[Federal Register Volume 77, Number 59 (Tuesday, March 27, 2012)]
[Rules and Regulations]
[Pages 18309-18475]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-6125]



[[Page 18309]]

Vol. 77

Tuesday,

No. 59

March 27, 2012

Part II





Department of Health and Human Services





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45 CFR Parts 155, 156, and 157





Patient Protection and Affordable Care Act; Establishment of Exchanges 
and Qualified Health Plans; Exchange Standards for Employers; Final 
Rule and Interim Final Rule

Federal Register / Vol. 77 , No. 59 / Tuesday, March 27, 2012 / Rules 
and Regulations

[[Page 18310]]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

45 CFR Parts 155, 156, and 157

[CMS-9989-F]
RIN 0938-AQ67


Patient Protection and Affordable Care Act; Establishment of 
Exchanges and Qualified Health Plans; Exchange Standards for Employers

AGENCY: Department of Health and Human Services.

ACTION: Final rule, Interim final rule.

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SUMMARY: This final rule will implement the new Affordable Insurance 
Exchanges (``Exchanges''), consistent with title I of the Patient 
Protection and Affordable Care Act of 2010 as amended by the Health 
Care and Education Reconciliation Act of 2010, 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.

DATES: Effective Date: These regulations are effective on May 29, 2012.
    Comment Date: Certain provisions of this final rule are being 
issued as interim final. We will consider comments from the public on 
the following provisions: Sec. Sec.  155.220(a)(3); 155.300(b); 
155.302; 155.305(g); 155.310(e); 155.315(g); 155.340(d); 155.345(a); 
and, 155.345(g). 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 May 11, 2012.

ADDRESSES: In commenting, please refer to file code CMS-9989-F. 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 ``Submit a 
comment'' instructions.
    2. By regular mail. You may mail written comments to the following 
address ONLY: Centers for Medicare & Medicaid Services, Department of 
Health and Human Services, Attention: CMS-9989-F, 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-F, 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.

FOR FURTHER INFORMATION CONTACT:
    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 part 155 
subparts D and E.
    Pete Nakahata at (202) 680-9049 for matters related to part 156.
    Rex Cowdry at (301) 492-4387 for matters related to part 155 
subpart H and part 157.

SUPPLEMENTARY INFORMATION: 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 comments received before the close of the comment period on 
the following Web site as soon as possible after they have been 
received: http://regulations.gov. Follow the search instructions on 
that Web site to view public comments.
    Comments received timely will be also available for public 
inspection as they are received, generally beginning approximately 3 
weeks after publication of a document, at the headquarters of the 
Centers for Medicare & Medicaid Services, 7500 Security Boulevard, 
Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 
a.m. to 4 p.m. To schedule an appointment to view public comments, 
phone 1-800-743-3951.
    This final rule incorporates provisions originally published as two 
proposed rules, the July 15, 2011 rule titled Establishment of 
Exchanges and Qualified Health Plans (``Exchange establishment proposed 
rule''), and the August 17, 2011 rule titled Exchange Functions in the 
Individual Market: Eligibility Determinations and Exchange Standards 
for Employers (``Exchange eligibility proposed rule''). These proposed 
rules are referred to collectively as the Exchange establishment and 
eligibility proposed rules. While originally published as separate 
rulemaking, the provisions contained in these proposed rules are 
integrally linked, and together encompass the key functions of 
Exchanges related to eligibility, enrollment, and plan participation 
and management. In addition, several sections in this final rule are 
being issued as interim final rules and we are soliciting comment on 
those sections. Given the highly connected nature of these provisions, 
we are combining both proposed rules and the interim final rule into a 
single final rule for reader ease and consistency with the note that, 
even though the final rule is shorter than the sum of the two proposed 
rules, it is longer than each individually.
    An updated Regulatory Impact Analysis associated with this final 
rule is available at http://cciio.cms.gov under ``Regulations and 
Guidance.'' A summary of the aforementioned analysis is included as 
part of this final rule.

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

[[Page 18311]]

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 (5 U.S.C. 8901, et 
seq.)
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
LEP Limited English Proficient
MAGI Modified Adjusted Gross Income
MEWA Multiple Employer Welfare Arrangement
NAIC National Association of Insurance Commissioners
OMB Office of Management and Budget
OPM U.S. Office of Personnel Management
PBM Pharmacy Benefit Manager
PHS Act Public Health Service Act
PRA Paperwork Reduction Act of 1985
QHP Qualified Health Plan
SHOP Small Business Health Options Program
SSA Social Security Administration
SSN Social Security Number
The Act Social Security Act
The Code Internal Revenue Code of 1986
TIN Taxpayer Identification Number

Table of Contents

I. Background
    A. Legislative Overview
    1. Legislative Requirements for Establishing Exchanges
    2. Legislative Requirements for Related Provisions
    B. Structure of the Final Rule
II. Provisions of the Proposed Regulation and Analysis of and 
Responses to Public Comments
    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--Exchange Functions in the Individual Market: 
Eligibility Determinations for Exchange Participation and Insurance 
Affordability Programs
    5. Subpart E--Exchange Functions in the Individual Market: 
Enrollment in Qualified Health Plans
    6. Subpart H--Exchange Functions: Small Business Health Options 
Program (SHOP)
    7. 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 C--Qualified Health Plan Minimum Certification 
Standards
    C. Part 157--Employer Interactions With Exchange and SHOP 
Participation
    1. Subpart A--General Provisions
    2. Subpart C--Standards for Qualified Employers
III. Provisions of the Final Regulations
IV. Waiver of Proposed Rulemaking
V. Collection of Information Requirements
VI. Summary of Regulatory Impact Analysis
VII. Regulatory Flexibility Act
VIII. Unfunded Mandates
IX. Federalism
X. Regulations Text

    Executive Summary: Beginning in 2014, individuals and small 
businesses will be able to purchase private health insurance through 
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.
    This final rule: (1) Sets forth the minimum Federal standards that 
States must meet if they elect to establish and operate an Exchange, 
including the standards related to individual and employer eligibility 
for and enrollment in the Exchange and insurance affordability 
programs; (2) outlines minimum standards 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 final rule is to afford States substantial discretion in 
the design and operation of an Exchange, with greater standardization 
provided where directed by the statute or where there are compelling 
practical, efficiency or consumer protection reasons. Consistent with 
the scope of the Exchange establishment and eligibility proposed rules, 
this final rule does not address all of the Exchange provisions in the 
Affordable Care Act; rather, more details will be provided in 
forthcoming guidance and future rulemaking, where appropriate.
    A portion of this rule is issued on an interim final basis. As 
such, we will consider comments from the public on the following 
provisions:
     Sec.  155.220(a)(3)--Related to the ability of a State to 
permit agents and brokers to assist qualified individuals in applying 
for advance payments of the premium tax credit and cost-sharing 
reductions for QHPs.
     Sec.  155.300(b)--Related to Medicaid and CHIP 
regulations;
     Sec.  155.302--Related to options for conducting 
eligibility determinations;
     Sec.  155.305(g)--Related to eligibility standards for 
cost-sharing reductions;
     Sec.  155.310(e)--Related to timeliness standards for 
Exchange eligibility determinations;
     Sec.  155.315(g)--Related to verification for applicants 
with special circumstances;
     Sec.  155.340(d)--Related to timeliness standards for the 
transmission of information for the administration of advance payments 
of the premium tax credit and cost-sharing reductions; and
     Sec.  155.345(a) and Sec.  155.345(g)--Related to 
agreements between agencies administering insurance affordability 
programs.

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 standards 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 policies. 
Section 1311(k) 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) directs 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 standards related 
to Exchanges, QHPs, and other components of title I of the Affordable 
Care Act.
    Section 1401 of the Affordable Care Act creates new section 36B of 
the Internal Revenue Code (the Code), which provides for a premium tax 
credit for eligible individuals who enroll in a QHP through an 
Exchange. Section 1402 establishes provisions to reduce the cost-
sharing obligation of certain

[[Page 18312]]

eligible individuals enrolled in a QHP offered through an Exchange, 
including standards for determining Indians eligible for certain 
categories of cost-sharing reductions.
    Under section 1411 of the Affordable Care Act, the Secretary is 
directed to establish a program for determining whether an individual 
meets the eligibility standards for Exchange participation, advance 
payments of the premium tax credit, cost-sharing reductions, and 
exemptions from the individual responsibility provision.
    Sections 1412 and 1413 of the Affordable Care Act and section 1943 
of the Social Security Act (the Act), as added by section 2201 of the 
Affordable Care Act, contain additional provisions regarding 
eligibility for advance payments of the premium tax credit and cost-
sharing reductions, as well as provisions regarding simplification and 
coordination of eligibility determinations and enrollment with other 
health programs.
    Unless otherwise specified, the provisions in this final 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.
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 are finalizing special Exchange 
enrollment periods and the reductions in cost sharing for Indians 
authorized, respectively, by sections 1311(c)(6) and 1402(d) of the 
Affordable Care Act under this authority in subparts D and E of part 
155, and we expect to address others in future rulemaking.
    Section 6005 of the Affordable Care Act creates new section 1150A 
of the Act, which directs QHP issuers, and sponsors of certain plans 
offered under part D of title XVIII of the Act to provide data on the 
cost and distribution of prescription drugs covered by the plan. We are 
codifying these standards under this authority in subpart C of part 
156.

B. Structure of the Final Rule

    The regulations outlined in this final rule are codified in the new 
45 CFR parts 155, 156, and 157. Part 155 outlines the standards 
relative to the establishment, operation, and minimum functionality of 
Exchanges, including eligibility standards for insurance affordability 
programs. Part 156 outlines the standards for health insurance issuers 
with respect to participation in an Exchange, including the minimum 
certification standards for QHPs. Many provisions in part 155 have 
parallel provisions 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. Part 157 establishes the participation standards for 
employers in the Small Business Health Options Program (SHOP).
    Subjects included in the Affordable Care Act to be addressed in 
separate rulemaking include but are not limited to: (1) Standards 
outlining the Exchange process for issuing certificates of exemption 
from the individual responsibility policy and payment under section 
1411(a)(4); (2) defining essential health benefits, actuarial value and 
other benefit design standards; and (3) standards for Exchanges and QHP 
issuers related to quality.
    We note that the health plan standards set forth under this final 
rule are, for the most part, strictly related to QHPs certified to be 
offered through the Exchange and not the entire individual and small 
group market. Such policies for the entire individual and small and 
large group markets have been, and will continue to be, addressed in 
separate rulemaking issued by HHS, and the Departments of Labor and the 
Treasury.

C. Alignment With Related Rules and Published Information

    The Exchange eligibility proposed rule was published in conjunction 
with ``Medicaid Program; Eligibility Changes under the Affordable Care 
Act of 2010--CMS-2349-P,'' which will be referred to throughout this 
final rule as the ``Medicaid proposed rule'' and the proposed rule 
published by the Department of the Treasury, ``Health Insurance Premium 
Tax Credits--REG 131491-10,'' which will be referred to throughout this 
final rule as the ``Treasury proposed rule''. This regulation includes 
numerous cross-references to the Medicaid final rule, which is expected 
to be finalized shortly after this final rule. The Treasury final rule 
is expected to be published soon after this Exchanges final rule.
    HHS published a document titled ``State Exchange Implementation 
Question and Answers'' on November 29, 2011. \1\ We reference this 
document throughout the preamble where the information complements 
policies in this final rule.
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    \1\ State Exchange Implementation Questions and Answers, 
published November 29, 2011: http://cciio.cms.gov/resources/files/Files2/11282011/exchange_q_and_a.pdf.pdf.
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II. Provisions of the Proposed Regulation and Analysis and Responses to 
Public Comments

    The Exchange establishment and eligibility proposed rules were 
published in the Federal Register on July 15, 2011 and August 17, 2011, 
respectively, with comment periods ending October 31, 2011. In total, 
we received approximately 24,781 comments on both proposed rules. Of 
the comments received, about 23,000 were a collection of letter 
campaigns related to women's services, or general public comments on 
the Affordable Care Act and the government's role in healthcare, but 
not specific to the proposed rules. We also received a number of 
comments on essential health benefits and preventive services. We have 
not addressed such comments, and others that are not directly related 
to the proposed rule, because they are outside the scope of this final 
rule.
    Before the proposed rules, HHS also published a Request for Comment 
(the RFC) on August 3, 2010 (75 FR 45584) inviting the public to 
provide input regarding the rules that will govern the Exchanges. In 
this final rule, we have responded to comments submitted in response to 
the Exchange establishment and eligibility proposed rules and the RFC, 
where relevant. These comments are not separately identified, but 
instead are incorporated into each substantive section of the final 
rule as appropriate. For the most part, we address issues according to 
the numerical order of the regulation sections.
    Comments represented a wide variety of stakeholders, including but 
not limited to States, tribes, tribal organizations, health plans, 
consumer groups, healthcare providers, industry experts, and members of 
the public. In addition, we held consultation sessions on August 22, 
2011, September 7, 2011, and September 15, 2011 to provide an overview 
of the proposed rule where Tribal governments were afforded an 
opportunity to ask questions and make comments. The public was reminded 
to submit written comments before the close of the public comment 
period that was announced in the proposed rule and we extended the 
comment period by 30 days to ensure ample opportunity for comments.

[[Page 18313]]

    Many commenters addressed the balance between flexibility for 
States and Exchanges and standardization and predictability for 
consumers nationwide. Commenters also expressed concerns about 
differences between Exchange and Medicaid policies and about various 
aspects of the eligibility verification and redetermination process.
    While we recognize that consumers may benefit from national 
standards, we continue to believe that States are best equipped to 
adapt the minimum Exchange functions to their local markets and the 
unique needs of their residents. Further, States already have 
significant experience performing many key functions, including 
oversight and enforcement of health plans, and determining eligibility 
for health benefit programs. Therefore, where possible we finalized 
provisions of the proposed rule that provided significant discretion 
for States to go beyond the minimum standards in implementing and 
designing an Exchange. We believe this approach leverages local 
expertise and experience to provide a positive experience for 
consumers. Since functions within an Exchange will be handled 
consistently, consumers comparing plans within an Exchange will benefit 
from standardization. In addition, based on comments received, we 
provide States with additional options for determining eligibility 
under a State-based and Federally-facilitated Exchange in this final 
rule.

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)
    Proposed Sec.  155.10 of subpart A specified the general statutory 
authority for and scope of standards proposed in part 155, which 
establish minimum standards for the State option to establish an 
Exchange; minimum Exchange functions; eligibility and enrollment of 
qualified individuals, including for advance payments of the premium 
tax credit and cost-sharing reductions; enrollment periods; minimum 
SHOP functions; eligibility and enrollment of qualified employers and 
employees in a SHOP; and certification of QHPs. We did not receive 
specific comments on this section and are finalizing the provision as 
proposed.
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 were taken directly from the Affordable Care Act or 
from existing regulations, though some new definitions were created 
when necessary.
    We proposed definitions or interpretations for ``Exchange,'' 
``advance payments of the premium tax credit,'' ``annual open 
enrollment period,'' ``applicant,'' ``cost-sharing reductions,'' 
``initial enrollment period,'' and ``special enrollment period.'' In 
addition, in the Exchange Eligibility proposed rule, we included a 
definition for ``application filer.''
    Comment: A few commenters suggested that the term ``applicant'' 
only apply to individuals seeking coverage for themselves. Another 
commenter sought clarification as to whether the term applies only to 
modified adjusted gross income (MAGI)-based Medicaid applicants or to 
all Medicaid applicants.
    Response: We have revised the definition of the term ``applicant'' 
to apply only to individuals who are seeking eligibility for coverage 
for themselves or their family. The proposed definition included an 
individual who is seeking eligibility for advance payments of the 
premium tax credit and cost-sharing reductions who might not be seeking 
coverage for himself or herself (for example, in a situation in which a 
parent is seeking coverage only for his or her children); we have 
removed these programs from the definition of applicant as part of this 
clarification. Revising this definition is important to clarify that 
certain provisions of subpart D (for example, verification of 
citizenship and lawful presence) only apply to individuals who are 
seeking coverage.
    We also note that this term applies regardless of the results of an 
individual's eligibility determination. Consequently, if an individual 
is seeking coverage and he or she is ultimately determined eligible for 
Medicaid in a non-MAGI category, he or she was still an ``applicant.'' 
We further clarify that the term ``applicant'' applies regardless of 
whether an application was submitted directly to the Exchange, or if an 
application was submitted to an agency administering an insurance 
affordability program (for example, the State Medicaid or CHIP agency) 
and then transmitted to the Exchange.
    Comment: We received comments suggesting that the definition of 
``application filer,'' described in Sec.  155.300(a), incorporate 
language included in Medicaid proposed regulations at 42 CFR 435.907, 
allowing that applications be completed by ``the applicant, an 
authorized representative, or someone acting responsibly for the 
applicant.''
    Response: In the final rule, we amend the definition of 
``application filer'' in proposed Sec.  155.300 to align with the 
description of individuals who may submit an application according to 
Sec.  155.405(c) of this final rule as well as the Medicaid final rule, 
and to include: applicants; an adult who is in the applicant's 
household, as defined in 42 CFR 435.603(f), or family, as defined in 
section 36B(d)(1) of the Code; authorized representatives; or, if the 
applicant is a minor or incapacitated, someone acting responsibly on 
behalf of the applicant.
    Comment: A few commenters suggested that defining ``benefit year'' 
as a calendar year may be confusing to some industries where such term 
is not used in the same way. Others asked how this definition impacts 
the calculation of deductibles and out-of-pocket limits.
    Response: The term ``benefit year'' is defined only for the 
purposes of this regulation and does not change the industry's use of 
the term. In this final rule, as in the proposed rule, we use ``benefit 
year'' to refer to the calendar year of coverage provided through the 
Exchange. The calculation of deductibles and cost-sharing limits 
described in section 1302(c) of the Affordable Care Act will be 
addressed in future regulations.
    Comment: One commenter recommended we should define ``consumer'' to 
include enrollees, qualified employers, qualified individuals and 
qualified employers. One commenter requested that ``person'' be more 
clearly defined to be limited to individuals acting as brokers or 
agents, because in some States the word ``person'' is defined to 
include entities such as a company, insurer, association, or an 
organization.
    Response: In response to the comments, we have tried to limit the 
use of the terms ``consumer'' and ``person'' to reduce ambiguity and 
any confusion. When possible, we say ``individual'' when the terms 
``applicant, qualified individual, or enrollee'' are not suitable. The 
definition of agent or broker is inclusive of individuals, companies, 
insurers, associations, organizations, and any other entity that holds 
a license as an agent, broker, or insurance producer. This final rule 
does not define ``person.''
    Comment: Some commenters suggested that we codify the definition of 
``educated health care consumer in section 1304(e) of the Affordable 
Care Act.
    Response: We have added this definition to Sec.  155.20.

[[Page 18314]]

    Comment: Two commenters sought clarification on whether the term 
``Exchange'' includes both the individual market and SHOP components of 
an Exchange.
    Response: The definition of ``Exchange'' includes the phrase 
``makes QHPs available to qualified individuals and qualified 
employers'' and thus incorporates the Exchange functions that serve 
both the individual and small group markets. Governance of an 
independent SHOP is addressed in Sec.  155.110(e) and unique standards 
for the SHOP are outlined in subpart H of this final rule.
    Comment: One commenter suggested that we define what it means for 
an Exchange to ``make available'' QHPs.
    Response: We believe that this regulation in its entirety defines 
what it means to ``make available'' QHPs in terms of certifying QHPs, 
displaying comparative QHP information, determining eligibility for 
enrollment, facilitating enrollment, and providing consumer assistance.
    Comment: One commenter requested that we define the term ``entities 
eligible to carry out Exchange functions.''
    Response: We define what entities are eligible to carry out 
Exchange functions in Sec.  155.110(a) of this final rule, and believe 
that a definition in Sec.  155.20 would be duplicative.
    Comment: Several commenters recommended that the final rule include 
a definition of ``family'' and that it be based on definitions used by 
Office of Personnel Management or the Department of Labor, or as 
defined under the Family and Medical Leave Act. Commenters urged the 
definition to capture the diversity and variety of family structures. 
Several commenters noted that a definition will promote clarity and 
consistency in the implementation of proposed Sec.  156.255.
    Response: For purposes of the administration of advance payments of 
the premium tax credit and cost-sharing reductions, this final rule 
cross-references and incorporates from section 36B of the Code the 
definition of ``household income.'' That definition relies on an 
identification of members of the ``family'' that is based on section 
36B of the Code, which will be finalized as part of the Treasury rule. 
We intend this final rule to align with the Code as implemented by the 
Secretary of the Treasury's final rules. This final rule, at Sec.  
155.320(c)(2)(i), provides that an application filer must provide an 
attestation to the Exchange regarding the individuals that comprise his 
or her household for purposes of Medicaid and CHIP eligibility (within 
the meaning of 42 CFR 435.603(f)). Please refer to part 155 subpart D 
for a more detailed discussion of this topic. We note that we are not 
finalizing the provisions of Sec.  156.255(c).
    Comment: Several commenters stated that the definition of 
``qualified employer'' should include a multi-employer plan as defined 
in ERISA Section 3(37), and that ``qualified employee'' should include 
individuals who are participants in a multi-employer plan, not just 
individuals who are employed by a qualified employer.
    Response: We do not think that the law supports accepting the 
commenters' suggested changes in the definitions of ``qualified 
employer'' and ``qualified employee.'' Accordingly, we have not changed 
the definitions in the final rule. We intend to address commenters' 
concerns surround multi-employer and church plans in future guidance.
    Comment: We received numerous comments regarding the types of plans 
that should be considered health plans eligible for certification as 
QHPs. A few commenters suggested that multiple employer welfare 
arrangements (MEWAs) be allowed to offer plans through the Exchange, be 
allowed to offer plans only in the SHOP and not the individual market, 
and be allowed to restrict enrollment to specific industry members or 
associations. A small number of commenters also suggested that Taft-
Hartley plans and church plans be available through the Exchange. Other 
commenters urged HHS to ensure that all QHPs offered through the 
Exchange meet the same standards to ensure a level playing field and 
questioned the ability of self-insured employer groups to comply.
    Response: We finalize the definition of a health plan as codified 
from section 1301(b)(1) of the Affordable Care Act, and the standards 
set forth for participation in an Exchange are equally applicable to 
any health insurance issuer seeking certification of health plans as 
QHPs. We intend to address issues related to multi-employer and church 
plans in future guidance.
    Comment: Many commenters recommended HHS adopt an expansive 
definition of ``lawfully present'' that includes all prospective 
qualified individuals. A few commenters suggested that our definition 
be based on the current definition in section 214 of the Children's 
Health Insurance Program Reauthorization Act (CHIPRA, Pub. L. 111-3) or 
definitions proposed by the National Immigration Law Center and Asian 
and Pacific Islander American Health Foundation. Several commenters 
recommended that States have flexibility to continue using existing 
standards for lawfully present, as long as the rules are no more 
restrictive than Federal law. Many commenters recommended that we 
clarify that any list of ``lawfully present'' immigration categories is 
not exhaustive, as statuses and documents are constantly evolving.
    Many commenters also suggested a range of additional categories to 
be included in the lawfully present definitions, including individuals 
whose immigration status makes them eligible to apply for an Employment 
Authorization Document regardless of whether they have secured a work 
permit under 8 CFR 274a.12; certain victims of trafficking who have 
been granted ``continued presence''; individuals granted a stay of 
removal/deportation by administrative or court order, statute, or 
regulations; individuals who are lawfully present in the Commonwealth 
of the Mariana Islands and American Samoa; individuals Permanently 
Residing in the U.S. under Color of Law; and asylum applicants 
(including pending applicants for asylum under section 208(a) of the 
Immigration and Nationality Act (INA), or for withholding of removal 
under section 241(b)(3) of the INA or Convention Against Torture).
    Response: We maintain the definition of ``lawfully present'' as 
used in the Pre-Existing Condition Insurance Plan, which is consistent 
with the definition of ``lawfully present'' used in section 214 of 
CHIPRA, and included in the proposed rule. HHS will consider 
commenters' recommendations in developing future rulemaking on this 
definition as it relates to Medicaid, CHIP, and the Exchanges.
    Comment: Several commenters recommended we adopt the broad, U.S. 
Census data definition for ``limited English proficient'' which is ``an 
individual whose primary language is not English and who speaks English 
less than very well.''
    Response: In the final rule, we do not adopt a definition for the 
phrase ``limited English proficient.'' We anticipate issuing future 
guidance that will interpret this term and will provide best practices 
and advice related to meaningful access standards for limited English 
proficient individuals.
    Comment: One commenter recommended that the definition for 
``minimum essential coverage'' include both defined contribution and 
defined benefit plans, allowing individuals to use any health care 
funds to maximize their purchasing power. Another commenter suggested 
that the Federal definition of ``eligible employer sponsored plan'' be 
such that in

[[Page 18315]]

circumstances that an employer is not able to provide a threshold of 
quality coverage, a defined contribution combined with premium tax 
credits should be provided in the individual market Exchange.
    Response: The definitions of ``minimum essential coverage'' and 
``eligible employer sponsored plan'' are provided in section 5000A(f) 
of the Code and will be interpreted in Treasury guidance. The 
provisions of the Affordable Care Act that we implement through this 
final rule rely on those definitions from the Code.
    Comment: One commenter believes that Navigators should not be an 
individual person, but rather a regulated entity/institution, noting 
that awarding Navigator grants to individuals will increase the 
potential for fraud and consumer protection violations.
    Response: We maintain the definition for ``Navigator'' from the 
proposed rule. However, we have added Navigator standards in Sec.  
155.210(b) that are intended to reduce the potential for fraud and 
increase consumer protection.
    Comment: Regarding the definition of ``plain language,'' one 
commenter recommended that all communications be provided in the 
individual's primary language. Several commenters recommended that we 
align with the National Institutes of Health's definition of ``plain 
language,'' including standards that communications be written between 
a fourth and sixth grade reading level, include non-written visuals, 
and reflect the likelihood that a proportion of individuals accessing 
the Exchange will not be familiar with utilizing online technologies.
    Response: We maintain the definition of ``plain language'' as 
codified from section 1311(e)(3)(B) of the Affordable Care Act, which 
directs HHS and the Department of Labor to jointly develop and issue 
guidance on best practices of plain language writing.
    Comment: One comment voiced concern that the definition of 
``qualified health plan'' might potentially undermine a State that 
wanted to implement a standard that QHP issuers offer their QHPs 
outside of an Exchange.
    Response: We note that, consistent with the Affordable Care Act 
provisions that address how issuers of QHPs may offer their products, 
nothing in this final rule precludes a QHP issuer from offering a QHP 
outside of an Exchange, which we believe leaves flexibility for States 
to establish the offering of QHPs outside of the Exchange as a 
condition of certification.
    Comment: We received comments throughout to add the phrase ``and 
stand-alone dental plans providing the pediatric dental essential 
health benefit'' when referring to QHPs. One commenter requested that 
we define ``stand-alone dental plan.''
    Response: In general, with some exceptions as noted in new Sec.  
155.1065(a)(3) of this final rule, we consider stand-alone dental plans 
to be a type of ``qualified health plan,'' and therefore believe that 
the addition of the suggested text is unnecessary. We believe that 
Sec.  155.1065 sufficiently defines ``stand-alone dental plan'' for the 
purposes of participation in an Exchange, and a definition in Sec.  
155.20 would be duplicative.
    Comment: We received several comments about the applicability of 
Medicare Secondary Payer (MSP) rules regarding coverage of End Stage 
Renal Disease (ESRD) and their applicability to QHPs as group health 
plans. These comments were received within the context of several 
sections, including: Sec.  155.20, which defines the terms ``health 
plan'' and ``qualified health plan''; Sec.  155.705 (Functions of a 
SHOP); Sec.  155.1000 (Certification Standards for QHPs); and Sec.  
156.200 (QHP Participation Standards). Commenters recommended that MSP 
rules regarding coverage of ESRD apply to QHPs as group health plans.
    Response: We clarify that QHPs offered in the small group market 
fall under the definition of a group health plan subject to MSP 
provisions codified in section 1862(b)(1) of the Social Security Act. 
This would result in parity between the SHOP and non-Exchange small 
group market regarding the applicability of MSP rules that pertain to 
ESRD coverage.
    Comment: A few commenters suggested that the definition of 
``State'' include the Territories.
    Response: The definition of State is based on section 1304 of the 
Affordable Care Act, which does not include Territories. Section 1323 
of the Affordable Care Act addresses Territories in the context of 
Exchanges and is not within the scope of this regulation.

Summary of Regulatory Changes

    We are finalizing the definitions proposed in Sec.  155.20, with 
the addition of the term ``educated healthcare consumer,'' which 
references the statutory definition for such term. As discussed in 
later sections, we also add a definition for ``application filer'' and 
``Exchange Blueprint'' to provide more detail for the purposes of 
eligibility and enrollment and approval of State-based Exchanges. We 
also clarified the definition of ``applicant.'' Finally, we have 
replaced the text of definitions copied from the Affordable Care Act 
with a direct reference instead, including: ``eligible-employer 
sponsored plan,'' ``grandfathered health plan,'' ``health plan,'' 
``individual market,'' ``plain language,'' and ``small group market.''
2. Subpart B--General Standards Related to the Establishment of an 
Exchange
    The Affordable Care Act sets forth general standards related to the 
establishment of an Exchange and identifies a number of areas where 
States that choose to operate an Exchange may exercise operational 
discretion. This subpart sets forth approval standards for State-based 
Exchanges, as well as the process by which HHS will determine whether a 
State-based Exchange meets those standards.
a. Establishment of a State Exchange (Sec.  155.100)
    We proposed to codify the option for States to elect to establish 
an Exchange to serve qualified individuals and qualified employers, 
provided that the Exchange is a governmental agency or non-profit 
entity established by the State and that the governance structure of 
the Exchange is consistent with Sec.  155.110. Furthermore, we 
introduced the concept of a State Partnership model that would allow 
States to leverage work done by other States and the Federal 
Government.
    Comment: Many commenters supported the general approach of State 
flexibility in the Exchange establishment proposed rule, while some 
urged additional flexibility and others requested more uniformity to 
decrease administrative complexity. Some topics where more uniformity 
was suggested include: minimum numbers of board meetings, conflict of 
interest standards, stakeholder consultation, call centers outside of 
normal hours, types of consumer outreach, notices, and access for 
limited English proficient individuals. Several commenters urged HHS to 
establish a menu of systems, functions, standard operating procedures, 
educational materials, reporting formats, and other tools that States 
could adopt for their Exchanges. One commenter suggested that States 
that use the HHS templates should receive an accelerated review 
process.
    Response: Decreasing administrative complexity will assist States 
in Exchange establishment. States are encouraged to make use of 
materials available to them from other States and on HHS's 
Collaborative Application Lifecycle Tool (CALT). HHS is also

[[Page 18316]]

developing a Web portal that will allow continued sharing of 
information, business process flows, and templates to aid States in the 
establishment of their Exchange.
    Comment: One commenter requested clarification on proposed Sec.  
155.100(a) regarding whether a State could only establish a SHOP, and 
not an Exchange to serve the individual market. Other commenters urged 
HHS not to allow administrative separation of the small group and 
individual markets between a State-based and Federally-facilitated 
Exchange.
    Response: HHS will approve a State-based Exchange upon determining 
that all minimum functions of an Exchange are met, which includes 
providing access to QHPs to qualified individuals and to qualified 
employers through a SHOP.
    Comment: In relation to proposed Sec.  155.100(b), several 
commenters voiced support of the option for Exchanges to be operated 
through a non-profit or governmental entity. One commenter requested 
clarification on what is encompassed in ``governmental.'' Some 
commenters were concerned about accountability of non-profit entities 
and encouraged States to establish governmental or quasi-governmental 
entities. Several commenters requested clarification that stakeholders 
would still need to be consulted regardless of the governance entity.
    Response: The discretion afforded States outlined in section 
1311(d)(1) of the Affordable Care Act is critical. We do not provide 
additional clarification regarding what would be considered 
``governmental'' in deference to existing State classifications. We 
note that Sec.  155.130 of this final rule applies to all Exchanges.

Summary of Regulatory Changes

    We are finalizing the provisions proposed in Sec.  155.100 of the 
proposed rule without modification.
b. Approval of a State Exchange (Sec.  155.105)
    In Sec.  155.105, we proposed that the Secretary must determine by 
January 1, 2013 whether a State's Exchange will be fully operational by 
January 1, 2014 and outlined the proposed standards based upon which 
HHS will approve a State Exchange. Please refer to the preamble of the 
Exchange establishment proposed rule, at 76 FR 41870-41871, for a 
detailed discussion of these standards.
    Specifically, we outlined the process through which HHS will 
approve a State-based Exchange. We proposed that to initiate the State 
Exchange approval process, a State must submit an Exchange Plan to HHS. 
We noted that we planned to issue a template outlining the components 
of the Exchange Plan, subject to the notice and comment process under 
the Paperwork Reduction Act. We proposed that each State receive 
written approval or conditional approval of its Exchange Plan in order 
to operate and to constitute an agreement between HHS and the Exchange 
to adhere to the contents of the Exchange Plan. We also proposed that a 
State must notify HHS and receive written approval from HHS before 
significant changes are made to the Exchange Plan. We sought comment on 
whether the State Plan Amendment process offered an appropriate model 
for change submission and approval.
    Finally, we proposed to codify the provision in the Affordable Care 
Act that if a State elects not to establish an Exchange--or if the 
State's Exchange is not approved--HHS must establish an Exchange in 
that State, and we proposed standards of the proposed rule that would 
apply to a Federally-facilitated Exchange.
    Comment: Many commenters were concerned that the approval date of 
January 1, 2013 for State-based Exchanges, as described in proposed 
Sec.  155.100(a), will be difficult for many States to meet and 
suggested that HHS allow more flexibility or issue waivers for States 
that cannot meet the timeframes. One commenter suggested that HHS 
approve an Exchange if a State has passed enabling legislation, or has 
the necessary regulatory process for Exchange creation underway by 
January 1, 2013, and can provide HHS with a detailed plan and timeline 
for Exchange development. In contrast, several commenters supported the 
January 1, 2013 approval deadline and requested that HHS closely 
monitor and enforce the implementation timeline.
    Several commenters also supported conditional approval and noted 
that it could help States meet the timelines for Exchange development. 
One commenter requested additional information on conditional approval, 
including the latest date when HHS could revoke conditional approval 
and interim deadlines and benchmarks. Another commenter did not support 
conditional approval and felt it diluted Federal scrutiny, while others 
expressed concern that conditional approval would result in States 
beginning open enrollment late, in a diminished capacity, or in a way 
that impairs HHS's ability to implement a Federally-facilitated 
Exchange.
    Response: We believe that in order to meet the October 1, 2013 open 
enrollment date, a State-based Exchange must be approved or 
conditionally approved by January 1, 2013, as called for in section 
1321(c)(1)(B) of the Affordable Care Act. HHS may conditionally approve 
a State-based Exchange upon demonstration that it is likely to be fully 
operationally ready by October 1, 2013, which provides States with 
flexibility in meeting Exchange development timelines. HHS will provide 
additional details in future guidance.
    Comment: One commenter suggested that proposed Sec.  155.105(b) 
include additional confidentiality standards, including that an 
Exchange comply with section 1411(g) of the Affordable Care Act and the 
Privacy Act (5 U.S.C. 552a).
    Response: HHS is committed to ensuring that security and privacy 
standards are in place in an Exchange. Security and privacy standards 
are addressed in Sec.  155.260 and Sec.  155.270 of this final rule. We 
believe it is duplicative to include these standards in Sec.  
155.105(b).
    Comment: Several commenters requested that the rule regarding the 
geographic area described in proposed Sec.  155.105(b)(4) be modified 
to clearly indicate that where there are multiple Exchanges, with each 
Exchange serving a distinct geographic area, that consumers could only 
use one Exchange. Several commenters suggested that HHS establish that 
the distinct geographic areas be consistent with premium rating areas 
in the State as determined under section 2701(a)(2) of the PHS Act.
    Response: In the preamble to the Exchange establishment proposed 
rule for Sec.  155.105, we clarified that only one Exchange may operate 
in each geographically distinct area and that a subsidiary Exchange 
must be at least as large as a rating area. We maintain this position 
in the final rule, which we believe provides States with discretion to 
ensure that subsidiary Exchange service areas are consistent with 
rating areas.
    Comment: Several commenters requested that the proposed Exchange 
Plan described in proposed Sec.  155.105(c)(1) be subject to a public 
comment period before HHS approval. One commenter asked that HHS post 
documents related to the proposed Exchange Plan and operational 
readiness on the HHS Web site.
    Response: We believe that accelerating timeframes to accommodate a 
period for public comment on what we now refer to as ``Exchange 
Blueprints'' would put unreasonable pressure on what is already 
perceived as a tight timeline. Therefore, in order to maintain 
flexibility and because of

[[Page 18317]]

timeframe concerns, the final rule does not call for a State's Exchange 
Blueprint to be made public and open to comment prior to approval by 
HHS.
    Comment: One commenter supported the proposal that the operational 
readiness assessment conducted by HHS, as described in proposed Sec.  
155.105(c)(2), be coordinated with the monitoring process of the State 
Establishment Grants provided under section 1311 of the Affordable Care 
Act.
    Response: We believe that the operational readiness assessment 
should be coordinated with the grants monitoring process and are 
currently developing guidance for the evaluation process.
    Comment: In relation to proposed Sec.  155.105(d) and (e), several 
commenters supported using a process modeled from the Medicaid and CHIP 
State Plan review process for the approval of the initial Exchange and 
subsequent changes, including the 90-day review timeframe and posting 
of changes on the Internet, and because they believe that the process 
ensures sufficient Federal oversight and transparency. In contrast, 
many other commenters urged HHS to use a review plan other than the 
Medicaid and CHIP model, contending that the State Plan review process 
would delay State implementation while waiting for an HHS review that 
could potentially take up to 180 days. The commenters suggested that 
the proposed approach would be unwieldy, especially where HHS requests 
for additional information from States would restart the 90-day period, 
and would inhibit States from being able to effectively establish an 
Exchange and respond to changing circumstances over time.
    Response: We believe that initial approval of an Exchange and 
approval of subsequent changes should not cause unnecessary delay in 
Exchange implementation or future operations. Therefore, HHS will not 
model the review of the initial proposed Exchange Plan or future 
changes after the Medicaid and CHIP State Plan process. Additionally, 
we have changed reference of the ``Exchange Plan'' to ``Exchange 
Blueprint'' to avoid confusion with the Medicaid and CHIP review 
process. Finally, we amended Sec.  155.105(e) to provide that when a 
State makes a written request for approval of a significant change to 
Exchange Blueprint, the change may be effective on the earlier of 60 
days after HHS receipt of a completed request, or upon approval by HHS. 
For good cause, HHS may extend the review period an additional 30 days 
to a total of 90 days. We note that during the review period, HHS may 
deny the significant change to the Exchange Blueprint.
    Comment: Several commenters sought more information and provided 
suggestions on the establishment and operation of the Federally-
facilitated Exchange described in proposed Sec.  155.100(f), including: 
the overall structure, governance, oversight, and standards; how it 
would differ from State to State; the approach to certification of QHPs 
(``active purchaser'' versus ``any willing plan''); and, what the 
relationship would be between a Federally-facilitated Exchange and 
Partnership model. One commenter expressed concern about consumer 
advocates' ability to engage in the governance and oversight of a 
Federally-facilitated Exchange, while other commenters requested that 
the Federally-facilitated Exchange's planning documents and updates 
should be subject to public notice and comment.
    Response: Information regarding the Federally-facilitated Exchange 
will be provided in future guidance.
Summary of Regulatory Changes
    We are finalizing the provisions proposed in Sec.  155.105 of the 
proposed rule, with the following modifications: in paragraph (a), we 
added clarifying language regarding the timeframe for Exchange 
approval, and clarified that HHS may consult with other relevant 
Federal agencies to approve a State-based Exchange. Throughout Sec.  
155.105, we changed ``Exchange Plan'' to ``Exchange Blueprint.'' We 
included subpart D in the list of Exchange functions in paragraph 
(b)(2) because we are finalizing the Exchange establishment and 
eligibility rules together, and removed the policy that States agree to 
perform responsibilities related to the reinsurance program because we 
are not finalizing the operation of the reinsurance program in 
connection with Exchange establishment. We amended paragraph (e) to 
provide timeframes for the approval of significant changes to the 
Exchange Blueprint.
c. Election To Operate an Exchange After 2014 (Sec.  155.106)
    We proposed to give States the opportunity to seek approval to 
operate an Exchange after the statutory date of January 1, 2013. 
Specifically, we proposed 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, or January 1 of the prior year. Further, a State must work 
with HHS to develop a plan to transition from a Federally-facilitated 
Exchange (including a Partnership) to a State-based Exchange.
    We also proposed a process to allow a State-based 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, provided 
that the State notifies HHS of this determination 12 months prior to 
ceasing its operations and collaborates with HHS on the development and 
execution of a transition plan.
    Comment: One commenter stated that the deadlines set by the 
Affordable Care Act for setting up a State-based Exchange are not 
realistic and that HHS should extend them.
    Response: We understand the concerns regarding the deadlines for 
setting up a State-based Exchange. While we do not believe authority 
exists in section 1321(c) of the Affordable Care Act to alter the 
January 1, 2014 Exchange implementation date, we proposed Sec.  155.106 
to alleviate some of the timing pressure. We maintain that approach in 
this final rule.
    Comment: Numerous commenters supported the flexibility for a State 
to elect to operate an Exchange after 2014, and several requested more 
detail on the transition plans in proposed Sec.  155.106(a)(3). 
Suggestions for the transition plan included: demonstration of consumer 
input and tribal consultation; process for educating consumers about 
potential changes; process for ensuring QHP issuers have sufficient 
time to comply with new standards (such as a one-year grace period); 
and, a plan to protect enrollees from lapses of coverage. A number of 
commenters recommended a State-based Exchange starting after 2014 must 
have similar or better levels of insured rates, affordability, covered 
benefits, and administrative simplicity or quality of services.
    Response: We believe that it is important to develop a seamless 
transition plan for consumers and issuers alike, and will provide 
future guidance on transition plans.
    Comment: Several commenters requested clarification on the process 
for transitioning to a Federally-facilitated Exchange in proposed Sec.  
155.106(b) when a State terminates Exchange operations with less than 
twelve months notice to HHS. One commenter urged HHS to establish an 
alternative process for providing interim coverage to consumers if a 
State does not provide sufficient notice.
    Response: We understand concerns regarding the transition 
timeframes.

