February 28, 2014, the Exchange must 
ensure a coverage effective date of either the first day of the 
following month or the first day of the second following month.
    (d) Notice of annual open enrollment period. Starting in 2014, the 
Exchange must provide advance written notification to each enrollee 
about annual open enrollment.
    (e) Annual open enrollment period. For benefit years beginning on 
or after January 1, 2015, the annual open enrollment period begins 
October 15 and extends through December 7 of the preceding calendar 
year.
    (f) Effective date for coverage after the annual open enrollment 
period. The Exchange must ensure coverage is effective as of the first 
day of the following benefit year for a qualified individual who has 
made a QHP selection during the annual open enrollment period.
    (g) [Reserved]


Sec.  155.420  Special enrollment periods.

    (a) General requirements. The Exchange must provide special 
enrollment periods consistent with this section, during which qualified 
individuals and enrollees may enroll in QHPs or change enrollment from 
one QHP to another.
    (b) Effective dates. Once a qualified individual is determined 
eligible for a special enrollment period, the Exchange must ensure that 
the qualified individual's effective date of coverage is:
    (1) On the first day of the following month for all QHP selections 
made by the 22nd of the previous month,
    (2) On either the first day of the following month or the first day 
of the second following month for all QHP selections made between the 
23rd and last day of a given month, or
    (3) In the case of birth, adoption or placement for adoption 
effective on the date of birth, adoption, or placement for adoption.
    (c) Length of special enrollment periods. Unless specifically 
stated otherwise herein, a qualified individual or enrollee has 60 days 
from the date of a triggering event to select a qualified health plan.
    (d) Special enrollment periods. The Exchange must allow qualified 
individuals and enrollees to enroll in or change from one QHP to 
another as a result of the following triggering events:
    (1) A qualified individual or dependent loses minimum essential 
coverage;
    (2) A qualified individual gains a dependent or becomes a dependent 
through marriage, birth, adoption or placement for adoption;
    (3) An individual, who was not previously a citizen, national, or 
lawfully present individual gains such status;
    (4) A qualified individual's enrollment or non-enrollment in a QHP 
is unintentional, inadvertent, or erroneous and is the result of the 
error, misrepresentation, or inaction of an officer, employee, or agent 
of the Exchange or HHS, or its instrumentalities as evaluated and 
determined by the Exchange. In such cases, the Exchange may take such 
action as may be necessary to correct or

[[Page 41918]]

eliminate the effects of such error, misrepresentation, or inaction;
    (5) An enrollee adequately demonstrates to the Exchange that the 
QHP in which he or she is enrolled substantially violated a material 
provision of its contract in relation to the individual;
    (6) An individual is determined newly eligible or newly ineligible 
for advance payments of the premium tax credit or has a change in 
eligibility for cost-sharing reductions, regardless of whether such 
individual is already enrolled in a QHP. The Exchange must permit an 
individual whose existing coverage through an eligible employer-
sponsored plan will no longer be affordable or provide minimum value 
for his or her employer's upcoming plan year to access this special 
enrollment period prior to the end of his or her coverage through such 
eligible employer-sponsored plan;
    (7) A qualified individual or enrollee gains access to new QHPs as 
a result of a permanent move;
    (8) An Indian, as defined by section 4 of the Indian Health Care 
Improvement Act, may enroll in a QHP or change from one QHP to another 
1 time per month; and
    (9) A qualified individual or enrollee meets other exceptional 
circumstances as the Exchange or HHS may provide.
    (e) Loss of coverage. Loss of coverage does not include termination 
or loss due to--
    (1) Failure to pay premiums on a timely basis, including COBRA 
premiums prior to expiration of COBRA coverage, or
    (2) Situations allowing for a rescission as specified in 45 CFR 
147.128, Rules Regarding Rescissions.
    (f) Limits on special enrollment periods. An enrollee may only move 
to a different plan at the same level of coverage, as described in 
section 1302(d)(1) of the Affordable Care Act, excluding paragraph 
(d)(6) of this section.


Sec.  155.430  Termination of coverage.

    (a) General requirements. The Exchange must determine the form and 
manner in which coverage in a QHP may be terminated.
    (b) Termination events.
    (1) The Exchange must permit an enrollee to terminate his or her 
coverage in a QHP with appropriate notice to the Exchange or the QHP.
    (2) The Exchange may terminate an enrollee's coverage in a QHP, and 
must permit a QHP issuer to terminate such coverage, in the following 
circumstances:
    (i) The enrollee is no longer eligible for coverage in a QHP 
through the Exchange;
    (ii) The enrollee becomes covered in other minimum essential 
coverage;
    (iii) Payments of premiums for coverage of the enrollee cease, 
provided that the grace period required by Sec.  156.270 of this 
subtitle has expired;
    (iv) The enrollee's coverage is rescinded in accordance with Sec.  
147.128 of this subtitle;
    (v) The QHP terminates or is decertified as described in Sec.  
155.1080; or
    (vi) The enrollee changes from one QHP to another during an annual 
open enrollment period or special enrollment period in accordance with 
Sec.  155.410 or Sec.  155.420.
    (c) Termination of coverage tracking and approval. The Exchange 
must--
    (1) Establish mandatory procedures for issuers of QHPs to maintain 
records of termination of coverage;
    (2) Track number of coverage terminations and submit that 
information to HHS on a monthly basis;
    (3) Establish standards for termination of coverage that require 
issuers of QHPs to provide reasonable accommodations to individuals 
with mental or cognitive conditions, including mental and substance use 
disorders, Alzheimer's disease, and developmental disabilities before 
terminating coverage for such individuals; and
    (4) Retain records in order to facilitate audit functions.
    (d) Effective dates for termination of coverage.
    (1) In the case of a termination in accordance with paragraph 
(b)(1) of this section, the last day of coverage is the termination 
date specified by the enrollee, if the Exchange and QHP have a 
reasonable amount of time from the date on which the enrollee provides 
notice to terminate his or her coverage. If the Exchange or the QHP do 
not have a reasonable amount of time from the date on which the 
enrollee provides notice to terminate his or her coverage, the last day 
of coverage is the first day after such reasonable amount of time has 
passed.
    (2) In the case of a termination in accordance with paragraph 
(b)(2)(ii) of this section, the last day of coverage is the day before 
the effective date of an enrollee's coverage for new minimum essential 
coverage.
    (3) In the case of a termination in accordance with paragraph 
(b)(2)(vi) of this section, the last day of coverage in an enrollee's 
prior QHP is the day before the effective date of coverage in his or 
her new QHP.
    (4) In cases other than those described in paragraphs (d)(1)-(3) of 
this section, the last day of coverage is:
    (i) The fourteenth day of the month if the notice of termination is 
sent by the Exchange or termination is initiated by the QHP no later 
than the fourteenth day of the previous month; or
    (ii) The last day of the month if the notice of termination is sent 
by the Exchange or termination is initiated by the QHP no later than 
the last day of the previous month.


Sec.  155.440  [Reserved]

Subpart H--Exchange Functions: Small Business Health Options 
Program (SHOP)


Sec.  155.700  Standards for the establishment of a SHOP.

    General requirement. An Exchange must provide for the establishment 
of a SHOP that meets the requirements of this subpart and is designed 
to assist qualified employers and facilitate the enrollment of 
qualified employees into qualified health plans.


Sec.  155.705  Functions of a SHOP.