[[Page 18318]]

HHS will develop an approach to transitioning Exchanges in various 
circumstances when it becomes clearer what such circumstances would 
entail.
    Comment: One commenter requested information as to the availability 
of funding options for States electing to operate an Exchange after 
2014.
    Response: As described in the State Exchange Implementation 
Questions and Answers released by HHS on November 29, 2011, 
establishment grants may be awarded through the end of 2014 for 
approved and permissible establishment activities. The process of 
``establishing'' an Exchange may extend beyond the first date of 
operation and may include improvements and enhancements to key 
functions over a limited period of time. Generally, grants can be used 
to establish Exchange functions and operating systems and to test and 
improve systems and processes. We have determined that a State that 
does not have a fully approved State Exchange on January 1, 2013 may 
continue to qualify for and receive a grant award, subject to the 
Funding Opportunity Announcement (FOA) eligibility criteria.
Summary of Regulatory Changes
    We are finalizing the provisions in Sec.  155.106 of the proposed 
rule, with a conforming, technical change that replaced ``Exchange 
Plan'' with ``Exchange Blueprint'' in paragraph (a)(2) and removed the 
word initial from paragraph (a) to make the provision more broad.
d. Entities eligible to carry out Exchange functions (Sec.  155.110)
    In Sec.  155.110, we proposed to codify an Exchange's authority to 
contract with eligible entities, and requested comment on conflict of 
interest standards. We noted that the Exchange remains responsible for 
meeting all Federal rules related to contracted functions.
    If the Exchange is an independent State agency or not-for-profit 
entity established by the State, we proposed that its governing board 
meet the standards outlined in Sec.  155.110(c)(1) through Sec.  
155.110(c)(4) of the proposed rule, which included: the Exchange 
accountability structure must be administered under a formal, publicly-
adopted operating charter or by-laws; the Exchange board must hold 
regular public meetings; representatives of health insurance issuers, 
agents, brokers, or other individuals licensed to sell health insurance 
may not constitute a majority of the governing board; and, all members 
of the governing board must meet conflict of interest and 
qualifications standards. We invited comment on several topics related 
to conflict of interest and Exchange governance.
    We also proposed that the Exchange governing body ensure that a 
majority of members have relevant experience in a number of areas and 
invited comment on the types of representatives that could best ensure 
successful Exchange operations. We solicited comment on ethics and 
disclosure standards.
    Additionally, we proposed to allow a State to operate its 
individual market Exchange and SHOP under separate governance or 
administrative structures, provided that the State coordinates and 
shares relevant information between the two Exchange bodies and that it 
ensures adequate resources to assist both individuals and small 
employers.
    Finally, we proposed that HHS retain the option to review the 
accountability structure and governance principles of an Exchange and 
requested comment on the appropriate frequency for these reviews.
    Comment: A number of commenters requested clarification on whether 
State departments of insurance would be considered eligible contracting 
entities under proposed Sec.  155.110(a), citing the importance of such 
expertise in the operation of an Exchange.
    Response: We clarify in Sec.  155.110(a)(2) of this final rule 
that, in addition to State Medicaid agencies, other State agencies that 
meet the qualifications in (a)(1) would be considered eligible 
contracting entities. For purposes of this final rule and Exchange 
operations, we interpret the term ``incorporated'' in (a)(1)(i) to 
include State agencies, such as departments of insurance, that have 
been established under and are subject to State law.
    Comment: Several commenters urged HHS to apply conflict of interest 
standards to eligible contracting entities.
    Response: We generally defer to States to establish conflict of 
interest standards for eligible contracting entities beyond the 
prohibition of health insurance issuers being eligible contracting 
entities, as established in section 1311(f)(3) of the Affordable Care 
Act and codified in Sec.  155.110(a)(1)(iii). We believe that many 
States have existing conflict of interest laws, have appropriate 
expertise in this area, and can support Exchanges in the development of 
conflict of interest standards for such entities.
    Comment: Several commenters agreed with the governance provisions 
in proposed Sec.  155.110(c) and requested further guidance on 
governance, while others recommended that HHS defer to States on 
governance citing concerns of burden. Another commenter suggested that 
all Exchanges, including an Exchange that is a State agency, needed a 
governing board. One commenter requested that all Exchanges post their 
policies and procedures on the Internet.
    Response: We have afforded States substantial discretion regarding 
governance and do not believe that the governance standards are 
burdensome from an operational or systems standpoint. Additionally, to 
lessen the burden on States, an Exchange may use the State's conflict 
of interest standards, regulations, or laws for governance of the 
Exchange. An existing State agency would already have an accountability 
structure, unlike an independent agency or nonprofit entity. Therefore, 
we believe that a governing board is not necessary for an existing 
State agency, although we note that a State may choose to establish one 
anyway. Section 155.110(d) of this final rule directs Exchanges to make 
publicly available a set of guiding governance principles, which it may 
do through the Internet. We also create minimum standards for consumer 
representation on Exchange Boards to protect consumers and the 
interests of the Exchange without adding burden on States or Exchanges.
    Comment: With respect to proposed Sec.  155.110(c)(3), a few 
commenters requested HHS define ``represents consumer interests'' and 
``conflict of interest.'' Many commenters recommended that all Exchange 
boards must have at least one consumer representative or advocate and a 
formal consumer advisory committee. A few commenters recommended 
increasing the threshold for voting members that do not have a conflict 
of interest to something higher than a simple majority.
    Response: We accept the suggestion that at least one voting member 
be a consumer advocate, and have amended in Sec.  155.110(c)(3)(i) of 
this final rule accordingly. We do not believe this change will 
conflict with any current Exchange boards. We have also maintained the 
minimum standard that a simple majority of board members not have a 
conflict of interest, but a State can choose to establish an Exchange 
with a higher threshold of non-conflicted board members.
    Comment: Commenters suggested broadening the list of groups 
identified as having a conflict of interest in proposed Sec.  
155.110(c)(3)(ii) to include: health care providers; anyone with a 
financial interest; anyone with a spouse or immediate family with a 
conflict of interest; major vendors, subcontractors, or other financial 
partners of conflicted parties; members of health trade

[[Page 18319]]

associations and providers; and, health information technology 
companies. Commenters recommended that such groups be limited or 
prohibited from participation in an Exchange. Other commenters 
recommended that individuals with ties to the insurance industry 
participate through technical panel or advisory group instead of 
through board membership.
    Response: As proposed, Sec.  155.110(c)(3)(ii) ensures as a minimum 
standard that the groups with the most direct conflict of interest 
cannot form a majority of voting members on a governing board. We 
believe that further definition of conflict of interest may create 
inconsistencies with State law and other existing State standards, but 
note that Exchanges may expand the list or further define conflict of 
interest. For example, a State may elect to prohibit any conflicted 
members from serving on the board.
    Comment: Several commenters suggested areas in addition to those 
listed in proposed Sec.  155.110(c)(4) in which governing board members 
should have experience, including: minority health; mental health; 
pediatric health; consumer education or outreach; public coverage 
programs; health disparities; or represent or be American Indian and 
Alaska Natives. A few commenters suggested that the Exchange board 
include members that reflected the cultural, ethnic and geographical 
diversity of the State.
    Response: Each of the suggested groups could add value to an 
Exchange governance board. However, we believe that a State can 
determine the expertise it believes would be most beneficial for the 
needs of its community. We note that the list in Sec.  155.110(c)(4) is 
a minimum; thus, States may establish governing boards standards that 
include expertise in other areas, or may set up advisory committees to 
achieve another mechanism for specialized input.
    Comment: Regarding proposed Sec.  155.110(f), some commenters 
suggested that HHS limit review of an Exchange's governance to every 
three or four years, while several commenters voiced concerns about the 
administrative burden of an annual review. One commenter recommended an 
annual review but only for the first few years of Exchange operation.
    Response: We have maintained language in the final rule but clarify 
that any changes to the accountability structure and governing 
principles of the Exchange will likely be reviewed under Sec.  
155.105(e) of this final rule or at the discretion of HHS through a 
process that may not occur annually under Sec.  155.110(f).
Summary of Regulatory Changes
    We are finalizing the provisions proposed in Sec.  155.110, with 
the following modifications: in paragraph (a)(1)(iii)(2), we clarified 
that any State entity that meets the qualifications of paragraph (a)(1) 
is an eligible contracting entity to include State departments of 
insurance. We established in new paragraph (c)(3)(i) that at least one 
member of the Exchange's board must include one voting member who is a 
consumer representative, and renumbered proposed paragraph (c)(3)(i) as 
(c)(3)(ii).
e. Non-interference with Federal Law and Non-Discrimination Standards 
(Sec.  155.120)
    In Sec.  155.120, we proposed that an Exchange may not establish 
rules that conflict with or prevent the application of Exchange 
regulations promulgated by HHS. We also proposed to codify 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. In addition, we proposed that a State must 
comply with any applicable non-discrimination statutes, specifically 
that a State 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.
    Comment: One commenter suggested that HHS ensure that contractors 
comply with the non-discrimination provisions of proposed Sec.  
155.120. One commenter recommended HHS amend Sec.  155.120(c) to 
explicitly name specific activities of the Exchange, including 
marketing, outreach, and enrollment in the Exchange.
    Response: We clarify that Sec.  155.120 applies to Exchange 
contractors and believe this notion is conveyed in Sec.  155.110(b) for 
contractors. We believe that Sec.  155.120 already applies to all 
activities of the Exchange, and thus do not explicitly list marketing, 
outreach, and enrollment.
    Comment: Several commenters recommended that HHS specify that 
proposed Sec.  155.120(b) functions as a floor for protection against 
discrimination. The commenters stated that in the event a State law 
provides additional consumer protections in an Exchange, the final rule 
should make clear that such a State law will prevail over the minimum 
protections codified in Federal law.
    Response: We believe the proposed approach of codifying section 
1321(d) of the Affordable Care Act does not preclude the application of 
stronger protections in the Exchange provided by State law. Therefore, 
we do not make any further changes in the regulations to make this 
clarification.
    Comment: A number of commenters requested that HHS provide 
clarification on proposed Sec.  155.120(c)(1) and specify which 
statutes would be considered ``applicable non-discrimination 
statutes,'' with suggestions including the Americans with Disabilities 
Act, section 504 of the Rehabilitation Act, section 1557 of the 
Affordable Care Act, provider non-discrimination in accordance with 
section 2706 of the PHS Act. One commenter recommended that HHS ensure 
that States and Exchanges comply with existing State provider non-
discrimination laws and another recommended that we amend the Sec.  
155.120(c)(1) to include consumer protection laws.
    Response: We clarify that by ``applicable non-discrimination 
statutes,'' we mean any statute that would apply to Exchange activities 
by its clear language or as consistent with any rulemaking that has 
been established in accordance with such statutes. We acknowledge that 
the some non-discrimination statutes apply to specific activities and 
situations, and an Exchange must comply with such statutes to the 
extent its activities or circumstances would be subject to these 
standards.
    Comment: We received a comment on the preamble to the proposed 
Sec.  155.120(c)(2). The commenter recommended that HHS delete the 
phrase ``operating in such a way as to discriminate'' or revise the 
nondiscrimination standard to prohibit discrimination based ``solely'' 
on the listed grounds.
    Response: To clarify, we believe that Exchanges should not 
discriminate in any way on the basis of groups listed in Sec.  
155.120(c)(2). We believe that the regulatory text conveys that intent.
    Comment: A number of commenters recommended HHS amend proposed 
Sec.  155.120(c)(2) to add categories to the proposed list, including 
Indians or individuals in the Lesbian, Gay, Bisexual, and Transgender 
(LGBT) community, individuals with limited English proficiency, and 
people with disabilities.
    Response: We recognize the commenters' concerns but we are 
maintaining the categories specified in Sec.  155.120(c) because we 
believe that categories not listed in Sec.  155.120(c)(2) are already 
protected by existing laws that apply to Exchanges.
    Comment: A number of commenters requested that HHS provide 
clarification

[[Page 18320]]

on the oversight and enforcement of the non-discrimination standards, 
including recommendations for strong oversight, the establishment of a 
clear complaints process, and mandatory public dissemination of an 
acknowledgement by QHP issuers that they comply with the non-
discrimination standards in section 1557 of the Affordable Care Act.
    Response: We acknowledge the commenters' concerns regarding the 
monitoring and enforcement of the non-discrimination policies. We plan 
to issue future guidance on the oversight and enforcement of the non-
discrimination standards.

Summary of Regulatory Changes

    We are finalizing the provisions proposed in Sec.  155.120 of the 
proposed rule, with a technical change to include part 157 in paragraph 
(b).
f. Stakeholder Consultation (Sec.  155.130)
    Consistent with the Affordable Care Act, we proposed that Exchanges 
consult with certain groups of stakeholders on an ongoing basis. The 
list of stakeholders identified were the following: educated health 
care consumers who are enrollees in QHP; individuals and entities with 
experience in facilitating enrollment in health care coverage; 
advocates for enrolling hard to reach populations; small businesses and 
self employed individuals; State Medicaid and CHIP agencies; Federally-
recognized Tribes; public health experts; health care providers, large 
employers; health insurance issuers; and agents and brokers. For a more 
complete list of stakeholders and for a discussion of how Exchanges may 
interact with tribes, please refer to page 41873 of the Exchange 
establishment proposed rule.
    Comment: Some commenters requested clarification on what it means 
to ``regularly consult on an ongoing basis,'' as described in proposed 
Sec.  155.130, and suggested that we clarify that an Exchange must 
consult with stakeholders beyond establishment of the Exchange, 
outlining specific processes for consultation (including public 
meetings and input sessions), and specifying that Exchange activities 
must be topics of consultation (including the call center, Web site, 
consumer assistance functions and Navigators).
    Response: We recognize that it is important to utilize various 
methods of consultation to ensure the Exchange meets the diverse needs 
of the State's population and seeks input on a broad set of issues. 
However, we believe that States are in the best position to determine 
what will be the most efficient and effective methods of stakeholder 
consultation for meeting the State's unique needs and, therefore, we do 
not establish additional standards in the final rule.
    Comment: Many commenters recommended that HHS add additional 
categories of stakeholder groups to proposed Sec.  155.130, including: 
a nonprofit community organization; unions; representatives of 
individuals with disabilities; minorities; advocates for individuals 
with limited English proficiency; essential community providers; 
employees of small businesses; stand-alone dental plans; health care 
consumer advocates; experts in low income tax policy; experts in 
privacy policy; and professional organizations representing specific 
health care providers. Several commenters requested clarification on 
what types of health insurance issuers and providers fall under the 
categories for consultation. A few commenters suggested that we narrow 
the list of stakeholders.
    Response: We recognize that Exchange consultation with the above 
groups would help the Exchange ensure it can meet the needs of the 
population it serves. However, we believe that the categories proposed 
in Sec.  155.130 are broad enough to encapsulate a wide variety of 
stakeholders, and encourage Exchanges to consult with any other 
stakeholders that will add perspective to the development of an 
Exchange. Similarly, we did not accept suggestions to make the 
stakeholder categories narrower and believe the minimum list proposed 
will stimulate stakeholder participation. Exchanges have the 
flexibility to determine what types of stakeholders would fall under 
each of the categories.
    Comment: Regarding proposed Sec.  155.130(a), one commenter was 
concerned that including ``educated health care consumer'' as a 
stakeholder unfairly excludes people of a certain education level. 
Another commenter recommended that HHS delete the word ``educated'' 
from ``educated health care consumer'' to avoid multiple 
interpretations. Numerous commenters recommended that HHS replace 
``educated health care consumer'' with ``health care consumer 
experienced with the system.'' One commenter suggested that the 
definition of ``educated health care consumers'' take into account the 
diversity in the age, background, and health status of consumer 
stakeholders. A few commenters suggested that HHS expand the 
stakeholder group to include consumers who are eligible or likely to 
enroll in a QHP in addition to those consumers enrolled in QHPs.
    Response: We note that the term ``educated health care consumer'' 
is defined in section 1304(e) of the Affordable Care Act to mean an 
individual who is knowledgeable about the health care system, and has 
background or experience in making informed decisions regarding health, 
medical, and scientific matters; we have codified this definition in 
Sec.  155.20 of this final rule. An Exchange can interpret and apply 
the term in the way that is most appropriate for its environment 
consistent with this definition.
    Comment: Regarding proposed Sec.  155.130(f), commenters 
recommended that the final rule prohibit States from delegating 
consultation with Federally-Recognized Tribes to the governing bodies 
operating the Exchange. Commenters noted that establishing Exchanges as 
independent public entities would make stakeholder consultation 
difficult to monitor consultation with Tribes. Several commenters 
suggested that a tribal consultation policy be developed and approved 
by the State, the Exchange, and tribal governments prior to the 
submission of approval of an Exchange Blueprint. Some commenters also 
recommended that States must utilize a process for seeking advice from 
the Indian Health Service, tribal organizations, and urban Indian 
organizations as outlined in section 5006(e) of the American Recovery 
and Reinvestment Act. Also, one commenter requested HHS to expand the 
tribal consultation standard to include any tribal organization or 
inter-tribal consortium as defined in the Indian Self-Determination and 
Education Assistance Act and the Indian Health Care Improvement Act.
    Response: Section 1311(d)(6) of the Affordable Care Act directs the 
Exchange to carry out consultation with stakeholders, and Sec.  
155.130(f) codifies this provision with respect to Federally-recognized 
Tribes. We note that Exchange tribal consultation reflects a 
government-to-government relationship, as Exchanges would conduct 
consultation on behalf of States. Future guidance will be provided to 
States regarding key milestones, including tribal consultation, for 
approval of a State-based Exchange. Because of the government-to-
government nature of tribal consultation, we did not include a 
provision similar to section 5006(e) of the American Recovery and 
Reinvestment Act in the proposed rule or in this final rule, and did 
not expand the tribal consultation standard to include tribal 
organizations, programs, or commissions. In the final rule,

[[Page 18321]]

Exchanges must consult with Federally-recognized Tribes; however, this 
does not preclude Exchanges from engaging in discussions or consulting 
with tribal and Urban Indian organizations. It should be noted that 
when a tribal or Urban Indian organization is a stakeholder as defined 
in Sec.  155.130--for example, the tribal or Urban Indian organization 
is a health care provider--then consultation may be necessary. We 
therefore encourage States to consult with tribal and Urban Indian 
organizations.
    Comment: Some commenters recommend that as a component to the 
ongoing tribal consultation standard in proposed Sec.  155.130(f), the 
Exchange should establish an ``Indian desk'' with the lead person 
identified and contact information provided, and extend the authority 
of CMS Native American Contacts to include facilitating and interacting 
with the State Exchange governing bodies.
    Response: We did not accept the suggestion that all Exchanges must 
establish an ``Indian Desk.'' States have discretion to determine 
appropriate approaches and mechanisms for interacting with the Tribes, 
providing information to Indian Country and for meeting the needs of 
American Indians/Alaska Natives, which can be determined during the 
tribal consultation process. We also did not accept the suggestion 
related to the CMS Native American Contacts. While we recognize that 
the Native American Contacts have a critical role in working with 
States and Tribes, structuring the responsibilities of CMS staff 
positions is not within the scope of this final rule.
    Comment: A few commenters suggested that the final rule enforce 
tribal consultation by Exchanges in the planning, implementation and 
operation of State-based Exchanges, and ensure adequate funding for the 
technical assistance provided by tribal entities to States and 
Exchanges. One commenter expressed a concern that Exchanges may not be 
able to process eligibility and enrollment information regarding 
American Indians/Alaska Natives unless they are included in policy and 
regulation development. Some commenters strongly urge CMS to work with 
Tribes to undertake a thorough education of State insurance 
commissioners on issues related to Indian law, the structure of the 
Indian health care delivery system, and protocols for consulting with 
Tribes, since many Tribes do not have experience working with insurance 
commissioners.
    Response: We did not accept the suggestion for Exchanges to 
obligate State grant funding for technical assistance provided by 
tribal entities to States and Exchanges. We believe that the concern 
regarding Exchange inclusion of American Indians and Alaska Natives in 
policy development is addressed in the final rule and the Exchange 
Establishment Grant, which directs Exchanges to consult with Federally-
recognized Tribes. We note that education of State health insurance 
commissioners on Indian law will be addressed at the operational level 
of CMS.
    Comment: We received a number of comments stating that HHS should 
limit the number of consultations with health insurance issuers, 
agents, and brokers described in proposed Sec.  155.130(j) and (k) to 
minimize any potential conflicts of interest. One commenter recommended 
that consultation with a health insurance issuer be made fully 
transparent, while several other commenters recommended that the 
consultation only include agents and brokers that enroll qualified 
individuals, employers, or employees.
    Response: We understand the concerns of commenters, but also 
acknowledge that health insurance issuers and agents and brokers are 
likely to play a significant role in the Exchange. We encourage 
Exchanges to be transparent in the consultation process. Furthermore, 
in States where the Exchange is not housed in the department of 
insurance, we expect there to be regular consultation between the 
Exchange and the department of insurance, given the need for 
coordination between the two entities.
    Comment: One commenter recommended that stakeholder input should 
contribute to both State-based Exchanges and Federally-facilitated 
Exchanges.
    Response: As indicated in Sec.  155.105(f), the stakeholder 
standards of Sec.  155.130 apply to both Federally-facilitated 
Exchanges and State-based Exchanges.

Summary of Regulatory Changes

    We are finalizing the provisions proposed in Sec.  155.130 of the 
proposed rule without modification.
g. Establishment of a Regional Exchange or Subsidiary Exchange (Sec.  
155.140)
    In Sec.  155.140, we outlined several proposed features of regional 
Exchanges, including that a regional Exchange would encompass two or 
more States and could submit a single Exchange Blueprint, and the 
criteria that the Secretary will use to approve such an Exchange.
    Specifically, we proposed that a State may establish one or more 
subsidiary Exchanges if each such Exchange serves a geographically 
distinct area that is at least as large as a rating area described in 
section 2701(a) of the PHS Act. We invited comment on operational or 
policy concerns related to subsidiary Exchanges that cross State lines. 
We also requested comment on the extent to which we should allow more 
flexibility in the structure of a subsidiary Exchange.
    Finally, we proposed basic standards for a regional or subsidiary 
Exchange. For a complete discussion of the proposed standards, please 
see pages 41873-41874 and 41914 of the Exchange establishment proposed 
rule.
    Comment: Regarding proposed Sec.  155.140(a), several commenters 
supported the flexibility to establish regional Exchanges so that 
States could share Exchange infrastructure and systems. However, other 
commenters had concerns regarding the applicability of State standards 
across a regional Exchange. Some were concerned about coordinating the 
regulation of QHP issuers in a regional Exchange to ensure each State's 
insurance standards were met, especially regarding licensure and 
solvency, and others raised concerns about coordination between the 
Medicaid agencies of multiple States regarding consistency of 
eligibility determinations and provider payments. Other commenters were 
concerned that consumer protections, including State non-discrimination 
laws, minimum benefit standards, network adequacy, complaints 
processes, and tribal consultation, would be potentially undermined by 
a regional Exchange (particularly one that crosses non-contiguous 
States). Some commenters suggested that States must provide a 
compelling reason to establish a regional Exchange to help preserve 
consumer protections.
    Response: We acknowledge the commenters' concerns regarding 
coordination across States. We note that in Sec.  155.140(c)(1), we 
establish that a regional or subsidiary Exchange must meet all Exchange 
standards, which would include, for example, the standard in Sec.  
156.200(b)(4) that a QHP issuer be licensed and in good standing in 
each State in which it offers coverage. We believe that this and other 
provisions in the final rule provide some clarity on coordination. We 
recognize the concerns regarding consumer protection, and HHS will take 
those into account on a case-by-case basis during review of a regional 
Exchange Blueprint.

[[Page 18322]]

    Comment: With regard to proposed Sec.  155.140(a), one commenter 
requested clarification on whether a regional Exchange would need to 
cover the entirety of each State, and another requested clarification 
on whether two States could share administrative resources without 
sharing governance.
    Response: We note that in Sec.  155.140(c)(1), a regional Exchange 
would have to comply with all Exchange standards, including Sec.  
155.105(b)(3), which directs a State to ensure that the entire 
geographic area of a State is covered by an Exchange. A State has 
flexibility in the way it meets this standard. We believe that States 
are able to share administrative and operational resources to the 
extent practicable, and would not be considered a regional Exchange 
unless they also shared governance, consumer assistance, enrollment and 
eligibility processes, QHP certification authority, and the SHOP.
    Comment: Regarding proposed Sec.  155.140(b), a number of 
commenters did not support the proposed rules regarding subsidiary 
Exchanges out of concern for consumer protections, consumer confusion, 
administrative complexity, the effect of smaller risk pools, and the 
ability for subsidiary Exchanges to exacerbate adverse selection. 
Commenters suggested that a State must demonstrate a compelling 
justification as to how a subsidiary Exchange would be in the best 
interest of consumers. Some commenters suggested that subsidiary 
Exchanges should remain under centralized State governance and policy 
decisions to provide some consistency across the State. A number of 
commenters supported the provision in proposed Sec.  155.140(b)(2) that 
ensures a subsidiary Exchange is as large as a rating area because they 
believe it would prevent risk selection. Several commenters urged HHS 
not to allow subsidiary Exchanges to cross State lines while others 
supported the concept.
    Response: We recognize the concerns of commenters related to the 
consumer experience under subsidiary Exchanges, but we believe that 
such Exchanges may be valuable and appropriate in some marketplaces. In 
reviewing a State's Exchange Blueprint, HHS will consider how best to 
protect the consumer experience.
    Comment: A few commenters requested clarification on whether an 
Exchange can be statewide for the individual market with several SHOPs 
operated through subsidiary Exchanges. Several commenters supported the 
alignment of SHOP and individual market Exchange service areas to 
ensure consistency for consumers and insurers, and for a more robust 
insurance market.
    Response: In this final rule, we maintain the standard in Sec.  
155.140(c)(2)(ii) that the service areas of a SHOP and individual 
market Exchange must match.

Summary of Regulatory Changes

    We are finalizing the provisions proposed in Sec.  155.140 of the 
proposed rule without modification.
h. Transition Process for Existing State Health Insurance Exchanges 
(Sec.  155.150)
    In Sec.  155.150, we proposed that, unless determined to be non-
compliant, a State operating a pre-Affordable Care Act 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 invited comment on 
which proposed threshold should be used and on alternative data 
sources. We also proposed that any State that is currently operating a 
health insurance exchange that meets these criteria must work with HHS 
to identify areas of non-compliance with the standards of this part.
    Comment: A small number of commenters had suggestions for proposed 
Sec.  155.150(a). A few commenters suggested that we use the 
Congressional Budget Office estimates for projected coverage in 2016 
and others recommended the Census Bureau's American Community Survey or 
the Current Population Survey estimates of State coverage on January 1, 
2010. A number of commenters suggested using a source that included 
Urban Indian-specific data, while another commenter suggested the 
coverage numbers be based on non-elderly State residents only. One 
commenter raised concerns that coverage numbers are calculated 
inaccurately at the State level.
    Response: We have amended proposed Sec.  155.150(a)(2) to reference 
the Congressional Budget Office projected coverage numbers published on 
March 30, 2011. HHS will work with any State that believes it would 
fall into this category to determine if its State coverage numbers were 
equal to or above that threshold in January of 2010.
    Comment: Several commenters suggested that proposed Sec.  
155.150(b) should provide additional information, provide for an 
expedited review process, make corrective action plans publicly 
available, establish that determining compliance will occur by fall 
2012, and otherwise remain consistent with the January 1, 2013 
timeframe for Exchange approval.
    Response: We believe that any State that qualifies under Sec.  
155.150(a) would continue to generally meet all standards for Exchange 
approval as established elsewhere in the final rule, including the 
process for review and timeframes, so we do not believe it necessary to 
outline standards in this section.

Summary of Regulatory Changes

    We are finalizing the provisions proposed in Sec.  155.150 of the 
proposed rule, with the exception of specifying the database for the 
projected coverage numbers upon implementation.
i. Financial support for continued operations (Sec.  155.160)
    In Sec.  155.160, we proposed to codify the statutory provision 
that a State ensure its Exchange has sufficient funding to support 
ongoing operations beginning January 1, 2015 and develop a plan for 
ensuring funds will be available. Specifically, we proposed to allow a 
State Exchange to fund its ongoing operations by charging user fees or 
assessments on participating issuers or by generating other forms of 
funding, provided that any such assessments are announced in advance of 
the plan year. We invited 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.
    Comment: In response to proposed Sec.  155.160, several commenters 
stated that an Exchange must not be approved by HHS unless a clear plan 
to achieve financial sustainability has been articulated. Further, 
commenters recommended that an Exchange also address the implications 
of its selected fee structure with respect to adverse selection and 
identify strategies to mitigate this risk.
    Response: A clearly defined plan for financial sustainability is 
essential to Exchange success and in Sec.  155.160(b), we codify 
section 1311(d)(5)(A) of the Affordable Care Act, which establishes 
that a State ensure that its Exchange has sufficient funding to support 
its operations beginning January 1, 2015. As noted in the preamble to 
the proposed rule, a funding plan is necessary for Exchange approval. 
States should conduct an analysis of various user fee structures as 
well as other financial support options before making a decision. This 
analysis could include, among other factors, the potential impact on 
risk selection, issuer

[[Page 18323]]

participation, consumer experience, and provider contracting. We 
maintain the codification in this final rule.
    Comment: With respect to proposed Sec.  155.160(b), many commenters 
offered specific recommendations on how Exchanges should generate 
revenue, including methods for calculating assessments, such as percent 
of premium with or without a cap; per-policy fees; or establishing fees 
at a specified amount. Commenters also recommended uniform notice 
standards, such as 10 or 12 months in advance of the relevant plan or 
benefit year, or in March of each year. A few commenters recommended 
specific frequencies of collection, such as monthly.
    Response: The Affordable Care Act directs Exchanges to be self-
sustaining and provides flexibility for Exchanges to generate support 
for continued operation in a variety of ways, such as through user 
fees. Accordingly, we do not limit Exchanges' options in the final rule 
by prescribing or prohibiting certain approaches. We believe that user 
fees parameters, as well as the need for other revenue-generating 
strategies, may vary by State depending upon several factors such as 
the number of potential enrollees and the Exchange's operational costs. 
Consistent with this flexibility, we have not finalized the proposal 
that the Exchange announce user fees in advance of the applicable plan 
year, and instead look to Exchanges that opt to charge user fees to 
establish a deadline and vehicle for such announcement, as well as the 
frequency with which the Exchange will collect such fees.
    Comment: Some commenters expressed support for the flexibility 
provided with respect to funding for ongoing operations as specified in 
proposed Sec.  155.160(b). Others recommended a centralized approach to 
assessments or raised concerns about specific approaches for generating 
revenue, such as a provider or general tax. A few commenters requested 
that HHS provide technical assistance to States in developing 
assessment structures.
    Response: Exchange flexibility in funding ongoing operations is 
critical, as we believe that the ability to pursue specific funding 
strategies may vary by State. We encourage Exchanges to consider the 
implications of various fee structures on all stakeholders before 
making a selection, but note that the Exchange has discretion to set 
parameters related to assessments. As we have noted previously, HHS is 
committed to working with States on a variety of Exchange features, 
including but not limited to financial sustainability.
    Comment: In response to the reference to the definition of 
``participating issuer'' in proposed Sec.  156.50, many commenters made 
recommendations regarding the types of issuers that should be subject 
to any assessments established by the Exchange. The majority of 
commenters advocated for a broad-based approach in which all issuers 
would be subject to the assessment. Fewer commenters recommended a 
narrower approach or that certain plans, such as excepted benefit 
plans, be excluded. Finally, several commenters requested that the 
final rule clarify that Exchanges will identify the issuers subject to 
any assessment.
    Response: The Exchange should identify the issuers that are subject 
to any user fees or other assessments, if applicable. This could 
include all participating issuers, as defined in Sec.  156.50 of this 
final rule, or a subset of issuers identified by the Exchange. 
Similarly, an Exchange could exempt certain issuers from assessments. 
We believe that Exchange discretion is important with respect to issuer 
participation so that Exchanges can consider a broad range of user fee 
and assessment alternatives. We anticipate that Exchanges will consider 
a variety of factors, such as the projected operating costs of the 
Exchange, and the number of issuers and consumers who are expected to 
participate, if and when establishing a fee structure.
    Comment: A few commenters expressed concern that user fees or 
assessments charged in accordance with proposed Sec.  155.160 will be 
shifted to consumers and providers. These commenters variously 
recommended that any user fees passed on to the consumer be treated as 
rate increases, that user fees be reported separately on consumer 
bills, and that the final rule prohibit direct assessments on 
consumers. Conversely, several commenters recommended that the Exchange 
must report on user fees and other assessments; specifically, the 
amount collected and how the fees were used.
    Response: Any user fees or other assessments collected by the 
Exchange would be reflected in issuers' premiums, consistent with 
current industry practice, and would thus be considered as part of any 
rate review conducted by the State. We believe that having issuers 
report separately any user fees is unnecessary, as we expect that the 
Exchange will announce user fees in advance of each plan year. With 
respect to having Exchanges report on user fees, we recognize that 
transparency is important, but defer to State flexibility to establish 
a process to notify issuers and report on the assessment of user fees, 
if this is the approach taken to supporting continued operations. We 
encourage States to be transparent in this process.
    Comment: A handful of commenters on proposed Sec.  155.160 
recommended that Exchanges establish uniform user fees for issuers in 
the individual Exchange and SHOP.
    Response: We believe that the decision about whether to charge 
uniform user fees for issuers in the individual and small group markets 
is best made by the Exchange, within the context of the local market 
and the Exchange operational structure. Therefore, we are not limiting 
Exchange flexibility in this area.
    Comment: A few commenters on proposed Sec.  155.160(b) requested 
that HHS clarify the statement in the proposed rule that no Federal 
funds will be available to Exchanges after 2014. A few other commenters 
suggested that Exchanges secure funding from State Medicaid and CHIP 
agencies to support functions performed on behalf of individuals 
eligible for Medicaid and CHIP (for example, eligibility screenings and 
referrals).
    Response: The Affordable Care Act specifies that the State ensure 
that its Exchange is self-sustaining by January 1, 2015. Further, as 
noted in the Department's State Exchange Implementation Questions and 
Answers released on November 29, 2011, section 1311 grant funding to 
establish an Exchange will only be awarded through 2014. This funding 
is available to States pursuing State-based Exchanges, or preparing to 
partner with HHS on specific functions, and can be used to fund State 
activities to establish Exchange functions and operating systems and to 
test and improve systems and processes over time. In addition, we note 
that nothing in this final rule prohibits an Exchange from executing 
agreements with other State agencies to provide funding for certain 
functions that also assist or support those other State agencies. As 
noted in the November 29, 2011 Q&A document, HHS has provided 
additional help to States to build and maintain a shared eligibility 
service that allows for the Exchange, the Medicaid agency, and the CHIP 
agency to share common components, technologies, and processes to 
evaluate applications for insurance affordability programs. This 
includes enhanced funding under Medicaid and opportunities for other 
State programs to reuse the information

[[Page 18324]]

technology infrastructure without having to contribute funding for 
development costs related to shared services.
    Comment: Several commenters on proposed Sec.  155.160 made 
recommendations with respect to how user fees or other assessments 
collected by the Exchange should be incorporated into issuers' medical 
loss ratios. Some commenters suggested that user fees should be treated 
as administrative costs, while others recommended that user fees be 
excluded from the calculation.
    Response: We clarify that all calculations and reporting of user 
fees must be consistent with HHS's medical loss ratio rule, published 
at 45 CFR 158.

Summary of Regulatory Changes

    We are finalizing the provisions in proposed Sec.  155.160, with 
limited exceptions: first, in revised paragraph (b)(1), we consolidated 
the description of how Exchange revenue may be generated to simplify 
the regulatory language. We deleted proposed paragraph (b)(3) and 
instead clarified in revised paragraph (b)(2) that no Federal grant 
funding to establish an Exchange will be awarded after January 1, 2015. 
Finally, we removed the proposal that an Exchange announce user fees in 
advance of the plan year and instead defer to State notification 
processes for assessing user fees, if applicable.
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 (specifically, subparts D, E, H and 
K). The minimum functions are designed to provide State flexibility. 
Uniform standards are established where specified by the statute or 
where there were compelling practical, efficiency or consumer 
protection reasons. This subpart also outlines standards for consumer 
tools and assistance, including the Internet Web site to facilitate 
consumer comparison of QHPs, the Navigator program, notices, the 
involvement of agents and brokers, premium payment, and privacy and 
security.
a. Functions of an Exchange (Sec.  155.200)
    We proposed that an Exchange must perform the minimum functions 
outlined in subparts E, H, and K related to enrollment, SHOP, and QHP 
certification, respectively. We also proposed that the Exchange grant 
certifications of exemptions from the individual responsibility 
requirement. The proposed rule established that each Exchange would 
perform eligibility determinations; establish a process for appeals of 
eligibility determinations; perform functions related to oversight and 
financial integrity; 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. We invited comments regarding these and other 
functions that should be performed by an Exchange.
    Comment: Several commenters suggested that HHS establish objective 
and public performance measures to determine how well an Exchange is 
executing the minimum functions. Examples provided by commenters 
include monitoring the percent of consumers enrolled in a QHP in a 
timely fashion, or monitoring the change in premiums over time in 
relation to health plans offered outside of an Exchange. Other 
commenters suggested that performance should be measured against 
benchmarks that change over time. The commenters further suggested that 
HHS employ remedies to address any State-based Exchange that is not 
performing the minimum functions adequately, particularly the 
processing of applications for advance payments of the premium tax 
credit and cost-sharing reductions.
    Response: Ongoing compliance with regulatory standards is critical 
to the effective operation of Exchanges and HHS is currently exploring 
mechanisms for performance measures and oversight tools available under 
section 1313 of the Affordable Care Act. We also note that the 
Government Accountability Office is also directed by section 1313(b) of 
the Affordable Care Act to conduct a study of Exchanges, including a 
comparison of premiums inside and outside of an Exchange.
    Comment: Several commenters urged HHS to clarify that the minimum 
functions in proposed Sec.  155.200 are a floor and not a ceiling. 
Similarly, some commenters suggested other minimum functions, including 
but not limited to: coordinating with public programs and entities; 
monitoring and addressing adverse selection; creating an ombudsman 
office to handle complaints and appeals related to Exchange functions; 
and minimizing wrongful denials of eligibility.
    Response: The minimum functions presented in Sec.  155.200 
represent a floor that can be exceeded by an Exchange, but we do not 
believe we need to revise our proposed regulation text for that 
clarification. In response to the specific functions suggested by 
commenters, we believe that many of the suggested additional minimum 
functions are already encompassed in the final rule. For example, 
subpart D addresses coordination with other public programs and 
entities as well as the accuracy of eligibility determinations. We also 
note that subpart K of this part equips the Exchange with the ability 
to establish certification standards that mitigate adverse selection, 
while other sections of this subpart outlines various forms of consumer 
support.
    Comment: A number of commenters suggested that the final rule 
include the standard to fulfill the United States' Trust Responsibility 
to provide health care for American Indian/Alaska Native individuals 
regardless of where they reside.
    Response: We believe Congress has acknowledged the Federal 
government's historical and unique legal relationship with Indian 
tribes by providing additional benefits for American Indians and Alaska 
Natives to increase access to health care coverage in rural and urban 
areas. Those benefits include the waiver of cost-sharing amounts and 
the special enrollment period. We believe that the provisions in this 
final rule implementing these benefits will supplement the services and 
benefits that are provided by the Indian Health Service.
    Comment: Numerous commenters recommended standards related to the 
certificates of exemption described in Sec.  155.200(b) of the proposed 
rule.
    Response: As noted in the preamble to the proposed rule, we intend 
to address certificates of exemption and implement section 
1311(d)(4)(H) and 1411 of the Affordable Care Act through future 
rulemaking.
    Comment: Many commenters urged HHS to provide more details on the 
eligibility appeals minimum function in Sec.  155.200(d) of the 
proposed rule, and several specifically commented on the need for 
appeals processes to accommodate limited English proficient 
individuals.
    Response: As noted in the preamble to the proposed rule, we intend 
to address the content and manner of appeals of individual eligibility 
determinations in future rulemaking. We have removed this from the list 
of minimum functions at this time. We note, however, that Sec.  155.355 
provides that Exchange eligibility notices include notice of the right 
to an appeal. In addition, Exchange notices must meet certain minimum 
standards in Sec.  155.230. Both of these provisions are discussed in 
more detail in response to comments on those specific sections.

[[Page 18325]]

    Comment: Many commenters urged HHS to provide more details on the 
standards for oversight and financial integrity of an Exchange in Sec.  
155.200(e) of the proposed rule.
    Response: Section 1313 of the Affordable Care Act describes the 
steps the Secretary may take to oversee Exchanges and ensure their 
financial integrity, including conducting investigations and annual 
audits and partially rescinding Federal financial support from a State 
in which the Exchange has engaged in serious misconduct. We may publish 
regulations or other guidance in the future describing specific 
parameters of this oversight.
    Comment: Several commenters submitted comments in response to our 
proposals in Sec.  155.200(f) supporting the use of national quality 
standards, State flexibility in implementation, reporting quality 
information to consumers and the evaluation of Exchanges as well as 
QHPs.
    Response: As noted in the preamble to the proposed rule, we intend 
to address the content and manner of quality reporting under this 
section in future rulemaking. In addition, the State Exchange 
Implementation Questions and Answers published by HHS on November 29, 
2011 discusses the implementation of the quality rating system for QHPs 
at question 11.
    Comment: Some commenters requested clarification on whether an 
Exchange is considered a business associate under HIPAA.
    Response: In response to commenters' requests for clarification 
regarding Exchanges and HIPAA, we have added language to section Sec.  
155.200 clarifying the relationship between Exchanges and QHP issuers, 
which are HIPAA covered entities, to help States determine the 
applicability of HIPAA to their Exchange. The final rule provides 
States with a breadth of options for designing and implementing 
Exchange functions and operations. Therefore, it is not possible to 
state the applicability of the HIPAA Privacy and Security Rules to all 
Exchanges. We have added Sec.  155.200(e) to clarify that an Exchange 
is not acting on behalf of a QHP when the Exchange engages in the 
minimum functions outlined in this final rule.
    Because the Exchange, in performing functions under Sec.  155.200, 
is not operating on behalf of a particular QHP issuer, but rather is 
acting on its own behalf in performing statutorily-required 
responsibilities to determine an individual's eligibility for 
enrollment in a QHP through the Exchange, it is not a HIPAA business 
associate of the QHP issuer in regard to its performance of these 
functions. However, an Exchange that chooses to perform functions other 
than or in addition to those in Sec.  155.200 may be a HIPAA covered 
entity or business associate. For instance, a State may need to 
consider whether the Exchange performs eligibility assessments for 
Medicaid and CHIP, based on MAGI, or conducts eligibility 
determinations for Medicaid and CHIP as described in Sec.  155.302(b).
    As stated in the Exchange establishment proposed rule, each 
Exchange should engage in an analysis of its functions and operations 
to determine whether the Exchange is a covered entity or business 
associate, based on the definitions in 45 CFR 160.103. However, we 
believe that clarifying our conceptualization of the relationship 
between an Exchange and QHP issuers will assist Exchanges in their 
independent evaluation of the applicability of HIPAA. Please see 
further discussion of privacy and security in Sec.  155.260.

Summary of Regulatory Changes

    In the final rule, we made the following changes to Sec.  155.200: 
we have removed the proposed paragraph (c), and instead included 
eligibility determinations as a minimum function through reference to 
subpart D in paragraph (a). We have also removed the proposed paragraph 
(d) related to appeals of eligibility determinations. In the final 
rule, paragraphs (c) and (d) now reflect the minimum functions related 
to oversight/financial integrity and quality activities, respectively. 
We have added a new paragraph (e) to clarify our intent that in 
carrying out its responsibilities under subpart C, an Exchange would 
not be considered to be operating on behalf of a QHP.
b. Partnership
    In the Exchange establishment proposed rule, HHS introduced the 
concept of a Partnership model in which HHS and States work together on 
the operation of an Exchange. At a State grantee meeting on September 
19, 2011, HHS provided additional information regarding the Partnership 
model.
    A Partnership Exchange would be a variation of a Federally-
facilitated Exchange. Section 1321(c) of the Affordable Care Act 
establishes that if a State does not have an approved Exchange, then 
HHS must establish an Exchange in that State; the statute does not 
authorize divided authority or responsibility. This means that HHS 
would have ultimate responsibility for and authority over the 
Partnership Exchange. In a Partnership Exchange, we intend to provide 
opportunities for a State to help operate the plan management function, 
some consumer assistance functions, or both. For successful operation 
of the Exchange in this model, we expect that States would agree under 
the terms of section 1311 grants to ensure cooperation from the State's 
insurance, Medicaid, and CHIP agencies to coordinate business 
processes, systems, data/information, and enforcement. Under such an 
arrangement, States could use section 1311 Exchange grant funding to 
pay for activities related to establishment of these Exchange 
functions, thereby maintaining existing relationships and allowing for 
easier transitions to State-based Exchanges in future years if a State 
elects to pursue Exchange approval.
    Comment: Many commenters supported the goal of a Partnership, but 
voiced concerns about the potentially negative implications for a 
seamless consumer experience. Commenters urged HHS to ensure that 
consumers would not be able to differentiate an Exchange operated by a 
single entity from a Partnership Exchange. Other commenters recommended 
a highly transparent process so consumers would know where to file 
appeals and voice complaints and health insurance issuers would know 
which standards are enforced by which entity. Some commenters raised 
concerns about separating Exchange functionality at all, and urged HHS 
not to sacrifice a seamless consumer experience for State flexibility.
    Response: A seamless consumer experience is a cornerstone to an 
effective Exchange, and we plan to structure any Partnership in such a 
way that will not undermine a smooth process for individuals and 
employers.
    Comment: Several commenters suggested other functions for State 
involvement in a Partnership instead of the plan management and 
consumer assistance, in particular suggesting that States perform 
Medicaid eligibility determinations. Some commenters recommended 
allowing a State to retain responsibility for making Medicaid 
eligibility determinations in order to avoid duplicating existing State 
systems or curtailing traditional State responsibilities. A few 
commenters suggested that there be a specific process to handle 
disputes between HHS and Medicaid regarding Medicaid eligibility if 
States retained that function in a Federally-facilitated Exchange, and 
one suggested that consumers be held harmless and enrolled in coverage 
during eligibility disputes. Meanwhile, other commenters urged HHS not 
to bifurcate eligibility determinations

[[Page 18326]]

between Federal and State entities out of concerns about the negative 
implications for the consumer experience and the complications such 
bifurcation would create. A small number also suggested that a State 
with a Federally-facilitated Exchange must accept Federal eligibility 
determinations.
    Other proposed functions for Partnership included: the certificates 
of exemption described in Sec.  155.200(b), quality rating system, 
enrollee satisfaction tools, determination of affordability and minimum 
value of employer-sponsored coverage, or eligibility determinations for 
advance payments of the premium tax credit. Other commenters suggested 
areas that should specifically be retained by a State in any 
circumstance, including State responsibility for overseeing licensure, 
solvency, market conduct, form approval and other operations of QHPs, 
overseeing licensed agents, and responding to consumer complaints.
    Response: In this final rule, we address leveraging existing State 
resources and expertise regarding Medicaid in subpart D. Exchange 
responsibilities related to the quality rating system and enrollee 
satisfaction survey will be outlined in future rulemaking. In addition, 
HHS continues to explore how to leverage existing State insurance 
activities in several areas, including licensure, solvency, and network 
adequacy. The State Exchange Implementation Questions and Answers 
published on November 29, 2011 provides additional discussion in this 
area.
    Comment: Some commenters suggested that we allow States to have a 
variety of options under a Partnership Exchange, while other commenters 
recommended that a standardized set of limited options would be the 
most effective way to ensure that a Partnership does not create 
significant administrative burden.
    Response: We recognize that an unlimited number of options for 
organization of a Federally-facilitated Exchange would be extremely 
complicated to implement and operate, and believe that the options and 
flexibilities HHS has laid out will balance flexibility with 
administrative feasibility.
    Comment: Many commenters, citing concerns about accountability, 
supported the approach of the Partnership being a form of a Federally-
facilitated Exchange, while others preferred that States retain 
ultimate authority in a Partnership. Some of the commenters urged HHS 
to oppose any Partnership that would confuse or blur lines of authority 
and responsibility. A few commenters suggested that HHS have readiness 
assessments or performance metrics to measure how a State will perform, 
or is performing, a function under Partnership. One commenter suggested 
that HHS have no role in plan management if a State decides to operate 
this function, while another voiced concerns about how HHS would 
enforce certain decisions if a State is operating one or more Exchange 
functions.
    Response: Section 1321(c) of the Affordable Care Act does not 
contemplate divided authority over an Exchange. In all organizations of 
a Federally-facilitated Exchange, the Secretary will retain ultimate 
responsibility and authority over operations and all inherently 
governmental functions. A State wishing to enter into a Partnership 
must agree to perform the function(s) within certain parameters, as 
agreed upon by the State and HHS.
    Comment: Some commenters urged HHS not to allow a State to operate 
only an individual market or SHOP component of an Exchange through a 
Partnership.
    Response: We believe that splitting the SHOP through a Partnership 
is not a reasonable or feasible option at this time and have not 
established that as an option.
    Comment: Many commenters urged HHS to consult with stakeholders 
during the development of a Partnership with a given State.
    Response: Section 155.105(f) clarifies that the Federally-
facilitated Exchange must follow the stakeholder consultation standards 
in Sec.  155.130. The Federally-facilitated Exchange will consult with 
a variety of stakeholders to ensure that the needs of the States in 
which it operates are met.
    Comment: A few commenters requested that Tribal governments be 
eligible to participate in a Partnership.
    Response: Currently, only States would be eligible to enter into a 
Partnership with HHS, as States are the entities designated in the 
Affordable Care Act as responsible for setting up an Exchange (see 
discussion of the Exchange establishment proposed rule for more detail 
(76 FR 41870). However, HHS will continue ongoing tribal consultation 
to ensure that Exchanges address the needs of tribal populations.

Summary of Regulatory Changes

    We did not propose regulations on Partnership and have not added 
any in this final rule. Rather, further information will be provided in 
the context of future guidance on the Federally-facilitated Exchange.
c. Consumer Assistance Tools and Programs of an Exchange (Sec.  
155.205)
    In proposed Sec.  155.205, we established that the Exchange must 
provide for the operation of a consumer assistance call center that is 
accessible via a toll-free telephone number, and outlined capabilities 
and suggested infrastructure as well as types of information we think 
will be most critical to consumer experience and informed decision-
making. The proposed rule sought comment on ways to streamline and 
prevent duplication of effort by the Exchange call center and QHP 
issuers' customer call centers while ensuring that consumers have a 
variety of ways to learn about their coverage options and receive 
assistance.
    We further proposed that an Exchange must maintain an Internet Web 
site that contains the following information on each available QHP: the 
premium and cost sharing information; the summary of benefits under 
section 2715 of the PHS Act; the identification of the QHP coverage 
(``metal'') level; the results of the enrollee satisfaction survey; the 
assigned quality ratings; the medical loss ratio; the transparency of 
coverage measures reported to the Exchange, and the provider directory.
    We noted that we were evaluating the extent to which the Exchange 
Web site may satisfy the need to provide plan comparison functionality 
using HealthCare.gov, and invited comment on this issue. We also 
requested comment on a Web site standard that would allow applicants, 
enrollees, and individuals assisting them to store and access their 
personal account information and make changes.
    We also proposed that the Exchange Web site be accessible to 
persons with disabilities and provide meaningful access to persons with 
limited English proficiency. In addition, we proposed that the Exchange 
post certain QHP financial information, and that an Exchange 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 
invited comment on the extent to which States would benefit from a 
model calculator and suggestions on its design.
    Finally, we proposed that the Exchange have a consumer assistance 
function, and that the Exchange conduct outreach and education 
activities to educate consumers about the Exchange and encourage 
participation separate

[[Page 18327]]

from the implementation of a Navigator program described in Sec.  
155.210.
    Comment: Several commenters supported the significant flexibility 
in structuring a call center provided in proposed Sec.  155.205(a). 
Other commenters suggested that HHS establish more detailed standards 
such as establishing key areas of competency for a call center service, 
including being able to provide information about QHPs, the categories 
of available assistance, and the application process. Some commenters 
recommended that an Exchange call center address additional topics, 
ranging from the ability to make appropriate referrals to other sources 
of information, to the capacity to provide enrollment assistance to 
hospitals and other providers encountering the uninsured. One commenter 
said that the call center should be able to respond to online chat.
    Response: We accept the recommendation of commenters that Exchange 
discretion in establishing a call center should be maintained, and 
therefore have not established additional standards in Sec.  155.205(a) 
of the final rule. The final rule does not preclude an Exchange from 
adopting additional standards or implementing the specific suggestions 
from commenters to provide more robust consumer assistance.
    Comment: HHS received many comments regarding an Exchange's ability 
to make appropriate referrals through the call center in proposed Sec.  
155.205(a). Commenters specifically recommended that Exchanges have the 
capacity to refer consumers to Medicaid, Indian Health Service/Tribal/
Urban (I/T/U) providers, Navigators and assisters, oral translation 
services, and family planning services. A commenter also suggested that 
the call center be able to appropriately address the special issues 
facing families with mixed immigration status. Several commenters asked 
that the call center refer consumers who were ineligible for coverage 
through the Exchange to safety net health providers and other low-cost, 
non-Exchange options. Some commenters suggested that the call center be 
able to appropriately refer discrimination complaints.
    Response: We believe Sec.  155.205(a) addresses this issue with the 
phrase ``address the needs of consumers requesting assistance.'' In the 
preamble to the proposed rule, we noted that the Exchange call center 
should be a conduit to services like Navigators and State consumer 
programs (76 FR 41875). We maintain this expectation under this final 
rule and note that Exchanges have discretion to establish more specific 
standards.
    Comment: Many commenters recommended that the call center be able 
to provide oral communication to people with limited English 
proficiency (LEP), and several suggested standards that assure service 
to those with hearing disabilities.
    Response: We have amended the final rule to apply the meaningful 
access standards specified in the redesignated Sec.  155.205(c)(1), 
(c)(2)(i), and (c)(3) to an Exchange call center. HHS will also issue 
further guidance on language access and such guidance will coordinate 
our accessibility standards with insurance affordability programs, and 
across HHS programs, as appropriate, providing more detail regarding 
literacy levels, language services and access standards.
    Comment: HHS received comments about ways a call center can assure 
quality service, including training on important topics, establishing 
performance standards on topics like call wait times, abandonment 
rates, and call return time; or modeling call center performance 
standards on existing call centers, with 1-800 Medicare and the 
Michigan Health Insurance Consumer Assistance Program mentioned as 
positive examples. Commenters also suggested testing the call center 
with consumer focus groups, developing analytics on call center service 
issues, and updating an Exchange customer's account with a record of 
any services provided by call center personnel.
    Response: We believe that Sec.  155.205(a) as proposed outlines 
general standards to address the needs of consumers and we retain this 
language in the final rule. We did not propose and are not adding 
specific performance standards for Exchange call centers in this final 
rule, but we note that in connection with the operation of Federally-
facilitated Exchanges, we will take these specific performance 
recommendations into consideration.
    Comment: HHS received many comments on the need to coordinate call 
center services with other entities. Several commenters recommended 
that service issues handled by an Exchange call center versus those 
handled by a QHP issuer call center should be clearly delineated to 
avoid consumer confusion and unnecessary duplication, a topic for which 
we requested comment in the proposed rule. One commenter recommended 
limiting the Exchange call center services to pre-enrollment, leaving 
QHP issuers to provide customer service for QHP enrollees. Another 
commenter recommended a ``no wrong number'' approach to customer 
service, advising that State flexibility would best foster a solution. 
One commenter spoke of the need to integrate the call center with the 
Exchange Web site in order to provide personal service without having 
callers repeat information already entered via an online account. 
Another commenter asked that HHS clarify the different roles of 
eligibility workers and the call center.
    Response: An Exchange must balance the need to prevent duplication 
against ensuring that consumers have a variety of ways to learn about 
their coverage options, an imperative supported by the flexibility in 
paragraph Sec.  155.200(a). In regard to the differing roles between 
eligibility workers and the call center, we believe this is an 
operational issue that each Exchange must address. Thus, we are 
finalizing this provision as proposed.
    Comment: Related to proposed Sec.  155.200(b), many commenters 
remarked that the Web site www.Healthcare.gov's ``Find Insurance 
Options'' would work as a model for health plan comparison for the 
Exchange, though often with the caveat that this feature should be 
fully integrated into the Exchange Web site. A commenter also noted 
that Healthcare.gov provides a foundation but would need changes to be 
used for an Exchange. Some commenters opposed Healthcare.gov as a model 
because it does not have transactional functionality or a precise 
premium calculator. Another commenter urged HHS to also consider 
eHealthInsurance.com and Medicare.gov as models.
    Response: HHS considered comments on the appropriateness of 
Healthcare.gov as a model for presenting comparative plan information, 
as well as comments suggesting consulting other models such as 
eHealthInsurance.com and Medicare.gov. We will take these 
recommendations into account in development of the model Internet Web 
site template and in future guidance.
    Comment: With respect to the preamble discussion related to 
proposed Sec.  155.205(b), commenters were generally supportive of the 
concept that Exchange Web sites allow applicants and enrollees to store 
and access their personal information in an online account or allow 
eligibility and enrollment application assisters to maintain records of 
an individual's application process. Some commenters raised privacy and 
security concerns, and one commenter suggested applying a privacy and 
security standard like that used by the Financial Industry

[[Page 18328]]

Regulatory Authority (FINRA) in its self-regulation of the securities 
industry, ensuring that actions by authorized representatives are 
recorded for consumer protection purposes.
    Response: We believe that applicants, enrollees, and authorized 
third party assisters should have access to an online personal account 
with strong privacy and security protections and will consider these 
comments when developing the model Internet Web site template and 
guidance. We encourage Exchanges to consider the benefit of accounts, 
but are not establishing account functionality as a minimum Exchange 
Web site standard in this final rule.
    Comment: Many commenters supported the proposal in Sec.  
155.205(b)(1)(ii) that the Exchange display the summary of benefits and 
coverage established in section 2715 of the PHS Act. Several noted that 
the summary of benefits should be searchable, not necessitate 
additional software to view, and include drug formulary information.
    Response: Enrollees, consumers, and other stakeholders need access 
to a variety of cost and benefit information via the Exchange Web site 
to make an informed plan selection. Accordingly, we are finalizing the 
provisions in paragraphs Sec.  155.205(b)(1)(i) and (ii), which direct 
an Exchange Web site to display premium and cost-sharing information 
and a summary of benefits and coverage for each QHP. We clarify that 
paragraphs (b)(1)(i) and (b)(1)(ii) are separate standards because the 
premium and cost-sharing information needs for an Exchange surpass 
those included in the summary of benefits and coverage document. We 
note that paragraph (b)(1)(ii) allows an Exchange the option of 
collecting the summary of benefits from issuers in a manner supporting 
a searchable format. The content of the summary of benefits and 
coverage is outside of the scope of this final rule and refer readers 
to the Summary of Benefits and Coverage and Uniform Glossary final 
rule, codified at Sec.  147.200 of this title, published at 77 FR 8668 
(Feb. 14, 2012).
    Comment: With respect to the provider directory standard in 
proposed Sec.  155.205(b)(1)(viii), a number of commenters recommended 
that an Exchange provide an up-to-date consolidated provider directory 
to enable consumers to see which QHPs a given provider participates in 
from the Exchange Web site. A few other commenters advised HHS to 
ensure that the Exchange link to a QHP's Web site provider directory 
for timely and accurate information. Another commenter asked that the 
final rule clarify that an online directory meets the standard in 
paragraph (b)(1)(viii), and that Exchanges do not need to provide paper 
provider directories.
    Response: HHS considered the comments received on the Internet Web 
site's display of provider directory information. To maintain maximum 
flexibility for an Exchange, the final rule does not specify whether an 
Exchange should collect a consolidated provider directory or link to a 
QHP's Web site in order to meet the standards in paragraph 
(b)(1)(viii). Additional comments on the provider directories are 
addressed in Sec.  156.230.
    Comment: One commenter indicated that our proposed standard in 
Sec.  155.205(b)(1)(vi) to display medical loss ratio on the Exchange 
Web site was inappropriate, comparing it to a manufacturer's cost to 
produce. Another commenter suggested dropping the proposed MLR display 
for the individual market Exchange, stating that it was too technical a 
concept to be useful for consumers.
    Response: Issuers already report this data under the Affordable 
Care Act in accordance with section 2718 of the PHS Act, and displaying 
the medical loss ratio on the Exchange Web site makes this information 
accessible to consumers.
    Comment: Several commenters noted that an Exchange should track 
which Web site features were most used, or caused consumers difficulty, 
in order to continually improve the Web site. Some of these commenters 
asked that usage information be publicly disclosed.
    Response: Statistics on Web site usage may be helpful for Exchange 
quality assurance, and we will consider these comments when developing 
best practice guidelines for Exchanges. We make no modifications in the 
final rule to specifically regulate collection or dissemination of 
statistics on Web site usage.
    Comment: Many commenters supported the proposed Sec.  155.205(b)(2) 
standards regarding meaningful access to people with disabilities and 
persons with limited English proficiency, with some suggesting that HHS 
further clarify that the Web site must be fully accessible, with Web 
site materials and notices available in alternative formats. One 
commenter noted that the Exchange calculator and other online tools 
should be accessible and independently usable as much as possible for 
people with disabilities. Commenters suggested that all Web site 
language be at a sixth grade proficiency level. A number of commenters 
suggested that the Web site be available in Spanish and one or more 
languages prevalent in the Exchange service area. Many suggested that 
the Web site clearly display taglines in up to 15 different languages 
explaining how to access oral translation in those languages. In 
contrast, one commenter requested that HHS defer to a State on 
meaningful access standards because a State is best situated to 
determine local needs. Finally, several commenters suggested that 
meaningful access standards apply to information presented on the Web 
site on premiums, premium tax credits, individual responsibility 
exemptions, and the appeals process.
    Response: We have made several changes in this final rule. We added 
paragraph Sec.  155.205(c) to establish that communications be in plain 
language to help applicants and enrollees understand the information 
presented; the definition of ``plain language'' is discussed in Sec.  
155.20 of this final rule. We added Sec.  155.205(c)(1) to specify that 
auxiliary aids and services be provided at no cost to the individual. 
Provisions on access for those with limited English proficiency are 
modified in new paragraph Sec.  155.205(c)(2) to include oral 
translation, written translation, and taglines in non-English languages 
indicating the availability of language services. Finally, we added 
paragraph (c)(3) to establish that the Exchange must inform applicants 
and enrollees of the services in paragraph (1) and (2). We note that in 
this final rule, at Sec.  155.230(b) and Sec.  156.250, we apply the 
meaningful access standards to Exchange notices and QHP issuer notices, 
respectively. We note that the standards in this section do not preempt 
current guidance issued by the Office of Civil Rights.
    We are not adding specific accessibility standards in this final 
rule, but intend to issue such standards in future guidance, seeking 
input first from States and other stakeholders about appropriate 
standards. Such guidance will coordinate our accessibility standards 
with insurance affordability programs, and across HHS programs, as 
appropriate, providing more detail regarding literacy levels, language 
services and access standards.
    We retained the standard that Web sites must be accessible to 
people with disabilities and encourage States to review WCAG 2.0 level 
AA Web site standards, which have been considered for adoption as 
Section 508 standards in the recent proposed rule issued by the 
Architectural and Transportation Barriers Compliance Board (Access 
Board)76 FR 76640, December 8, 2011). See also Section 5.1.3 of the 
Guidance for Exchange and Medicaid Information

[[Page 18329]]

Technology (IT) Systems 1.0 published in November 2010.\2\ We intend to 
publish future guidance on these standards.
---------------------------------------------------------------------------

    \2\ Guidance for Exchange and Medicaid Information Technology 
(IT) Systems 1.0 published in November 2010: http://cciio.cms.gov/resources/files/joint_cms_ociio_guidance.pdf.
---------------------------------------------------------------------------

    Comment: With respect to the financial information described in 
proposed Sec.  155.205(b)(3)(i), one commenter sought clarification on 
what HHS means by licensing costs. Another commenter recommended 
dropping the proposal in Sec.  155.205(b)(3)(v) that Exchanges display 
losses due to waste, fraud and abuse, arguing that it would be 
speculative and inflammatory. Alternatively, several other commenters 
asked for more detail on Exchange reporting, and asked that HHS direct 
an Exchange to include all costs, including costs incurred in making a 
Medicaid eligibility determination, in the administrative cost of the 
Exchange.
    Response: We did not accept the recommendations to establish 
additional standards and have maintained the proposed policy in the 
final rule, which is redesignated as subparagraph (b)(6). Section 
1311(d)(7) of the Affordable Care Act directs the Exchange Web site to 
display losses due to waste, fraud and abuse. HHS will consider the 
request for greater clarity on licensing costs as we develop guidance 
to interpret and implement this standard.
    Comment: Many commenters supported our proposal that the Exchange 
Web site provide information about Navigators and other assisters in 
Sec.  155.205(b)(4). Several commenters suggested that HHS explicitly 
include the display of contact information for other assisters, 
especially the Exchange call center. Another commenter asked that 
brokers and agents only be listed if they are also Navigators. One 
tribal entity remarked that consumer assistance should include services 
provided by Indian Health Service/Tribal/Urban (I/T/U) organizations.
    Response: We maintain the standard in redesignated Sec.  
155.205(b)(3) of this final rule. Exchanges have the flexibility to 
establish additional standards regarding posting information relating 
to Navigators and other assisters.
    Comment: Many commenters were supportive of an Exchange Web site 
that facilitates a ``one-stop'' eligibility determination as described 
in Sec.  155.205(b)(5) of the proposed rule. Commenters were supportive 
of the Web site allowing for enrollment in coverage. Another commenter 
stated that the Exchange should not be the only access point for 
coverage, and that HHS should address the need for consumer assistance 
for Web site-related purchasing mistakes.
    Response: Exchange Web sites will not be the only access point for 
an individual to apply for coverage through the Exchange. Standards for 
enrollment initiated by an applicant through a non-Exchange Web site 
are described in an amended Sec.  155.220 and Sec.  156.265, which 
provide additional details about eligibility determinations and 
protections against an applicant's personal data from being 
inappropriately shared with other parties. Applications are also 
described in Sec.  155.405(c) of the final rule. We have also modified 
the Web site's function in enrollment in the proposed Sec.  
155.205(b)(1), by clarifying in redesignated Sec.  155.205(b)(5) that 
an Exchange Web site facilitates the selection of a QHP by a qualified 
individual since enrollment is effectuated by the QHP issuer in a 
process described in Sec.  156.265(b).
    Comment: Many commenters expressed support for a Web site 
calculator proposed in Sec.  155.205(c) that displays the estimated 
cost of coverage after the application of any expected advance payments 
of the premium tax credit and cost-sharing reductions. In general, 
these commenters urged simplicity and requested no additional 
calculation from the consumer. Several commenters recommended that HHS 
provide a national model calculator for efficiency and consistency 
across Exchanges. One commenter in particular asked that the calculator 
make cost-sharing reductions available to American Indians/Alaska 
Natives readily apparent. Another commenter suggested that the Web site 
provide a standard way for a consumer to take less than the available 
advance payment of the premium tax credit. A few other commenters 
suggested that the Web site have decision support to help a consumer 
see how a change in income would affect advance payments of the premium 
tax credit and make a plan selection accordingly. Several commenters 
suggested that the Exchange specify that an ``out-of-pocket'' estimate 
be part of the Exchange calculator in order to help consumers avoid 
evaluating cost by premium alone. Finally, one commenter suggested that 
the calculator account for the variation in cost sharing for ``in-
network'' versus ``out-of-network'' services.
    Response: We will consider these recommendations as we develop 
guidance, best practices, and the model Web site template, but we are 
not finalizing more specific standards for the electronic calculator in 
this final rule as we are codifying the statutory provision related to 
the calculator.
    Comment: Commenters were generally supportive of Exchanges 
providing consumer assistance as described in Sec.  155.205(d) of the 
proposed rule. Many asked that an Exchange complete a consumer needs 
assessment before designing its consumer assistance program. HHS 
received many comments on the need to conduct outreach and education 
for hard to reach populations described in proposed Sec.  155.205(e). 
Many commenters remarked that assistance should be able to serve those 
with disabilities or limited English proficiency, suggesting standards 
for consumer assistance such as oral translation for all limited 
English proficient individuals, or simply that such services be 
culturally and linguistically appropriate. Some commented that consumer 
assistance workers should be knowledgeable of the Indian Health System. 
One commenter remarked that consumer assistance should be accessible 
across multiple channels, including Web site, telephone, and in-person. 
Several commenters remarked on the need for in-person assistance, with 
one commenter suggesting the Internal Revenue Service's Volunteer 
Income Tax Assistance Program as a model, another commenter 
recommending agents and brokers for consumer assistance, and a third 
suggesting that assistance be provided as much as possible by nonprofit 
organizations. Others suggested that an outreach program be coordinated 
with public programs because of the likely overlap in eligibility, or 
with providers like Federally Qualified Health Centers and essential 
community providers. Other commenters pointed to existing enrollment 
campaigns for lessons learned, such as the need to build in time to 
``ramp up'' an enrollment campaign.
    Response: We will consider comments we received on consumer 
assistance in Sec.  155.205(d) in the development of guidance. In this 
final rule, we maintain this provision as proposed and believe that it 
provides sufficient discretion to further develop the consumer 
assistance function. We have modified Sec.  155.205(e) in this final 
rule to direct Exchanges to provide education regarding insurance 
affordability programs to ensure coordination with public programs. HHS 
received many helpful comments on how to ensure effective consumer

[[Page 18330]]

assistance and outreach and will consider these as we develop guidance.

Summary of Regulatory Changes

    We are finalizing the provisions proposed in Sec.  155.205 of the 
proposed rule, with the following modifications: we renumbered proposed 
paragraphs (b)(3) through (b)(6) as (b)(2) to (b)(5) in the final rule. 
We clarified in paragraph (b)(5) of this final rule that a qualified 
individual may select a QHP on the Exchange Web site to initiate the 
enrollment process, rather than completing the entirety of the 
enrollment process on the Web site. We moved the standard regarding the 
calculator to paragraph (b)(6) of this final rule. We redesignated 
paragraph (c)(1) and clarified standards for persons with disabilities, 
including the provision of auxiliary aids and services at no cost to 
the individual and that Exchange Web sites must be accessible. We added 
paragraph (c)(2) to outline standards for limited English proficient 
persons, including that oral translation be available, written 
translation be available, and that the availability of language 
services be displayed with taglines written in each respective 
language, and in paragraph (c)(3) that individuals must be made aware 
of the availability of these services. Finally, we made several minor 
technical and non-substantive changes.
d. Navigator Program Standards (Sec.  155.210)
    In Sec.  155.210, we proposed Navigator program standards for both 
the individual market Exchange and SHOP. We first proposed that 
Exchanges must award grant funds to public or private entities or 
individuals to serve as Navigators, and described the eligibility 
standards for and the types of entities to which the Exchange may award 
Navigator grants. We also identified the minimum duties of Navigators, 
including standards for the information and services provided by 
Navigators. We sought comment on how best to ensure that the 
information provided by Navigators is accurate and complete and whether 
HHS should identify additional standards for Navigators in future 
guidance.
    We further proposed that a Navigator must meet any licensing, 
certification or other standards prescribed by the State or Exchange, 
as appropriate, and may not have a conflict of interest during the term 
as Navigator. We sought comment on whether we should propose additional 
standards on Exchanges to make determinations regarding conflicts of 
interest.
    In addition, we proposed that the Exchange include at least two 
types of Navigators from the list of eligible entities included in the 
Affordable Care Act. We sought comment as to whether we should ensure 
that at least one community and consumer-focused non-profit 
organization be designated as a Navigator by an Exchange, or whether we 
should provide that Navigator grantees reflect a cross-section of 
stakeholders.
    We also proposed to codify the statutory prohibitions on Navigator 
conduct in the Exchange, specifically that health insurance issuers are 
prohibited from serving as Navigators and that Navigators must not 
receive any compensation from any health insurance issuer in connection 
with the enrollment of any qualified individuals or qualified employees 
in a QHP. We sought comment on this issue and whether there are ways to 
manage any potential conflicts of interest that might arise.
    Finally, we proposed to codify the statutory restriction that the 
Exchange cannot support the Navigator program with Federal funds 
received by the State for the establishment of Exchanges. For a more 
detailed discussion of how this statutory prohibition applies in States 
where Navigators address Medicaid and CHIP administrative functions, 
please refer to the preamble of the Exchange establishment proposed 
rule (76 FR 41878). We also noted that we were considering a standard 
that the Navigator program be operational with services available to 
consumers no later than the first day of the initial open enrollment 
period.