    (a) Exchange functions that apply to SHOP. The SHOP must carry out 
all the required functions of an Exchange described in this subpart and 
in subparts C, E, H, and K of this part, except:
    (1) Requirements related to individual eligibility determinations 
in Sec.  155.200(c) and appeals of such determinations in Sec.  
155.200(d).
    (2) Requirements related to enrollment of qualified individuals 
described in subpart E of this part;
    (3) The requirement to create a premium tax credit calculator 
pursuant to Sec.  155.205(c);
    (4) The requirement to certify exemptions from the individual 
coverage requirement pursuant to Sec.  155.200(b);
    (5) Requirements related to the payment of premiums by individuals, 
Indian tribes, tribal organizations and urban Indian organizations 
under Sec.  155.240.
    (b) Unique functions of a SHOP. The SHOP must also provide the 
following unique functions:
    (1) Enrollment and eligibility functions. The SHOP must adhere to 
the requirements outlined in Sec. Sec.  155.710, 155.715, 155.720, 
155.725, and 155.730. In addition, the SHOP must at a minimum 
facilitate the special enrollment periods described in Sec.  
156.285(b)(2) of this subtitle.
    (2) Employer choice requirements. With regard to QHPs offered 
through the SHOP, the SHOP must allow a qualified

[[Page 41919]]

employer to select a level of coverage as described in section 
1302(d)(1) of the Affordable Care Act, in which all QHPs within that 
level are made available to the qualified employees of the employer.
    (3) SHOP options with respect to employer choice requirements. With 
regard to QHPs offered through the SHOP, the SHOP may allow a qualified 
employer to make one or more QHPs available to qualified employees by a 
method other than the method described in paragraph (b)(2) of this 
section.
    (4) Premium aggregation. The SHOP must perform the following 
functions related to premium payment administration:
    (i) Provide each qualified employer with a bill on a monthly basis 
that identifies the total amount that is due to the QHP issuers from 
the qualified employer; and
    (ii) Collect from each employer the total amount due and make 
payments to QHP issuers in the SHOP for all qualified enrollees.
    (5) QHP Certification. With respect to certification of QHPs in the 
small group market, the SHOP must ensure QHPs meet the requirements 
specified in Sec.  156.285 of this subtitle.
    (6) Rates and rate changes. The SHOP must--
    (i) Require all QHP issuers to make any change to rates at a 
uniform time that is either quarterly, monthly, or annually; and
    (ii) Not vary rates for a qualified employer during its plan year.
    (7) QHP availability in merged markets. If a State merges the 
individual market and the small group market risk pools pursuant to 
section 1312(c)(3) of the Affordable Care Act, the SHOP may permit a 
qualified employee to enroll in any QHP meeting the following 
requirements of the small group market:
    (i) Deductible maximums described in section 1302(c) of the 
Affordable Care Act; and
    (ii) Levels of coverage described in Sec.  155.705(b)(2).
    (8) QHP availability in unmerged markets. If a State does not merge 
the individual and small group market risk pools, the SHOP must permit 
each qualified employee to enroll only in QHPs in the small group 
market.
    (9) SHOP expansion to large group market. If a State elects to 
expand the SHOP to the large group market, a SHOP must allow issuers of 
health insurance coverage in the large group market in the State to 
offer QHPs in such market through a SHOP beginning in 2017, provided 
that a large employer meets the qualified employer requirements by 
electing to make all full-time employees of such employer eligible for 
one or more QHPs offered in the large group market through a SHOP.


Sec.  155.710  Eligibility standards for SHOP.

    (a) General requirement. The SHOP must permit qualified employers 
to purchase coverage for qualified employees through the SHOP.
    (b) Employer eligibility requirements. An employer is a qualified 
employer eligible to purchase coverage through a SHOP if such 
employer--
    (1) Is a small employer;
    (2) Elects to offer, at a minimum, all full-time employees coverage 
in a QHP through a SHOP; and
    (3) Either--
    (i) Has its principal business address in the Exchange service area 
and offers coverage to all its employees through that SHOP; or
    (ii) Offers coverage to each eligible employee through the SHOP 
serving that employee's primary worksite.
    (c) Participating in multiple SHOPs. If an employer meets the 
criteria in (b) above and makes the election described in paragraph 
(b)(3)(ii) of this section, a SHOP shall allow the employer to offer 
coverage to those employees whose primary worksite is in the SHOP's 
service area.
    (d) Continuing eligibility. The SHOP must treat a qualified 
employer which ceases to be a small employer solely by reason of an 
increase in the number of employees of such employer as a qualified 
employer until the qualified employer otherwise fails to meet the 
eligibility criteria of this section or elects to no longer purchase 
coverage for qualified employees through the SHOP.
    (e) Employee eligibility requirements. An employee is a qualified 
employee eligible to enroll in coverage through a SHOP if such employee 
receives an offer of coverage from a qualified employer.


Sec.  155.715  Eligibility determination process for SHOP.

    (a) General requirement. Before permitting the purchase of coverage 
in a QHP, the SHOP must determine that the employer or individual who 
requests coverage is eligible in accordance with the requirements of 
Sec.  155.710.
    (b) Applications. The SHOP must accept a SHOP single employer 
application form from employers and the SHOP single employee 
application form from employees wishing to elect coverage through the 
SHOP in accordance with the relevant standards of Sec.  155.730.
    (c) Verification of application. For the purpose of verifying 
information within the employer and employee applications, the SHOP--
    (1) Must verify that an individual applicant is identified by the 
employer as an employee to whom the qualified employer has offered 
coverage and must otherwise accept the information attested to within 
the application unless the SHOP has a reason to doubt the information's 
veracity; and
    (2) May establish, in addition to or in lieu of reliance on the 
application, additional methods to verify the information provided by 
the applicant on the applicable application.
    (d) Eligibility adjustment period.
    (1) For an employer requesting to purchase coverage through the 
SHOP for which the SHOP has a reason to doubt the information on the 
application submitted by the employer, the SHOP must--
    (i) Make a reasonable effort to identify and address the causes of 
such reason to doubt, including through typographical or other clerical 
errors;
    (ii) Notify the employer of the reason;
    (iii) Provide the employer with a period of 30 days from the date 
on which the notice described in paragraph (d)(1)(i) of this section is 
sent to the employer to either present satisfactory documentary 
evidence to support the employer's application, or resolve the 
inconsistency; and
    (iv) If, after the 30-day period described in paragraph (d)(1)(iii) 
of this section, the SHOP has not received satisfactory documentary 
evidence, the SHOP must--
    (A) Notify the employer of its denial of eligibility pursuant to 
paragraph (e) of this section; and
    (B) If the employer was enrolled pending the confirmation or 
verification of eligibility information, discontinue the employer's 
participation in the SHOP at the end of the month following the month 
in which the notice is sent.
    (2) For an individual requesting eligibility to enroll in a QHP 
through the SHOP for whom the SHOP has a reason to doubt the 
information on the application submitted by the individual, the SHOP 
must--
    (i) Make a reasonable effort to identify and address the causes of 
such inconsistency, including through typographical or other clerical 
errors;
    (ii) Notify the individual of the inability to substantiate his or 
her employee status;
    (iii) Provide the employee with a period of 30 days from the date 
on which the notice described in paragraph (d)(2)(ii) of this section 
is sent to the employee to either present satisfactory documentary 
evidence to support the

[[Page 41920]]

employee's application, or resolve the inconsistency; and
    (iv) If, after the 30-day period described in paragraph (d)(2)(iii) 
of this section, the SHOP has not received satisfactory documentary 
evidence, the SHOP must notify the employee of its denial of 
eligibility pursuant to paragraph (f) of this section.
    (e) Notification of employer eligibility. The SHOP must provide an 
employer requesting eligibility to purchase coverage with a notice of 
approval or denial of eligibility and the employer's right to appeal 
such eligibility determination.
    (f) Notification of employee eligibility. The SHOP must notify an 
employee seeking to enroll in a QHP offered through the SHOP of the 
determination by the SHOP whether the individual is eligible in 
accordance with Sec.  155.710 and the employee's right to appeal such 
determination.
    (g) Notification of employer withdrawal from SHOP. If a qualified 
employer ceases to purchase coverage through the SHOP, the SHOP must 
ensure that--
    (1) Each QHP terminates the coverage of the employer's qualified 
employees enrolled in the QHP through the SHOP; and
    (2) Each of the employer's qualified employees enrolled in a QHP 
through the SHOP is notified of the termination of their coverage prior 
to such termination.