General Standards

    Comment: Regarding proposed Sec.  155.210(a), several commenters 
had specific recommendations regarding the types of and content of 
contractual agreements that should exist between Navigators and 
Exchanges.
    Response: The final rule does not specify the type of or contents 
of the contractual agreements between Exchanges and Navigators, other 
than codifying the statutory provision that Navigators receive grants. 
Exchanges can design the grant agreements as they deem appropriate so 
long as they ensure that Navigators are completing, at least, the 
minimum duties outlined in Sec.  155.210(e) of the final rule.
    Comment: Several commenters recommended additional standards for 
Navigator programs established under proposed Sec.  155.210(a), 
including a needs assessment of the population in the geographic areas 
in which Navigators will serve consumers and an ongoing evaluation 
system to gauge Navigator performance.
    Response: While a needs assessment is likely to yield useful 
information in developing the Navigator program, we do not accept the 
commenters' suggestion that Navigator programs conduct such 
assessments. We note that many States have already begun research on 
the needs of the populations an Exchange could serve. To the extent 
that needs assessments undertaken as part of Exchange establishment and 
planning do not inform which types of Navigators to select and how 
Navigators can best serve potential Exchange enrollees, we encourage 
States to conduct them. But the final rule does not direct States to 
conduct additional research. Additionally, we strongly encourage 
Exchanges to implement regular reviews and assessments of their 
Navigators.
    Comment: A significant number of commenters expressed the 
importance of mitigating Navigator conflict of interest and of ensuring 
Navigator accountability. Many commenters asked that HHS issue specific 
conflict of interest standards that would apply to all entities 
interested in serving as Navigators, and some made specific 
recommendations regarding what should be included in such standards. 
Several commenters, including consumer and patient advocacy groups and 
State agencies, also requested that we define ``conflict of interest'' 
as used in Sec.  155.210(b)(1)(iv) of the proposed rule, while another 
commenter suggested that States should have the flexibility to 
determine if a conflict of interest exists for Navigators.
    Response: The final rule contains restrictions on Navigator conduct 
that are intended to eliminate possible sources of conflicts of 
interest. However, the baseline standards that we have specified will 
likely not be sufficient to comprise a robust set of conflict of 
interest standards in all Exchanges. As such, Sec.  155.210(b)(1) of 
the final rule establishes that Exchanges develop and disseminate a set 
of conflict of interest standards to ensure appropriate integrity of 
Navigators. Exchanges will be best-equipped to determine what 
additional conflict of interest standards are appropriate for their 
markets, and we strongly urge Exchanges to develop standards that are 
sufficient to help ensure that consumers receive accurate and unbiased 
information at all times from all Navigators. We also clarify here that 
``conflict of interest,'' as used in Sec.  155.210(c)(1)(iv) of the 
final rule, means that a Navigator has a private or personal interest 
sufficient to influence, or appear to influence, the objective

[[Page 18331]]

exercise of his or her official duties; for purposes of this rule, it 
includes the conflict of interest standards developed by each Exchange.
    We urge Exchanges to develop conflict of interest standards that 
include, but are not limited to, areas such as financial 
considerations; non-financial considerations; the impact of a family 
member's employment or activities with other potentially conflicted 
entities; Navigator disclosures regarding existing financial and non-
financial relationships with other entities; Exchange monitoring of 
Navigator-based enrollment patterns; legal and financial recourses for 
consumers that have been adversely affected by a Navigator with a 
conflict of interest; and applicable civil and criminal penalties for 
Navigators that act in a manner inconsistent with the conflict of 
interest standards set forth by the Exchange. Additionally, we will be 
releasing model conflict of interest standards in forthcoming guidance.
    Comment: We requested comment on standards related to training in 
the proposed rule and received a large number of responses on this 
issue. Several commenters suggested that HHS establish minimum 
standards for Navigator training, including templates for the format 
and content of Navigator training materials. Some commenters suggested 
that Navigators be trained to specifically serve the needs of varying 
groups, including but not limited to: low-income individuals; limited 
English proficient individuals; tribal organizations; individuals with 
disabilities; and individuals with mental health or substance abuse 
needs. Other commenters urged HHS to defer to States in relation to 
Navigator training and standards beyond those established in the 
proposed rule.
    Response: Due in part to the sensitivity of information that will 
be available to Navigators, newly added Sec.  155.210(b)(2) of the 
final rule directs Exchanges to establish training standards that apply 
to all persons performing Navigator duties under the terms of a 
Navigator grant, including both paid and unpaid staff of entities 
serving as Navigators. We plan to issue training model standards in 
forthcoming guidance to supplement, not replace, the need for Navigator 
applicants to demonstrate that they can carry out the minimum duties of 
a Navigator as listed in Sec.  155.210(e) of the final rule. We 
encourage Exchanges to conduct ongoing and recurring training for 
Navigators.
    Comment: One comment from a consumer advocacy organization 
requested that HHS specifically indicate that the Gramm-Leach-Bliley 
Act (Pub. L. 106-102) does not apply to the Navigator program as 
Navigators will not be selling insurance.
    Response: The Gramm-Leach-Bliley Act (GLBA) is intended to enhance 
competition in the financial services industry by providing a 
prudential framework for the affiliation of banks, securities firms, 
insurance companies, and other financial service providers, and for 
other purposes. To the extent a Navigator is not licensed to sell 
insurance, we believe the GLBA would not apply. The GLBA will apply to 
agents and brokers as it currently does, including agents and brokers 
that choose to serve as Navigators. However, other Navigator grantees 
will not be affected. Navigators must meet other training, conflict of 
interest, and privacy and security standards established by the 
Exchange.
    Comment: We received many comments expressing support for a 
standard that Navigator programs be operational with services available 
to consumers no later than the first day of the initial open enrollment 
period. Some commenters noted that while they support the proposed 
start date, they prefer an earlier operational start date.
    Response: We have not directed Navigator programs to be operational 
by the first day of the initial open enrollment period. However, we 
encourage Navigator programs to be operational with services available 
to consumers by October 1, 2013, for State-based Exchanges that are 
approved or conditionally approved by January 1, 2013, or the start of 
any annual open enrollment period in subsequent years for State-based 
Exchanges certified after January 1, 2013.

Entities Eligible to be a Navigator

    Comment: Many commenters proposed that States, Exchanges, or HHS 
should set appropriate certification or licensing standards for 
Navigators. A few commenters proposed that HHS set a broad range of 
certification or licensing standards that States or Exchanges could 
tailor to meet their own needs, while others suggested specific 
programs upon which Exchanges could model Navigator certification 
standards, such as the Medicare State Health Insurance Assistance 
Programs, ombudsman programs, area agencies on aging, and Promotoras, a 
community health worker model that has been adopted into many Latino 
communities in the United States.
    Response: We understand and appreciate the concerns of commenters 
that recommended certification or licensure standards for Navigators; 
we have finalized in this rule a primary role for Exchanges and States 
in the creation, development and enforcement of such standards. We 
encourage Exchanges to set certification or licensing standards for 
Navigators in accordance with the guidelines set forth in this final 
rule and any State law(s) that may apply. However, without some minimum 
standards, significant variability may develop that could put consumers 
at a disadvantage. Therefore, HHS has added Sec.  155.210(b)(2) of the 
final rule to indicate that Exchanges must develop a set of training 
standards to ensure Navigator competency in the needs of underserved 
and vulnerable populations, eligibility and enrollment procedures, and 
the range of public programs and QHP options available through the 
Exchange. Additionally, given the policy set forth in Sec.  
155.210(c)(1)(v) that Navigators comply with the privacy and security 
standards adopted by the Exchanges under Sec.  155.260, the training 
standards must also ensure that Navigators are trained in the proper 
handling of tax data and other personal information. HHS also plans to 
issue additional guidance on the model standards for Navigator training 
and best practices for certification or licensure standards.
    Comment: A majority of commenters proposed that Navigators should 
not have to hold an agent or broker license or errors and omissions 
liability coverage in order to be certified or licensed as a Navigator. 
Conversely, a small number of commenters suggested that Navigators hold 
an agent or broker license as well as errors and omissions coverage and 
that Navigators should be subject to the same licensing and education 
standards established for agents and brokers.
    Response: We accept the commenters' suggestion that States and 
Exchanges should not be able to stipulate that Navigators hold an agent 
or broker license, and we clarify that States or Exchanges are 
prohibited from adopting such a standard, including errors and 
omissions coverage. ``Agent or broker'' is defined in Sec.  155.20 as 
``a person or entity licensed by the State as an agent, broker, or 
insurance producer.'' Thus, establishing licensure standards for 
Navigators would mean that all Navigators would be agents and brokers, 
and would violate the standard set forth Sec.  155.210(c)(2) of the 
final rule that at least two types of entities must serve as 
Navigators. Additionally, we do not think that holding an agent or 
broker license is necessary or sufficient to perform the duties of a 
Navigator as these licenses generally do not address

[[Page 18332]]

training, among other things, about public coverage options.
    Comment: Several commenters addressed the need for Navigators to 
have expertise in serving American Indian/Alaska Native communities and 
on the ability of Navigators to adequately address the needs of 
American Indians/Alaska Natives. In addition, a few commenters 
suggested we modify the language proposed in Sec.  155.210(b)(1)(iii) 
such that Navigators serving tribal communities should be exempt from 
any State licensing or certification standards, as well as from 
conflict of interest standards.
    Response: Exchanges that include one or more Federally-recognized 
tribes within their geographic area must engage in regular and 
meaningful consultation and collaboration with tribes in accordance 
with Sec.  155.130(f) of this final rule. In section 155.210(c)(2), we 
have identified Tribes, Tribal organizations, and urban Indian 
organizations as eligible entities to serve as Navigators. Development 
of the Navigator program should be an important element of Exchanges' 
consultation with Tribal governments. The Navigator program will help 
ensure that American Indians/Alaska Natives participate in Exchanges.
    Comment: Commenters recommended that when the geographic area of an 
Exchange includes an Indian Tribe, tribal organization, or Urban Indian 
organization, that at least one of these organizations must be included 
as a Navigator within this Exchange. Another commenter recommended that 
HHS include directives to Navigator programs and contractors to provide 
resources directly to Tribes so they can conduct Navigator tasks within 
their own communities.
    Response: Although Indian Tribes, tribal organizations, or Urban 
Indian organizations are listed in Sec.  155.205(c)(2)(viii) as 
potential Navigators, we believe that the Exchange should have 
flexibility regarding the granting of Navigator awards. However, as 
noted previously, development of the Navigator program should be a 
critical element of an Exchange's consultation with tribal governments, 
and tribal governments should have the opportunity to provide early 
input on the development of the Navigator program.
    Comment: Several commenters articulated the need for Navigators to 
be non-discriminatory in performing their duties. Commenters 
recommended that Navigators should comply with the non-discrimination 
standards that apply to the Exchange as a whole.
    Response: We clarify that because Navigators are third parties 
under agreement (that is, the grant agreement) with the Exchange, the 
non-discrimination standards that apply to Exchanges in Sec.  
155.120(c) will also apply to entities seeking to become Navigators.
    Comment: Regarding Sec.  155.205(b)(2), a majority of commenters 
supported the provision suggested in the proposed rule to establish 
that at least one of the two types of entities eligible to serve as 
Navigators must be a community or consumer-focused non-profit entity 
(76 FR 41877). Several commenters recommended expanding the list of 
categories to include additional entities. A small number of commenters 
thought States should have sole discretion over the determination of 
which entities may serve as Navigators. One commenter favored allowing 
States to determine the need for a Navigator program; another 
recommended using licensed insurance professionals to facilitate 
enrollment; and a small number stated that the standard that two types 
of entities must be Navigators was unnecessary and counterproductive.
    Response: We accept the commenters' suggestion that at least one 
entity that serves as a Navigator should be a community or consumer-
focused non-profit, and have amended Sec.  155.210(c)(2) to convey this 
policy. The categories listed in the final rule in Sec.  155.210(c)(2) 
represent a broad spectrum of organizations, but are not meant to be an 
exhaustive list of potential Navigators. As stated in Sec.  
155.210(c)(2)(viii), other public or private entities that meet the 
standards of the Navigator program may be eligible to receive a 
Navigator grant. When establishing a Navigator program, Exchanges 
should plan to have a sufficient number of Navigators available to 
assist qualified individuals and employers from various geographic 
areas and with varying needs who wish to enroll in QHPs within their 
State.
    Comment: One comment stated that a Navigator should never be an 
individual person, but instead a verifiable and appropriately regulated 
entity or institution.
    Response: We believe that the standard to meet licensure and 
certification standards in Sec.  155.210(c), and the prohibition 
against health insurance issuers, and those who receive any 
consideration directly or indirectly from any health insurance issuer 
in connection with the enrollment in the Exchange, from receiving 
Navigator grants in Sec.  155.210(d) will serve as sufficient 
regulation against fraud by individuals or organizations who qualify to 
be Navigators.

Prohibitions on Navigator Conduct

    Comment: Many commenters discussed the impact that Navigator 
compensation, or ``consideration'' as used in Sec.  155.210(c)(2) of 
proposed rule, would have on a Navigator's obligation to provide 
impartial assistance and avoid conflicts of interest. The majority of 
these commenters recommended that Navigators be prohibited from 
receiving compensation from health insurance issuers for enrolling 
individuals in plans outside of the Exchange, while some commenters 
expressed support for the compensation restrictions as proposed. 
Several commenters requested that a prohibition on enrollment-based 
compensation from a health issuer not prohibit Navigator programs from 
utilizing Medicaid or CHIP funds for appropriate Navigator activities. 
Some commenters also recommended that such a prohibition not preclude 
Navigators from receiving grants from health insurance issuers for 
activities unrelated to enrolling individuals in plans inside of the 
Exchange. Many commenters requested clarification of the term 
``consideration.''
    Response: Prohibiting Navigators from receiving compensation from 
health insurance issuers for enrolling individuals in health insurance 
plans is an important way to mitigate potential conflict of interest, 
and we have amended the final rule in Sec.  155.210(d)(4) to establish 
this prohibition. Permitting Navigators to receive such compensation 
would introduce a financial conflict of interest which would run 
counter to the focus of the Navigator program as a consumer-centered 
assistance resource. We clarify that this prohibition applies to 
Navigators broadly, including staff of an entity serving as a Navigator 
or entities that serve as Navigators for one Exchange while 
simultaneously serving in another capacity for another Exchange. 
Additionally, we clarify that this prohibition does not preclude 
Navigators from receiving grants from the Exchange that are funded 
through the collection of user fees.
    We note that the final rule does not inherently prohibit Navigators 
from receiving grants and other consideration from health insurance 
issuers for activities unrelated to enrollment into health plans, 
although we remain concerned that such relationships--financial and 
otherwise--may present a significant conflict of interest for 
Navigators. We urge Exchanges to consider the ramifications of such

[[Page 18333]]

relationships when developing conflict of interest standards for their 
Navigator programs.
    We also clarify that ``consideration,'' as used in Sec.  
155.210(d)(4) of the final rule, should be interpreted to both mean 
financial compensation--including monetary or in-kind of any type, 
including grants--as well as any other type of influence a health 
insurance issuer could use, including but not limited to things such as 
gifts and free travel, which may result in steering individuals to 
particular QHPs offered in the Exchange or plans outside of the 
Exchange.

Duties of a Navigator

    Comment: Many commenters supported the Navigator duties proposed in 
Sec.  155.210(d), and some suggested that the duty to ``maintain 
expertise in eligibility, enrollment, and program specifications'' 
should include knowledge about Exchanges, Medicaid, CHIP, other private 
and public health insurance programs, appeals, and rules related to 
cost-sharing. Other commenters recommended other specific minimum 
duties for Navigators, including providing information about total plan 
costs, assisting consumers with applying for advance payments of 
premium tax credit and other cost-sharing reductions, and making 
consumers aware of the tax implications of their enrollment decisions.
    Response: The final rule maintains most of the duties set forth in 
the proposed rule, except as re-assigned as Sec.  155.210(e) and 
reflecting edited language in Sec.  155.210(e)(3). The change in Sec.  
155.210(e)(3) is a technical correction to ensure consistency with our 
clarification in Sec.  155.205(b)(7). Similarly, a Navigator 
facilitating a QHP selection for a consumer initiates the enrollment 
process, which is then conducted by the Exchange. Section 155.400(a)(2) 
of this final rule describes the subsequent step in the enrollment 
process, and directs Exchanges to transmit the QHP selection to the 
appropriate QHP issuer.
    We believe that Navigators should make consumers aware of the tax 
implications of their enrollment decisions, and consider this to be 
included in Sec.  155.210(e)(1) of the final rule. Navigators should 
also provide information about the costs of coverage and assist 
consumers with applying for advanced payments of the premium tax credit 
and cost-sharing reductions, and we clarify that Sec.  155.210(e)(2) 
and Sec.  155.210(e)(3) of the final rule are intended to include such 
activities. We also clarify that such assistance could result in an 
individual receiving an eligibility determination for other insurance 
affordability programs. Additionally, we note that Exchanges can 
establish additional minimum Navigator duties and encourage Exchanges 
to determine whether additional Navigator duties may be appropriate.
    Comment: A significant number of commenters recommended that 
Navigators be accessible to all consumers, including those with 
disabilities, and that all information provided under Sec.  
155.210(d)(5) of the proposed rule by Navigators be provided orally as 
well as in writing.
    Response: Navigators need to be accessible to individuals with 
disabilities, and redesignated Sec.  155.210(e)(5) of the final rule 
establishes that Navigators must ensure accessibility and usability for 
individuals with disabilities, which we believe includes accessibility 
by individuals with hearing or visual impairments and using enrollment 
tools, written in plain language, that are easily accessible by 
consumers. We believe this provision will help ensure that Navigators 
minimize obstacles to access for all potential enrollees and remain 
accessible to consumers. Exchanges have the flexibility to develop 
materials or to assign the responsibility to Navigators.
    Comment: Many commenters expressed the need for Navigators to be 
linguistically and culturally competent, as described in Sec.  
155.210(d)(5) of the proposed rule, and a significant number 
recommended training in this area. Commenters had numerous specific 
recommendations regarding how Navigators would be able to best 
accomplish this duty, and other commenters wanted additional clarity 
regarding this standard. Some commenters recommended that Navigator 
programs select diverse Navigators as a method of reinforcing 
linguistic and cultural competence. One commenter suggested that having 
a consumer's family members or friends serve as interpreters should not 
be permitted to fulfill the obligation to provide culturally and 
linguistic appropriate services.
    Response: Redesignated Sec.  155.210(e)(5) establishes that 
Navigators must provide information in a way that is culturally and 
linguistically accessible to ensure that as many consumers as possible 
can benefit from Navigator programs. The linguistic and cultural 
accessibility standard applies broadly across the duties of a 
Navigator, including public education and outreach activities. We 
encourage Exchanges to undertake cultural and linguistic analysis of 
the needs of the populations they intend to serve and to develop 
training programs that ensure Navigators can meet the needs of such 
populations. We note that we do not believe that this standard can be 
met by simply having consumers' family members or friends serve as 
interpreters. As previously stated, future guidance will set forth 
model standards related to linguistic and cultural competency.
    Comment: Regarding the duties of a Navigator outlined in Sec.  
155.210(d) of the proposed rule, several commenters expressed the 
importance of data and the use of information technology for Navigator 
programs, including Navigator collection of data and narratives 
regarding consumer experiences. Some consumers also stated that 
Navigators should collaborate with other programs and entities, 
including other consumer assistance programs and State governments, so 
that all groups could mutually share information.
    Response: The final rule does not establish that Navigators or the 
Navigator program must collect data or to ensure compatibility with 
existing information systems. However, Exchanges have the flexibility 
to use such tools to ensure that Navigators and Exchanges are best 
serving consumers.

Funding for Navigators

    Comment: One commenter recommended that Navigator compensation by 
an Exchange described in Sec.  155.210(e) of the proposed rule be only 
in the form of block grants, while another commenter recommended that 
Navigator grants include distribution on a per capita basis for 
enrolling individuals in QHPs offered through the Exchange.
    Response: We do not outline a specific compensation structure for 
Navigators, and we maintain the proposed approach to funding in Sec.  
155.210(f) of the final rule. This approach does not alter section 
1311(i)(6) of the Affordable Care Act that establishes that all funds 
for Navigator grants come from the operational funds of the Exchange. 
We note, however, that operational funds of the Exchange may be revenue 
received by the Exchange through user fees or other revenue sources, so 
long as the Exchange is self-sustaining. We anticipate that there may 
be public or private grants available to support certain Exchange 
functions, such as education and outreach; once received for the 
purposes of funding Exchange operations, these funds would be 
operational funds.

[[Page 18334]]

    Comment: We received numerous comments suggesting that we monitor 
Navigator programs to ensure that they have sufficient funding under 
proposed Sec.  155.210(e) to meet the needs of all potential enrollees, 
and several commenters recommended that we issue guidance on minimum 
funding levels needed to operate sustainable Navigator programs.
    Response: While States and Exchanges should ensure that Navigator 
programs have sufficient funds to ensure that all potential enrollees 
are capable of being assisted and guided in eligibility and decision-
making for coverage in the Exchanges, we believe that minimum funding 
level for Navigator program needs will vary by State and by populations 
and therefore do not establish a minimum in Sec.  155.210(f) of the 
final rule.
    Comment: We received several comments regarding the use of Medicaid 
or CHIP funds when Navigators perform administrative functions for 
those programs. The majority of commenters, primarily consumer and 
patient advocacy groups, were supportive of using Federal Medicaid and 
CHIP funds for this purpose, while a small minority was opposed to such 
an approach. One commenter recommended that Navigators not perform 
Medicaid or CHIP administrative functions, stating that these 
activities are the purview of the State Medicaid program.
    Response: We continue to support the position that if a State 
chooses to permit Navigators to perform or assist with Medicaid and 
CHIP administrative functions, Medicaid or CHIP agencies may claim 
Federal funding for a share of expenditures incurred for such 
activities. A more detailed discussion of this position is in the 
proposed rule (76 FR 41878).

Summary of Regulatory Changes

    We are finalizing the provisions proposed in Sec.  155.210 of the 
proposed rule, with the following modifications. In new paragraph (b), 
we provide that an Exchange must develop and publicly disseminate 
conflict of interest and training standards for all entities that serve 
as Navigators. In paragraph (c)(1)(v), we apply the privacy and 
security standards adopted by the Exchange, as established in Sec.  
155.260, to Navigators. In paragraph (c)(2), we provided that at least 
one entity serving as a Navigator must be a community and consumer-
focused non-profit. We clarified in paragraphs (d)(2) and (d)(3) that 
subsidiaries of health insurance issuers and associations that include 
members of or lobby on behalf of the insurance industry are prohibited 
from serving as Navigators. In paragraph (d)(4) we clarified that 
Navigators may not receive compensation from a health insurance issuer 
in connection with the enrollment of individuals or employees in any 
health plan, including both QHPs and non-QHPs. Finally, in paragraph 
(e)(3) we clarified that Navigators must assist consumers in selecting 
a QHP, thereby initiating the enrollment process.
e. Ability of States to Permit Agents and Brokers to Assist Qualified 
Individuals, Qualified Employers, or Qualified Employees Enrolling in 
QHPs (Sec.  155.220)
    Based on comments and feedback to the proposed rule, we are 
revising the rule to include paragraph (a)(3) of this section as an 
interim final provision, and we are seeking comments on it.
    In Sec.  155.220, we proposed to codify section 1312(e) of the 
Affordable Care Act that gives States the option to permit agents or 
brokers to enroll individuals and employers in QHPs. To ensure that 
individuals and small groups have access to information about agents 
and brokers should they wish to use one, we proposed to permit an 
Exchange to display information about agents and brokers on its Web 
site or in other publicly available materials. Additionally, 
recognizing that an Exchange may wish to work with web-based entities 
and other entities with experience in health plan enrollment, we sought 
comment on the functions that such entities could perform, the 
potential scope of how these entities would interact with the Exchange, 
and the standards that should apply to an entity performing functions 
in place of, or on behalf of, an Exchange while acknowledging and 
meeting the statutory limitation that premium tax credits and cost-
sharing reductions be limited to enrollment through the Exchange. We 
also sought comment on the practical implications, costs, and benefits 
to an Exchange that coordinates with such entities, as well as any 
implications for security or privacy of such an arrangement.
    Comment: A number of commenters sought clarification on whether and 
how the involvement of agents and brokers described in proposed Sec.  
155.220 may serve as Navigators under Sec.  155.210. Many commenters 
sought further clarification as to the distinction between the role of 
agents or brokers and the role of Navigators in the Exchange.
    Response: In general, the responsibilities of a Navigator differ 
from the activities that an agent or broker. For example, the duties of 
a Navigator described under Sec.  155.210(e) of the final rule include 
providing information regarding various health programs, beyond private 
health insurance plans, and providing information in a manner that is 
culturally and linguistically appropriate to the needs of the 
population being served by the Exchange. Moreover, any individual or 
entity serving as a Navigator may not be compensated for enrolling 
individuals in QHPs or health plans outside of the Exchange; as such, 
an agent or broker serving as a Navigator would not be permitted to 
receive compensation from a health insurance issuer for enrolling 
individuals in particular health plans. That said, nothing precludes an 
Exchange's Navigator program from including agents and brokers, subject 
to the conditions of Sec.  155.210.
    Comment: Several commenters expressed support for the proposed 
Sec.  155.220(a) and the level of flexibility it affords State 
Exchanges to determine the role of agents and brokers and web-based 
entities in the Exchange marketplace. Several commenters specifically 
expressed support for the manner in which the accompanying preamble to 
the proposed rule described the Exchange as accountable for the actions 
of web-based entities.
    Response: We accept the recommendation that Exchanges have the 
flexibility to determine the role of agents and brokers, including web-
based entities, in their marketplaces. We have retained the language in 
Sec.  155.220(a), which codifies the statutory flexibility that States 
may determine whether agents and brokers may enroll individuals, 
employers and employees in QHPs and provide assistance to qualified 
individuals applying for financial assistance.
    Comment: HHS received several comments urging us to prohibit agents 
and brokers, including web-based brokers, from performing eligibility 
determinations.
    Response: The Exchange must perform eligibility determinations, 
subject to the standards and flexibility outlined in subpart D of this 
final rule. We note that an individual cannot enroll in a QHP through 
the Exchange, nor can a QHP issuer enroll a qualified individual in a 
QHP through the Exchange, unless such individual completes the single 
streamlined application to determine eligibility as described in Sec.  
155.405 and is determined eligible. We have clarified in Sec.  
156.265(b)(1) that that enrollment by QHP issuer may be considered 
``enrollment through the Exchange'' only after the Exchange notifies 
the QHP

[[Page 18335]]

issuer that the individual has received an eligibility determination, 
the individual is qualified to enroll in a QHP through the Exchange, 
and the Exchange transmits enrollment information to the QHP issuer 
consistent with Sec.  155.400(a). In Sec.  155.220(c)(1), we also 
specify that an individual can be enrolled in a QHP through the 
Exchange with the assistance of an agent or broker only if the agent or 
broker ensures that the individual completes the application and 
eligibility verification process through the Exchange Web site. We 
acknowledge and clarify that nothing in this final rule prohibits a QHP 
issuer from selling QHP coverage directly or through an agent or 
broker, so long as the standards of Sec.  156.255(b) are met; however, 
such sales and enrollment are not ``enrollment through the Exchange'' 
and such enrollees are not eligible for the benefits that are tied to 
enrollment through the Exchange.
    Comment: With respect to proposed Sec.  155.220(a), several 
commenters sought clarification of the role agents and brokers in 
enrolling individuals in QHPs. Several commenters urged us to 
strengthen the role of agents and brokers in the Exchange by further 
clarifying their ability to participate in the Exchange marketplace. 
With respect to the preamble discussion of web-based entities, several 
commenters urged HHS to permit web-based entities in particular to 
enroll individuals eligible for advance payments of the premium tax 
credit and cost-sharing reductions in QHPs so that such individuals may 
have access to the same avenues for QHP enrollment as those individuals 
who do not receive financial assistance.
    Response: We accept the recommendation that we provide Exchanges 
with discretion to leverage the market presence of agents and brokers, 
including web-based entities that are licensed by the State (web-
brokers), to draw consumers to the Exchange and to QHPs. We have 
amended Sec.  155.220 to include minimum standards for the process by 
which an agent or broker may help enroll an individual in a QHP in a 
manner that constitutes enrollment through the Exchange. This is 
intended to include traditional agents and brokers, as well as web-
brokers. This process must include the completion by the individual of 
a single streamlined application to determine eligibility through the 
Exchange's Web site, as described in Sec.  155.405; the transmission of 
enrollment information by the Exchange to the QHP issuer to allow the 
issuer to effectuate enrollment of qualified individuals in the QHP; 
and any standards set forth in an agreement between the agent or broker 
and the Exchange. We note that there may be various means a State may 
choose to integrate agents, brokers and web-brokers consistent with the 
standards described in this section for enrollment through the 
Exchange. Agents and brokers may assist individuals enrolling directly 
through the Exchange Web site and may serve as Navigators consistent 
with standards described in Sec.  155.210. We also afford Exchanges 
discretion to allow agents and brokers to use their own Web sites to 
assist individuals in completing the QHP selection process, as long as 
such a Web site conforms to the standards identified in Sec.  
155.220(c)(3). While Exchanges that pursue this option would be able to 
leverage the market presence of web-brokers in drawing consumers to the 
Exchange and QHPs, we note that the Exchanges will also have to share 
data and coordinate closely with such entities.
    Comment: With respect to proposed Sec.  155.220(a), many commenters 
urged us to set standards around the use of agents and brokers in order 
to ensure certain consumer protections. These suggestions included 
having Exchanges to monitor and oversee all agents and brokers 
enrolling individuals and small groups in QHPs; establishing provisions 
to mitigate agents' and brokers' incentives to steer consumers to 
enroll in certain QHPs or to non-QHPs; setting uniform commissions for 
agents and brokers or establishing that issuers must compensate agents 
and brokers the same amount for Exchange and non-Exchange plans; 
prohibiting commissions for agents and brokers in the Exchange 
altogether; establishing certain disclosures by agents and brokers, 
including disclosure of their commission and whether or not the agent 
or broker has been the subject of any sanctions; applying privacy and 
confidentiality standards to agents and brokers; prohibiting Exchanges 
from directing individuals or small groups to enroll only through an 
agent or broker; prohibiting advertising by agents or brokers; or 
prohibiting agents and brokers from the Exchange altogether.
    A number of commenters also expressed concern regarding the role of 
third-party web-based entities enrolling individuals in QHPs. Several 
commenters emphasized that such external entities should be held to the 
same standards as the Exchange; should not be permitted to perform 
eligibility determinations; or should be held to certain consumer 
protection standards to prevent steering.
    Response: We recognize the importance of consumer protections with 
respect to agents and broker interactions. We also recognize the 
States' role in licensing and overseeing agents and brokers and have 
allowed States to determine which standards would apply to agents and 
brokers acting in the Exchange, if the State chooses to permit agents 
and brokers to enroll individuals and small groups in QHPs through the 
Exchange. In order to address commenters' concerns while maintaining 
the State's primary role in overseeing agents and brokers, we have 
added paragraph (d) to ensure that agents and brokers must comply with 
an agreement with the Exchange under which the agent or broker would 
comply with the Exchange's privacy and security standards that are 
adopted consistent with Sec.  155.260 and Sec.  155.270. We have also 
added paragraph (e) to ensure that agents and brokers comply with 
applicable State law.
    We also recognize that the role of web-brokers may evolve upon 
implementation of Exchanges, and that Exchanges may seek to involve 
web-brokers in the enrollment process using a variety of technologies. 
We have set forth standards in this rule to ensure that consumers enjoy 
a seamless experience with appropriate consumer protections if an 
Exchange chooses to allow web-brokers to participate in Exchange 
enrollment activities. In order to address commenters' particular 
concerns around the role of web-based entities, we note that 
eligibility determinations must be conducted by the Exchange and 
enrollment information must be transmitted to the QHP issuer by the 
Exchange. We have added paragraph (c)(3) to Sec.  155.220 to ensure 
that Web sites used by agents or brokers to enroll individuals in a 
manner that constitutes enrollment through the Exchange provide 
consumers with access to the same information as they would if they 
used the Exchange Web site instead. Based on several commenters' 
suggestion that we address agents' and brokers' ability to steer or 
incentivize consumers to enroll in certain QHPs, and commenters' 
general concern about the fact that the existence of such Web sites may 
confuse consumers, we have inserted standards under paragraph (c)(3) of 
this section to prevent such web-brokers from providing financial 
incentives and to establish that such Web sites must allow consumers to 
withdraw from the web-broker's process and use the Exchange Web site 
instead at any time. Furthermore, the web-brokers would also be subject 
to the standards inserted

[[Page 18336]]

under paragraph (d) and (e) regarding compliance with an agreement with 
the Exchange and State law, respectively.

Summary of Regulatory Changes

    We are finalizing the provisions proposed in Sec.  155.220 of the 
proposed rule, with several modifications. In the new paragraph (a)(2), 
we clarify that agents and brokers may enroll qualified individuals in 
a QHP in a manner that constitutes enrollment through the Exchange. In 
new paragraph (a)(3), we clarify that agents and brokers may assist 
individuals in applying for advance payments of the premium tax credit 
and cost-sharing reductions for QHPs. As noted elsewhere in this rule, 
paragraph (a)(3) is being published as interim. We outline the 
parameters of what is considered enrollment through the Exchange in the 
newly added paragraph (c), including that an agent or broker must 
ensure that an individual completes the eligibility verification 
process through the Exchange and that the Exchange transmits enrollment 
information to the QHP issuer consistent with Sec.  155.400(a). In 
paragraphs (d) and (e), respectively, we establish that agents or 
brokers must comply with the terms of an agreement with the Exchange as 
well as applicable State laws. New paragraph (c)(3) establishes 
standards that would apply for an agent or broker's Internet Web site 
were to be used to assist individuals in selecting a QHP within the 
framework of enrollment through the Exchange.
f. General Standards for Exchange Notices (Sec.  155.230)
    In Sec.  155.230, we proposed standards for any notice sent by an 
Exchange in accordance with part 155. We additionally proposed that all 
applications, forms, and notices be provided in plain language, and be 
written in a manner that provides meaningful access to individuals with 
limited English proficiency and ensures effective communication for 
people with disabilities. We sought comment on whether we should codify 
specific examples of meaningful access in the final rule. We also 
proposed that the Exchange annually re-evaluate the appropriateness and 
usability of all applications, forms, and notices and consult with HHS 
when changes are made.
    Comment: Several commenters expressed support for proposed Sec.  
155.230(a) that provides that any notice sent by the Exchange in 
accordance with part 155 must be in writing and include the information 
described in paragraphs (a)(1) through (a)(3). Many commenters further 
specified that the Exchange should send a second notice, or multiple 
notices, when the action taken in a notice (of eligibility 
determination) will result in a termination of coverage or another 
adverse action. Some commenters provided other specific recommendations 
about the content, timing, and formatting of notices, particularly for 
the purpose of clarity and applicability of relevant information on the 
part of the consumer. For example, some commenters specified that 
notices should include the relevant and appropriate range of customer 
service resource contact information based on the specific individual's 
location or circumstances. Some commenters suggested that HHS issue 
model notices or best practices for crafting notices for States, and 
commenters suggested that HHS develop templates or minimum standards of 
forms and notices.
    Response: We believe that notices should be in writing, 
electronically whenever possible, and we are taking specific content, 
timing, and format-related recommendations we received from commenters 
into consideration as we move forward with development of model 
Exchange-issued notices. While Sec.  155.230(a)(1) through (a)(3) 
outline some specific content standards for notices, we plan to issue 
model notices. In addition to the content specific standards described 
under Sec.  155.230(a), we expect that notices will also include the 
date on which the notice is sent. In Sec.  155.230(a)(3) we add that a 
notice must include the reason for the intended action.
    Comment: Several commenters recommended that applicants and 
enrollees should be able to specify their preferred method of 
communication for notices, including the option to receive duplicative 
notices, and that electronic notices should fulfill the Exchanges' 
obligation to provide notices in writing in accordance with Sec.  
155.230(a). A few commenters requested clarification concerning whether 
Medicaid/CHIP will provide future guidance on the use of electronic 
communications.
    Response: In the final rule, we do not make changes to address the 
use of electronic notices. In coordination with Medicaid and CHIP, we 
will address standards related to electronic notices and coordination 
of notices between the Exchange, Medicaid, and CHIP in future 
rulemaking. We note that our goal is to allow for electronic notices 
wherever practical. Future rulemaking in coordination with Medicaid and 
CHIP will also increase our ability to align standards across programs.
    Comment: One commenter recommended that HHS consider whether it is 
necessary to set a specific timeline or clarify how quickly 
applications and notices must be processed by the Exchange. Another 
commenter suggested that the language for Sec.  155.230 be expanded to 
refer to ``applications, forms, notices and any other documents sent by 
an Exchange.''
    Response: We have not included general timeliness standards in 
Sec.  155.230 of this final rule, as we did not propose them. However, 
subpart D contains timeliness standards related to eligibility 
determinations as interim final rules. In addition, as we develop model 
notices and future guidance, we will consider both notice timeliness 
standards and the applicability of Sec.  155.230 to other documents 
issued by the Exchange.
    Comment: A few commenters recommended that HHS remove ``if 
applicable'' from proposed Sec.  155.230(a)(2) that reads: ``An 
explanation of appeal rights, if applicable.''
    Response: Section 155.230 applies to all notices in accordance with 
part 155. However, in some cases, a notice of appeal rights is not 
relevant. For example, the notice of the annual open enrollment period 
in accordance with Sec.  155.410(d) does not provide information 
specific to an individual and is not appealable. In contrast, the 
Exchange must include the notice of the right to appeal and 
instructions regarding how to file an appeal in any determination 
notice issued to the applicant in accordance with Sec.  155.310(g), 
Sec.  155.330(e), or Sec.  155.335(h) of subpart D. We intend to 
address appeal rights and procedures in future rulemaking.
    Comment: A majority of commenters supported the approach described 
in Sec.  155.230(b) of the proposed rule, while others suggested that 
HHS add more detail to accessibility standards. Many commenters 
recommended that we provide specific standards and thresholds for 
translation of written information, and be understandable to limited 
English proficient populations. One common suggested threshold was to 
provide written translations where 5 percent or 500 limited English 
proficient individuals reside in the State or Exchange service area, 
whichever is less. Many commenters also recommended we add specific 
standards with respect to oral interpretation, including at no cost to 
the individual, and informing individuals how to access these services 
through use of ``taglines'' in at least 15 languages. A few commenters 
asked for

[[Page 18337]]

flexibility for States in developing language services standards as 
States' populations and needs differ, and one commenter expressed 
concern that a specific, uniform standard could pose an unreasonable 
burden.
    Response: In response to these comments, we have modified our 
proposed regulation at Sec.  155.230(b) to cross-reference the 
accessibility, readability, and translation and oral interpretation 
standards outlined in Sec.  155.205(c). We plan to put forth guidelines 
relating to these standards in upcoming guidance.
    Comment: Many commenters noted the importance of health literacy 
and the need to provide information that is readable and 
understandable. A few commenters suggested that the reading level of 
informational materials should be not greater than the 6th grade 
reading level.
    Response: We recognize the importance of health literacy and 
significance of providing readable and understandable information. We 
will take these comments into consideration as we develop guidance that 
sets more specific standards and thresholds for readability, and as we 
develop joint guidance with the Department of Labor related to ``plain 
language.'' However, we have decided not to add specific reading level 
standards in the final rule.
    Comment: While some commenters expressed support for the proposed 
Sec.  155.230(c) that the Exchange review notices on an annual basis, 
other commenters were concerned about the burdensome and costly nature 
of an annual review. Some commenters instead suggested that such a 
review occur every three years or ``periodically.'' Several commenters 
recommended that Exchanges have flexibility in how they implement 
provision of notices and provided specific examples (that is, 
flexibility in content), while one commenter advised that Federal 
standards should provide a floor for notices but not diminish stronger 
standards that the State may have for notices. Commenters who supported 
an annual review also suggested that Exchanges seek consumer and 
stakeholder input as notices are developed and changes to notices are 
made. Some commenters also expressed support for or sought 
clarification related to how a State must consult with HHS when changes 
are made to notices, particularly regarding the scope of such a 
consultation. A few commenters suggested that notices should be 
reviewed annually as a part of the recertification process.
    Response: In Sec.  155.230(c) of the final rule, we revise the 
language from the proposed rule to provide that the Exchange must re-
evaluate the appropriateness and usability of applications, forms, and 
notices without specifying the interval at which such review must 
occur. Due to commenters' concerns about the feasibility and burden of 
an annual review and the request for flexibility regarding notices 
implementation, we removed the standard that this review must occur on 
an annual basis. We anticipate that the model notices developed by HHS 
will help to ensure that Exchanges include the appropriate content for 
their notices and reduce administrative burden and cost to Exchanges. 
We will consider the feasibility of reviewing notices, and notably any 
proposed changes made to notices, and will consider stakeholder input, 
particularly Exchanges and State Medicaid programs, as the model 
notices are developed.

Summary of Regulatory Changes

    We are finalizing the provisions proposed in Sec.  155.230 of the 
proposed rule, with several modifications: we clarify in paragraph (b) 
that applications, forms and notices must comply with the readability 
and accessibility standards established in Sec.  155.205(c) for the 
Exchange Internet Web site. In paragraph (c), we removed the proposed 
provision that the Exchange must re-evaluate applications, forms, and 
notices on an annual basis and also removed that the Exchange must 
consult with HHS when changes are made. In Sec.  155.230(a)(3), we add 
that a notice must include the reason for the intended action.
g. Payment of Premiums (Sec.  155.240)
    In Sec.  155.240, we proposed that Exchanges must always allow an 
individual, at his or her option, to pay the premium directly to the 
QHP issuer. In addition, we proposed 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. We solicited comment on how 
such an approach might work in an Exchange. We also invited 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. 
With respect to the operation of a SHOP, we proposed that an Exchange 
must accept payment of an aggregate premium by a qualified employer.
    Finally, we proposed that an Exchange may facilitate electronic 
collection and payment of premiums. We sought comment concerning 
Exchange flexibility in establishing the premium payment process and 
what Federal regulatory standards would be appropriate to ensure 
fiduciary accountability when an Exchange collects premiums.
    Comment: One commenter suggested that QHP issuers report to an 
Exchange if an individual pays the issuer directly under the option 
described in Sec.  155.240(a).
    Response: We believe that this information will be transmitted from 
a QHP issuer and an Exchange through the process of effectuating 
enrollment through the Exchange and through the process to initiate 
advance payments of the premium tax credit and cost-sharing reductions. 
We outline reporting standards related to enrollment and notification 
if an individual stops payment in Sec.  155.400, Sec.  155.430, and 
Sec.  156.270.
    Comment: One commenter suggested that issuers should be responsible 
for collecting premiums directly from individuals, as described in 
proposed Sec.  155.240(a), but that the Exchange should be permitted to 
garnish wages or undertake other legal means to collect unpaid premiums 
owed to QHP issuers.
    Response: We clarify that nothing in the final rule imposes a 
responsibility on Exchanges to pursue unpaid premiums on behalf of a 
QHP issuer. We do not believe the Exchange should take on debt 
collection responsibilities for issuers.
    Comment: With regard to proposed Sec.  155.240(a), one commenter 
suggested that a possible interpretation of section 1312(b) of the 
Affordable Care Act is that payment facilitation by an Exchange could 
be considered direct payment by the individual to the QHP issuer.
    Response: We interpret section 1312(b) of the Affordable Care Act 
to mean that individuals always have the option to pay a QHP issuer 
directly, and therefore, we maintain this policy as proposed.
    Comment: In response to Sec.  155.240(b) of the proposed rule, 
several commenters recommended that Exchanges must allow Indian tribes, 
tribal organizations, and urban Indian organizations to pay the 
unsubsidized portion of QHP premiums on behalf of enrollees. Some 
commenters noted that Indian tribes have a right to use Federal funds 
to pay insurance premiums on behalf of their members and a sovereign 
right to use their own funds for that purpose. Other commenters 
recommended that the Exchange accepts aggregated payments from 
employers so

[[Page 18338]]

it should also accept aggregated payments from tribes, tribal 
organizations, and urban Indian organizations. A few commenters 
recommended that HHS eliminate the qualifier, ``subject to the terms 
and conditions determined by the Exchange,'' in the final rule.
    Response: We did not accept the recommendation that Exchanges must 
permit Indian tribes, tribal organizations and urban Indian 
organizations to pay premiums on behalf of enrollees. Premium 
aggregation is a unique function of the SHOP Exchange, and is not 
identified as a function of the individual market Exchange. However, we 
recognize that some Exchanges may wish to work with tribal governments 
to facilitate payment on behalf of enrollees, including aggregated 
payment. We encourage Exchanges to include this option as part of its 
consultation with tribal governments. This rule does not prohibit a QHP 
issuer from accepting third-party payments of premiums from tribal 
governments, tribal organizations, or urban Indian organizations for 
enrollees through the Exchange.
    Comment: Many commenters supported the option for an Exchange to 
act as a premium facilitator or aggregator for the individual market, 
as permitted under Sec.  155.240(d). Several commenters suggested 
strengthening the standard by establishing that Exchanges must have the 
capacity to facilitate payments in the individual market citing 
benefits such as ease for consumer, consistent source of payments for 
QHP issuers, program integrity, and provision of real-time enrollment 
and payment data for Exchange monitoring. Others suggested a standard 
that Exchanges set a default payment, and suggested that Exchanges 
provide multiple avenues for payment including premium facilitation, 
direct to issuer, in person, online, by phone, by mail, and through 
cash, debit, credit, check, or automatic electronic transfers. One 
commenter suggested that the Exchange Blueprint address how complexity 
added by multiple payment options would be mitigated and another 
commenter recommended that an individual select the payment methodology 
at the time of enrollment for that benefit year.
    Response: Premium aggregation has potential benefits for 
individuals, but we also do not think that there are sufficient 
disadvantages in having individuals pay QHP issuers directly to warrant 
establishing premium aggregation as a minimum standard. We believe that 
the final rule balances the potential benefits of premium collection in 
the individual market with State flexibility. We encourage all 
Exchanges to provide consumers with multiple payment options that 
facilitate enrollment and avoid creating payment processes that create 
barriers. We note that Exchanges have the flexibility to create a 
default payment mechanism through the Exchange, and to direct 
individuals to select a payment option for a year at the time of 
enrollment.
    Comment: Several commenters oppose proposed Sec.  155.240(d) that 
allows for an Exchange to facilitate the collection and payment of 
premiums for the individual market. Commenters were concerned with 
several areas including cost, the timeliness of payments getting from 
consumers to the issue, and the additional complexity in the case of 
errors.
    Response: We believe that premium aggregation may add value to an 
Exchange for consumers through ease of payment and to QHP issuers 
through having a single source of payment. Without premium aggregation 
in the small group market, a single entity would have to pay a variety 
of QHP issuers to administer its group health plan. However, the burden 
for paying premiums directly to QHP issuers is much less for 
individuals and families who are likely to be enrolled in a single QHP. 
Thus, premium aggregation is a minimum function of a SHOP, while it is 
optional for the individual market. We note that because an Exchange 
will need to establish premium aggregation functionality for a SHOP, it 
may be able to offer this option to individuals without additional up-
front costs.
    Comment: One commenter suggested that proposed Sec.  155.240(d) ban 
paperwork for financial transactions and, instead, call for the use of 
electronic methods exclusively to lower administrative costs and allow 
quick feedback between Exchanges, qualified individuals, qualified 
employers, and QHP issuers.
    Response: We believe that electronic payment methods have many 
benefits, and encourage Exchanges to use them where possible, but also 
acknowledge that electronic payment methods may not always be optimal 
for all consumers and may not be possible for all Exchanges. Therefore, 
it is not a minimum standard in this final rule.
    Comment: Most commenters supported the proposed Sec.  155.240(e) to 
adopt electronic means of collecting premium payments by individuals 
and employers, and the accompanying application of the privacy and 
standards outlined in Sec.  155.260 and Sec.  155.270. One commenter 
recommended deleting the cross reference to Sec.  155.260, because this 
section related to privacy and security, not electronic transaction 
standards.
    Response: We have maintained the cross-reference to Sec.  155.260 
in this final rule. Section 155.240(e) is meant to establish compliance 
with both electronic transactions standards in Sec.  155.270 and 
privacy and security provisions of Sec.  155.260. Because personally 
identifiable information may be exchanged in the process of premium 
payment, we believe the protections for collection, use and disclosure 
of information contained in standard transactions for premium payments 
are as vital as the format of these transactions.

Summary of Regulatory Changes

    We are finalizing the provisions proposed in Sec.  155.240 with the 
exception of the removal of proposed paragraph (c), as we believe that 
payment of premiums by qualified employers is sufficiently addressed in 
Sec.  155.705. The other paragraphs have been re-numbered accordingly 
in the final rule.
h. Privacy and Security of Information (Sec.  155.260)
    In proposed Sec.  155.260, we addressed the privacy and security 
standards Exchanges must establish and follow. Specifically, we 
proposed that the Exchange apply appropriate security and privacy 
protections when collecting, using, disclosing or disposing of any 
personally identifiable information. In addition, we proposed that an 
Exchange apply these standards on contractors or sub-contractors 
through contracts or agreements with the Exchange.
    We defined personally identifiable information (PII) and proposed 
prohibiting the collection, use, or disclosure of PII by the Exchanges 
unless: (1) required or permitted by Sec.  155.260 of this subpart or 
other applicable law, and (2) the collection, use, or disclosure is 
made in accordance with subpart E of this part, Sec.  155.200(c) of 
this subpart and section 1942 of the Act. We invited comment as to 
whether and how we should restrict the method of disposal in this 
section.
    We also proposed that the security standards of the Exchange be 
consistent with HIPAA security rules described at 45 CFR 164.306, 
164.308, 164.310, 164.312, and 164.314. We solicited comment on the 
aptness of adopting the HIPAA Privacy Rule's standards for Exchanges. 
Alternatively, we proposed to provide States with the flexibility to 
create a more appropriate and tailored standard, given the varied types 
of

[[Page 18339]]

information to which the Exchange would have access. We noted that we 
were considering directing each Exchange to adopt privacy policies that 
conform to the Fair Information Practice Principles (FIPPs), and sought 
comment on the appropriateness of FIPPs in this context and the best 
means to integrate FIPPs into the privacy policies and operating 
procedures of individual Exchanges. We listed examples of FIPPs-based 
principles derived from the Nationwide Privacy and Security Framework 
for the Electronic Exchange of Individually Identifiable Health 
Information, which is a model developed by the Office of the National 
Coordinator for Health IT. These are not purely FIPPs principles, but 
examples of how they may be used to develop robust privacy and security 
standards.
    We also proposed that security policies and procedures must be in 
writing and available to the Secretary of HHS, and must identify any 
applicable laws that the Exchange will need to follow. In addition, we 
proposed that any data matching arrangements between the Exchange and 
agencies that administer Medicaid and CHIP for the exchange of 
eligibility information be consistent with all applicable laws. We also 
proposed that return information is kept confidential under section 
6103 of the Code.
    Finally, we proposed that any person that knowingly and willfully 
uses or discloses personally identifiable information inappropriately 
would be subject to a civil money penalty of not more than $25,000 per 
disclosure and any other applicable penalties that may be prescribed by 
law.
    Comment: Many commenters recommended that HHS set a national 
minimum standard for use and disclosure of personally identifiable 
information (PII) under proposed Sec.  155.260(b) rather than allow 
each Exchange flexibility to develop and implement standards customized 
to its operations. One commenter stated that HHS should harmonize State 
and Federal laws for the development and operation of information 
technology systems across all States. Commenters suggested adopting 
different existing privacy and/or security standards alone or in 
various combinations, including the Fair Information Practice 
Principles (FIPPs) model adopted by the Office of the National 
Coordinator for Health Information Technology, HIPAA Privacy, HIPAA 
Security, the Privacy Act, Medicaid standards at section 1902(a)(7) of 
the Act, the confidentiality and disclosure provisions of the 
Department of Homeland Security's Systematic Alien Verification for 
Entitlements (SAVE) program (42 U.S.C. 1320b-7), the HITECH Act, and 
the Gramm-Leach-Bliley Act (GLBA).
    Response: We recognize that there should be robust minimum privacy 
and security standards to ensure the confidentiality and integrity of 
PII created, collected, used, or disclosed by an Exchange. We also 
accept the comment that each Exchange will need to consider any State 
and Federal laws governing individuals' privacy and security rights for 
the geographic area(s) in which it operates in order to ensure PII is 
protected against any reasonably anticipated uses or disclosures that 
are not permitted or required by law. We acknowledge the current 
variance among States' laws governing privacy and security, but believe 
that eliminating this variance would, in many cases, apply Federal 
standards to existing State privacy and security frameworks. This would 
be prohibitively expensive for many States, and could be detrimental to 
the goal of maintaining the confidentiality of PII. In addition, 
multiple security frameworks increase the complexity of the 
technological environment--if a State must follow two different 
frameworks, there is an increased risk of applying the wrong security 
controls to the Exchange. Finally, but equally important, we recognize 
the need for flexibility in the implementation of these standards in 
order to minimize implementation costs. The imposition of uniform 
standards would increase costs related to re-training staff, engaging 
contractors, investing in additional physical and technological 
infrastructure, and other tasks related to implementation of the new 
standards. We believe it would increase the complexity of State 
operations, with associated risks and costs, without providing 
meaningful improvements to the protection of PII.
    In the final rule, we do not establish a single, baseline standard. 
We direct an Exchange to put in place safeguards that ensure a set of 
critical security outcomes, and we present a framework within which an 
Exchange must create its privacy and security policies and protocols. 
We specify that an Exchange establish and implement privacy and 
security standards that are consistent with the FIPPs-based principles 
identified in the ``Nationwide Privacy and Security Framework for 
Electronic Exchange of Individually Identifiable Health Information,'' 
the model adopted by the Office of the National Coordinator for Health 
Information Technology.\3\ In addition to these FIPPs-based principles, 
Sec.  155.260(a)(4) of this final rule directs Exchanges to establish 
and implement operational, technical, administrative, and physical 
safeguards that will ensure a set of defined privacy and security 
outcomes. We believe the standards in this final rule will minimize 
burden by allowing HHS and the States to leverage existing security 
infrastructure and allow Exchanges to tailor their privacy and security 
approaches to the types of information Exchanges will create, collect, 
use, and disclose, while providing a baseline set of standards and 
critical outcomes upon which all States must base their privacy and 
security policies and protocols.
---------------------------------------------------------------------------

    \3\ Nationwide Privacy and Security Framework for Electronic 
Exchange of Individually Identifiable Health Information: http://healthit.hhs.gov/portal/server.pt/community/healthit_hhs_gov_privacy_security_framework/1173.
---------------------------------------------------------------------------

    We plan to release guidance to assist States in developing and 
implementing privacy and security policies and protocols that fulfill 
the standards of this section. In addition, HHS will assist States in 
the development of policies and protocols as part of the reviews and 
technical assistance provided to grantees under the section 1311(a) of 
the Affordable Care Act.
    Comment: A large group of commenters requested that HHS codify 
sections 1411(g), 1413(c)(2), and 1414(a) of the Affordable Care Act. 
Several commenters recommended amending the language in proposed Sec.  
155.260(b)(1)(i) to explicitly establish that, based on section 1411(g) 
of the Affordable Care Act, information may not be created, collected, 
used, or disclosed unless ``strictly necessary.'' One commenter 
recommended that we remove the reference to ``other applicable law'' 
and replace it with specific references to sections 1411(g) and 1557 of 
the Affordable Care Act, sections 1942 and 1137 of the Act, and the 
Privacy Act of 1974.
    Response: We believe that privacy and security of PII is of utmost 
importance. Accordingly, in the final rule, we have made major changes 
to the Exchange privacy and security standards, both to give more 
specific guidance to States as they implement the Exchange program, and 
to ensure confidentiality for individuals who may interact with 
Exchanges. As stated in the preamble to the proposed rule, we looked to 
sections 1411(g), 1413(c)(2), and 1414(a) of the Affordable Care Act as 
the basis for many of the provisions in the proposed regulatory text. 
First, we removed proposed paragraph (a), which defined personally 
identifiable information in the context of the Exchange program. This 
is a broadly

[[Page 18340]]

used term across Federal agencies, and has been defined in the Office 
of Management and Budget Memorandum M-07-16. In order to reduce 
duplicative guidance or potentially conflicting regulatory language, we 
have removed this portion of the proposed rule, and point to the 
aforementioned memorandum as the source of this definition.
    Paragraph (a)(1) of the final rule specifically addresses PII that 
is created or collected for the purposes of determining eligibility for 
enrollment in a QHP, determining eligibility for other insurance 
affordability programs, or determining eligibility for exemptions from 
the individual responsibility provisions in section 5000A of the Code. 
This paragraph limits the purposes for which the Exchange can use this 
information to those outlined in Sec.  155.200 of this subpart.
    Paragraph (a)(2) is broader in scope than paragraph (a)(1), and 
includes all information collected for the purposes of carrying out 
Exchange minimum functions described in Sec.  155.200. This paragraph 
prohibits the creation, collection, use or disclosure of PII unless the 
manner in which the Exchange does so is consistent with the privacy and 
security standards outlined in Sec.  155.260(a).
    Paragraphs (a)(3) through (a)(4) outline the privacy and security 
principles and critical outcomes, and set expectations for development 
of privacy and security protocols by Exchanges, and new paragraph 
(a)(5) specifies that the Exchange must monitor, periodically assess, 
and update the security controls and related system risks to ensure the 
continued effectiveness of those controls. We also inserted the 
provision from section 1413(c)(1) of the Affordable Care Act that an 
Exchange must develop and utilize secure electronic interfaces when 
sharing PII in Sec.  155.260(a)(6).
    We are not amending the final rule to codify section 1414(a) of the 
Affordable Care Act, because it falls under the jurisdiction of the 
Department of the Treasury. We are not codifying section 1557 of the 
Affordable Care Act because it is outside the scope of this rule. We 
are not codifying section 1137 of the Act, which includes standards for 
States' income and eligibility verification systems, in this final rule 
because it does not impose any additional privacy or security 
standards. In addition, section 1413(c)(3) of the Affordable Care Act 
simply directs that an Exchange can only determine eligibility on the 
basis of reliable, third party data, which is outside the scope of this 
section. We note that while the final rule does not propose to codify 
these listed provisions, Exchanges will need to comply with applicable 
laws that are outside the scope of this rulemaking.
    Comment: A number of commenters requested clarification regarding 
HIPAA and Exchanges. One commenter requested that HHS declare that 
HIPAA applies to all Exchanges, but many commenters discouraged the use 
of this standard. A few commenters specifically requested that HHS not 
use HIPAA as the privacy standard. One commenter stated that applying 
HIPAA Privacy to non-HIPAA entities might permit broader collection, 
use, and disclosure of data than was intended by Congress in statutory 
limits set forth in section 1411(g) of the Affordable Care Act. Another 
commenter added that HIPAA lacks controls associated with new 
technologies.
    Response: We believe HIPAA is not broad enough to adequately 
protect the various types of PII that will be created, collected, used, 
and disclosed by Exchanges and individuals or entities who have access 
to information created, collected, used, and disclosed by Exchanges. We 
recognize that there will be aspects of Exchanges, as health insurance 
marketplaces, that will not be reached by the HIPAA regulations 
governing health plans, certain providers, and clearinghouses (that is, 
``HIPAA covered entities''). In clarifying these points, however, it is 
important to recognize that the privacy and security standards that are 
adopted in this rule do not obviate the need for HIPAA covered entities 
to meet the HIPAA Privacy and Security Rules' standards. The Exchange 
sections of the Affordable Care Act did not alter the applicability of 
HIPAA to HIPAA covered entities.
    To avoid any further confusion on this point, we believe that it is 
advisable to remove any specific regulatory references to HIPAA in 
proposed Sec.  155.260(b), which we have redesignated as Sec.  
155.260(a) of this final rule. We replaced such references with the 
standards outlined in the first response in this section. We believe 
that the privacy and security standards in the final rule are analogs 
of the HIPAA policies in the proposed rule, with similar standards and 
restrictions. As stated in the preamble discussion to Sec.  155.260 in 
the proposed rule, each State will need to conduct an analysis of its 
operations and functions to determine its HIPAA status based on the 
definitions in 45 CFR 160.103, and, when applicable, meet any and all 
obligations under those regulations in addition to any Exchange 
standards. For instance, a State may need to consider whether the 
Exchange performs eligibility assessments for Medicaid and CHIP, based 
on MAGI, or conducts eligibility determinations for Medicaid and CHIP 
as described in Sec.  155.302(b).
    We have inserted language in Sec.  155.200 of the final rule that 
will clarify the relationship between an Exchange and a QHP--as noted 
therein, nothing in this final rule should be construed to create a 
relationship between an Exchange and a QHP whereby an Exchange performs 
functions on behalf of a QHP. Further, we intend to release guidance 
that will assist States in determining the applicability of HIPAA and 
other Federal laws to Exchanges.
    Comment: Several commenters suggested that HHS encourage States to 
apply privacy and security standards that are stricter than the minimum 
standard set forth by HHS regulations. Others asked that HHS make clear 
in the final rule that, even if an Exchange is covered by a single 
standard, it will continue to be subject to additional rules set by HHS 
and the States. Commenters asserted that State law regarding privacy 
and security should remain applicable. One commenter stated that HHS 
should provide States with the flexibility to enact more stringent 
standards based on those States' determination of the most appropriate 
standard.
    Response: We accept commenters' suggestion that States retain the 
discretion to apply more stringent standards than the minimum privacy 
and security standards imposed by this section. Nothing in this final 
rule prevents or otherwise impairs the applicability of more stringent 
State law. Equally, we note that nothing in this final rule obviates 
the need to meet any other applicable Federal privacy and security 
laws.
    Comment: One commenter asserted that HHS does not have the 
authority to require Exchanges to provide access to its data protection 
policies and procedures to HHS. The commenter requested that HHS 
provide an explanation of why it wants or needs access to an Exchange's 
data protection policies and procedures and what it plans to do with 
that information. The commenter also stated that HHS has no enforcement 
authority over State-based Exchanges and therefore may not take 
``action'' against an Exchange with data protection policies and 
procedures the Secretary deems ``inadequate.'' In contrast, several 
commenters supported the provision in the proposed rule that Exchanges 
develop policies and procedures regarding the use, disclosure, and 
disposal of PII. Many

[[Page 18341]]

commenters asked that these policies and procedures be available to the 
public, and that HHS ensure that Exchanges engage stakeholders, 
including consumers, in the development of these policies and allow for 
public comment prior to submission to the Secretary. A few commenters 
asserted that these policies and procedures be part of the written 
Exchange Blueprint, in accordance with Sec.  155.105 of the proposed 
rule, or another similar document that is available to the public.
    Response: The Secretary has broad authority under section 1321(a) 
of the Affordable Care Act to issue appropriate regulations and 
standards with respect to the operation of Exchanges. Due to the 
private nature of the information provided to Exchanges, we believe 
that a process that allows the Secretary to ensure continued compliance 
with the privacy and security standards of Sec.  155.260 is not only 
appropriate, but necessary. According to section 1321(c) of the 
Affordable Care Act, the Secretary has the authority to determine 
whether a State Exchange meets the requisite standards to operate. If 
the Exchange fails to meet these standards, the Secretary may establish 
and operate a Federally-facilitated Exchange in that State.
    In addition, the Affordable Care Act also gives HHS an audit 
enforcement mechanism under section 1313. We believe the Secretary has 
broad authority to ensure the submission of these policies in 
accordance with 1313(a)(3) of the Affordable Care Act. This information 
is necessary to ensure the integrity of the Exchange and its related 
activities and to protect confidential consumer information. However, 
Exchanges do not have to release these policies and protocols to the 
public because this disclosure might reveal information that could 
damage the State's ability to maintain the integrity and security of 
its systems. Finally, while we have not included the privacy and 
security policies and protocols in the Exchange Blueprint, we believe 
we have the authority to do so if deemed appropriate by the Secretary.
    Comment: Many commenters recommended that the privacy and security 
standards in proposed Sec.  155.260 apply to application assisters, 
Navigators, contractors, other individuals who have access to PII 
gathered from individuals or available through an Exchange. One 
commenter asserted that the final rule should clearly affirm the 
obligation of these parties to abide by all Federal confidentiality and 
privacy laws.
    Response: Individuals who have agreements with an Exchange that can 
collect, use, or disclose PII as part of their Exchange-related 
activities should comply with the final rule's privacy and security 
standards. However, we do not believe the Affordable Care Act grants 
the Secretary the authority to regulate all individuals and entities 
directly. Such authority is limited to the Exchange, who can impose 
these standards on individuals and entities that enter into agreements 
with the Exchange, such as contractors, agents, and brokers, and HHS 
grantees, such as Navigators. We have added Sec.  155.260(b) of the 
final rule, which ensures that Exchanges impose privacy and security 
standards that are the same or more stringent than the privacy and 
security standards in Sec.  155.260(a) as a condition of the agreement 
with other individuals or entities that will receive information 
through the Exchange.
    Comment: Several commenters asked that HHS provide notice to 
individuals who share PII with an Exchange. Commenters also asked that 
HHS direct Exchanges to notify individuals of their privacy rights and 
note why the information is being collected prior to asking individuals 
to submit PII. One commenter said HHS should not share protected health 
information (PHI) without written consent before each disclosure.
    Response: We believe the FIPPs-based principles in the final rule 
ensure that an Exchange will make individuals aware of the purpose of 
any information collection as well as the privacy policies that affect 
individuals and their PII. We have added language to new section Sec.  
155.260(a)(3)(iv) that an Exchange must develop privacy and security 
policies and protocols that are consistent with the FIPPs-based 
principle of ``Individual Choice,'' which states that individuals 
should be provided a reasonable opportunity and capability to make 
informed decisions about the collection, use, and disclosure of their 
personally identifiable information. In addition, in new Sec.  
155.260(a)(3)(iii), we establish that an Exchange's policies and 
protocols must be consistent with the principle of ``Openness and 
Transparency,'' which states that there should be openness and 
transparency about policies, procedures, and technologies that directly 
affect individuals and/or their personally identifiable health 
information. In addition, if a State determines that its Exchange is a 
HIPAA covered entity or business associate, as defined in 45 CFR 
160.103, that Exchange must adhere to any applicable HIPAA privacy and 
security standards, including those regarding the protection of 
protected health information (PHI). The final rule addresses only 
personally identifiable information, as defined in Sec.  155.260(a) and 
does not modify HIPAA.
    Comment: A handful of commenters stated that Exchanges should 
obtain specific authorization from individuals prior to using any PII 
for marketing purposes. Some commenters requested that HHS prohibit 
Exchanges from sharing any information for marketing or fundraising 
purposes altogether. One commenter stated that HHS should specifically 
prohibit Exchanges from selling data, or allowing access to PII 
collected for Exchange purposes for data mining. Another commenter 
stated that HHS should specifically prohibit any secondary uses of PII 
that are not specifically authorized.
    Response: Section 155.260(a) does not permit the use or disclosure 
of PII for marketing or fundraising purposes. The final rule clarifies 
that PII collected for those purposes of determining eligibility for 
enrollment in a QHP, determining eligibility for other insurance 
affordability programs, or determining eligibility for exemptions from 
the individual responsibility provisions in section 5000A of the Code, 
can only be used to the extent such information is necessary to carry 
out minimum functions in Sec.  155.200 of this subpart.
    Comment: Two commenters stated that HHS should be able to collect 
demographic information on a voluntary basis through the Exchange. 
Commenters believe that collection of demographic information would 
help to provide essential health information on vulnerable or 
underserved populations, facilitate tailored outreach and aid in 
enrollment activities, and provide input in the development of 
prevention and health care programming that address disparities.
    Response: Section 1411(g) of the Affordable Care Act does not 
prohibit the collection of demographic data. We respond to this issue 
in greater depth in the preamble to Sec.  155.405, which addresses the 
single, streamlined application.
    Comment: Several commenters requested that HHS specify in the final 
rule that Social Security numbers should be collected for limited 
purposes. These commenters stated that Social Security numbers should 
be shared only for the purposes of determining eligibility for advance 
payments of the premium tax credit and cost-sharing reductions. Two 
commenters stated that Social Security numbers should be shared only 
for the purpose of identification of an individual.

[[Page 18342]]

    Response: Sections 1411(b) and (c) of the Affordable Care Act give 
the Secretary the authority to ensure that applicants for enrollment in 
a QHP offered through an Exchange provide a Social Security number so 
that an Exchange can perform the requisite eligibility determination. 
While we believe that an individual's Social Security number should be 
collected and used for limited purposes, the use of an individual's 
Social Security number is essential to complete functions beyond 
identification--for example, the verifications described in sections 
1411(c), (d), and (e) of the Affordable Care Act.
    Comment: One commenter stated that HHS should establish criteria 
for the collection and retention of information when a consumer is a 
survivor or victim of domestic violence based on policies of child 
support collection programs.
    Response: We do not believe that the final rule should contain the 
specific data collection for vulnerable populations for purposes other 
than those defined in the statute.
    Comment: Two commenters asked that HHS ensure that Exchanges 
promptly notify potentially affected enrollees in the event of a data 
breach or unauthorized access to PII. One commenter suggested that HHS 
ensure that an Exchange conducts an investigation and hold the 
breaching party accountable, both legally and financially, for 
notification and investigation following the breach or unauthorized 
access.
    Response: We do not plan to include the specific notification 
procedures in the final rule. Consistent with this approach, we do not 
include specific policies for investigation of data breaches in this 
final rule. We do, however, plan to release guidance that addresses 
breach procedures.
    Comment: One commenter requested that the final rule include 
privacy and security standards for storage, retention, and response to 
legal and civil matters. Another commenter stated that HHS should not 
retain PII longer than is necessary to carry out an authorized Exchange 
function.
    Response: While the rule does not specifically mention storage, 
retention, or response to legal and civil matters, we believe that the 
final rule adequately addresses privacy and security standards for all 
potential uses of data, including storage and retention. We therefore 
do not include these elements in the final rule. We expect privacy and 
security standards developed by the Exchange will address the storage 
of information when it is not in use. Also, the Exchange policies and 
protocols must apply to all requests for information from outside 
sources, including governmental bodies, the courts, or law enforcement 
officials. We also believe that Exchanges should not retain PII longer 
than necessary. Retention times for Federally-facilitated Exchanges 
will be approved by the National Archives and Records Administration. 
As these retention times have not yet been issued for these Exchanges, 
and as we believe that a single standard for retention should apply to 
all Exchanges, we plan to release guidance on this topic at a later 
date.
    Comment: One commenter asserted that HHS should not create one 
central location for personal information. The commenter challenged the 
government's ability to protect personal information.
    Response: This comment regarding the storage of personal 
information is operational in nature and outside the scope of this 
rule. We plan to release guidance describing the approach for 
collection and storage of PII. We believe that the privacy and security 
standards in the final rule are sufficiently robust to protect the 
types of PII that will be created, collected, used, and disclosed by 
Exchanges.
    Comment: A few commenters suggested that HHS should define the 
operational solutions for Exchange policies and protocols for privacy 
and security. One commenter said that Exchanges should create usage 
logs that are subject to audit to ensure the data are being accessed 
appropriately and only for business purposes. Another commenter stated 
that HHS should implement procedures related to identity theft to 
address cases where an applicant or enrollee reports that someone has 
fraudulently submitted information in his or her name. One commenter 
recommended that HHS collect data in a manner that allows for de-
identification so that data can be made available for other purposes, 
such as research and analysis.
    Response: We believe that having policies and protocols to protect 
against identify theft and fraudulent enrollment is critical. However, 
setting operational solutions for complying with regulatory standards 
in this section is outside the scope of the rule. HHS will release 
guidance identifying potential operational solutions for storing and 
tracking data, identifying and preventing fraudulent submissions to the 
Exchange, and de-identifying data.
    Comment: A number of commenters recommended that HHS address the 
issue of authentication of individuals who access PII through the 
Exchange. One commenter asserted that HHS should ensure that Exchanges 
authenticate all entities and individuals interacting with the 
Exchanges. Commenters also cautioned HHS to develop authentication 
procedures that are minimally burdensome and do not discourage or 
prevent lawful consumer access to the Exchange. One commenter stated 
that authentication procedures should be proportionate to the risks 
associated with the corresponding activities. This commenter also 
stated that authentication procedures should leverage commercially 
available database sources, a method currently in use by States to 
authenticate identity.
    Response: Exchanges will need robust authentication procedures that 
are effective, efficient, and minimally burdensome for both States and 
individuals. We have added language to the final rule that Exchanges 
must implement safeguards to ensure that personally identifiable 
information is disclosed only to those authorized to receive or view 
it. In addition, we expanded the scope of the privacy and security 
standards by stating explicitly that these standards must apply, as a 
condition of contract or agreement with an Exchange, to individuals or 
entities, including but not limited to Navigators, agents, and brokers, 
that: (1) gain access to personally identifiable information submitted 
to an Exchange; or (2) create, collect, use or disclose personally 
identifiable information gathered directly from applicants, qualified 
individuals, or enrollees while that individual or entity is performing 
the functions outlined in the agreement with the Exchange.

Summary of Regulatory Changes

    We are finalizing the provisions proposed in Sec.  155.260 of the 
proposed rule regarding privacy standards, with the following 
modifications: in an effort to prevent confusion and duplication in 
terminology, we removed paragraph (a), which defined personally 
identifiable information (PII) in the context of the Exchange program. 
This is a term used broadly by all Federal agencies, and the term is 
defined in a 2007 OMB Memorandum, which we point to in the preceding 
preamble discussion.
    We redesignated proposed paragraph (b) as new paragraph (a). In 
paragraph (a)(1) of the final rule, we added that, where the Exchange 
creates or collects personally identifiable information for the 
purposes of determining eligibility for enrollment in a QHP, 
determining eligibility for other insurance affordability programs, as 
defined in Sec.  155.20; determining eligibility for enrollment in a 
qualified health plan; determining eligibility for other

[[Page 18343]]

insurance affordability programs, as defined in 155.20; or determining 
eligibility for the exemptions from individual responsibility 
provisions described in section 5000A of the Code, the Exchange may 
only use or disclose such personally identifiable information only to 
the extent such information is necessary to carry out the functions 
described in Sec.  155.200 of this subpart. This paragraph limits the 
purposes for which the Exchange can use this information to those 
outlined in Sec.  155.200 of this subpart. Paragraph (a)(2) is broader 
in scope than the type of PII described in (a)(1), and includes all 
personally identifiable information collected for the purposes of 
carrying out Exchange minimum functions described in Sec.  155.200. 
This paragraph prohibits the creation, collection, use or disclosure of 
PII unless the manner in which the Exchange does so is consistent with 
the privacy and security standards outlined in Sec.  155.260. In the 
final rule, we removed the provision from proposed paragraph (b)(2) for 
Exchanges to establish and follow operational, administrative, physical 
and technical security standards that, if carried out by a HIPAA 
covered entity would meet the standards at 45 CFR 164.306, 164.308, 
164.310, 164.312 and 164.314. In its place we clarify that the Exchange 
must not create, collect, use or disclose PII unless the manner in 
which they do so is consistent with the standards of Sec.  155.260. In 
new sections (a)(3)(i) through (viii), we outlined the principles that 
an Exchange must use in the development of its privacy and security 
standards. These include individual access; correction; openness and 
transparency; individual choice; collection, use, and disclosure 
limitations; data quality and integrity; safeguards; and 
accountability.
    As described in new text added to (a)(4)(i) through (vi), an 
Exchange must establish and implement a set of operational, technical, 
administrative and physical safeguards that ensure the confidentiality, 
integrity, and availability of PII created, collected, used, and 
disclosed by the Exchange; that personally identifiable information is 
only used by or disclosed to those authorized to receive or view it; 
return information, as such term is defined by section 6103(b)(2) of 
the Code, is kept confidential under section 6103 of the Code; 
personally identifiable information is protected against any reasonably 
anticipated threats or hazards to the confidentiality, integrity, and 
availability of such information; and personally identifiable 
information is protected against any reasonably anticipated uses or 
disclosures of such information that are not permitted or established 
by law.
    New paragraph (a)(5) directs the Exchange to monitor, periodically 
assess, and update the security controls and related system risks to 
ensure the continued effectiveness of the controls. In new paragraph 
(a)(6), we added a standard that the Exchange develop and utilize 
secure electronic interfaces when sharing personally identifiable 
information electronically.
    In new paragraph (b), we added that, except for tax return 
information, when creation, collection, use, or disclosure is not 
otherwise required by law, an Exchange must establish the same or more 
stringent privacy and security standards (as those in Sec.  155.260(a)) 
as a condition of contract or agreement with individuals or entities, 
such as Navigators, agents, and brokers, that gain access to personally 
identifiable information submitted to an Exchange; or create, collect, 
use or disclose personally identifiable information gathered directly 
from applicants, qualified individuals, or enrollees while that 
individual or entity is performing the functions outlined in the 
agreement with the Exchange.
    New paragraph (c) directs the Exchange to ensure its workforce 
complies with the policies and procedures developed and implemented by 
the Exchange to comply with this section.
    In new paragraph (e), we added language to clarify that the 
standards for data matching and sharing between the Exchanges and 
Medicaid, CHIP, and BHP, where applicable, are triggered when these 
entities share PII. In addition, we added paragraph (e)(1) through 
(e)(4), which state that data matching or sharing agreements must: meet 
any applicable requirements described in this section; meet any 
applicable requirements described in sections 1413(c)(1) and (c)(2) of 
the Affordable Care Act; be equal to or more stringent that the 
requirements for Medicaid programs under section 1942 of the Act; and, 
for those matching agreements that meet the definition of ``matching 
program'' under 5 U.S.C. 552a(a)(8), comply with 5 U.S.C. 552a(o).
    In paragraph (g), we added that the civil penalty applies to each 
instance of knowing and willful improper use or disclosure of 
information. We redesignated proposed paragraph (b)(4) as new paragraph 
(d), and redesignated proposed paragraph (d) as new paragraph (f).
i. Use of standards and protocols for electronic transactions (Sec.  
155.270)
    In Sec.  155.270 of the proposed rule, we proposed that the 
Exchange apply the HIPAA administrative simplification standards 
adopted by the Secretary in accordance with 45 CFR parts 160 and 162 
when the Exchange performs electronic transactions with a covered 
entity. In addition, we proposed to codify the Health Information 
Technology (HIT) enrollment standards and protocols that were developed 
in accordance with section 3021 of the PHS Act, which was added by 
section 1561 of the Affordable Care Act, and that were adopted by the 
Secretary.\4\ Specifically, we proposed that these aforementioned 
standards and protocols be incorporated within Exchange information 
technology systems.
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    Comment: HHS received several comments supporting our proposal to 
apply HIPAA administrative simplification standards, including the use 
of national standards and protocols for electronic transactions in 
Sec.  155.270. However, one commenter expressed concern about the 
potential for gaps in the 005010 standard adopted by the Secretary in 
accordance with HIPAA. Another commenter, who supported the application 
of the administration simplification standards, added that HHS should 
apply any new transaction standards or protocols developed to 
supplement the HIPAA transactions consistently across all State-based 
Exchanges to promote administrative simplification among QHP issuers 
and eligibility services integrated with Exchanges.
    Response: HIPAA administrative simplification standards are the 
appropriate standards for transactions that occur between the Exchange 
and covered entities, such as issuers, to continue the promotion of 
uniformity in administration and information interoperability of the 
Exchange activities as part of the larger health insurance industry. If 
Exchanges choose to implement standards in addition to those 
established in 45 CFR parts 160 and 162, they will continue to be in 
compliance with the final rule. As we work with Exchanges in connection 
with the information reporting standards for enrollment purposes to QHP 
issuers and/or Medicaid and CHIP agencies, we will be mindful of the 
potential for gaps in the 005010 standard adopted by the Secretary in 
accordance with HIPAA and will fully adhere to privacy and security 
standards in Sec.  155.260 and Sec.  155.270.