Sec.  155.720  Enrollment of employees into QHPs under SHOP.

    (a) General requirements. The SHOP must process the SHOP single 
employee applications of qualified employees to the applicable QHP 
issuers and facilitate the enrollment of qualified employees in QHPs. 
All references to QHPs in this section refer to QHPs offered through 
the SHOP.
    (b) Enrollment timeline and process. The SHOP must establish a 
uniform enrollment timeline and process that all QHP issuers and 
qualified employers comply with for the following activities to occur 
before the effective date of coverage for qualified employees:
    (1) Determination of employer eligibility for purchase of coverage 
in the SHOP as described in Sec.  155.715;
    (2) Qualified employer selection of QHPs offered through the SHOP 
to qualified employees, consistent with Sec.  155.705(b)(2) and (3);
    (3) Provision of a specific timeframe during which the qualified 
employer can select the level of coverage or QHP offering, as 
appropriate;
    (4) Provision of a specific timeframe for qualified employees to 
provide relevant information to complete the application process;
    (5) Determination and verification of employee eligibility for 
enrollment through the SHOP;
    (6) Processing enrollment of qualified employees into selected 
QHPs; and
    (7) Establishment of effective dates of employee coverage.
    (c) Transfer of enrollment information. In order to enroll 
qualified employees of a qualified employer participating in the SHOP, 
the SHOP must--
    (1) Transmit enrollment information on behalf of qualified 
employees to QHP issuers in accordance with the timeline described in 
paragraph (b) of this section; and
    (2) Follow requirements set forth in Sec.  155.400(c) of this part.
    (d) Payment. The SHOP must--
    (1) Adhere to requirements set forth in Sec.  155.705(b)(4); and
    (2) Terminate qualified employers that do not comply with the 
process established in Sec.  155.705(b)(4).
    (e) Notification of effective date. The SHOP must ensure that a 
qualified employee enrolled in a QHP is notified of the effective date 
of coverage consistent with Sec.  156.260(b) of this subtitle.
    (f) Records. The SHOP must receive and maintain records of 
enrollment in QHPs, including identification of--
    (1) Qualified employers participating in the SHOP, and
    (2) Qualified employees enrolled in QHPs.
    (g) Reconcile files. The SHOP must reconcile enrollment information 
and employer participation information with QHPs on no less than a 
monthly basis in accordance with standards established in Sec.  
155.400(d).
    (h) Employee termination of coverage from a QHP. If any employee 
terminates coverage from a QHP, the SHOP must notify the individual's 
employer.


Sec.  155.725  Enrollment periods under SHOP.

    (a) General requirements. The SHOP must--
    (1) Adhere to the start of the initial open enrollment period set 
forth in Sec.  155.410; and
    (2) Ensure that enrollment transactions are sent to QHP issuers and 
that such issuers adhere to coverage effective dates in accordance with 
Sec.  156.260 of this subtitle.
    (b) Rolling enrollment in the SHOP. The SHOP must permit a 
qualified employer to purchase coverage for its small group at any 
point during the year. The employer's plan year must consist of the 12-
month period beginning with the qualified employer's effective date of 
coverage.
    (c) Annual employer election period. The SHOP must provide 
qualified employers with a period prior to the completion of the 
employer's plan year and before the annual employee open enrollment 
period, in which the qualified employer may change its participation in 
the SHOP for the next plan year, including--
    (1) The method by which qualified employer makes QHPs available to 
qualified employees pursuant Sec.  155.705(b)(2) and (3);
    (2) The employer contribution towards the premium cost of coverage;
    (3) The level of coverage offered to qualified employees as 
described in Sec.  155.705(b)(2) and (3); or
    (4) The QHP or plans offered to qualified employees pursuant to 
Sec.  155.705.
    (d) Annual employer election period notice. The SHOP must provide 
notification to a qualified employer of the annual election period in 
advance of such period.
    (e) Annual employee open enrollment period. The SHOP must establish 
an annual open enrollment period for qualified employees prior to the 
completion of the applicable qualified employer's plan year and after 
that employer's annual election period.
    (f) Employees hired outside of the initial or annual open 
enrollment period. The SHOP must provide an employee hired outside of 
the initial or annual open enrollment period a specified period to seek 
coverage in a QHP beginning on the first day of employment.
    (g) Effective dates. The SHOP must establish effective dates of 
coverage for qualified employees consistent with the effective dates of 
coverage described in Sec.  155.720.
    (h) Renewal of coverage. If a qualified employee enrolled in a QHP 
through the SHOP remains eligible for coverage, such individual will 
remain in the plan selected the previous year unless--
    (1) He or she disenrolls from such plan in accordance with 
standards identified in Sec.  155.430;
    (2) He or she enrolls in another QHP if such option exists; or
    (3) The QHP is no longer available to the qualified employee.


Sec.  155.730  Application standards for SHOP.

    (a) General requirements. Application forms used by the SHOP must 
meet the requirements set forth in this section.
    (b) Single employer application. The SHOP must use a single 
application to determine employer eligibility and to collect 
information necessary for purchasing coverage. Such application must 
collect the following--

[[Page 41921]]

    (1) Employer name and address of employer's locations;
    (2) Number of employees;
    (3) Employer Identification Number (EIN); and
    (4) A list of qualified employees and their social security 
numbers.
    (c) Single employee application. The SHOP must use a single 
application for eligibility determination, QHP selection and enrollment 
for qualified employees.
    (d) Model application. The SHOP may use the model single employer 
application and the model single employee application provided by HHS.
    (e) Alternative employer application. The SHOP may use an 
alternative application if such application is approved by HHS and 
collects the following--
    (1) In the case of the employer application, the information 
described in paragraph (b) of this section; and
    (2) In the case of the employee application, the information 
necessary to establish eligibility of the employee as a qualified 
employee and to complete the enrollment of a qualified employee, such 
as plan selection and identification of dependents to be enrolled.
    (f) Filing. The SHOP must allow an employer to file the SHOP single 
employer application and employees to file the single employee 
application in the form and manner described in Sec.  155.405(c).

Subpart K--Exchange Functions: Certification of Qualified Health 
Plans


Sec.  155.1000  Certification standards for QHPs.

    (a) Definition. The following definition applies in this subpart:
    Multi-State plan is a health plan offered by a health insurance 
issuer under contract with the U.S. Office of Personnel Management 
(OPM) to offer a multi-State QHP through the Exchange. The plan must 
offer a benefits package that is uniform in each State and consists of 
the benefit design standards described in section 1302 of the 
Affordable Care Act; meets all requirements for QHPs; and meets Federal 
rating requirements pursuant to section 2701 of the PHS Act, or a 
State's more restrictive rating requirements, if applicable.
    (b) General requirement. The Exchange must offer only QHPs which 
have in effect a certification issued or recognized by the Exchange as 
QHPs. Any reference to QHPs must be deemed to include multi-State 
plans, unless specifically provided for otherwise.
    (c) General certification criteria. The Exchange may certify a 
health plan as a QHP in the Exchange if--
    (1) The health insurance issuer provides evidence during the 
certification process in Sec.  155.1010 that it complies with the 
minimum certification requirements outlined in subpart C of part 156 of 
this subtitle, as applicable; and
    (2) The Exchange determines that making the health plan available 
is in the interest of the qualified individuals and qualified 
employers, except that the Exchange must not exclude a health plan--
    (i) On the basis that such plan is a fee-for-service plan;
    (ii) Through the imposition of premium price controls; or
    (iii) On the basis that the health plan provides treatments 
necessary to prevent patients' deaths in circumstances the Exchange 
determines are inappropriate or too costly.


Sec.  155.1010  Certification process for QHPs.

    (a) Certification procedures. The Exchange must establish 
procedures for the certification of QHPs consistent with Sec.  
155.1000(c).
    (b) Exemption from certification process. Notwithstanding paragraph 
(a) of this section, a multi-State plan is exempt from the 
certification process established by the Exchange and deemed as meeting 
the certification requirements for QHPs.
    (c) Completion date. The Exchange must complete the certification 
of the QHPs prior to the open enrollment period as outlined in Sec.  
155.410.
    (d) Ongoing compliance. The Exchange must monitor the QHP issuers 
for demonstration of ongoing compliance with the certification 
requirements in Sec.  155.1000(c).


Sec.  155.1020  QHP issuer rate and benefit information.

    (a) Receipt and posting of rate increase justification. The 
Exchange must receive a justification for a rate increase for a QHP 
prior to the implementation of such an increase. The Exchange must 
ensure that the QHP issuer has prominently posted the justification on 
its Web site as required under Sec.  156.210 of this subtitle.
    (b) Rate increase consideration. The Exchange must consider rate 
increases in accordance with section 1311(e)(2) of the Affordable Care 
Act, which includes consideration of the following:
    (1) A justification for a rate increase prior to the implementation 
of the increase;
    (2) Recommendations provided to the Exchange by the State pursuant 
to section 2794(b)(1)(B) of the PHS Act; and
    (3) Any excess of rate growth outside the Exchange as compared to 
the rate of such growth inside the Exchange.
    (c) Benefit and rate information. The Exchange must receive the 
following information, at least annually, from QHP issuers for each QHP 
in a form and manner to be specified by HHS:
    (1) Rates;
    (2) Covered benefits; and
    (3) Cost-sharing requirements.


Sec.  155.1040  Transparency in coverage.

    (a) General requirement. The Exchange must collect information 
relating to coverage transparency as described in Sec.  156.220(a) of 
this subtitle from QHP issuers.
    (b) Use of plain language. The Exchange must determine whether the 
information required to be submitted and made available under paragraph 
(a) of this section is provided in plain language.
    (c) Transparency of cost-sharing information. The Exchange must 
monitor whether a QHP issuer has made cost-sharing information 
available in a timely manner upon the request of an individual as 
required by Sec.  156.220(d) of this subtitle.


Sec.  155.1045  Accreditation timeline.

    The Exchange must establish a uniform period following 
certification of the QHP within which a QHP issuer that is not already 
accredited must become accredited as required by Sec.  156.275 of this 
subtitle.


Sec.  155.1050  Establishment of Exchange network adequacy standards.

    An Exchange must ensure that the provider network of each QHP 
offers a sufficient choice of providers for enrollees.


Sec.  155.1055  Service area of a QHP.

    The Exchange must have a process to establish or evaluate the 
service areas of QHPs to determine whether the following minimum 
criteria are met:
    (a) The service area of a QHP covers a minimum geographical area 
that is at least the entire geographic area of a county, or a group of 
counties defined by the Exchange, unless the Exchange determines that 
serving a smaller geographic area is necessary, nondiscriminatory, and 
in the best interest of the qualified individuals and employers.
    (b) The service area of a QHP has been established without regard 
to racial, ethnic, language, health status-related factors listed in 
section 2705(a) of the PHS Act, or other factors that exclude specific 
high utilizing, high cost or medically-underserved populations.

[[Page 41922]]

Sec.  155.1065  Stand-alone dental plans.

    (a) General requirements. The Exchange must allow the offering of a 
limited scope dental benefits plan through the Exchange if--
    (1) The plan meets the requirements of section 9832(c)(2)(A) of the 
Code and 2791(c)(2)(A) of the PHS Act; and
    (2) The plan covers at least the pediatric dental essential health 
benefit as defined in section 1302(b)(1)(J) of the Affordable Care Act.
    (b) Offering options. The Exchange may allow the dental plan to be 
offered--
    (1) As a stand-alone dental plan; or
    (2) In conjunction with a QHP.
    (c) Certification standards. If a plan described in paragraph (a) 
is offered through an Exchange, another health plan offered through 
such Exchange must not fail to be treated as a QHP solely because the 
plan does not offer coverage of benefits offered through the stand-
alone plan that are otherwise required under section 1302(b)(1)(J) of 
the Affordable Care Act.


Sec.  155.1075  Recertification of QHPs.

    (a) Recertification process. The Exchange must establish a process 
for recertification of QHPs that includes a review of the general 
certification criteria as outlined in Sec.  155.1000(c). Upon 
determining the recertification status of a QHP, the Exchange must 
notify the QHP issuer.
    (b) Timing. The Exchange must complete the QHP recertification 
process on or before September 15 of the applicable calendar year.


Sec.  155.1080  Decertification of QHPs.

    (a) Definition. The following definition applies to this section:
    Decertification means the termination by the Exchange of the 
certification status and offering of a QHP.
    (b) Decertification process. The Exchange must establish a process 
for the decertification of QHPs which, at a minimum, meet the 
requirements in this section.
    (c) Decertification by the Exchange. The Exchange may at any time 
decertify a health plan if the Exchange determines that the QHP issuer 
is no longer in compliance with the general certification criteria as 
outlined in Sec.  155.1000(c).
    (d) Appeal of decertification. The Exchange must establish a 
process for the appeal of a decertification of a QHP.
    (e) Notice of decertification. Upon decertification of a QHP, the 
Exchange must provide notice of decertification to all affected 
parties, including:
    (1) The QHP issuer;
    (2) Exchange enrollees in the QHP who must receive information 
about a special enrollment period, as described in Sec.  155.420;
    (3) HHS; and
    (4) The State department of insurance.
    3. Part 156 is added as follows:

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

Subpart A--General Provisions
Sec.
156.10 Basis and scope.
156.20 Definitions.
156.50 Financial support.
Subpart B--[Reserved]
Subpart C--Qualified Health Plan Minimum Certification Standards
156.200 QHP issuer participation standards.
156.210 QHP rate and benefit information.
156.220 Transparency in coverage.
156.225 Marketing of QHPs.
156.230 Network adequacy standards.
156.235 Essential community providers.
156.245 Treatment of direct primary care medical homes.
156.250 Health plan applications and notices.
156.255 Rating variation.
156.260 Enrollment periods for qualified individuals.
156.265 Enrollment process for qualified individuals.
156.270 Termination of coverage for qualified individuals.
156.275 Accreditation of QHP issuers.
156.280 Segregation of funds for abortion services.
156.285 Additional standards specific to the SHOP.
156.290 Non-renewal and decertification of QHPs.
156.295 Prescription drug distribution and cost reporting.

    Authority: Title I of the Affordable Care Act, sections 1301-
1304, 1311-1312, 1321, 1322, 1324, 1334, 1342-1343, and 1401-1402.

Subpart A--General Provisions


Sec.  156.10  Basis and scope.