[[Page 18344]]

    Comment: One commenter recommended that ``operating rules'' be 
included in the phrase ``the Exchange must use standards, 
implementation specifications, and code sets adopted by DHHS'' in Sec.  
155.270(a), noting that proposed Sec.  155.240(e) contains language 
that an Exchange must use ``the standards and operating rules 
referenced in Sec.  155.260 and Sec.  155.270'' when conducting 
electronic transactions with QHPs involving premium payments or 
electronic fund transfers.
    Response: We accept the commenter's recommendation to add the 
phrase ``operating rules'' to the proposed regulation text. In the 
final rule, we amended Sec.  155.270(a) to include the term ``operating 
rules'' to address communications involving Exchanges that are subject 
to HIPAA administrative simplification.
    Comment: Several commenters supported Sec.  155.270(b) of the 
proposed rule, which directs an Exchange to incorporate standards 
developed by the Secretary in accordance with section 1561 of the 
Affordable Care Act, which amends the PHS Act and directs HHS to 
develop interoperable and secure standards and protocols for electronic 
enrollment transactions in consultation with the HIT Policy and HIT 
Standards committees. However, some commenters expressed concern about 
the ongoing usefulness of the committees' recommendations. Two 
commenters stated that the recommendations of those committees are now 
outdated. Another stated that a weakness in the cited HIT enrollment 
standards and protocols is the fact that these standards are not 
applicable to web services. Commenters noted that these standards and 
protocols facilitate the transfer of consumer eligibility, enrollment, 
and disenrollment information, but do not fill the need for standards 
that would apply to web services versions of HIPAA transactions. One 
commenter said it is critical that Exchanges design electronic data 
formatting and transmission standards that are uniform, easily 
implemented by QHP issuers, and leverage electronic data formatting and 
transmission standards that are already in use by health insurance 
carriers. Commenters also suggested that HHS recommend that Exchanges 
use specific data exchange formats and transmission standards such as 
those already established under the Health Insurance Portability and 
Accountability Act of 1996 and by CMS (for example, the 834 Enrollment, 
Online Enrollment Center (OEC) file format, and Health Plan Management 
System (HPMS) reporting).
    Response: It will be important to leverage electronic data 
formatting and transmission standards that are already in use. However, 
we also believe that adhering to the broad standards and protocols 
developed by the Secretary, in collaboration with the HIT Policy and 
Standards committees, in accordance with section 3021 of the PHS Act, 
will provide standardization while allowing for the flexibility to 
leverage existing standards. We plan to issue guidance to help States 
determine appropriate transmission standards and data exchange formats 
for their Exchanges. We will also be consulting with the HIT Policy and 
HIT Standards committees at regular intervals to update the cited HIT 
enrollment standards and protocols to be more applicable to web 
services and to incorporate updates from Exchange electronic data 
formatting and transmission standards to broader standardization 
efforts. We also note that Sec.  155.270 controls only how the Exchange 
sends information electronically to HIPAA covered entities. Section 
Sec.  155.260 addresses privacy and security standards.
    Comment: A few commenters expressed concern about the privacy and 
security of information being shared via electronic transactions in 
accordance with proposed Sec.  155.270. Some commenters requested that 
this section reference the limitations on use and disclosure in Sec.  
155.260 of this subpart, which sets privacy and security standards for 
Exchanges. These commenters also recommended codifying section 
1413(c)(1) of the Affordable Care Act, which directs States to develop 
secure interfaces for electronic data sharing. Another group of 
commenters expressed concern that co-mingling of data used for 
different purposes would create threats to the privacy of PII. These 
commenters requested that HHS ensure that Exchanges maintain a division 
between information that is stored and information that is used for 
eligibility determinations and redeterminations, with strict standards 
for disclosure or release of stored data.
    Response: We believe the commenter's suggestion to include a 
regulatory citation to Sec.  155.260 would be redundant because the 
privacy and security standards and protections in Sec.  155.260 will 
apply to all transactions in which data are created, used, collected, 
stored, or disposed of by Exchanges. We also note that section 1413(c) 
of the Affordable Care Act is codified in section Sec.  155.260(b)(3) 
and Sec.  155.260(c). In addition, we note that the privacy and 
security standards cited in Sec.  155.260 apply to both stored 
information and information used for eligibility determinations and 
redeterminations. Finally, while we acknowledge that stored data and 
data in active use warrant different privacy and security protocols, we 
believe that the privacy and security standards in Sec.  155.260 direct 
Exchanges to have safeguards in place to prevent improper use, 
collection, or disclosure of information, whether the data are at rest 
or in transit. We therefore do not think it is necessary to address 
this distinction in our final regulation.
    Comment: One commenter recommended that HHS adopt an operating rule 
that would apply to web services versions of the HIPAA transactions. 
This commenter encouraged HHS to consider the CORE Phase II rules, 
which have significant industry support, and to develop new standards 
that are not addressed in the CORE Phase II rules.
    Response: It is important for HHS to adopt a standard for web-based 
transactions; however, detailed discussion on the adoption of such 
standards is outside the scope of this final rule. In this final 
regulation, we maintain the policy that Exchanges must apply and follow 
HIPAA standard transactions when engaging in electronic exchanges of 
information with Covered Entities.
    Comment: One commenter requested clarification about whether it was 
in the intention of HHS to ensure that all electronic transactions with 
covered entities be consistent with the standards of 45 CFR parts 160 
and 162. The commenter stated that this would direct all Medicaid 
agencies and issuers to use only standard transactions when conducting 
electronic transactions with Exchanges. Further, if it is the intent of 
HHS to permit, rather than require, these entities to conduct standard 
transactions with Exchanges, the commenter expressed that proposed 
Sec.  155.270(a) should be rewritten to state this clearly. In 
addition, this commenter requested that HHS clarify whether Exchanges 
must conduct standard transactions with non-covered entities, such as 
employers and banks or their respective agents that request to do so. 
This clarification would ensure that employers and others that are now 
conducting (or may in the future conduct) such standard transactions as 
eligibility for a health plan, enrollment or disenrollment in a health 
plan, or health plan premium payments may be assured they can do so as 
standard transactions with exchanges.
    Response: It is the intention of HHS to require, rather than to 
permit, adherence to the standards,

[[Page 18345]]

implementation specifications, and code sets adopted by the Secretary 
in 45 CFR parts 160 and 162, but only to the extent that the Exchange 
is performing electronic transactions with a covered entity. It is not 
the intention of HHS to establish standardized HIPAA transactions when 
Exchanges perform electronic transactions with non-covered entities, 
such as employers or banks. However, the Exchange has the flexibility 
to choose to use those standards, even if they are not minimum 
standards.

Summary of Regulatory Changes

    We are finalizing the provisions proposed in Sec.  155.270 of the 
proposed rule, with the following modification: in paragraph (a), we 
added a provision for Exchanges to use the operating rules adopted by 
the Secretary in 45 CFR parts 160 and 162.
4. Subpart D--Exchange Functions in the Individual Market: Eligibility 
Determinations for Exchange Participation and Insurance Affordability 
Programs
    In this subpart, we proposed standards that the Exchange will use 
to determine eligibility for Exchange participation and insurance 
affordability programs. In the proposed rule and in this final rule, we 
organized the standards as follows: eligibility standards, eligibility 
determination process, and applicant information verification process.
a. Definitions and General Standards for Eligibility Determinations 
(Sec.  155.300)
    In Sec.  155.300, we proposed definitions for this subpart. 
Virtually all of the definitions proposed in this section were taken 
from other proposed regulations, including the Exchange establishment 
proposed rule which was published prior to the Exchange eligibility 
proposed rule. Specifically, in this section, we proposed definitions 
or interpretations for ``adoption taxpayer identification number,'' 
``applicable Medicaid modified adjusted gross income (MAGI)-based 
income standard,'' ``applicable CHIP modified adjusted gross income 
(MAGI)-based income standard,'' ``application filer,'' ``Federal 
Poverty Level,'' ``Indian,'' ``insurance affordability programs,'' 
``minimum value,'' ``non-citizen,'' ``primary taxpayer,'' ``State CHIP 
Agency,'' ``State Medicaid Agency,'' and ``tax dependent.'' We also 
proposed rules related to the applicability of Medicaid and CHIP rules 
and the acceptance of attestations.
    Comment: A few commenters discussed the use of the term ``MAGI'' in 
the proposed rule. A commenter recommended referencing the term ``MAGI-
based standard for Medicaid and CHIP,'' as defined in the Medicaid 
proposed rule, and the term ``MAGI,'' as defined in the Treasury 
proposed rule. One commenter also asked that the differences in the use 
of MAGI for Medicaid eligibility, such as income exemptions described 
in the Medicaid proposed rule, be specified in Sec.  155.300.
    Response: We recognize the need to reference the definitions of 
``MAGI'' and ``MAGI-based income'' in Sec.  155.300(a), and in this 
final rule include a reference to MAGI, as defined in 36B(d)(2)(B) of 
the Code, and MAGI-based income, as defined in 42 CFR 435.603(e). To 
clarify, we use ``MAGI'' with respect to household income for advance 
payments of the premium tax credit and cost-sharing reductions, and 
``MAGI-based income'' with respect to household income for Medicaid and 
CHIP. We note that to further clarify this, we have added cross-
references whenever ``household income'' is used throughout this 
subpart to specify whether it is in reference to household income for 
purposes of advance payments of the premium tax credit and cost-sharing 
reductions, as defined in section 36B(d)(2) of the Code, or household 
income for purposes of Medicaid and CHIP, as defined in 42 CFR 
435.603(d).
    Comment: We received a number of comments regarding the definition 
of Federal Poverty Level (FPL), as proposed in Sec.  155.300(a). The 
definition, as proposed, specified that the FPL table used for 
eligibility for advance payments of the premium tax credit and cost-
sharing reductions for a coverage year must be the table published as 
of the first day of Exchange open enrollment for the coverage year; 
commenters recommended that this definition be aligned with the 
definition of FPL used for Medicaid and CHIP eligibility, which uses 
the FPL table available at the time of an eligibility determination.
    Response: We acknowledge the commenters' concerns. However, section 
36B(d)(3) of the Code, as added by section 1401(a) of the Affordable 
Care Act, clearly defines the FPL table that must be used for 
eligibility determinations for advance payments of the premium tax 
credit and cost-sharing reductions in such a way that it is distinct 
from the FPL table that is used for Medicaid and CHIP eligibility 
during much of the year. Therefore, HHS will maintain the proposed 
definition of FPL in the final rule. To the definition of ``Federal 
poverty level'', we also included ``or FPL''; throughout the final rule 
we also remove references to Treasury regulations when using the term 
FPL since the term is defined in this section using the same definition 
as in section 36B of the Code.
    Comment: We received many comments asking HHS to define 
``incarcerated, other than pending the disposition of charges'' in 
proposed Sec.  155.300. Several commenters also recommended that such a 
definition be similar to the definition of ``inmate of a public 
institution,'' as used by the Medicaid program (42 CFR 435.1010).
    Response: We acknowledge commenters' suggestion that we further 
define the term ``incarcerated, other than pending the disposition of 
charges,'' as used in Sec.  155.305(a)(2), and we intend to clarify 
this term in future guidance. We note that 42 CFR 435.1010 defines the 
term ``inmate of a public institution'', which is broader than the term 
``incarcerated'' as used in this part; therefore, we do not have the 
authority or reason to adopt the broader definition, as the term 
``incarcerated'' is used in the statute.
    Comment: Commenters asked that we amend our definitions of ``State 
Medicaid Agency'' and ``State CHIP Agency'' to explicitly include those 
offices that administer them in the U.S. Territories.
    Response: We acknowledge the suggestion, but are maintaining the 
proposed definitions in the final rule. These definitions reference 
Medicaid and CHIP regulations, which address Territories separately. 
Furthermore, the definition of ``State'' as included in section 1304(d) 
of the Affordable Care Act does not include Territories, and since this 
final rule implements only certain provisions of Title I of the 
Affordable Care Act that relate to States and Exchanges, we do not 
include Territories in these definitions.
    Comment: We received several comments providing alternative 
interpretations of the definition of ``Indian'' than that which was 
included in the Exchange establishment and eligibility proposed rules. 
Some commenters suggested our definition is too narrow and inconsistent 
with Federal law. One commenter recommended that Indian be defined as a 
person who is a member of an Indian tribe or any person who is a member 
of an Indian tribe as defined in subsection (d) of the Indian Health 
Care Improvement Act (IHCIA), not limited to only Federally-recognized 
tribes. Other commenters stated that they believed that HHS's 
interpretation is not supported by the plain language of section 4 of 
IHCIA or section 4(d) of the Indian Self-Determination and

[[Page 18346]]

Education Assistance Act (ISDEAA) and believe that it is contrary to 
general principles of Indian law. Several commenters recommend that at 
a minimum HHS recognize that the definitions under the ISDEAA and IHCIA 
are operationally the same. Several commenters recommend that this rule 
align its definition with the Medicaid/CHIP definition found in 42 CFR 
447.50.
    Response: Since the Affordable Care Act statutory provisions 
identifying the specific benefits available to Indians incorporate 
section 4 of the IHCIA (for purposes of the special enrollment period 
described in Sec.  155.420(d)(8)) and section 4(d) of the ISDEAA (for 
purposes of the cost-sharing provisions described in Sec.  155.300(a) 
and (b)) for the definition of Indian, we are unable to adopt the 
Medicaid/CHIP definition under 42 CFR 447.50. Therefore, we maintain 
our proposed definition in this final rule. However, since both the 
ISDEAA and IHCIA operationally mean the same thing, there is uniformity 
among the definition of Indian for purposes of the Exchange-related 
benefits described in this final rule. We accept that the definitions 
of ``Indian'' as provided under section 4(d) of ISDEAA (codified at 25 
U.S.C. 450 et seq.) and section 4 of IHCIA (codified at 25 U.S.C. 1603) 
operationally mean the same thing: an individual who is a member of an 
Indian tribe. In their definitions of an ``Indian tribe,'' both of 
these acts have nearly identical language that refers to a number of 
Indian entities (tribes, bands, nations, or other organized groups or 
communities) that are included in this definition on the basis that 
they are ``recognized as eligible for the special programs and services 
provided by the United States to Indians because of their status as 
Indians.''
    Comment: One commenter asked that we clarify that the use of 
``attestation'' does not prohibit the Exchange from obtaining 
electronic data and then asking an applicant to validate it, with the 
goal of increasing the efficiency and accuracy of the eligibility 
process.
    Response: A key principle in our approach to the eligibility 
process is to streamline this verification process and maximize the use 
of electronic data. In many cases, we anticipate that the dynamic, 
electronic application process will take the approach that is 
recommended by the commenter. In other cases, it will be necessary to 
obtain information prior to verifying it. In general, the language of 
the final rule does not mandate a specific sequencing of activities, 
and is designed to allow flexibility within standards to ensure that 
the eligibility process can evolve to align with changes in technology 
and the availability of authoritative data. We also note that we will 
be providing a model application, which will include sequencing for the 
various steps needed in the eligibility process. Consequently, we are 
maintaining the language from the proposed rule. We look forward to 
working closely with States to achieve our shared goal of a streamlined 
eligibility process, including through the many areas in which we are 
providing flexibility to allow for continuous quality improvement in 
access to affordable health insurance.
    We note that we have removed the language that specified that 
additional individuals, including a parent, caretaker or someone acting 
responsibly on behalf of such an individual, could provide 
attestations. The definition of application filer, which is now located 
in Sec.  155.20, includes references to all individuals who may provide 
attestations; applicants, authorized representatives, and if the 
applicant is a minor or incapacitated, someone acting responsibly on 
behalf of the applicant. We have also replaced all references in this 
subpart regarding application filers providing attestations with 
references to applicants providing attestations, since the language in 
Sec.  155.300(c) provides overarching clarification that attestations 
for applicants can be provided by application filers.
    Comment: We received comment regarding our definition of primary 
taxpayer. A commenter expressed concern that an individual may not know 
his future filing status.
    Response: While this final rule revises the term ``primary 
taxpayer'' to ``tax filer,'' to incorporate both spouses in a situation 
in which a married couple is filing jointly, we keep the proposed 
definition with minor revisions. Section 36B of the Code governs 
eligibility for the premium tax credit and advance payments of the 
premium tax credit, and specifies that it is based on the annual 
household income for a tax family for the year for which coverage is 
requested, which necessitates an understanding of an applicant's 
expected tax household for such year. We acknowledge challenges in 
communicating with individuals during the application process, 
including regarding tax filing status, and intend to work closely with 
stakeholders to develop effective communication strategies and tools.

Summary of Regulatory Changes

    We are finalizing the definitions proposed in Sec.  155.300 of the 
proposed rule, with the following modifications:
    We removed the definition of ``application filer,'' and moved the 
definition to Sec.  155.20, as a definition applicable for all of part 
155; we address this change in comment response for Sec.  155.20. In 
the definition of ``applicable CHIP MAGI-based income standard,'' we 
changed the reference from 42 CFR 457.05(a) to 42 CFR 457.310(b)(1) to 
align with the Medicaid final rule. For the definition of ``minimum 
value'', we clarified that the definition is used to describe coverage 
in an eligible employer-sponsored plan, and that minimum value means 
that an eligible employer-sponsored plan meets the standards with 
respect to coverage of the total allowed costs of benefits set forth in 
section 36B(c)(2)(C)(ii) of the Code. We added language to the 
definition of ``State Medicaid agency'' to clarify that the State 
Medicaid agency may be established or designated by the State in 
accordance with Medicaid regulations. For the definition of ``insurance 
affordability program'' we cross-referenced 42 CFR 435.4, but clarify 
that those programs included in this definition are the State Medicaid 
program under Title XIX of the Act, CHIP under Title XXI of the Act, 
the BHP under section 1331 of the Affordable Care Act, advance payments 
of the premium tax credit under section 36B of the Code, and cost-
sharing reductions under section 1402 of the Affordable Care Act.
    As further explained in response to comments later in Sec.  
155.305, we also changed the definition of ``primary taxpayer'' to 
``tax filer,'' which reflects that the role includes either spouse in a 
joint-filing situation, and changed the term throughout the subpart. 
Within the definition, we also added ``or a married couple,'' to 
clarify that a tax filer may be an individual or a married couple, and 
deleted subparagraph (1)(iv), which included language clarifying that a 
primary taxpayer could be either spouse in a married couple, as this 
language is now redundant. In paragraph (a), we added a definition for 
``modified adjusted gross income'' and a definition of ``MAGI-based 
income.'' We also change the rule described in paragraph (b) to clarify 
that the Medicaid and CHIP regulations referred to in this subpart will 
be implemented in accordance with the policies and procedures as 
applied by the State Medicaid or State CHIP agency or as approved by 
the agency in the agreement described in 155.435(a). In response to 
comments, we also added new paragraph (d), which describes a rule for 
the Exchange when determining whether information is ``reasonably 
compatible''; this clarification is

[[Page 18347]]

discussed in more detail in Sec.  155.315 comment response.
    We also made technical changes to this section. In paragraph (c), 
we changed the reference to Sec.  155.310(e)(2)(ii) to Sec.  
155.310(d)(2)(ii). For the definition of ``applicable Medicaid MAGI-
based income standard,'' we changed the reference to 42 CFR 
435.1200(c)(3) to 42 CFR 435.1200(b)(2).
    Lastly, throughout this subpart, we have removed cross-references 
to the Treasury proposed rule and replaced them with cross-references 
to the applicable language in section 36B of the Code, as added by 
section 1401(a) of the Affordable Care Act, as the Treasury proposed 
rule will not be finalized as of the publication of this rule. Upon 
publication of the Treasury final rule, we intend to replace the 
statutory references with the appropriate regulatory references.
b. Options for conducting eligibility determinations (Sec.  155.302)
    Based on comments and feedback to the proposed rule, we are 
revising the rule to include this section as an interim final 
provision, and we are seeking comments on it.
    Comment: We received a number of comments expressing support for a 
policy in which eligibility processes were integrated across the 
Exchange, Medicaid, and CHIP in order to ensure a seamless experience 
for consumers. Commenters further stressed the importance of a single 
entity conducting all eligibility determinations. We also received 
comments asking that States be permitted to rely on the Federal 
government for certain eligibility functions, and that State Medicaid 
and CHIP agencies be permitted to exercise final control over 
eligibility determinations for Medicaid and CHIP based on applications 
submitted to the Exchange, particularly when the State does not operate 
an Exchange. In particular, commenters asked that the Federal 
government offer to perform eligibility determinations for advance 
payments of the premium tax credit and cost-sharing reductions, based 
on an argument that this is not a current part of State processes, 
should be uniform across States, and is connected to the advance 
payment of premium tax credits with Federal funds. Another commenter 
suggested that rather than have the Federal government assume 
responsibility for an entire eligibility function, we should isolate 
certain components of the eligibility function.
    Response: While a fully-integrated eligibility process will best 
achieve a seamless experience for applicants, we adopt the suggestion 
of the commenters who requested more flexibility for States regarding 
Medicaid and CHIP eligibility determinations. With appropriate 
standards, this approach could both maintain the seamless consumer 
experience while allowing States to design the eligibility process to 
best match their current systems and capacity. Accordingly, while the 
majority of subpart D continues to refer to all functions being carried 
out by the Exchange, in new Sec.  155.302 of this final rule, we 
specify that the Exchange may fulfill these provisions through 
different options or combinations of options, subject to standards 
described in Sec.  155.302(d). The standards in Sec.  155.302(d) are 
intended to ensure that this approach to eligibility determinations 
still affords applicants a seamless path to enrollment in coverage and 
that it does not increase administrative burden and costs; we use 
certain performance standards identified in paragraphs (b), (c) and (d) 
and the agreements among the relevant agencies to achieve this. We 
clarify that these options are separate and distinct from the ``State 
Partnership'' model described in the preamble of Sec.  155.200 of this 
final rule. We intend to provide further guidance on the implementation 
of these options, including the roles and responsibilities of the 
various parties, in the future.
    First, in Sec.  155.302(a), we clarify that the Exchange may 
fulfill its minimum functions under this subpart by either executing 
all eligibility functions, directly or through contracting arrangements 
described in Sec.  155.110(a), or through one or both of the approaches 
identified in paragraphs (b) and (c) when other entities determine the 
eligibility of applicants for insurance affordability programs.
    Second, in Sec.  155.302(b), we identify that the Exchange may 
conduct an assessment of eligibility for Medicaid and CHIP rather than 
an eligibility determination for Medicaid and CHIP. Such an arrangement 
is permissible provided that the Exchange makes such an assessment 
based on the applicable Medicaid and CHIP MAGI-based income standards 
and citizenship and immigration status, using verification rules and 
procedures consistent with Medicaid and CHIP regulations, without 
regard to how such standards are implemented by the State Medicaid and 
CHIP agencies. That is, the assessment must follow verification rules 
and procedures that could be adopted by a State Medicaid or CHIP 
agency, although the use of this option is not contingent on the State 
Medicaid or CHIP agency doing so.
    In paragraph (b)(2), we provide that notices and other activities 
that must be conducted in connection with an eligibility determination 
for Medicaid or CHIP are conducted by the Exchange consistent with the 
standards identified in this subpart or by the applicable State 
Medicaid or State CHIP agency consistent with applicable law.
    In paragraph (b)(3), we outline the procedures the Exchange must 
follow when, based on the assessment conducted consistent with the 
standards in paragraph (b)(1), the Exchange finds an applicant 
potentially eligible for Medicaid or CHIP. We note that ``potentially 
eligible'' does not mean that the individual's income, as determined by 
the Exchange, necessarily is at or below the applicable Medicaid or 
CHIP MAGI-based income standard. We would expect in the interagency 
agreements between the State Medicaid and CHIP agencies and the 
Exchange, the Exchange's determination of which applications will be 
transferred for further action by the Medicaid and CHIP agencies will 
depend in part on the extent to which their verification procedures are 
consistent with those followed by the State Medicaid and CHIP agencies. 
The Exchange would transmit such an individual's information to the 
State Medicaid or CHIP agency in accordance with paragraph (b)(3) for 
additional processing, although the Exchange would consider him or her 
as ineligible for Medicaid or CHIP for purposes of eligibility for 
advance payments of the premium tax credit and cost-sharing reductions 
until the State Medicaid or CHIP agency notified the Exchange that the 
individual was eligible for Medicaid or CHIP. We will work with 
Exchanges to establish a reasonable application of the term 
``potentially eligible'' taking into account an Exchange's assessment 
procedures.
    In paragraph (b)(4), we describe the procedures that the Exchange 
must follow when, based on an assessment conducted in accordance with 
paragraph (b)(1), the Exchange finds that an applicant is not 
potentially eligible for Medicaid or CHIP based on the applicable 
Medicaid and CHIP MAGI-based income standards. The Exchange must 
consider such an applicant as ineligible for Medicaid or CHIP for 
purposes of determining eligibility for advance payments of the premium 
tax credit and cost-sharing reductions, and notify the applicant and 
provide him or her with the opportunity to withdraw his or her 
application for Medicaid and CHIP. To the extent that an applicant 
withdraws his or her application for Medicaid and CHIP (for example, if 
he

[[Page 18348]]

or she is approved for advance payments based in part on an assessment 
that he or she is not potentially eligible for Medicaid and CHIP), the 
applicant would not receive a formal approval or denial of Medicaid and 
CHIP; the alternative is for the applicant to request that the Exchange 
transmit the application to the State Medicaid and CHIP agency for 
additional processing.
    As noted above, in addition to providing the applicant with the 
opportunity to withdraw his or her application for Medicaid and CHIP, 
in paragraph (b)(4)(i)(B), the Exchange must notify and provide the 
applicant with the opportunity to request a full determination of 
eligibility for Medicaid and CHIP by the applicable State Medicaid and 
CHIP agencies. For an applicant who requests a full Medicaid and CHIP 
determination, the Exchange must transmit all information as provided 
as part of the application, update, or renewal that initiated the 
assessment and any information obtained or verified by the Exchange to 
the State Medicaid and CHIP agency. The Exchange must also consider 
such an applicant as ineligible for Medicaid or CHIP for purposes of 
determining eligibility for advance payments of the premium tax credit 
and cost-sharing reductions until the State Medicaid or CHIP agency 
notifies the Exchange that the applicant has been determined eligible 
for Medicaid or CHIP.
    The arrangement under paragraph (b) would also provide that the 
Exchange must adhere to the eligibility determination made by the 
Medicaid or CHIP agency, and that the Exchange and the applicable State 
Medicaid and CHIP agencies enter into an agreement specifying their 
respective responsibilities in connection with eligibility 
determinations for Medicaid and CHIP. We expect that these agreements 
will establish the responsibilities across the parties, and we will 
work with States to help develop such agreements. We note that we 
include rules related to assessments of eligibility for Medicaid and 
CHIP in paragraph (b)(1), to reinforce this concept. The standards and 
responsibilities of the Exchange, which we include for this agreement, 
complement the standards in 42 CFR 435.1200(d) of the Medicaid final 
rule. In accordance with these standards, we expect that when an 
assessment is conducted by the Exchange and transmitted to the State 
Medicaid or CHIP agency, and the Exchange is providing advance payments 
pending an eligibility determination for Medicaid and CHIP, the 
Exchange will receive a notification of the final determination of 
eligibility for Medicaid and CHIP made by the receiving agency. 
Together, these standards aim to avoid the duplication of requests for 
information from applicants and verification of information, and ensure 
timely eligibility determinations despite the `hand-offs' to different 
agencies or entities. Furthermore, we believe the inclusion of the 
functions and the standards for the agreements described in Sec.  
155.302 are consistent with our goal of ensuring a seamless eligibility 
process. We also note that while defining what constitutes eligibility 
for minimum essential coverage for purposes of eligibility for advance 
payments of the premium tax credit and cost-sharing reductions is 
outside the scope of this regulation, we clarify that our understanding 
is that if the Exchange conducts an assessment in accordance with 
paragraph (b) of this section and does not find that an applicant is 
eligible for Medicaid and CHIP, such finding is sufficient to meet the 
eligibility criteria specified in Sec.  155.305(f)(1)(ii)(B) with 
respect to Medicaid and CHIP.
    Third, in Sec.  155.302(c) of the final rule, we describe that the 
Exchange must implement a determination of eligibility for advance 
payments of the premium tax credit and cost-sharing reductions made by 
HHS. We also describe that such an arrangement must provide that all 
verifications, notices, and other activities conducted in connection 
with determining eligibility for advance payments of the premium tax 
credit and cost-sharing reductions are conducted by either the Exchange 
in accordance with all of the applicable standards described in this 
subpart or by HHS in accordance with the agreement between HHS and the 
Exchange. We also direct that the Exchange transmit all applicant 
information and other information obtained or verified by the Exchange 
to HHS. The Exchange would then adhere to HHS's determination for 
advance payments of the premium tax credit and cost-sharing reductions. 
The Exchange and HHS would also need to enter into an agreement 
specifying their respective responsibilities in connection with 
eligibility determinations for advance payments of the premium tax 
credit and cost-sharing reductions. As with the option described in 
Sec.  155.302(b), we include particular standards and responsibilities 
which are designed to eliminate duplicative requests for information 
from applicants and ensure timely eligibility determinations.
    In Sec.  155.302(d) we outline the standards to which the Exchange 
must adhere when assessments of eligibility for Medicaid and CHIP based 
on MAGI and eligibility determinations for advance payments of the 
premium tax credit and cost-sharing reductions are made in accordance 
with paragraphs (b) and (c); such standards include that all 
eligibility processes are streamlined and coordinated across applicable 
agencies, that such arrangement does not increase administrative costs 
and burden on applicants, enrollees, beneficiaries, or application 
filers, or increase delay, and that applicable requirements under part 
155 and section 6103 of the Code are met.
    Lastly, we note that all of the above configuration options will 
necessitate coordination between the Exchange, HHS, and the State 
Medicaid and CHIP agency. We will work closely with States to develop 
operational solutions that will result in a high-quality eligibility 
process, which in turn will result in achievement of our shared 
coverage goals and a sustainable Exchange.

Summary of Regulatory Changes

    We are finalizing the following provisions at Sec.  155.302 and 
requesting comment. In paragraph (a), we provided that the Exchange may 
choose to satisfy the standards of subpart D directly or through 
contracting arrangements, or through one or a combination of options 
described in paragraphs (b) and (c), subject to additional standards 
outlined in paragraph (d).
    If the Medicaid or CHIP agency retains final control of eligibility 
determinations for Medicaid and CHIP, in paragraph (b), we described 
that notwithstanding the standards of this subpart the Exchange may 
conduct assessments of eligibility for Medicaid and CHIP based on MAGI 
rather than the eligibility determinations for Medicaid and CHIP 
provided that: the Exchange makes such an assessment based on the 
applicable Medicaid and CHIP MAGI-based income standards and 
citizenship and immigration status, using verification rules and 
procedures consistent with 42 CFR parts 435 and 457, without regard to 
how such standards are implemented by the State Medicaid and CHIP 
agencies; notices and other activities conducted in connection with an 
eligibility determination for Medicaid or CHIP are performed by the 
Exchange consistent with the standards identified in this subpart or 
the State Medicaid or CHIP agency consistent with applicable law; when 
the Exchange assesses an individual as potentially eligible for 
Medicaid or CHIP, the Exchange transmits all information provided as a 
part of the application, update, or

[[Page 18349]]

renewal that initiated the assessment, and any information obtained or 
verified by the Exchange to the State Medicaid or CHIP agency via 
secure electronic interface; when the Exchange finds an individual not 
potentially eligible for Medicaid and CHIP, the Exchange considers the 
applicant as ineligible for Medicaid and CHIP for purposes of 
determining eligibility for advance payments of the premium tax credit 
and cost-sharing reductions and must notify such applicant, and provide 
him or her with the opportunity to either withdraw his or her 
application for Medicaid and CHIP or request a full determination of 
eligibility for Medicaid or CHIP by the State Medicaid and CHIP 
agencies. When an applicant requests a full determination of 
eligibility for Medicaid and CHIP, the Exchange must transmit all 
information obtained or verified by the Exchange to the State Medicaid 
and CHIP agencies promptly and without undue delay and consider such an 
applicant as ineligible for Medicaid and CHIP for purposes of 
determining eligibility for advance payments of the premium tax credit 
and cost-sharing reductions until the State Medicaid or CHIP agency 
notifies the Exchange that the applicant is eligible for Medicaid or 
CHIP. Furthermore, under the arrangement described in paragraph (b), 
the Exchange must adhere to the eligibility determination for Medicaid 
or CHIP made by the State Medicaid or CHIP agency, and the Exchange and 
the State Medicaid and CHIP agencies must enter into an agreement 
specifying their respective responsibilities in connection with 
eligibility determinations for Medicaid and CHIP. We note that in such 
an arrangement if the Exchange the State Medicaid and CHIP agencies are 
using the same information technology infrastructure formal 
transmissions may not be needed.
    In paragraph (c), we establish that notwithstanding the standards 
of this subpart the Exchange may implement a determination of 
eligibility for advance payments of the premium tax credit and cost-
sharing reductions made by HHS. Under such option we provide: that 
verifications, notices, and other activities necessary in connection 
with an eligibility determination for advance payments of the premium 
tax credit and cost-sharing reductions are performed by the Exchange in 
accordance with the standards identified in this subpart or by HHS, in 
accordance with the agreement between the Exchange and HHS; the 
Exchange transmits all information provided as a part of the 
application, update, or renewal that initiated the eligibility 
determination, and any information obtained or verified by the 
Exchange, to HHS via secure electronic interface, promptly and without 
undue delay; the Exchange adheres to the eligibility determination for 
advance payments of the premium tax credit and cost-sharing reductions 
made by HHS; and the Exchange and HHS enter into an agreement 
specifying their respective responsibilities in connection with 
eligibility determinations for advance payments of the premium tax 
credit and cost-sharing reductions.
    In paragraph (d), we outline the standards to which assessments and 
eligibility determinations described in paragraph (b) and (c) must 
adhere, including that eligibility processes are streamlined and 
coordinated across insurance affordability programs; such arrangement 
does not increase administrative costs and burdens on individuals or 
increase delay; and any applicable standards under Sec.  155.260 or 
Sec.  155.270, Sec.  155.315(i), and section 6103 of the Code with 
respect to the confidentiality, disclosure, maintenance, or use of 
information will be met. All such changes adopted for this section of 
the final rule are described in responses to comments for Sec.  
155.302.
c. Eligibility Standards (Sec.  155.305)
    Based on comments and feedback to the proposed rule, we are 
revising the rule to include paragraph (g) of this section as an 
interim final provision, and we are seeking comments on it.
    In Sec.  155.305, we proposed to codify the eligibility standards 
for enrollment in a QHP and for insurance affordability programs. 
Specifically, we proposed that the Exchange determine an applicant 
eligible for enrollment in a QHP if he or she meets the basic standards 
for enrollment in a QHP outlined in the Affordable Care Act, including 
that the individual must be a citizen, national, or a non-citizen who 
is lawfully present, not incarcerated, and be reasonably expected to 
remain so for the entire period for which enrollment is sought. We 
solicited comments regarding the language that an individual be 
``reasonably expected,'' for the entire period for which enrollment is 
sought, to be a citizen, national, or non-citizen lawfully present, and 
on how this policy can be implemented in a way that is straightforward 
for individuals to understand and for the Exchange to implement.
    We also proposed that in order to be eligible to enroll in a QHP, 
an individual must intend to reside in the State in the service area of 
the Exchange. We clarified that this residency standard is designed to 
apply to all Exchanges, including regional and subsidiary Exchanges. In 
general, we proposed to align the Exchange residency standard with the 
Medicaid residency standards proposed in 42 CFR 435.403 of the Medicaid 
proposed rule (76 FR 51148). We clarified that this residency standard 
does not require an individual to intend to reside for the entire 
benefit year. We also proposed that the Exchange follow additional 
Medicaid residency standards (which were proposed in the August 17, 
2011 Medicaid rule at 42 CFR 435.403) and the policy of the State 
Medicaid or CHIP agency to the extent that an individual is 
specifically described in that section and not under paragraphs 
(a)(3)(i) or (ii).
    We proposed that for a spouse or a tax dependent who resides 
outside the service area of the tax filer's Exchange, the spouse or tax 
dependent will be permitted to either: (1) enroll in a QHP through the 
Exchange that services the area in which he or she resides or intends 
to reside; or (2) enroll in a QHP through the Exchange that services 
the area in which his or her tax filer intends to reside or resides, as 
applicable. We also solicited comment on any standards regarding in-
network adequacy for out-of-State dependents that we should consider in 
a different section of the proposed rule. We also noted that HHS 
intends to allow State Medicaid agencies to continue to have State-
specific rules with respect to residency for students under the 
Medicaid program, and solicited comments on whether different residency 
rules should be maintained for enrollment in a QHP or whether a unified 
approach should be adopted.
    We proposed that the Exchange determine an applicant eligible for 
an enrollment period if he or she meets the criteria for an enrollment 
period, as specified in Sec.  155.410 and Sec.  155.420. We also 
proposed that the Exchange determine applicants' eligibility for 
Medicaid and CHIP. Specifically, we proposed that the Exchange 
determine eligibility for Medicaid based on categories utilizing the 
applicable Medicaid MAGI-based income standard, and that the Exchange 
determine eligibility for CHIP if an applicant meets the standards of 
42 CFR 457.310 through 457.320 and has a household income within the 
applicable CHIP MAGI-based income standard. Additionally, we proposed 
to codify that if a BHP is operating in the service area of the 
Exchange, the Exchange will determine an applicant's eligibility for