    (a) Basis.
    (1) This part is based on the following sections of title I of the 
Affordable Care Act:

1301. QHP defined.
1302. Essential health benefits requirements.
1303. Special rules.
1304. Related definitions.
1311. Affordable choices of health benefit plans.
1312. Consumer choice.
1313. Financial integrity.
1321. State flexibility in operation and enforcement of Exchanges 
and related requirements.
1322. Federal program to assist establishment and operation of 
nonprofit, member-run health insurance issuers.
1331. State flexibility to establish Basic Health Programs for low-
income individuals not eligible for Medicaid.
1334. Multi-State plans.
1402. Reduced cost-sharing for individuals enrolling in QHPs.
1411. Procedures for determining eligibility for Exchange 
participation, advance premium tax credits and reduced cost sharing, 
and individual responsibility exemptions.
1412. Advance determination and payment of premium tax credits and 
cost-sharing reductions.
1413. Streamlining of procedures for enrollment through an Exchange 
and State, Medicaid, CHIP, and health subsidy programs.
    (2) This part is based on the following sections of title I of the 
Act:


1150A.  Pharmacy Benefit Managers Transparency Requirements

    (b) Scope. This part establishes standards for QHPs under 
Exchanges, and addresses other health insurance issuer requirements.


Sec.  156.20  Definitions.

    The following definitions apply to this part, unless the context 
indicates otherwise:
    Applicant has the meaning given to the term in Sec.  155.20 of this 
subtitle.
    Benefit design standards means coverage that provides for all of 
the following:
    (1) The essential health benefits as described in section 1302(b) 
of the Affordable Care Act;
    (2) Cost-sharing limits as described in section 1302(c) of the 
Affordable Care Act; and
    (3) A bronze, silver, gold, or platinum level of coverage as 
described in section 1302(d) of the Affordable Care Act, or is a 
catastrophic plan as described in section 1302(e) of the Affordable 
Care Act.
    Benefit year has the meaning given to the term in Sec.  155.20 of 
this subtitle.
    Cost-sharing has the meaning given to the term in Sec.  155.20 of 
this subtitle.
    Cost-sharing reductions has the meaning given to the term in Sec.  
155.20 of this subtitle.
    Group health plan has the meaning given to the term in Sec.  
144.103 of this subtitle.
    Health insurance coverage has the meaning given to the term in 
Sec.  144.103 of this subtitle.
    Health insurance issuer or issuer has the meaning given to the term 
in Sec.  144.103 of this subtitle.
    Level of coverage means one of four standardized actuarial values 
as defined by section 1302(d)(2) of the Affordable Care Act of plan 
coverage.

[[Page 41923]]

    Plan year has the meaning given to the term in Sec.  155.20 of this 
subtitle.
    Qualified employer has the meaning given to the term in Sec.  
155.20 of this subtitle.
    Qualified health plan has the meaning given to the term in Sec.  
155.20 of this subtitle.
    Qualified health plan issuer has the meaning given to the term in 
Sec.  155.20 of this subtitle.
    Qualified individual has the meaning given to the term in Sec.  
155.20 of this subtitle.


Sec.  156.50  Financial support.

    (a) Definitions. The following definitions apply for the purposes 
of this section:
    Participating issuer means any issuer offering plans that 
participates in the specific function that is funded by user fees. This 
term may include: health insurance issuers, QHP issuers, issuers of 
multi-State plans (as defined in Sec.  155.1000(a) of this subtitle), 
issuers of stand-alone dental plans (as described in Sec.  155.1065 of 
this subtitle), or other issuers identified by an Exchange.
    (b) Requirement for State Exchanges. A participating issuer must 
remit user fee payments assessed by an Exchange under Sec.  155.160 of 
this subtitle.

Subpart B--[Reserved]

Subpart C--Qualified Health Plan Minimum Certification Standards


Sec.  156.200  QHP issuer participation standards.

    (a) General requirement. In order to participate in an Exchange, a 
health insurance issuer must have in effect a certification issued or 
recognized by the Exchange to demonstrate that each health plan it 
offers in the Exchange is a QHP.
    (b) QHP issuer requirement. A QHP issuer must--
    (1) Comply with the requirements of this subpart with respect to 
each of its QHPs on an ongoing basis;
    (2) Comply with Exchange processes, procedures, and requirements 
set forth pursuant to subpart K of part 155 and, in the small group 
market, Sec.  155.705 of this subtitle;
    (3) Ensure that each QHP complies with benefit design standards, as 
defined in Sec.  156.20;
    (4) Be licensed and in good standing to offer health insurance 
coverage in each State in which the issuer offers health insurance 
coverage;
    (5) Implement and report on a quality improvement strategy or 
strategies consistent with the standards of section 1311(g) of the 
Affordable Care Act, disclose and report information on health care 
quality and outcomes described in sections 1311(c)(1)(H) and (I) of the 
Affordable Care Act, and implement appropriate enrollee satisfaction 
surveys consistent with section 1311(c)(4) of the Affordable Care Act; 
and
    (6) Pay any applicable user fees assessed under Sec.  156.50; and
    (7) Comply with the standards related to the risk adjustment 
program under 45 CFR part 153.
    (c) Offering requirements. A QHP issuer must offer through the 
Exchange:
    (1) At least one QHP in the silver coverage level and at least one 
QHP in the gold coverage level as described in section 1302(d)(1) of 
the Affordable Care Act;
    (2) A child-only plan at the same level of coverage, as described 
in section 1302(d)(1) of the Affordable Care Act, as any QHP offered 
through the Exchange to individuals who, as of the beginning of the 
plan year, have not attained the age of 21; and
    (3) A QHP at the same premium rate consistent with Sec.  
156.255(b).
    (d) State requirements. A QHP issuer participating in the Exchange 
must adhere to the requirements of this subpart and any provisions 
imposed by the Exchange, or a State in connection with its Exchange, 
that are conditions of participation with respect to each of its QHPs.
    (e) Non-discrimination. A QHP issuer must not, with respect to its 
QHP, discriminate on the basis of race, color, national origin, 
disability, age, sex, gender identity or sexual orientation.


Sec.  156.210  QHP rate and benefit information.

    (a) General rate requirement. A QHP issuer must set rates for an 
entire benefit year, or for the SHOP, plan year.
    (b) Rate and benefit submission. A QHP issuer must submit rate and 
benefit information to the Exchange pursuant to Sec.  155.1020.
    (c) Rate justification. A QHP issuer must submit a justification 
for a rate increase prior to the implementation of the increase. A QHP 
issuer must prominently post the justification on its Web site.


Sec.  156.220  Transparency in coverage.

    (a) Required information. A QHP issuer must provide the following 
information in accordance with the standards in paragraph (b) of this 
section:
    (1) Claims payment policies and practices;
    (2) Periodic financial disclosures;
    (3) Data on enrollment;
    (4) Data on disenrollment;
    (5) Data on the number of claims that are denied;
    (6) Data on rating practices;
    (7) Information on cost-sharing and payments with respect to any 
out-of-network coverage; and
    (8) Information on enrollee rights under title I of the Affordable 
Care Act.
    (b) Reporting requirement. A QHP issuer must submit, in an accurate 
and timely manner, to be determined by HHS, the information described 
in paragraph (a) of this section to the Exchange, HHS and the State 
insurance commissioner, and make the information described in paragraph 
(a) of this section available to the public.
    (c) Use of plain language. A QHP issuer must make sure that the 
information submitted under paragraph (b) of this section is provided 
in plain language as defined under Sec.  155.20 of this subtitle.
    (d) Enrollee cost-sharing transparency. A QHP issuer must make 
available the amount of enrollee cost sharing under the individual's 
plan or coverage with respect to the furnishing of a specific item or 
service by a participating provider in a timely manner upon the request 
of the individual. At a minimum, such information must be made 
available to such individual through an Internet Web site and such 
other means for individuals without access to the Internet.


Sec.  156.225  Marketing of QHPs.

    A QHP issuer and its officials, employees, agents and 
representatives must--
    (a) State law applies. Comply with any applicable State laws and 
regulations regarding marketing by health insurance issuers; and
    (b) Non-discrimination. Not employ marketing practices that 
discourage the enrollment of individuals with significant health needs 
in QHPs.


Sec.  156.230  Network adequacy standards.

    (a) General requirement. A QHP issuer must ensure that the provider 
network of each of its QHPs, as available to all enrollees, meets the 
following standards--
    (1) Includes essential community providers in accordance with Sec.  
156.235;
    (2) Complies with any network adequacy standards established by the 
Exchange consistent with Sec.  155.1050 of this section; and
    (3) Is consistent with the network adequacy provisions of section 
2702(c) of the PHS Act.
    (b) Notice to applicants and enrollees. A QHP issuer must make its 
provider

[[Page 41924]]

directory for a QHP available to the Exchange for publication online 
pursuant to guidance from the Exchange and to potential enrollees in 
hard copy upon request. In the provider directory, a QHP issuer must 
identify providers that are not accepting new patients.


Sec.  156.235  Essential community providers.

    (a) General requirement. A QHP issuer must include within the 
provider network of the QHP a sufficient number of essential community 
providers, where available, that serve predominantly low-income, 
medically-underserved individuals. Nothing in this requirement shall be 
construed to require any health plan to provide coverage for any 
specific medical procedure provided by the essential community 
provider.
    (b) Inclusion. Essential community providers under paragraph (a) of 
this section include:
    (1) Health care providers defined in section 340B(a)(4) of the PHS 
Act; and
    (2) Providers described in section 1927(c)(1)(D)(i)(IV) of the Act 
as set forth by section 221 of Pub. L. 111-8.


Sec.  156.245  Treatment of direct primary care medical homes.

    A QHP issuer may provide coverage through a direct primary care 
medical home that meets criteria established by HHS, so long as the QHP 
meets all requirements that are otherwise applicable and the services 
covered by the direct primary care medical home are coordinated with 
the QHP issuer.


Sec.  156.250  Health plan applications and notices.

    QHP issuers must provide all applications and notices to enrollees 
in accordance with the standards described in Sec.  155.230(b) of this 
subtitle.


Sec.  156.255  Rating variations.

    (a) Rating areas. A QHP issuer, including an issuer of a multi-
State QHP, may vary premiums for a QHP or a multi-State QHP by the 
geographic rating area established under section 2701(a)(2) of the PHS 
Act.
    (b) Same premium rates. A QHP issuer must charge the same premium 
rate without regard to whether the plan is offered through an Exchange, 
or whether the plan is offered directly from the issuer or through an 
agent.
    (c) Rating categories. A QHP issuer must cover all of the following 
groups using some combination of the following categories:
    (1) Individuals;
    (2) Two-adult families;
    (3) One-adult families with a child or children; and
    (4) All other families.


Sec.  156.260  Enrollment periods for qualified individuals.

    (a) Individual market requirement. A QHP issuer must:
    (1) Enroll a qualified individual during the initial and annual 
open enrollment periods described in Sec.  155.410(b) and Sec.  
155.410(e) of this subtitle, and abide by the effective dates of 
coverage established by the Exchange pursuant to the requirements 
described in Sec.  155.410(c) and Sec.  155.410(f) of this subtitle; 
and
    (2) Make available, at a minimum, special enrollment periods 
described in Sec.  155.420(d), for QHPs and abide by the effective 
dates of coverage established by the Exchange pursuant to the 
requirements described in Sec.  155.420(b) of this subtitle.
    (b) Notification of effective date. A QHP issuer must notify the 
qualified individual of his or her effective date of coverage in 
coordination with the standards established in Sec.  155.410(c), Sec.  
155.410(f) and Sec.  155.420(b) of this subtitle.


Sec.  156.265  Enrollment process for qualified individuals.

    (a) General requirement. A QHP issuer must adhere to the following 
requirements for individuals seeking enrollment in a QHP.
    (b) Enrollment information collection and transmission. If an 
applicant initiates enrollment directly with the issuer for enrollment 
in a QHP, the QHP issuer must--
    (1) Collect enrollment information using the application adopted 
pursuant to Sec.  155.405 of this subtitle;
    (2) Transmit the enrollment information to the Exchange consistent 
with the standards described in Sec.  155.260 and Sec.  155.270 of this 
subtitle to facilitate the eligibility determination process; and
    (3) Enroll an individual only after receiving confirmation that the 
eligibility process is complete and the applicant has been determined 
eligible for enrollment in a QHP, in accordance with the standards 
established in Sec.  155.200(c) of this subtitle.
    (c) Acceptance of enrollment information. A QHP issuer must accept 
enrollment information in an electronic format from the Exchange that 
is consistent with the requirements of Sec.  155.260 and Sec.  155.270 
of this subtitle.
    (d) Premium payment. A QHP issuer must follow the premium payment 
process established by the Exchange pursuant to Sec.  155.240 of this 
subtitle.
    (e) Enrollment information package. A QHP issuer must provide new 
enrollees an enrollment information package.
    (f) Summary of benefits and coverage document. A QHP issuer must 
provide the summary of benefits and coverage document to enrollees as 
specified in 2715 of the PHS Act and prior to the start of the open 
enrollment period.
    (g) Enrollment reconciliation. A QHP issuer must reconcile 
enrollment files with the Exchange no less than once a month in 
accordance with Sec.  155.400(d) of this subtitle.
    (h) Enrollment acknowledgement. A QHP issuer must acknowledge 
receipt of enrollment information in accordance with Exchange standards 
established in Sec.  155.400(b)(2) of this subtitle.


Sec.  156.270  Termination of coverage for qualified individuals.

    (a) General requirement. A QHP issuer may only terminate coverage 
as permitted by the Exchange pursuant to Sec.  155.430(b) of this 
subtitle.
    (b) Termination of coverage notice requirement. If an enrollee's 
coverage with a QHP is terminated for any reason, the QHP issuer must 
provide the Exchange and the enrollee with a notice of termination of 
coverage which is consistent with the effective date established by the 
Exchange pursuant to Sec.  155.430(d) of this subtitle.
    (c) Termination of coverage due to non-payment of premium. A QHP 
issuer must establish a standard policy for the termination of coverage 
of enrollees due to non-payment of premium as permitted by the Exchange 
in Sec.  155.430(b)(2)(iii) of this subtitle. This policy for the 
termination of coverage:
    (1) Must include the grace period for enrollees receiving advance 
payments of the premium tax credits as described in paragraph (d) of 
this section; and
    (2) Must be applied uniformly to enrollees in similar 
circumstances.
    (d) Payment grace period for recipients of advance payments of the 
premium tax credit. A QHP issuer must provide a grace period of at 
least three consecutive months if an enrollee receiving advance 
payments of the premium tax credit has previously paid at least one 
month's premium. During the grace period, the QHP issuer must:
    (1) Pay all appropriate claims submitted on behalf of the enrollee;
    (2) Apply all payments received during such period to the first 
billing cycle in which payment was delinquent; and
    (3) Continue to collect advance payments of the premium tax credit 
on behalf of the enrollee from the Department of the Treasury.
    (e) Notice of non-payment of premiums. If an enrollee is delinquent 
on premium payment, the QHP issuer must provide the enrollee with 
notice of such payment delinquency.