[[Page 18350]]

the BHP, using the statutory criteria for eligibility.
    We also proposed that the Exchange determine eligibility for 
advance payments of the premium tax credit based on eligibility 
standards proposed in paragraph (f)(1) and (f)(2), and that the 
Exchange may provide advance payments of the premium tax credit only 
for an applicant who is enrolled in a QHP through the Exchange. 
Additionally, we clarified that the Exchange must determine a tax filer 
ineligible to receive advance payments of the premium tax credit if HHS 
notifies the Exchange that the tax filer or his or her spouse received 
advance payments for a prior year for which tax data would be utilized 
for income verification and did not comply with the requirement to file 
a tax return and reconcile the advance payments of the premium tax 
credit for such year. In the event the Exchange determines that a tax 
filer is eligible to receive advance payments of the premium tax 
credit, we proposed that the Exchange calculate advance payments of the 
premium tax credit in accordance with 26 CFR 1.36B-3 of the Treasury 
proposed rule (76 FR 50931).
    We also proposed that the Exchange require an application filer to 
provide the social security number (SSN) of the tax filer if an 
application filer attests that the tax filer has a SSN and filed a tax 
return for the year for which tax data would be utilized for 
verification of household income and family size. We solicited comments 
on how the Exchange can maximize the accuracy of the initial 
eligibility determination and establish a robust process for 
individuals to report changes in income to alleviate stakeholder 
concerns about income fluctuations during the year that may result in 
large reconciliation payments.
    Finally, we proposed that the Exchange must determine applicants 
eligible for cost-sharing reductions based on eligibility standards 
described in paragraph (g), and we note that special eligibility 
standards for cost-sharing reductions based on Indian status are 
described in Sec.  155.350 of this subpart. Specifically, we clarified 
in the proposed rule that an individual with household income that 
exceeds 250 percent of the FPL who is not an Indian is not eligible for 
cost-sharing reductions. We codified the statute such that an applicant 
must be enrolled in a QHP in the silver level of coverage in order to 
receive cost-sharing reductions. Lastly, we proposed three eligibility 
categories for cost-sharing reductions, and proposed that the Exchange 
transmit information about an enrollee's category to his or her QHP 
issuer in order to enable the QHP issuer to provide the correct level 
of reductions.
    Comments: We received comments regarding the provision in proposed 
Sec.  155.305(a)(1) which states that an individual must be 
``reasonably expected'' to be a citizen, national, or a non-citizen who 
is lawfully present for the entire period for which enrollment is 
sought. One commenter recommended that the final rule remove the 
``reasonably expected'' standard as it would limit non-citizens' 
eligibility to enroll in a QHP.
    Response: The final rule maintains the ``reasonably expected'' 
standard in accordance with section 1312(f)(3) of the Affordable Care 
Act. We do not interpret this provision to mean that an applicant must 
be lawfully present for an entire coverage year; rather, we anticipate 
that the verification process will address whether an applicant's 
lawful presence is time-limited, and if so, the Exchange will determine 
his or her eligibility for the period of time for which his or her 
lawful presence has been verified. We anticipate providing future 
guidance on this topic, with a focus on minimizing administrative 
complexity and burden.
    Comment: We received a number of comments related to and in support 
of the eligibility standard in proposed Sec.  155.305(a)(2) that in 
order to be eligible for enrollment in a QHP, an individual must not be 
incarcerated, with the exception of incarceration pending the 
disposition of charges. Several commenters expressed concerns and 
provided recommendations about how to coordinate and promote continuity 
of care for individuals who will be transitioning from incarceration, 
and some commenters expressed this concern in regard to specific 
populations of incarcerated individuals. One commenter recommended that 
prisoners should be able to apply for coverage through the Exchange in 
advance of their release so that coverage can be effective on their 
release date, while another commenter noted that we should provide that 
Exchanges must accept applications in the event they are submitted on 
behalf of an inmate of a correctional facility. Also, one commenter 
suggested that prisoners should not be held responsible for reporting 
changes if they become incarcerated, and prisoners should not be held 
liable for repayment of advance payments of the premium tax credit for 
which they would be liable if they are receiving them and then become 
incarcerated.
    Response: In Sec.  155.305(a)(2) of the proposed rule, we codified 
section 1312(f)(1)(B) of the Affordable Care Act, which specifies that 
in order to be eligible for enrollment in a QHP, an individual must not 
be incarcerated, other than incarceration pending the disposition of 
charges. HHS will consider commenters' recommendations related to 
promoting continuity of care for individuals leaving incarceration in 
future guidance. Since the Exchange will accept applications and make 
eligibility determinations throughout the year, an inmate would not be 
precluded from applying for coverage through the Exchange in an effort 
to coordinate an effective date of coverage with his or her release 
date. We also note that Sec.  155.420(d)(7) provides a special 
enrollment period (``A qualified individual or enrollee who gains 
access to new QHPs as a result of a permanent move'') which covers 
individuals who are released from incarceration.
    The final rule maintains the provision specifying that an enrollee 
must report any change with respect to the eligibility standards in 
Sec.  155.305, which includes when an enrollee becomes incarcerated, 
other than incarceration pending the disposition of charges, as it is 
important for the Exchange to be able to discontinue the enrollment and 
recompute any advance payments or cost-sharing reductions to account 
for the change in eligibility. As with other changes that affect 
eligibility for enrollment in a QHP, not reporting such a change so 
that advance payments of the premium tax credit can be adjusted 
accordingly exposes a tax filer to the risk of repayment of advance 
payments of premium tax credits at tax filing.
    In addition, we note that we clarify in Sec.  155.330(b)(4) of the 
final rule that an application filer may report a change on behalf of 
an enrollee, which, for example, allows a member of an enrollee's 
household to report the enrollee's incarceration. Also, in Sec.  
155.330(d)(2) of this final rule, we allow for flexibility for 
Exchanges to periodically check trusted data sources, provided that the 
data matching program meets certain standards; this provision could 
allow an Exchange to engage in data matching on incarceration to 
provide an additional avenue to capture changes.
    Comment: We received a number of comments related to the residency 
standards for enrollment in a QHP, described in proposed Sec.  
155.320(a)(3). Several commenters recommended that the residency 
standards across the Exchange, Medicaid and CHIP be aligned and uniform 
so as to limit States' discretion in precluding certain transient 
populations from having continuous coverage throughout the

[[Page 18351]]

year. Several commenters recommended that we align with the Medicaid 
``intent to reside'' standard, and include the two provisions from the 
residency standard as proposed in the Medicaid proposed rule at 42 CFR 
435.403(h)(1)(ii). One commenter suggested that we add the following 
alternative as a means of satisfying the residency standard: ``Has 
entered the State with a job commitment (whether or not he or she is 
currently employed).'' A few commenters recommended that we should 
adopt a more stringent residency standard than included in the Medicaid 
proposed rule.
    Response: We intend to align the residency standards with those of 
the Medicaid regulations; therefore, we are revising Sec.  
155.305(a)(3) in this final rule in response to commenters' 
recommendations that we align residency standards with Medicaid and 
CHIP and in consideration of changes made from the Medicaid proposed 
rule to the Medicaid final rule. For example, in Sec.  
155.305(a)(3)(i)(B), this final rule provides that an applicant age 21 
and over also meets the residency standard if he or she has entered the 
service area of the Exchange with a job commitment or seeking 
employment (whether or not the applicant is currently employed). This 
provision was included in the Medicaid proposed rule and is included in 
the Medicaid final rule; we include it here to provide consistency 
between these rules. We add language throughout Sec.  155.305(a)(3) to 
clarify that individuals must be ``living'' in the service area of the 
Exchange in addition to the prior standards, to clarify that an 
individual must be physically present in the service area of the 
Exchange in order to be eligible for enrollment in a QHP through that 
Exchange. We note, however, that this does not preclude an individual 
from submitting an application and receiving an eligibility 
determination in advance of relocating to a new State; in such a 
situation, his or her eligibility will not be effective until he or she 
is ``living'' in the new State. We have also restructured paragraph 
(a)(3)(i) and (ii) for clarity, and have added specific references to 
the Medicaid final rule.
    Comment: We received a number of comments related to the proposal 
in Sec.  155.305(a)(3)(iv) related to residency standards for family 
members who meet the applicable residency standard for a different 
Exchange service area than of one or both of the tax filers. While 
several commenters supported the provision in the proposed rule that 
dependents and spouses may enroll in a QHP offered through the Exchange 
in the service area where they reside or through the Exchange serving 
the area where a tax filer meets the applicable residency standard (or 
in the case of a spouse who is married filing jointly, another tax 
filer meets the applicable residency standard), several commenters 
opposed this provision. If this policy is maintained, one commenter 
recommended that HHS develop a system for Exchanges to easily apportion 
premium tax credits among family members. Several commenters expressed 
concern that a person who purchases coverage from a QHP offered through 
the Exchange where he or she does not live would likely encounter 
difficulties in finding care as well as significant additional costs 
from the use of out-of-network providers. In addition, the QHP issuer 
would be limited in its ability to facilitate use of the highest 
quality and most efficient providers and coordinate care across 
providers and settings. Commenters encouraged HHS to consider limiting 
this option. Several commenters recommended that HHS establish an 
electronic mechanism for Exchanges to communicate with each other, as 
well as sought clarification about how the Exchanges will coordinate 
tax credits for members of the same tax household purchasing coverage 
in QHPs through different Exchanges and other specific operational 
details around verification and the eligibility process. One commenter 
noted that this would be a simpler process if a tax filer could 
purchase coverage for a dependent or spouse in the other State's 
Exchange through the tax filer's Exchange via a link or web portal.
    Response: We maintain the residency standard in Sec.  
155.305(a)(3)(iv) of the final rule with limited modifications. All of 
the modifications result from a change in our terminology from 
``primary taxpayer'' to ``tax filer'' in an effort to reduce confusion 
that could be associated with the term ``primary taxpayer,'' notably 
since primary taxpayer generally refers to the first name on the tax 
return of two individuals who are married, but both individuals are tax 
filers and there is no significance to which is the primary taxpayer 
for purposes of the premium tax credit (this change has been made 
throughout the final rule). The remaining changes are to clarify that 
any member of a tax household that has members in multiple Exchange 
service areas may enroll in a QHP through any of the Exchanges for 
which one of the household's tax filers meets the applicable residency 
standard; the exception to this standard is that when both tax filers 
enroll in a QHP through the same Exchange, the tax filers' dependents 
may choose either the Exchange through which the tax filers are 
enrolled or an Exchange for which the dependents meet the applicable 
residency standard in paragraphs (a)(3)(i)-(iii). Taken together, we 
expect that these residency standards will ensure that enrollees in 
QHPs through the Exchange have appropriate access to services.
    Regarding comments suggesting that Exchanges should be able to 
apportion premium tax credits among family members, we will provide 
additional information in the future in coordination with the IRS. We 
note that the apportionment of advance payments will need to occur when 
a single tax household is covered by more than one QHP. Regarding 
comments we received related to network adequacy, a more detailed 
response is provided in Sec.  156.230 of this final rule. We also note 
that multi-State plans certified by and under contract with the 
Director of the Office of Personnel Management may provide another 
option in such scenarios. In response to comments recommending that we 
create an electronic mechanism by which Exchanges can communicate with 
each other and other operational details of the eligibility process, 
HHS is considering commenters' recommendations regarding how best to 
coordinate cross-Exchange activities.
    Comment: A few commenters strongly supported limiting enrollment to 
a single open enrollment period per year.
    Response: The language in Sec.  155.305(b) of the proposed rule 
specified that the Exchange determine an applicant eligible for an 
enrollment period in accordance with the provisions regarding 
enrollment periods in Sec.  155.410 and Sec.  155.420.
    Comment: A number of commenters expressed overall support for the 
Exchange conducting Medicaid and CHIP eligibility determinations, and 
some suggested that the regulation be amended to include a standard 
that an Exchange determine eligibility for Medicaid on any basis of 
eligibility offered in that State (such as optional eligibility 
categories and categories that do not use the MAGI standard). Some 
commenters expressed support for uniformity and standardization around 
eligibility and enrollment in general. Several commenters recommended 
that HHS provide that the Exchange must collect information related to 
non-MAGI eligibility to ensure that applicants can truly avail 
themselves of a ``no wrong door'' application process for Medicaid. A 
few commenters supported the clarification that eligibility for 
emergency Medicaid services does not

[[Page 18352]]

count as Medicaid eligibility for purposes of eligibility for premium 
tax credit and cost-sharing reductions through the Exchange. Another 
recommended that there should be an emphasis on child-only plans 
through the Exchange for those children who are not eligible for 
Medicaid.
    Response: Sections 155.345(b) and (d) of the final rule specify 
that the Exchange must assess information provided by an applicant who 
is not eligible for Medicaid based on standards specified in Sec.  
155.305(c) to determine whether he or she is potentially eligible for 
Medicaid in a category that does not use the MAGI standard, and refer 
any potentially eligible individuals to the Medicaid agency for an 
eligibility determination. In addition, Sec.  155.345(c) of the final 
rule specifies that the Exchange must provide an opportunity for an 
applicant to request a full Medicaid eligibility determination based on 
factors not considered in Sec.  155.305(c). We believe that this 
proposal creates a streamlined eligibility process for the vast 
majority of applicants, while also allowing applicants who may be 
eligible for a category that does not use the MAGI standard to access a 
more streamlined process than is available today, without requiring the 
Exchange to accommodate all of the complexity associated with the 
categories of Medicaid that were not modified by the Affordable Care 
Act.
    In order to maintain a single, streamlined application, and in 
accordance with section 1413(b)(2) of the Affordable Care Act, 
applicants will not be asked for more information than is needed for 
the Exchange to make an eligibility determination for insurance 
affordability programs based on MAGI, apart from collecting basic 
information to assess individuals for potential Medicaid eligibility on 
a non-MAGI basis, for example a single triggering question. Applicants 
will always have the opportunity to request a full determination of 
eligibility for Medicaid. We also note that we know that several States 
are considering leveraging a single Exchange/Medicaid/CHIP technology 
platform in future years to also accommodate non-MAGI Medicaid 
applicants, which is permitted under the statute and final rule. In 
response to commenters requesting clarification about whether 
eligibility for Medicaid coverage that is limited to emergency services 
counts as minimum essential coverage for purposes of eligibility for 
advance payments of the premium tax credit and cost-sharing reductions, 
this determination is subject to other rulemaking. We note, however, 
that individuals who are not lawfully present, are not eligible for 
enrollment in a QHP, let alone for enrollment in a QHP that is 
supported by advance payments and cost-sharing reductions. We also note 
that immigration status is not a factor for emergency Medicaid 
eligibility. In this final rule, we also revise Sec.  155.305(c) to 
streamline references to Medicaid citizenship and immigration status 
and residency eligibility standards, and align with the Medicaid MAGI-
based assessment described under 42 CFR 435.911(c)(1). Lastly, 
regarding child-only plans, we note that the Exchange will inform an 
applicant of all of the QHPs for which he or she is eligible, including 
any child-only plans.
    Comment: We received a range of comments related to performance 
measurement and oversight tools related to eligibility and enrollment. 
One commenter recommended a modification of Federal audit tools to 
ensure that States are evaluated based on the number of eligible people 
they correctly enroll for coverage. Some commenters recommended that 
QHP issuers should not be held responsible for any errors that the 
Exchange may make in the eligibility determination process, while some 
commenters sought clarification of an Exchange's liability for 
inaccurate eligibility determinations. Other commenters requested State 
flexibility when operational challenges impede a seamless eligibility 
and enrollment process (including, for example, transitioning enrollees 
from one insurance affordability program to another).
    Response: We plan to regulate in the future on oversight tools and 
performance measurements in future rulemaking and guidance. We will 
consider commenters' recommendations regarding oversight tools and 
performance measurement as we develop future guidance on this topic.
    Comment: Several commenters strongly supported the Exchange sharing 
common eligibility standards with Medicaid, CHIP, and the BHP, and 
determining eligibility for the BHP. Several commenters suggested that 
the Exchange should conduct eligibility determinations for other 
programs that are not related to health insurance coverage, such as the 
Supplemental Nutrition Assistance Program and the National School Lunch 
Program. Other commenters stated that individuals who are served by 
those programs should also be enrolled in the appropriate health care 
program if they are not already enrolled. At least one commenter 
recommended that those applying for unemployment insurance also be 
directed towards health benefits for which they might be eligible.
    Response: In the final rule, we do not require the level of 
integration between the Exchange and other human services programs that 
some commenters recommended. This would not preclude a State from 
leveraging the technology platform and supporting infrastructure for 
insurance affordability programs for other health and human services 
programs in the future, provided that privacy and security standards 
(and applicable cost allocation rules) are met, particularly regarding 
the use and disclosure of information provided to the Exchange by 
applicants and Federal agencies. To this end, on August 10, 2011 and 
January 23, 2012, CMS, the Administration for Children and Families 
(ACF), and the Food and Nutrition Service (FNS) issued joint letters 
providing guidance on the limited exception to cost allocation 
guidelines which allows Federally-funded human services programs to 
benefit from Medicaid, CHIP, and Exchange technology investments.
    Comment: We received a number of comments related to eligibility 
standards for advance payments of the premium tax credit, in particular 
regarding compliance with the filing requirement described in proposed 
Sec.  155.305(f)(4). Some commenters recommended that the final rule 
clarify that if a tax filer is determined eligible for advance payments 
of the premium tax credit but opts not to take advance payments, his or 
her ability to file for the credit at the end of the tax year is not 
affected; commenters also asked whether such a scenario would adversely 
affect his or her eligibility for cost-sharing reductions. One 
commenter requested clarification regarding the length of time for 
which a taxpayer would be deemed ineligible for advance payment of 
premium tax credit following a failure to file a tax return. Some 
commenters suggested States should have the flexibility to discontinue 
eligibility for advance payments of the premium tax credit and Medicaid 
if Federal tax filings are not current.
    Response: We clarify that when a tax filer is determined eligible 
for advance payments of the premium tax credit but opts to not have 
advance payments made on his or her behalf, the tax filer may still 
claim the premium tax credit on his or her tax return; further, such 
action does not adversely affect his or her eligibility for cost-
sharing reductions. Regarding Sec.  155.305(f)(4), we note that the 
language of the proposed rule, which we maintain in the final rule, 
specifies that the

[[Page 18353]]

Exchange may not determine a tax filer eligible for advance payments if 
advance payments of the premium tax credit were made on behalf of the 
tax filer, or either spouse if the tax filer is a married couple, for a 
year for which tax data would be utilized for verification of household 
income and family size, and the tax filer or his or her spouse did not 
comply with the requirement to file an income tax return for that year 
as required by 26 U.S.C. 6011, 6012, and implementing regulations and 
reconcile the advance payments of the premium tax credit for that 
period.
    We also note that a tax filer faced with this bar to eligibility 
may be able to regain eligibility by filing a tax return and 
reconciling the advance payments of the premium tax credit. Lastly, we 
do not have authority to discontinue Medicaid eligibility based on a 
failure to file a tax return. In the final rule, we also make a 
correction to the eligibility criteria for advance payments of the 
premium tax credit at Sec.  155.305(f)(1)(ii) to align with the 
statutory requirement in section 36B(c)(1)(A) of the Code; the Exchange 
must generally determine that the tax filer is expected to have a 
household income of greater than or equal to 100 percent of the FPL.
    Comment: We received several comments requesting clarification as 
to how eligibility will be determined for specific household 
composition scenarios. One comment, for example, asked for 
clarification regarding situations in States that recognize same-sex 
marriages or civil unions.
    Response: In Sec.  155.305(f) in this final rule, we use a number 
of cross-references to section 36B of the Code which governs the 
premium tax credit; these rules are the same rules that are used to 
determine eligibility for advance payments of the premium tax credit. 
Consequently, we refer commenters to those rules for details regarding 
family and family size. Similarly, in Sec.  155.305(c) and (d), we use 
a number of cross-references to 42 CFR parts 435 and 457, which contain 
the Medicaid and CHIP rules for household composition; we refer 
commenters to those rules for details regarding these provisions.
    Comment: We received a comment asking that we address the issue of 
deeming a sponsor's income to non-citizen applicants for Federal means 
tested public benefits; specifically, the commenter asked whether that 
policy is applicable to calculation of annual household income for 
purposes of determining eligibility for advance payments of the premium 
tax credit and cost-sharing reductions. The same commenter suggested 
that for applicants who are determined ineligible for Medicaid as a 
result of accounting for sponsor income and whose annual household 
income is below 100 percent FPL, we should apply the special rule 
described in Sec.  155.305(f)(2) that would allow such applicants to be 
determined eligible for advance payments of the premium tax credits.
    Response: We intend to work closely with Treasury to address the 
applicability of sponsor deeming in the calculation of annual household 
income for purposes of determining eligibility for advance payments of 
the premium tax credit and cost-sharing reductions through future 
rulemaking or guidance. Such rulemaking or guidance will also address 
the relationship between sponsor deeming and the special rule described 
in Sec.  155.305(f)(2).
    Comment: Several commenters expressed concern about the 
affordability of coverage for low-income individuals, notably lawfully 
present immigrants who are eligible for advance payments of the premium 
tax credit but ineligible for Medicaid. Some commenters requested 
clarification that lawfully present non-citizens with incomes below 100 
percent FPL could be determined eligible for cost-sharing reductions in 
the 100 to 150 percent FPL eligibility category.
    Response: In response to comments received regarding lawfully 
present non-citizens with incomes below 100 percent FPL and eligibility 
for cost-sharing reductions, we are clarifying in Sec.  
155.305(g)(2)(i) of the final rule that an individual who is eligible 
for advance payments of the premium tax credit under Sec.  
155.305(f)(2) (non-citizens who are lawfully present and are ineligible 
for Medicaid) fall within the 100 to 150 percent FPL eligibility 
category for purposes of determining eligibility for cost-sharing 
reductions. We also correct Sec.  155.305(f)(1)(i) to provide that an 
applicant who expects to have a household income of greater than or 
equal to 100 percent FPL may be determined eligible for advance 
payments of the premium tax credit; this is a technical correction to 
comply with section 36B(c)(1)(A) of the Code.
    Comment: Several commenters suggested we clarify the relationship 
between advance payments of the premium tax credit and other forms of 
coverage, such as CHIP or Medicare, for determining eligibility as well 
as for the calculation of the premium tax credit.
    Response: We note that comments of this nature are outside the 
scope of this rule and are within the jurisdiction of the Secretary of 
the Treasury.

Summary of Regulatory Changes

    We are finalizing the provisions proposed in Sec.  155.305 of the 
proposed rule, with several modifications: we added language throughout 
Sec.  155.305(a)(3) of the final rule to clarify that individuals must 
be ``living'' in the service area of the Exchange in addition to the 
prior standards. In addition, in Sec.  155.305(a)(3)(i)(B), we include 
in the final rule that an applicant age 21 and over also meets the 
residency standard if he or she has entered the service area of the 
Exchange with a job commitment or seeking employment (whether or not 
currently employed). We have also restructured paragraph (a)(3)(i) and 
(ii) for clarity, and have added specific references to the Medicaid 
final rule. In paragraph (c)(1), we also added a standard that the 
Exchange must determine an applicant eligible for Medicaid if he or she 
meets the non-financial eligibility criteria for Medicaid for 
populations whose eligibility is based on MAGI (that is, citizenship or 
immigration status, residency, etc.), as certified by the Medicaid 
agency at 435.1200(b)(2), and added a cross-reference to 42 CFR 
435.603(d) for household income, in addition to the other criteria 
described under this paragraph. In paragraph (d), we added a cross-
reference to 42 CFR 435.603(d) for household income.
    In paragraph (f)(1)(i), we have changed ``at least 100 percent'' to 
``greater than or equal to 100 percent'' to align with statutory 
language. In paragraph (f)(1)(ii)(B), we codified the exception for 
coverage in the individual market. In paragraph (f)(4), we have added, 
``or either spouse if the tax filer is a married couple,'' and 
clarified that applicable Treasury provisions requires a tax filer on 
whose behalf advance payments are made to both file an income tax 
return, and as a part of that return, to reconcile the advance payments 
made.
    We have combined and restructured paragraphs (g) and (h) of the 
proposed rule into paragraphs (g)(1) and (g)(2) of the final rule. In 
paragraph (g)(2)(i) we have added a provision to implement section 
1402(b) of the Affordable Care Act, which provides a special rule for 
non-citizens who are lawfully present; this revision clarifies that 
individuals who are expected to have a household income of less than 
100 percent of the FPL for the benefit year for which coverage is 
requested and who are also eligible for advance payments of the premium 
tax credit under paragraph (f)(2) are eligible for cost-sharing 
reductions.

[[Page 18354]]

    In paragraph (g)(3), we have added language implementing section 
1402 of the Affordable Care Act, which provides cost-sharing reductions 
at a policy level, in situations where multiple tax households are 
covered by a single policy. In this paragraph, we specify a hierarchy 
of available cost-sharing provisions, and explain that when multiple 
tax households are covered on a single policy, the Exchange will apply 
only the first category of cost-sharing reductions listed in this 
paragraph. The categories are listed such that the lowest level of 
cost-sharing reductions will be provided to the combined households. We 
note that the tax households are always free to purchase separate 
policies, and in doing so, receive the benefit of all cost-sharing 
provisions for which they are eligible.
    Lastly, in paragraph (g)(4) we added language to clarify that 
household income for the purposes of eligibility for cost-sharing 
reductions is defined in accordance with section 36B(d)(2) of the Code, 
which is the same definition used for advance payments of the premium 
tax credit. We also clarified that the time period for measuring income 
for cost-sharing reductions is the same as for advance payments of the 
premium tax credit.
    We also made technical changes to the final rule. In Sec.  
155.305(c), we changed the reference to 42 CFR 435.1200(c)(1) to 42 CFR 
435.1200(b)(2), and throughout the section, as in the rest of the 
subpart, we replaced language regarding application filers providing 
attestations with references to applicants providing attestations, 
since the language in Sec.  155.300(c) provides overarching 
clarification that attestations for applicants can be provided by 
application filers.
d. Eligibility Determination Process (Sec.  155.310)
    Based on comments and feedback to the proposed rule, we are 
revising the rule to include paragraph (e) of this section as an 
interim final provision, and we are seeking comments on it.
    In Sec.  155.310, we proposed the process by which the Exchange 
will determine an individual's eligibility for enrollment in a QHP 
through the Exchange and for insurance affordability programs. 
Specifically, we proposed that the Exchange must accept applications 
from individuals in the form and manner described in Sec.  155.405, and 
included standards around the collection of information from non-
applicants. We also proposed that the Exchange permit an individual to 
decline an eligibility determination for insurance affordability 
programs. In addition, we proposed that the Exchange accept an 
application and make an eligibility determination for an applicant 
seeking an eligibility determination at any point in time during a 
benefit year. After the Exchange has collected and verified all 
necessary data, we proposed that the Exchange conduct an eligibility 
determination in accordance with the standards described in Sec.  
155.305 of this part.
    We also proposed that the Exchange allow an applicant who is 
determined eligible for advance payments of the premium tax credit to 
accept less than the expected annual amount of advance payments 
authorized. We clarified that the Exchange may provide advance payments 
on behalf of a tax filer only if the tax filer first attests that he or 
she will meet the tax-related provisions discussed in the definition of 
tax filer, including that he or she will claim a personal exemption 
deduction on his or her tax return for the applicants identified as 
members of his or her tax family.
    We also proposed that if the Exchange determines an applicant is 
eligible for Medicaid or CHIP, the Exchange will notify the State 
Medicaid or CHIP agency and transmit relevant information, including 
information from the application and the results of verifications, to 
the relevant agency promptly and without undue delay. We also proposed 
that effective dates for enrollment in a QHP through the Exchange, 
advance payments of the premium tax credit and cost-sharing reductions 
be implemented in accordance with the dates specified in Sec.  
155.410(c) and (f) and Sec.  155.420(b).
    We proposed that the Exchange provide an applicant with a timely, 
written notice of his or her eligibility determination, including the 
applicant's eligibility for insurance affordability programs, as 
appropriate. We also proposed that when the Exchange determines an 
applicant is eligible to receive advance payments of the premium tax 
credit or cost-sharing reductions based, in part, on a finding that the 
applicant's employer does not provide minimum essential coverage, 
provides coverage that is not affordable, or provides coverage that 
does not meet the minimum value standard, the Exchange must notify the 
employer and identify the employee.
    Finally, we proposed rules regarding the duration of an eligibility 
determination for an applicant who is determined eligible for 
enrollment in a QHP but does not select a QHP within his or her 
enrollment period in accordance with subpart E of this part. We 
solicited comments on whether a new determination should be conducted 
after a specific period of time has passed and whether the application 
process should begin anew in some or all situations.
    Comment: We received a few comments recommending the adoption of a 
timeliness standard within which the Exchange would need to complete an 
eligibility determination. Most of these commenters recommended 
requiring that the Exchange adhere to the Medicaid timeliness standard 
as outlined in 42 CFR 435.911(a)(2), which provides that the Medicaid 
agency must establish a standard for determining an individual's 
eligibility and informing the individual of his or her eligibility 
determination that does not exceed 45 days.
    Response: We recognize that there is a need for a timeliness 
standard for Exchange eligibility determinations. We add paragraph (e) 
which states that the Exchange must conduct an eligibility 
determination promptly and without undue delay. We also include that 
the Exchange must assess the timeliness of eligibility determinations 
based on the period from the date of application or transfer from an 
agency administering an insurance affordability program to the date the 
Exchange notifies the applicant of its decision or the date the 
Exchange transfers the application to another agency administering an 
insurance affordability program, when applicable. We intend to further 
interpret this timeliness standard in future guidance in coordination 
with standards established for the Medicaid and CHIP programs.
    We note that we think it is reasonable that the majority of 
eligibility determinations will be completed in a very short period of 
time and encourage the Exchange to continuously monitor and identify 
ways to shorten the time it takes to process an application and notify 
an applicant of his or her eligibility determination. We plan to work 
closely with States to establish a more detailed understanding of the 
timing needed for an eligibility determination as well as how the 
length of time needed can be reduced, and will provide future guidance 
on timeliness standards.
    Comment: We received a substantial number of comments in support of 
our proposed policy, as described in Sec.  155.310(a)(2), that the 
Exchange may not require an individual who is not seeking coverage for 
himself or herself to provide a SSN except as provided in proposed 
Sec.  155.305(f)(6) (when he or she is the tax filer and the 
application filer attests that the tax filer has a SSN and has filed a 
tax return for the year

[[Page 18355]]

for which the tax data would be utilized for verification of household 
and family size). While the majority of commenters supported the policy 
on the collection of SSNs, as proposed in Sec.  155.310(a)(2) and Sec.  
155.305(f)(6), a few commenters suggested adding language to reinforce 
the applicability of guidance on the collection of SSNs issued on 
September 21, 2000 by CMS (then HCFA), the Administration of Children 
and Families, and the Food and Nutrition Service (the `Tri-Agency 
guidance'); others asked that we cross-reference the companion 
provision in the Medicaid proposed regulation (42 CFR 435.907(e)(1)).
    Response: First, in new Sec.  155.310(a)(3)(i), we have clarified 
that the Exchange must collect a SSN from an applicant who has a SSN. 
We have also moved the proposed provision in Sec.  155.310(a)(2) to 
Sec.  155.310(a)(3)(ii). We clarify that this provision only provides 
that the Exchange must collect SSNs from a non-applicant if he or she 
is the tax filer, has a SSN, and has filed a tax return for the year 
for which tax data would be utilized. We believe this provision is 
necessary given the standards for determining eligibility for advance 
payments of the premium tax credit and cost-sharing reductions, as 
described in sections 1402(f)(3), 1411(b)(3) and 1412(b) of the 
Affordable Care Act, which provide that the most recent tax data 
available be the basis for determining eligibility for these benefits 
to the extent such tax data is available.
    In addition, we note that section 36B(d)(2)(A)(ii)(II) of the Code 
specifies that household income for purposes of premium tax credits 
includes the MAGI of any individuals who have a filing requirement. As 
previously noted, a SSN must be used to obtain tax data from the IRS, 
and the IRS will not provide the tax data of a dependent who had a 
filing requirement without the dependent's SSN. As noted above, while 
the Exchange will require an individual who is seeking coverage for 
himself or herself who has a SSN to provide it, the Exchange will only 
require an individual who is not seeking coverage for himself or 
herself to provide a SSN if he or she is a tax filer who meets the 
standard described in paragraph (f)(6). That is, in the limited number 
of cases in which a dependent is not seeking coverage for himself or 
herself, the Exchange will not require such a dependent to provide his 
or her SSN, although the dependent may provide it on a voluntary basis. 
However, we believe that Sec.  155.305(f)(6), as proposed, is 
permissible under section 1412, given that a) whether a dependent has a 
filing requirement may change frequently, resulting in a change in 
circumstances that allows the Exchange to use an alternate verification 
process; and b) we believe that it will be challenging for an applicant 
to determine whether a dependent was or will be required to file 
(versus a voluntary filing). Further, we do not believe that it is 
appropriate to add a provision to require the Exchange to collect the 
SSN for every dependent who is not seeking coverage for himself or 
herself, regardless of whether he or she had a filing requirement, 
because this would go beyond what is needed to obtain tax data for 
those who had a requirement to file. As such, we maintain this 
provision in the final rule. To the extent that a dependent who is not 
seeking coverage for himself or herself has income that needs to be 
considered for purposes of determining eligibility for advance payments 
of the premium tax credit and cost-sharing reductions, the Exchange 
will verify it through an alternate verification process.
    We believe that these provisions also comply with the statutory 
standards contained in section 1411(g)(1) of the Affordable Care Act, 
which specifies that the Exchange must not require an applicant to 
provide information beyond what is necessary to support the eligibility 
and enrollment process. Given the statutory standards, we believe these 
are the appropriate application of the Tri-Agency guidance. We intend 
to continue to review these issues in the context of all insurance 
affordability programs and to develop a single, streamlined application 
that accommodates these policy and eligibility differences.
    In addition, we have added Sec.  155.315(b), which clarifies that 
in accordance with section 1411 of the Affordable Care Act, the 
Exchange will transmit SSNs to HHS for validation with SSA. This is 
separate from the provision regarding citizenship verification, and 
only serves to ensure that SSNs provided to the Exchange can be used 
for subsequent transactions, including for verification of family size 
and household income with IRS. We clarify that in accordance with 
section 1411(e)(3) of the Affordable Care Act, which governs 
inconsistencies regarding SSNs, to the extent that the Exchange is 
unable to validate a SSN, the Exchange will follow the inconsistency 
procedures specified in Sec.  155.315(f).
    Comment: We received a number of comments in support of our 
proposed policy to allow applicants to opt out of an eligibility 
determination for insurance affordability programs but to not allow 
applicants to choose among a subset of insurance affordability programs 
in proposed Sec.  155.310(b). Only one commenter did not support the 
provision to allow individuals to opt out of screening for insurance 
affordability programs, citing that it is more important to provide a 
uniform eligibility determination for all applicants to increase the 
likelihood that individuals have access to affordable coverage options. 
One commenter also suggested that the final rule provide certain 
exceptions to the provision barring individuals from selecting among 
insurance affordability programs.
    Response: We believe it is important to preserve the option for an 
applicant to bypass the examination of his or her household income and 
other information that may result in a lengthier eligibility process, 
and allow him or her to enroll directly in a QHP without financial 
assistance if he or she so chooses. Therefore, in the final rule, we 
are maintaining the provision in Sec.  155.310(b) with some 
clarification; the Exchange must permit an applicant to request only an 
eligibility determination for enrollment in a QHP through the Exchange, 
but that the Exchange may not permit an applicant to request an 
eligibility determination for less than all insurance affordability 
programs. We expect that an Exchange could implement this provision by 
allowing an applicant to opt-out of an eligibility determination for 
all insurance affordability programs.
    We also maintain that an applicant may not choose between insurance 
affordability programs since section 36B(c)(2)(B) of the Code specifies 
that a tax filer is ineligible for advance payments of the premium tax 
credit for any applicant who is eligible for other minimum essential 
coverage.
    Comment: A number of commenters, particularly consumer groups, 
noted support for the provision in proposed Sec.  155.310(d)(2), which 
would allow an enrollee to accept less than the full amount of advance 
payments of the premium tax credit for which he or she is determined 
eligible; however, the majority of these commenters recommended that 
HHS complement this provision with a standard that the Exchange must 
provide detailed consumer education and tools regarding the premium tax 
credit and reconciliation. We also received a number of comments which 
raised concerns that individuals may not fully understand the 
responsibilities associated with receiving advance payments of the 
premium tax credit; such commenters recommended that HHS provide more 
detail concerning

[[Page 18356]]

what information will be provided to consumers about reconciliation.
    Response: We amended the final rule in Sec.  155.310(d)(2)(ii) to 
state that the Exchange may authorize advance payments of the premium 
tax credit on behalf of a tax filer only if the Exchange obtains 
certain attestations regarding advance payments of the premium tax 
credit from a tax filer. We intend to provide further guidance 
regarding the additional attestations that may be asked of individuals, 
which may include an attestation from a tax filer acknowledging that he 
or she understands the potential impact of reconciliation.
    Comment: We received a number of comments regarding the standards 
for Exchanges to notify the State Medicaid or CHIP agency upon 
determining an applicant eligible for Medicaid or CHIP and transmit 
relevant information promptly and without undue delay described in 
proposed Sec.  155.310(d)(3). Commenters recommended that HHS provide a 
timeliness standard that is more specific than ``promptly and without 
undue delay,'' and suggested adding language to provide the Exchange 
must transmit the relevant information ``within no more than 24 
hours.''
    A few commenters also recommended aligning with Medicaid language 
to clarify that ``relevant information'' transmitted to Medicaid or 
CHIP agencies include ``the electronic account containing the finding 
of Medicaid or CHIP eligibility, all information provided on the 
application, and any information obtained or verified by the Exchange 
in making such a finding.''
    Response: We considered the recommendation to adopt a specific time 
standard for the transmittal of information between the Exchange and 
State Medicaid or CHIP agencies; however, we believe that the 
timeliness standard in the regulation text at paragraph (e) provides 
the necessary flexibility to accommodate technological advances. We 
anticipate that we will interpret and clarify this standard in 
guidance. Furthermore, this standard is aligned with the Medicaid 
standard described in 42 CFR 435.911(c)(1); CMS also plans to issue 
guidance to clarify this standard.
    We also considered comments asking HHS to specify the meaning of 
``relevant information.'' We recognize that clarification is necessary, 
and in the final rule, replace the phrase ``relevant information'' in 
Sec.  155.310(d)(3), with ``all information necessary to effectuate 
coverage in Medicaid or CHIP.'' Although this is not the identical 
language used in Medicaid regulations, we believe it is the appropriate 
standard to adequately address the concern raised by the commenter.
    Comment: We received a variety of comments related to the 
notification of eligibility determination, described in proposed Sec.  
155.310(g). Several commenters asked that we amend the language in this 
provision to provide that such a notice must be ``written,'' as we 
specified in the proposed rule governing general notice standards in 
Sec.  155.230(a). One commenter suggested adding language to allow 
applicants or enrollees to choose to have notices sent to other 
parties, such as application assisters or authorized representatives; 
another recommended adding a notice to individuals when an application 
is incomplete.
    Response: Because paragraph Sec.  155.230(a) of the proposed rule 
specifies that notices issued by the Exchange must be ``written,'' this 
general notice standard would apply to the notification of eligibility 
determination, which we clarify in Sec.  155.310(g) in this final rule. 
We will further address notices and the roles of application assisters 
and authorized representatives in future rulemaking and guidance.
    Comment: We received a large number of comments on proposed Sec.  
155.310(g) regarding the content and scope of employer notices of an 
employee's eligibility for advance payments of the premium tax credit 
and cost-sharing reductions. These commenters suggested that HHS limit 
employer notices to a subset of employers to provide greater privacy 
protections for consumers. Most commenters stated that the employer 
should be notified of an employee's receipt of advanced payment of the 
premium tax credit or cost-sharing reductions only if this 
determination might trigger an employer responsibility payment. Some 
commenters asserted that the appropriate trigger for an employer to 
receive notification is if the employer has 50 or more full time 
equivalent employees and the employer has full-time employees that 
receive advanced payment of the premium tax credit or cost-sharing 
reductions through the Exchange. One commenter said that only employers 
that offer unaffordable coverage should receive a notification and 
employers that offer no coverage should not receive any employee 
information.
    Response: While we recognize that the employer responsibility 
provisions of section 4980H of the Code apply only to employers with 50 
or more full-time equivalent employees, section 1411(e)(4)(B)(iii) of 
the Affordable Care Act imposes the obligation to provide the notice 
regardless of the size of the employer. Therefore, we are not limiting 
the scope of the notice standard in this final rule to a subset of 
employers. We anticipate that HHS may provide additional guidance 
regarding how the content of the notice can be structured so as to 
minimize potential employer confusion associated with whether a 
determination will have implications under section 4980H of the Code.
    Further, we are aware that employer contact information may not 
always be available, because a person fails to provide it, or provides 
incorrect information, or that person changed employers, or a host of 
other reasons. We will work with Exchanges and employers on this to 
develop a solution for situations in which the Exchange does not have a 
seamless way to reach the correct employer for the purposes of 
delivering the notice.
    Comment: Other commenters raised additional privacy concerns 
regarding the content of notices sent to employers under proposed Sec.  
155.310(g). Several commenters suggested that the Exchange provide the 
employer with the minimum amount information necessary to evaluate 
liability for the employer responsibility payment. One commenter 
suggested that the Exchange should only transmit information necessary 
under law--the employee name and taxpayer identification number. This 
commenter stressed that the regulation should specify that the taxpayer 
identification number (TIN) should be used, and not the SSN, in 
accordance with section 1311(d)(4)(I)) of the Affordable Care Act. One 
commenter suggested that even the employee name should not be 
disclosed. Finally, a few commenters noted that HHS should be sensitive 
to the fact that some employees do not want their employers to know 
their household income.
    Response: For the purposes of the employer notice under section 
1411(e)(4)(B)(iii) of the Affordable Care Act, we believe that only the 
minimum necessary personally identifiable information should be 
released to an employer. The Affordable Care Act provides that the 
Exchange must notify an employer that his or her employee has been 
determined eligible for advance payments of the premium tax credit and 
that the employer may appeal such eligibility determination. The 
proposed rule provided only that the notice identify the employee. 
However, based on sections 1411(e)(4)(B)(iii), 1411(e)(4)(C), and 
1411(f)(2)(B) of the Affordable Care Act, our final regulation provides 
that if an enrollee is eligible for

[[Page 18357]]

a premium tax credit or cost-sharing reductions because that enrollee's 
employer does not provide minimum essential coverage through an 
eligible employer-sponsored plan, or that the employer provides 
coverage but it is not affordable or does not meet minimum value, the 
Exchange must notify the employer, identifying the employee, relating 
the opportunity to appeal, indicating that the employee has been 
determined eligible for advance payments of the premium tax credit, and 
indicating that the employer may be liable for a shared responsibility 
payment under section 4980H of the Code if the employer has 50 or more 
full-time workers. We note that we do not expect the Exchange to relay 
to the employer the exact reason for which the applicant was determined 
eligible, or to provide any tax return information to the employer. 
Rather, the notice should indicate the list (above) of potential 
reasons for the determination. We have amended the final rule, 
redesignating proposed section (g) as section (h) and adding sections 
(h)(2) and (h)(3) to Sec.  155.310 to clarify these standards.
    The notice will not disclose an enrollee's household income or any 
other taxpayer information, except the enrollee's name or other 
personal identifier. We anticipate that additional guidance regarding 
the content of the notification will be released in the future.
    Comment: One commenter expressed concern about potential HIPAA 
violations that may occur if an applicant provides the wrong employer 
contact information, and an incorrect employer receives the 
notification, with respect to the notices sent in accordance with 
proposed Sec.  155.310(g).
    Response: To the extent the Exchange is not a HIPAA covered entity 
or business associate, the Exchange would be subject only to the 
privacy and security standards of 155.260. If a State has determined 
that its Exchange is a HIPAA covered entity or business associate, to 
the extent the Exchange was merely acting on incorrect information 
provided to the Exchange by an applicant, there would be no HIPAA 
violation. In addition, we do not expect that the notice will result in 
a violation of applicable privacy and security standards in this 
section. We acknowledge that the notices outlined under this section 
will contain personally identifiable information, such as the name of 
enrollees. However, we think any inadvertent disclosure would be 
mitigated by the fact that only minimal information about the 
individual will be included in the employer notice; thus, we do not 
believe that this standard poses a substantial threat to individual 
privacy. In addition, we plan to disseminate guidance to Exchanges on 
practices designed to minimize the instances of individuals or entities 
other than the enrollee's actual employer receiving the notice.
    Comment: A number of commenters asked that Exchanges inform 
employers that retaliation based on the notices sent in accordance with 
Sec.  155.310(g) is prohibited and that evidence of retaliation could 
subject the employer to a penalty.
    Response: We note that section 1558 of the Affordable Care Act, 
which amends the Fair Labor Standards Act and is within the 
jurisdiction of the Department of Labor, includes a prohibition on an 
employer discharging or discriminating against an employee because the 
employee has received a premium tax credit or cost-sharing reductions. 
Because of this statutory provision, we do not believe additional 
standards are necessary in this final rule.
    Comment: One commenter suggested that IRS, and not HHS, effectuate 
the notice described in Sec.  155.310(h) because (1) IRS has 
information about employers subject to free rider assessments, and (2) 
IRS maintains a database of employer contacts for the transmission of 
sensitive personal information. Another commenter suggested that 
reporting to employers should be consolidated and centralized into a 
Federal process, with information provided on a monthly or quarterly 
basis.
    Response: Section 1411(e)(4)(B)(iii) provides that this notice must 
be provided to employers by Exchanges in connection with certain 
eligibility determinations. It is not within the discretion of the 
Secretary to shift responsibility for provision of this notice to the 
IRS. We do support reducing reporting burden by consolidating and 
streamlining reporting, if feasible. In addition, we plan to issue 
guidance to help Exchanges develop an operational strategy for 
reporting.