[[Page 41925]]

    (f) Exhaustion of grace period. If an enrollee receiving advance 
payments of the premium tax credit exhausts the grace period in 
paragraph (d) of this section without submitting any premium payment, 
the QHP issuer may terminate the enrollee's coverage effective at the 
end of the payment grace period.
    (g) Records of termination of coverage. QHP issuers must maintain 
records in accordance with Exchange standards established pursuant to 
Sec.  155.430(c) of this subtitle.
    (h) Effective date of termination of coverage. QHP issuers must 
abide by the termination of coverage effective dates described in Sec.  
155.430(d) of this subtitle.


Sec.  156.275  Accreditation of QHP issuers.

    (a) General requirement. A QHP issuer must:
    (1) Be accredited on the basis of local performance of its QHPs in 
the following categories by an accrediting entity recognized by HHS:
    (i) Clinical quality measures, such as the Healthcare Effectiveness 
Data and Information Set;
    (ii) Patient experience ratings on a standardized CAHPS survey;
    (iii) Consumer access;
    (iv) Utilization management;
    (v) Quality assurance;
    (vi) Provider credentialing;
    (vii) Complaints and appeals;
    (viii) Network adequacy and access; and
    (ix) Patient information programs, and
    (2) Authorize the accrediting entity that accredits the QHP issuer 
to release to the Exchange and HHS a copy of its most recent 
accreditation survey, together with any survey-related information that 
HHS may require, such as corrective action plans and summaries of 
findings.
    (b) Time frame for accreditation. A QHP issuer must be accredited 
within the timeframe established by the Exchange pursuant to Sec.  
155.1045 of this subtitle. The QHP issuer must maintain accreditation 
so long as the QHP issuer offers QHPs.


Sec.  156.280  Segregation of funds for abortion services.

    (a) State opt-out of abortion coverage. QHP issuers must comply 
with State law, if such State enacts a law that prohibits abortion 
coverage in QHPs.
    (b) Termination of opt out. A QHP issuer may provide coverage of 
abortion services through the Exchange in a State described in 
paragraph (a) of this section if the State repeals such law.
    (c) Voluntary choice of coverage of abortion services. 
Notwithstanding any other provision of title I of the Affordable Care 
Act (or any other amendment made under that title):
    (1) Nothing in title I of the Affordable Care Act (or any 
amendments by that title) shall be construed to require a QHP issuer to 
provide coverage of services described in paragraph (d) of this section 
as part of its essential health benefits, as described in 1302(b) of 
the Affordable Care Act, for any plan year.
    (2) Subject to paragraphs (a) and (b) of this section, the QHP 
issuer must determine whether or not the QHP provides coverage of 
services described in paragraph (d) of this section as part of such 
benefits for the plan year.
    (d) Abortion services.
    (1) Abortions for which public funding is prohibited--The services 
described in this paragraph (d)(1) are abortion services for which the 
expenditure of Federal funds appropriated for HHS is not permitted, 
based on the law as in effect as of the date that is 6 months before 
the beginning of the plan year involved.
    (2) Abortions for which public funding is allowed--The services 
described in this paragraph (d)(2) are abortion services for which the 
expenditure of Federal funds appropriated for HHS is permitted, based 
on the law as in effect as of the date that is 6 months before the 
beginning of the plan year involved.
    (e) Prohibition on the use of Federal funds.
    (1) If a QHP provides coverage of services described in paragraph 
(d)(1) of this section, the QHP issuer must not use any amount 
attributable to any of the following for the purposes of paying for 
such services:
    (i) The credit under section 36B of the Code and the amount (if 
any) of the advance payment of the credit under section 1412 of the 
Affordable Care Act;
    (ii) Any cost-sharing reduction under section 1402 of the 
Affordable Care Act and the amount (if any) of the advance payments of 
the reduction under section 1412 of the Affordable Care Act.
    (2) Establishment of allocation accounts. In the case of a QHP to 
which paragraph (e)(1) of this section applies, the QHP issuer must:
    (i) Collect from each enrollee in the QHP (without regard to the 
enrollee's age, sex, or family status) a separate payment for each of 
the following:
    (A) An amount equal to the portion of the premium to be paid 
directly by the enrollee for coverage under the QHP of services other 
than services described in paragraph (d)(1) of this section (after 
reductions for credits and cost-sharing reductions described in 
paragraph (e)(1) of this section); and
    (B) An amount equal to the actuarial value of the coverage of 
services described in paragraph (d)(1) of this section.
    (ii) Deposit all such separate payments into separate allocation 
accounts as provided in paragraph (e)(3) of this section. In the case 
of an enrollee whose premium for coverage under the QHP is paid through 
employee payroll deposit, the separate payments required under this 
subparagraph shall each be paid by a separate deposit.
    (3) Segregation of funds.
    (i) The QHP issuer to which paragraph (e)(1) of this section 
applies must establish allocation accounts described in paragraph 
(e)(3)(ii) for enrollees receiving the amounts described in paragraph 
(e)(1) of this section.
    (ii) Allocation accounts. The QHP issuer to which paragraph (e)(1) 
of this section applies must deposit:
    (A) All payments described in paragraph (e)(2)(i)(A) of this 
section into a separate account that consists solely of such payments 
and that is used exclusively to pay for services other than the 
services described in paragraph (d)(1);
    (B) All payments described in paragraph (e)(2)(i)(B) of this 
section into a separate account that consists solely of such payments 
and that is used exclusively to pay for services described in paragraph 
(d)(1) of this section.
    (4) Actuarial value. The QHP issuer must estimate the basic per 
enrollee, per month cost, determined on an average actuarial basis, for 
including coverage under the QHP of services described in paragraph 
(d)(1) of this section. In making such an estimate, the QHP issuer:
    (i) May take into account the impact on overall costs of the 
inclusion of such coverage, but may not take into account any cost 
reduction estimated to result from such services, including prenatal 
care, delivery, or postnatal care;
    (ii) Must estimate such costs as if such coverage were included for 
the entire population covered; and
    (iii) May not estimate such a cost at less than one dollar per 
enrollee, per month.
    (5) Ensuring compliance with segregation requirements.
    (i) Subject to paragraph (e)(5)(ii) of this section, the QHP issuer 
must comply with the efforts or direction of the State health insurance 
commissioner to ensure compliance with this section through the 
segregation of QHP funds in accordance with applicable provisions of 
generally accepted accounting requirements, circulars on funds 
management of the Office of

[[Page 41926]]

Management and Budget and guidance on accounting of the Government 
Accountability Office.
    (ii) Nothing in this clause shall prohibit the right of an 
individual or QHP issuer to appeal such action in courts of competent 
jurisdiction.
    (f) Rules relating to notice.
    (1) Notice. A QHP that provides for coverage of services in 
paragraph (d)(1) of this section, must provide a notice to enrollees, 
only as part of the summary of benefits and coverage explanation, at 
the time of enrollment, of such coverage.
    (2) Rules relating to payments. The notice described in paragraph 
(f)(1) of this section, any advertising used by the QHP issuer with 
respect to the QHP, any information provided by the Exchange, and any 
other information specified by HHS must provide information only with 
respect to the total amount of the combined payments for services 
described in paragraph (d)(1) of this section and other services 
covered by the QHP.
    (g) No discrimination on basis of provision of abortion. No QHP 
offered through an Exchange may discriminate against any individual 
health care provider or health care facility because of its 
unwillingness to provide, pay for, provide coverage of, or refer for 
abortions.
    (h) Application of State and Federal laws regarding abortions.
    (1) No preemption of State laws regarding abortion. Nothing in the 
Affordable Care Act shall be construed to preempt or otherwise have any 
effect on State laws regarding the prohibition of (or requirement of) 
coverage, funding, or procedural requirements on abortions, including 
parental notification or consent for the performance of an abortion on 
a minor.
    (2) No effect on Federal laws regarding abortion. Nothing in the 
Affordable Care Act shall be construed to have any effect on Federal 
laws regarding:
    (i) Conscience protection;
    (ii) Willingness or refusal to provide abortion; and
    (iii) Discrimination on the basis of the willingness or refusal to 
provide, pay for, cover, or refer for abortion or to provide or 
participate in training to provide abortion.
    (3) No effect on Federal civil rights law. Nothing in section 
1303(c) of the Affordable Care Act shall alter the rights and 
obligations of employees and employers under Title VII of the Civil 
Rights Act of 1964.
    (i) Application of emergency services laws. Nothing in the 
Affordable Care Act shall be construed to relieve any health care 
provider from providing emergency services as required by State or 
Federal law, including section 1867 of the Act (popularly known as 
``EMTALA'').


Sec.  156.285  Additional standards specific to the SHOP.

    (a) SHOP rating and premium payment requirements. QHP issuers 
offering QHPs through a SHOP must:
    (1) Accept payment from the SHOP on behalf of a qualified employer 
or an enrollee in accordance with Sec.  155.705(b)(4) of this subtitle;
    (2) Adhere to the SHOP timeline for rate setting as established in 
Sec.  155.705(b)(5) of this subtitle; and
    (3) Charge the same contract rate for a plan year.
    (b) Enrollment periods for the SHOP. QHP issuers must:
    (1) Enroll a qualified employee in accordance with the qualified 
employer's annual employee open enrollment period described in Sec.  
155.725 of this subtitle;
    (2) QHP issuers must provide special enrollment periods described 
in Sec.  155.420 of this subtitle excluding paragraphs (d)(3) and 
(d)(6).
    (3) Establish an effective date of coverage in accordance with 
Sec.  155.410(c) of this subtitle.
    (c) Enrollment process for the SHOP. A QHP issuer offering a QHP in 
the SHOP must:
    (1) Adhere to the enrollment process timeline for SHOP Exchanges as 
described in Sec.  155.720(b) of this subtitle;
    (2) Receive enrollment information in an electronic format, in 
accordance with the requirements in Sec.  155.260 and Sec.  155.270, 
from the SHOP frequently as described in Sec.  155.720(c) of this 
subtitle;
    (3) Provide new enrollees with the enrollment information package 
as described in Sec.  156.265(f) of this subtitle;
    (4) Provide the summary of benefits and coverage document to 
qualified employers and qualified employees as described in Sec.  
156.265(g) of this subtitle;
    (4) Reconcile enrollment files with the Exchange at least monthly;
    (5) Acknowledge receipt of enrollment information in accordance 
with Exchange standards; and
    (6) Enroll all qualified employees consistent with the plan year of 
the applicable qualified employer.
    (d) Termination of coverage in the SHOP. QHP issuers must:
    (1) Abide by the following requirements with respect to coverage 
termination of enrollees in the SHOP:
    (i) General requirements regarding termination of coverage 
established in Sec.  156.270(a);
    (ii) Requirements for notices to be provided to enrollees and 
qualified employers in Sec.  156.270(b) and Sec.  156.290(b).
    (iii) Requirements regarding termination of coverage effective 
dates as set forth in Sec.  156.270(g).
    (2) If a qualified employer chooses to withdraw from participation 
in the SHOP, the QHP issuer must terminate coverage for all enrollees 
of the withdrawing qualified employer.


Sec.  156.290  Non-renewal and decertification of QHPs.

    (a) Non-renewal of recertification. If a QHP issuer elects not to 
seek recertification with the Exchange, the QHP issuer, at a minimum, 
must--
    (1) Notify the Exchange of its decision prior to the beginning of 
the recertification process and procedures adopted by the Exchange 
pursuant to Sec.  155.1075 of this subtitle;
    (2) Fulfill its obligation to cover benefits for each enrollee 
through the end of the plan or benefit year;
    (3) Fulfill data reporting obligations from the last plan or 
benefit year;
    (4) Provide notice to enrollees as described in paragraph (b) of 
this section; and
    (5) Terminate coverage for enrollees in the QHP in accordance with 
Sec.  156.270, as applicable.
    (b) Notice of QHP non-renewal. If a QHP issuer elects not to seek 
recertification with the Exchange for its QHP, the QHP issuer must 
provide written notice to each enrollee.
    (c) Decertification. If a QHP is decertified by the Exchange, the 
QHP issuer must terminate coverage for enrollees only after:
    (1) The Exchange has made notification as described in Sec.  
155.1080 of this subtitle; and
    (2) Enrollees have an opportunity to enroll in other coverage.


Sec.  156.295  Prescription drug distribution and cost reporting.

    (a) General requirement. In a form and manner specified by HHS, a 
QHP issuer must provide to HHS the following information:
    (1) The percentage of all prescriptions that were provided under 
the QHP through retail pharmacies compared to mail order pharmacies, 
and the percentage of prescriptions for which a generic drug was 
available and dispensed compared to all drugs dispensed, broken down by 
pharmacy type, which includes an independent pharmacy, supermarket 
pharmacy, or mass merchandiser pharmacy that is licensed as a pharmacy 
by the State and that dispenses medication to the general public), that 
is paid by the QHP issuer or the QHP issuer's contracted PBM;

[[Page 41927]]

    (2) The aggregate amount, and the type of rebates, discounts or 
price concessions (excluding bona fide service fees, which include but 
are not limited to distribution service fees, inventory management 
fees, product stocking allowances, and fees associated with 
administrative services agreements and patient care programs (such as 
medication compliance programs and patient education programs)) that 
the QHP issuer or its contracted PBM negotiates that are attributable 
to patient utilization under the QHP, and the aggregate amount of the 
rebates, discounts, or price concessions that are passed through to the 
QHP issuer, and the total number of prescriptions that were dispensed.
    (3) The aggregate amount of the difference between the amount the 
QHP issuer pays its contracted PBM and the amounts that the PBM pays 
retail pharmacies, and mail order pharmacies, and the total number of 
prescriptions that were dispensed.
    (b) Confidentiality. Information disclosed by a QHP issuer or a PBM 
under this section is confidential and shall not be disclosed by HHS or 
by a QHP receiving the information, except that HHS may disclose the 
information in a form which does not disclose the identity of a 
specific PBM, QHP, or prices charged for drugs, for the following 
purposes:
    (1) As HHS determines to be necessary to carry out section 1150A or 
part D of title XVIII of the Act;
    (2) To permit the Comptroller General to review the information 
provided;
    (3) To permit the Director of the Congressional Budget Office to 
review the information provided; or
    (4) To States to carry out section 1311 of the Affordable Care Act.
    (c) Penalties. A QHP issuer that fails to report the information 
described in paragraph (a) of this section to HHS or knowingly provides 
false information will be subject to the provisions of subsection 
(b)(3)(C) of section 1927 of the Act.

(Catalog of Federal Domestic Assistance Program No. 93.773, 
Medicare--Hospital Insurance; and Program No. 93.774, Medicare--
Supplementary Medical Insurance Program)


    Dated: June 29, 2011.
Donald M. Berwick,
Administrator, Centers for Medicare & Medicaid Services.
    Dated: July 7, 2011.
Kathleen Sebelius,
Secretary.
[FR Doc. 2011-17610 Filed 7-11-11; 11:15 am]
BILLING CODE 4120-01-P