Summary of Regulatory Changes

    We are finalizing the provisions proposed in Sec.  155.310 of the 
proposed rule, with a few modifications. In paragraph (b), we clarified 
that the choice of an applicant is whether to allow the Exchange to 
determine his or her eligibility for insurance affordability programs. 
In paragraph (d)(2)(ii), we added language specifying that attestations 
from the tax filer will be attestations regarding advance payments of 
the premium tax credits. In paragraph (d)(3), we removed the reference 
to ``relevant'' information and further clarified that the Exchange 
must transmit all information from the records of the Exchange promptly 
and without undue delay to such agency that is necessary for the State 
Medicaid or CHIP agency to provide the applicant with coverage. In 
paragraph (e), we adopted a provision which provides that the Exchange 
must conduct eligibility determinations promptly and without undue 
delay.
    In paragraph (f), we clarified in the header that the effective 
dates outlined are effective dates for eligibility, and not for 
coverage. Consistent with changes we discuss in Sec.  155.420, we also 
added language in paragraphs (f)(1) and (f)(2) to differentiate between 
effective dates for initial eligibility determinations, which will be 
implemented in accordance with Sec.  155.410(c) and (f) and Sec.  
155.420(b), as applicable, and effective dates for redeterminations, 
which will be implemented in accordance with the dates specified in 
Sec.  155.330(f) and 155.335(i), as applicable. In paragraph (g), we 
added language to specify that the notice of eligibility determination 
must be written, consistent with other notice standards. We 
redesignated proposed paragraph (g) as new paragraph (h). In new 
paragraph (h), we added three additional standards, in accordance with 
section 1411(e)(4) of the Affordable Care Act, for the content of the 
notice to employers. In addition to identifying the employee, the 
notice must indicate that the employee has been determined eligible for 
advance payments of the premium tax credit; that, if the employer has 
50 or more full-time employees, the employer may be liable for the 
payment assessed under section 4980H of the Code; and that the employer 
has the right to appeal the determination.
    Also included in this final rule are several technical corrections 
from the proposed text. In paragraph (a)(1), we removed the reference 
to 45 CFR and changed the phrase to ``specified in Sec.  155.405 of 
this chapter.'' In paragraph (b), we added the words ``insurance 
affordability'' before ``programs'' as a clarification.
e. Verification Process Related to Eligibility for Enrollment in a QHP 
(Sec.  155.315)
    Based on comments and feedback to the proposed rule, we are 
revising the rule to include paragraph (g) of this section as an 
interim final provision, and we are seeking comments on it.
    In Sec.  155.315, we proposed the general standard that the 
Exchange must verify or obtain information to determine that an 
applicant is eligible for enrollment in

[[Page 18358]]

a QHP, unless a request for modification is granted in accordance with 
proposed paragraph (f) of this section.
    To verify whether an applicant for coverage through the Exchange is 
a citizen, national, or otherwise lawfully present individual in 
accordance with section 1312(f)(3) of the Affordable Care Act, we 
proposed to codify the role of the Secretary (through HHS) as an 
intermediary between the Exchange and other Federal officials, 
specifically the Social Security Administration and the Department of 
Homeland Security. In the case of an inconsistency related to 
citizenship, status as a national, or lawful presence, we proposed that 
the time period for the resolution is 90 days from the date on which 
the notice of inconsistency is received. We also clarified that the 
date on which the notice is received means 5 days after the date on the 
notice, unless the applicant shows that he or she did not receive the 
notice within the 5 day period.
    We also proposed that the Exchange verify an applicant's residency 
by accepting an applicant's attestation without further verification or 
following the procedures of the State Medicaid or CHIP agency, if such 
agency examines electronic data sources for all applicants. We also 
proposed that the Exchange may examine data sources regarding residency 
to the extent that information provided by an applicant regarding 
residency is not reasonably compatible with other information provided 
by the applicant or in the records of the Exchange. In addition, we 
proposed that a document that provides evidence of immigration status 
may not be used alone to determine State residency. We also proposed 
that the Exchange verify an applicant's attestation that he or she is 
not incarcerated. We solicited comment as to what electronic data 
sources are available and should be authorized by HHS for Exchange 
purposes, including whether access to such data sources should be 
provided as a Federally-managed service like citizenship and 
immigration status information from SSA and DHS.
    Further, we proposed that when an individual attests to information 
and such attestation is inconsistent with other data in the records of 
the Exchange, the Exchange must make a reasonable effort to identify 
and resolve the issues. If the Exchange is unable to resolve the 
inconsistencies, we proposed that the Exchange notify the applicant of 
the inconsistency. After providing this notice, we proposed that the 
Exchange provide 90 days from the date on which the notice is sent for 
the applicant to resolve the issues, either with the Exchange or with 
the agency or office that maintains the data source that is 
inconsistent with the attestation. We also proposed that the period 
during which an applicant may resolve the inconsistency may be extended 
by the Exchange if the applicant can provide evidence that a good faith 
effort has been made to obtain additional documentation.
    We further proposed that the Exchange allow an individual who is 
otherwise eligible for enrollment in a QHP, advance payments of the 
premium tax credit or cost-sharing reductions to receive such coverage 
and financial assistance during the resolution period, provided that 
the tax filer attests to the Exchange that he or she understands that 
any advance payments of the premium tax credit received during the 
resolution period are subject to reconciliation. We also proposed that 
if after the conclusion of the resolution period, the Exchange is 
unable to verify the applicant's attestation, the Exchange must 
determine the applicant's eligibility based on the information 
available from the data sources specified in this subpart and notify 
the applicant of such determination. We clarified that the Exchange 
must make effective this eligibility determination no earlier than 10 
days after and no later than 30 days after the date on which such 
notice is sent.
    Finally, we also proposed that HHS may approve an Exchange 
Blueprint to change the methods used to collect and verify information, 
within certain standards. We also proposed that the Exchange must not 
require an applicant to provide information beyond the minimum 
necessary to support eligibility and enrollment processes.
    Comment: We received a few comments asking that we establish 
standards for the collection, use and safeguarding of data used to 
verify applicant information, as described throughout proposed Sec.  
155.315. We received a few comments suggesting that we incorporate 
specific safeguards and protections for information used in the 
verification of citizenship and immigration status, proposed in Sec.  
155.315(b). Commenters suggested including language stating that 
information related to the verification of citizenship and immigration 
status be used only for purpose of verifying eligibility for enrollment 
in a QHP and that pending such verification, coverage should not be 
delayed, denied, reduced or terminated.
    Response: We address the privacy and security of information and 
the specific standards and protocols for the transmission of data in 
Sec.  155.260 and Sec.  155.270 of this final rule and note that these 
provisions apply to the transactions described throughout subpart D, 
including Sec.  155.315. Language in Sec.  155.260 provides that 
information must provided to or obtained by the Exchange for the 
purposes of determining eligibility for enrollment in a QHP, advance 
payments of the premium tax credit, and cost-sharing reductions, under 
sections 1411(b) through (e) of the Affordable Care Act, or exemptions 
from the individual responsibility provisions in section 5000A of the 
Code, may only be used to carry out those minimum functions of the 
Exchange described in Sec.  155.200; we believe this language addresses 
these concerns and establishes appropriate safeguards.
    Regarding comments asking that coverage not be delayed, denied, 
reduced or terminated, pending verification of citizenship and 
immigration status, we addressed these concerns in Sec.  155.315(f), 
which allows an applicant to enroll in coverage with financial 
assistance pending such verification. We also amend Sec.  155.315(c) in 
order to be consistent throughout this subpart and clarify that an 
applicant and not an application filer receives the notice of 
inconsistency.
    Comment: A number of comments addressed the process for resolving 
inconsistencies between applicant information and data obtained by the 
Exchange, as proposed in Sec.  155.315(e). Commenters requested that we 
provide details on the types of documentation that the Exchange may use 
to verify applicant information; specifically, commenters asked for 
details on documents that the Exchange will be permitted to use in 
verifying citizenship and immigration status. Other commenters asked 
that we clarify the ways in which individuals will be able to submit 
documentation to the Exchange when attempting to resolve such 
inconsistencies. Furthermore, in response to the Medicaid eligibility 
proposed rule, HHS received a number of comments requesting adoption of 
an exception for agencies administering insurance affordability 
programs to accept attestations alone from certain applicants, who are 
part of at-risk populations and who may not have access to necessary 
documentation to resolve inconsistencies.
    Response: While we acknowledge commenters' requests for details 
regarding documentation used during the inconsistency process, we 
believe that this level of specificity is most appropriate for 
guidance. Therefore, we maintain that the applicant may ``present 
satisfactory evidence'' in

[[Page 18359]]

Sec.  155.315(f)(2)(ii) of the final rule. We intend to issue future 
guidance with details on documents which may be used to support 
verification, in coordination with Medicaid and CHIP and in accordance 
with the statutory standard for the Exchange to follow the procedures 
specified in section 1902(ee) of the Act.
    We accept commenters' suggestions that we specify the ways in which 
an applicant will be able to submit documentation to the Exchange; 
accordingly, we adopt language in the final rule at Sec.  
155.315(f)(2)(ii) that the Exchange must provide the applicant with the 
opportunity to present satisfactory documentary evidence via the 
channels available for the submission of an application, as described 
in Sec.  155.405, except for by telephone.
    We also proposed a provision in Sec.  155.315(g) to provide a case-
by-case exception for applicants for whom documentation does not exist 
or is not reasonably available. We proposed this language to account 
for situations which documentation cannot be obtained, and to achieve 
consistency with the Medicaid program; examples of individuals for whom 
this provision may apply include homeless individuals, victims of 
domestic violence or natural disasters, and sporadic earners. We 
believe that adding this provision is permissible within the 
Secretary's statutory authority to change verification methods as 
provided under sections 1411(c)(4) and 1321(a)(1) of the Affordable 
Care Act. We note also that if at the conclusion of the 90 day period, 
the Exchange is unable to verify the applicant's attestation and the 
data from the data sources specified in Sec.  155.315 are unavailable, 
the Exchange must notify that applicant that the Exchange finds the 
applicant ineligible for the eligibility standard in question. In Sec.  
155.320(c)(3)(vi)(F), we also describe the procedures for the Exchange 
to discontinue advance payments and cost-sharing reductions in the 
event that the applicant's attestation is not verified by the 
conclusion of the 90 day period.
    We also make several changes throughout verification provisions of 
the final rule at Sec.  155.315 and Sec.  155.320 where information is 
found by the Exchange to be not reasonably compatible with an 
applicant's attestation and where the inconsistency process is 
triggered; we change the language in a number of places to state that 
the Exchange ``must,'' rather than ``may,'' examine electronic data 
sources or supporting documentation, when applicable. The proposed rule 
did not consistently require that the Exchange examine other data 
sources or documentary evidence for all verification processes.
    Comment: We received several comments regarding our use throughout 
Sec.  155.315 of the term ``reasonably compatible.'' Many commenters 
asked that we define the term and provided a number of suggested 
definitions; one common approach to clarifying the term was to provide 
the Exchange must only consider material differences between an 
attestation and available electronic data as not reasonably compatible.
    Response: We believe that the common approach suggested by 
commenters is a sensible one, and in Sec.  155.300(d) of this final 
rule, provide that the Exchange must consider information to be 
reasonably compatible with an applicant's attestation if the difference 
or discrepancy does not have an impact on the eligibility of the 
applicant, including the amount of advance payments of the premium tax 
credit or category of cost-sharing reductions. This provision would 
provide, for example, that if an individual attested to one address 
within an Exchange service area, but Exchange-obtained data 
demonstrated a different address within the same Exchange service area, 
he or she must be considered to meet the residency eligibility 
standard. We note that while we provide this clarification in the final 
rule, Exchanges may still exercise flexibility in defining what is 
considered reasonably compatible. We expect that definitions will vary 
depending on the types of information subject to verification, and that 
States will use this flexibility to enhance the eligibility process. We 
intend to provide future guidance on this issue. We also clarify that 
to the extent that income information provided by an application filer 
and income information obtained through electronic data sources both 
indicate that the applicant is eligible for Medicaid or CHIP, such 
information must be considered reasonably compatible; this provision 
aligns with the provision of the Medicaid eligibility final rule at 42 
CFR 435.952(c)(1). We also clarify that this rule does not mean that an 
applicant's attestation regarding annual household income must be 
identical to that of the tax return information in order to be 
considered reasonably compatible. The standard for household income is 
discussed in more detail in Sec.  155.320.
    Comment: We received a few comments which asked that we explicitly 
state that an applicant has the ability to access and amend the data 
used to determine his or her eligibility.
    Response: Section 155.330 of the proposed rule allowed an enrollee 
to report changes affecting his or her eligibility to the Exchange, 
which must then be verified by the Exchange. We maintain this provision 
in this final rule. We anticipate that the Exchange will make the 
information used in an eligibility determination available to the 
applicant and enrollee, including through a web-based self-service tool 
with appropriate safeguards. In addition, we direct the commenter to 
the final rule at Sec.  155.260(b)(3)(i), which provides the Exchange 
must incorporate a principle of individual access to personally 
identifiable information as part of the Exchange's privacy and security 
policies and procedures.
    Comment: We received comments asking that we specify the content of 
the eligibility determination notice provided to applicants, which is 
described in proposed Sec.  155.315(e)(2)(i). Commenters also suggested 
certain content standards for such a notice, including clear procedures 
for the inconsistency process.
    Response: As noted in the notice of proposed rulemaking, we intend 
to provide content and timing standards for notices in future 
rulemaking and guidance. We have made a minor edit to the final rule at 
Sec.  155.315(f)(2)(i) to clarify that this notice is sent to the 
applicant by the Exchange.
    Comment: We received a number of comments regarding the process to 
resolve inconsistencies, as described in proposed Sec.  155.315(b)(3) 
and (e). A few comments asked that the inconsistency periods described 
in proposed Sec.  155.315(b)(3) and (e) begin when the application is 
submitted, not when the notice of inconsistency is sent or received by 
the applicant. Other commenters asked that we align inconsistency 
periods for the Exchange with the inconsistency period described in 
section 1902(ee) of the Act.
    Response: Section 1411(e)(3) of the Affordable Care Act states that 
for inconsistencies related to citizenship and immigration status, the 
Exchange must follow procedures described in section 1902(ee) of the 
Act. Section 1902(ee) provides that the applicant must be given a 
period of 90 days from the date of the receipt of the notice to present 
satisfactory documentation. Because such a receipt date is difficult to 
pinpoint, we have adopted language specifying that the date on which 
the notice is received is 5 days from the date the notice is sent, 
unless the applicant demonstrates that he or she did not receive the 
notice within the 5 day period. This standard is also utilized by the 
SSA. Alternatively, for

[[Page 18360]]

inconsistencies not related to citizenship and immigration status, 
section 1411(e)(4)(A)(ii)(II) of the Affordable Care Act provides that 
the 90 day period must begin on the date on which the notice is sent to 
the applicant. Due to these statutory standards, we are unable to 
change the point at which the inconsistency period is triggered, and 
unable to further align the provision in proposed Sec.  155.315(e) with 
the process described in section 1902(ee) of the Act. Therefore, we 
maintain the provisions in Sec.  155.315(c)(3) and (f) in the final 
rule.
    We neglected to include the statutory language found in section 
1411(e)(4)(A)(i) of the Affordable Care Act which provides that the 
Exchange must address ``typographical or clerical errors'' in order to 
address causes of inconsistencies, prior to accepting documentation or 
other evidence from the applicant; we adopt this language in the final 
rule at Sec.  155.315(f)(1).
    Comment: We received a number of comments which expressed concern 
over the potential for increased liability for QHP issuers as 
applicants are provided coverage during the inconsistency period 
described in proposed Sec.  155.315(e). We also received comments 
suggesting that issuers should not be required to enroll, nor continue 
enrollment of, individuals for whom the Exchange is still verifying 
eligibility during the resolution period.
    Response: The standard to determine eligibility based on the 
information on the application (that is, an individual's attestation) 
during the inconsistency period is specified in section 1411(e)(3) and 
(e)(4) of the Affordable Care Act. We note that this final rule does 
not prohibit QHPs from requiring premium payment prior to providing 
coverage. We also expect that the Exchange and an applicant's selected 
QHP issuer will provide notice to an applicant to ensure that the 
enrollee is aware of liability for premium payment.
    Comment: One commenter suggested that the Exchange be given more 
flexibility to decrease the length of the inconsistency period.
    Response: The period of time during which an applicant is permitted 
to provide documentation in order to resolve an inconsistency is 
specified in sections 1411(e)(3) and 1411(e)(4)(A)(ii)(II) of the 
Affordable Care Act; therefore, we maintain provisions Sec.  
155.315(c)(3) and (f)(2)(ii) the final rule.
    Comment: A few commenters asked that we explicitly allow certain 
application assisters, Navigators, and application filers to help 
applicants navigate the inconsistency process, described in proposed 
Sec.  155.315(e).
    Response: As described in Sec.  155.210, part of the duties of a 
Navigator will be to educate the consumer, facilitate enrollment, and 
assist with any part of the application process. We also anticipate 
that agents and brokers will provide such assistance. In addition, we 
expect that application assisters who are not Navigators, agents, or 
brokers will provide support for consumers during the application 
process, and we anticipate providing additional guidance regarding this 
role, including on appropriate privacy and security protections.
    Comment: We received a number of comments on proposed Sec.  
155.315(e)(3), in which we proposed that the Exchange may extend the 
inconsistency period if the applicant demonstrates a good faith effort 
to obtain the documentation. Commenters asked that the Exchange must 
provide such an extension.
    Response: We adopted the provision regarding the extension of the 
inconsistency period in order to align with Medicaid guidance, which 
provides States the flexibility to allow a good faith extension. 
Therefore, we are maintaining the proposed text in the final rule.
    Comment: We received a comment asking that we include timeliness 
standards for processing inconsistencies.
    Response: We adopt a timeliness standard of ``promptly and without 
undue delay'' for eligibility determinations made by the Exchange in 
the final rule at Sec.  155.310(e), but intend to provide future 
guidance about best practices for an Exchange to make the best use of 
the 90 day inconsistency period.
    Comment: We received a number of comments on proposed Sec.  
155.315(g), in which we proposed that the Exchange may not require the 
applicant to provide information beyond the minimum necessary to 
support the eligibility and enrollment process. Commenters asked us to 
define ``minimum necessary''; others suggested that we include language 
describing how HHS will conduct oversight to ensure compliance with 
this provision.
    Response: We acknowledge the importance of oversight to ensure 
compliance with the provision described in Sec.  155.315(g) of the 
proposed rule, which is finalized in Sec.  155.315(i), and intend to 
provide additional detail regarding oversight in future rulemaking and 
guidance. HHS will also consider this in the context of evaluating 
alternate applications developed by States, as described in Sec.  
155.405(b), and will continue to work with States on the issue of 
information collection.
    Comment: We received a number of comments related to the proposed 
process for verification of citizenship and immigration status, 
described in proposed Sec.  155.315(b). A few commenters found the 
process unclear, and asked for more information regarding the 
verification process for other individuals listed on the application, 
such as spouses and tax dependents.
    We also received a number of comments related to the services that 
will be provided by a Federally-managed data services hub to support 
verification of citizenship and immigration status. Several comments 
recommended that we utilize the DHS Systematic Alien Verification for 
Entitlements (SAVE) system to verify immigration status. Comments on 
the proposed rule asked for information on the impact of services 
available through the Federally-managed data services hub on existing 
State agency connections with Federal data sources used for 
verification of citizenship and immigration status. Commenters 
recommended that Exchanges not use ``E-verify'' to verify immigration 
status and others asked that we provide details on the format of data 
provided to the State agency or Exchange. We also received comments 
asking whether it would be legally permissible for the Exchange to 
transmit information to DHS, via HHS, when an individual has attested 
to being a citizen. Another commenter asked how the Exchange will know 
whether an individual has documentation at the point of application 
that can be verified through DHS, as described in the provision 
proposed at Sec.  155.315(b)(2).
    Response: Section 1312(f)(3) of the Affordable Care Act, as 
codified in Sec.  155.305(a)(1) in this final rule, states that an 
individual may only enroll in a QHP through the Exchange if he or she 
is a citizen, national, or a non-citizen who is lawfully present, and 
is reasonably expected to be so for the entire period for which 
enrollment is sought. Because citizenship, status as a national, or 
lawful presence is an eligibility standard for any applicant seeking 
coverage through the Exchange for him or herself, the verification 
process described in Sec.  155.315(c) applies to each applicant, 
regardless of whether he or she is a tax filer or dependent.
    While we do not specify a level of operational detail in the final 
rule that includes the specific services or data

[[Page 18361]]

formats which will be used in supporting verification, we are working 
closely with our Federal partners to develop and provide details on the 
verification services provided by the Federally-managed data services 
hub; we expect to provide such details in guidance. However, we believe 
that the final rule supports the use of SAVE. We also note that we do 
not intend to use the E-verify service, as it is designed for employers 
to check the work authorization of employees, rather than to verify 
eligibility for benefits. Regarding existing State connections used in 
verification, we anticipate that Medicaid agencies, CHIP agencies, and 
Exchanges will leverage the Federally-managed data services hub for 
connections to SSA and DHS to support verification of citizenship and 
immigration status.
    With regard to the Exchange transmitting information to DHS via 
HHS, when an individual has attested to being a citizen, section 
1411(c)(2) of the Affordable Care Act specifies that in such cases when 
an individual who attests that he or she is a citizen but for whom 
citizenship cannot be verified through SSA, the Secretary of HHS shall 
submit to DHS the applicant's information and other identifying 
information for verification of immigration status. Based on this 
statutory standard, we maintain Sec.  155.315(b)(2) in the final rule 
as Sec.  155.315(c)(2).
    Lastly, we intend to work with DHS to provide Exchanges with the 
information needed to identify whether an applicant can likely be 
matched through DHS. DHS has existing verification relationships with 
many State Medicaid and CHIP agencies, as well as other Federal, State, 
and Local government entities, which means that many States will 
already be familiar with this information.
    Comment: We received several comments recommending the inclusion of 
language in proposed Sec.  155.315(b) describing the verification 
process as to whether an applicant is ``reasonably expected'' to be 
lawfully present for the entire period for which enrollment is sought. 
The ``reasonably expected'' standard is part of the standard for 
determining whether an applicant is a citizen, national or non-citizen 
who is lawfully present, which is described in Sec.  155.305(a)(1). 
Commenters' specific recommendations for such a verification process 
varied. One requested that as long as an applicant's residency is 
verified, that he or she be considered reasonably expected to be 
lawfully present for the entire period for which enrollment is sought. 
Others suggested that self-attestation alone be used in verification.
    Response: In the final rule, we address our interpretation of the 
term ``reasonably expected'' in Sec.  155.305. We intend to provide 
additional interpretation of this standard, including how it applies in 
specific scenarios, in future guidance.
    Comment: We received a few comments asking that we specify in 
regulation that an applicant is permitted to provide his or her A-
number for verification of immigration status through the records of 
DHS.
    Response: In Sec.  155.315(b), we proposed that for purposes of 
verifying citizenship and immigration status through the records of 
DHS, the Exchange must transmit information from the applicant's 
documentation and other identifying information to HHS. We intend the 
phrase ``information from the applicant's documentation and other 
identifying information'' to encompass information such as A-numbers; 
therefore, we maintain the provision in the final rule. This approach 
incorporates other types of identifying information (for example, I-94 
numbers) that are used by DHS, as well as preserves the intent and 
applicable of this regulation if DHS changes its process in the future.
    Comment: We received a number of comments regarding the connections 
between the Exchange and Federal data sources needed to support 
verification of applicant information. Comments expressed concern that 
each Exchange would need to develop separate data sharing arrangements 
and interfaces with Federal agencies maintaining information for use in 
verification. Comments responding to the proposed rule, which 
identified HHS as a conduit for information transmitted between the 
Exchange and Federal agencies, asked that we specifically refer to the 
Federally-managed data services hub, or electronic service, throughout 
Sec.  155.315, rather than refer to HHS as the entity through which 
data will be transmitted.
    Response: Acknowledging comments to the RFC and specific direction 
from section 1411(c) of the Affordable Care Act, we proposed that HHS 
would be the entity through which information would be transmitted to 
and from Exchanges and Federal data sources to support the verification 
process. In the final rule, we maintain HHS' role in supporting 
verification. However, in order to remain flexible to the technology 
used to transmit such data, we do not specifically mention in the final 
rule the ``electronic service'' or ``data services hub''. Instead, the 
final rule focuses on HHS' role as the entity which will facilitate the 
transfer of information, rather than how such information will be 
transferred. We anticipate that as technological advances are made, 
there may be changes in the procedures used by HHS to receive 
information from the Exchange and to communicate with other Federal 
agencies involved in the verification process.
    Comment: We received a number of comments on the process for 
verification of residency, proposed in Sec.  155.315(c). A significant 
number of commenters asked that self-attestation of residency be 
accepted without further verification. A smaller number of commenters 
recommended always allowing the Exchange to verify residency through 
electronic data sources, not only when the State Medicaid or CHIP 
agency operating in the State of the Exchange opts to examine such data 
sources.
    Response: We are redesignating proposed Sec.  155.315(c) as Sec.  
155.315(d), and amending it to state that an Exchange may accept an 
attestation of residency from an applicant or examine electronic data 
sources which have been approved by HHS. This flexibility would allow 
an Exchange, should it choose, to align with the verification 
procedures of the State Medicaid or CHIP agency. Such alignment may 
facilitate integration across insurance affordability programs and 
result in a more streamlined process. We amend Sec.  155.315(d)(3), as 
well as equivalent provisions throughout this subpart, to specify that 
if the Exchange finds that information provided by an applicant is not 
reasonably compatible, it must examine any information available 
through other electronic data sources. The proposed rule was 
inconsistent, and used, ``may,'' instead of, ``must,'' in this 
paragraph and in several other areas. This change was made to create 
consistency throughout the subpart, and because the rationale for the 
reasonably compatible concept, as described in the proposed rule, is 
that it is a threshold for when additional verification (for example, 
examining other electronic data sources) is necessary to complete the 
verification process. For example, in the event the Exchange accepts 
self-attestation without further verification, in accordance with 
paragraph (d)(1), and such attestation is found to be not reasonably 
compatible with other information provided by the individual or in the 
records of the Exchange, the Exchange would continue the verification 
process by examining available electronic data sources in order to 
verify the attestation. If the Exchange is still unable to complete the

[[Page 18362]]

verification after examining information in electronic data sources, 
the Exchange would then follow procedures to resolve the inconsistency, 
in accordance with Sec.  155.315(f). As discussed in the proposed rule, 
examining data sources, when available, prior to moving through the 
inconsistency process will help minimize the need to request paper 
documentation from applicants, and the burden for Exchanges to process 
such documentation.
    Comment: We received a few comments regarding the provision in 
proposed Sec.  155.315(c)(4) in which we propose that a document that 
provides evidence of immigration status may not be used alone to 
determine State residency. A commenter requested that we remove the 
word ``alone'' from this phrase. Another asked that we allow the 
Exchange to use documentation of immigration status to positively 
verify residency.
    Response: We are removing the word ``alone'' from Sec.  
155.315(d)(4) in the final rule because we do not intend for documents 
that provide evidence of immigration status to be used to determine 
State residency either alone or together with other documentation. We 
have also amended the phrase to allow the Exchange to positively verify 
residency using immigration documentation, which aligns with Medicaid 
regulations.
    Comment: We received a number of comments regarding the 
verification of incarceration status, as proposed in Sec.  155.315(d). 
Several commenters recommended that self-attestation of incarceration 
be accepted without further verification. Others believed that 
information or an attestation regarding incarceration should never be 
requested of an applicant, since such a request may be a deterrent to 
consumers applying for coverage through the Exchange. A smaller number 
of commenters questioned the availability of recent, accurate data with 
which Exchanges may verify incarceration status. One commenter stated 
that by not defining ``release date,'' incarceration status will be 
difficult to verify.
    Response: We acknowledge that there are challenges regarding the 
availability of electronic data on incarceration. However, we believe 
it is important for the Exchange to utilize any such data sources that 
are available and have been approved by HHS for this purpose, and, at 
the very least, accept self-attestations of incarceration status since 
such status is a statutory standard for eligibility to enroll in a QHP. 
In addition, we believe that this attestation can be collected with 
minimal burden on an applicant, and we expect that it will be paired 
with a clear explanation as to why the information is being requested. 
We believe that allowing for verification of incarceration status 
through paper documentation would increase administrative burden on the 
Exchange and applicants, and for these reasons, allow for the 
examination of paper documentation only in the event that the 
applicant's self-attestation is not reasonably compatible with other 
information provided by the individual or information in the records of 
the Exchange. For greater detail about the definition of incarceration, 
please see comment response for Sec.  155.300.

Summary of Regulatory Changes

    We are finalizing the provisions proposed in Sec.  155.315 of the 
proposed rule, with the following modifications. We added paragraph 
(b), which clarifies that the Exchange will validate SSNs that are 
provided by individuals. In paragraph (c)(3), we changed the word 
``shows'' to ``demonstrates'' in referring to what the applicant must 
do if the if he or she did not receive the notice within the 5 day 
period; this change was made to more accurately describe the obligation 
of the applicant. In paragraph (d)(1) and (2), we allowed the Exchange 
may choose whether it accepts an attestation from applicants regarding 
residency without further verification or examines electronic data 
sources for all applicants, and we clarify that the standard for 
approval of electronic data sources for verification of residency will 
be based on whether such sources are sufficiently current and accurate, 
and minimize administrative costs and burdens.
    In paragraph (d)(3), we clarify that by referring to data sources, 
we mean those data sources that are available to the Exchange and that 
have been approved by HHS for this purpose. In paragraph (d)(3), we 
remove the reference to ``a document that provides'' before 
``evidence'' so as not to limit the acceptable types of such evidence. 
We also remove the word ``alone'' in order to clarify that the Exchange 
may not use evidence of immigration status alone or together with other 
evidence to determine State residency. In paragraph (d)(3), we also 
change the term ``may'' to ``must'' to specify that if the applicant's 
attestation is not reasonably compatible with information in the 
records of the Exchange, the Exchange must examine available, approved 
data sources in order to verify the attestation. We also change the 
phrase in paragraph (d)(4) to state that evidence of immigration status 
may not be used to determine that an applicant is not resident of the 
Exchange service area.
    We clarified in paragraph (f) that an inconsistency may result when 
electronic data is necessary for verification but is not available. We 
also included in paragraph (f)(1), ``including through typographical or 
other clerical errors'' to describe the causes of inconsistency. In 
paragraph (f)(2)(i), we changed ``notify'' to ``provide notice to the 
applicant regarding'' in order to clarify the Exchange's notice 
standard. Also, we added language to paragraph (f)(2)(ii) to specify 
that all channels described in Sec.  155.405(c) of this part are 
acceptable for the submission of documentation to resolve 
inconsistencies, except for by telephone. In paragraph (f)(5)(i), we 
specify that the Exchange must determine the applicant's eligibility 
based on the information available unless such applicant qualifies for 
the exception provided under paragraph (g). We also add, on an interim 
final basis, paragraph (g), which provides a case-by-case approach to 
resolving inconsistencies for applicants for whom documentation does 
not exist or is not reasonably available.
    We also made technical corrections. We redesignated paragraphs (b) 
through (g) as paragraphs (c) through (i). In paragraph (a), we changed 
the reference to paragraph (e) to paragraph (g). In paragraph (d), we 
changed ``by'' to ``as follows,'' and changed verb tenses in (d)(1) and 
(d)(2). In paragraph (f)(3), we corrected the reference to paragraph 
(f)(3) and changed it to (f)(2)(ii). In paragraph (f)(5)(ii), we 
changed the word ``implement'' to ``effectuate.'' We also add, on an 
interim final basis, paragraph (g) to provide a case-by-case exception 
for applicants for whom documentation does not exist or is not 
reasonably available.
    In paragraph (h), we changed the word ``plan'' to ``Blueprint.'' 
Throughout the section, as in the rest of the subpart, we replaced 
language regarding application filers providing attestations with 
references to applicants providing attestations, since the language in 
Sec.  155.300(c) provides overarching clarification that attestations 
for applicants can be provided by application filers.
f. Verification process related to eligibility for insurance 
affordability programs (Sec.  155.320)
    In Sec.  155.320, we proposed that the Exchange verify information 
in accordance with this section only for an applicant who is requesting 
an eligibility determination for insurance affordability programs.

[[Page 18363]]

    We proposed standards related to the verification of eligibility 
for minimum essential coverage other than through an eligible employer-
sponsored plan.
    We also proposed standards for the verification of household income 
and family and family/household size and solicited comments regarding 
how best to ensure a streamlined eligibility process given underlying 
differences between the Treasury proposed rule and the Medicaid 
proposed rule. We proposed standards for the Exchange to obtain tax 
return data for individuals whose income is counted in calculating a 
tax filer's household income, and to obtain MAGI-based income for all 
individuals whose income is counted in calculating a tax filer's 
household income, in accordance with 26 CFR 1.36B-1(e), or an 
applicant's household income, in accordance with 42 CFR 435.603(d).
    We proposed the verification process for income and household size 
for Medicaid and CHIP and solicited comments as to how this process 
could work most smoothly for both electronic and paper applications. We 
proposed that the Exchange must verify household size by obtaining an 
attestation from the application filer and accepting the attestation 
without further verification unless the attestation is not reasonably 
compatible with other information in the records of the Exchange. We 
also proposed the process for the Exchange to verify MAGI-based 
household income by referring to the procedures described in Medicaid 
proposed regulations at 42 CFR 435.948 and 42 CFR 435.952 and CHIP 
regulations at 42 CFR 457.380. We solicited comments as to how the 
Exchange process and the Medicaid and CHIP processes can be streamlined 
to ensure consistency and maximize the portion of eligibility 
determinations that can be completed in a single session.
    Similar to Medicaid and CHIP, we proposed that for advance payments 
of the premium tax credit and cost-sharing reductions, the Exchange 
direct an application filer to attest to the specific individuals who 
comprise an applicant's family for advance payments of the premium tax 
credit and cost-sharing reductions, and that the Exchange accept an 
application filer's attestation of family size without further 
verification, unless the attestation and any other information in the 
records of the Exchange are not reasonably compatible. We further 
proposed the basic verification process for annual household income. We 
proposed that the Exchange compute, in accordance with specific rules 
for Medicaid and CHIP and specific rules for eligibility for advance 
payments of premium tax credits and cost-sharing reductions, annual 
household income for the family defined by the application filer and 
that the application filer validate this information by attesting 
whether it represents an accurate projection of the family's household 
income for the benefit year for which coverage is requested. We 
proposed that if tax data are unavailable, or if an application filer 
attests that the Exchange's computation based on available tax data 
does not represent an accurate projection of the family's household 
income for the benefit year for which coverage is requested, the 
Exchange direct the application filer to attest to the family's 
projected household income. We proposed that if such an attestation is 
not reasonably compatible with the data obtained by the Exchange or if 
the data is unavailable, the Exchange must follow procedures for the 
alternate verification process. We also proposed that the Exchange use 
an alternate process for determining income for purposes of advance 
payments of the premium tax credit and cost-sharing reductions for tax 
filers in certain situations. We proposed that in situations in which 
an application filer attests that a tax filer's annual household income 
has increased or is reasonably expected to increase from the 
information obtained from his or her tax return, the Exchange accept 
the application filer's attestation without further verification, with 
limited exceptions. We also proposed to codify the minimum standards 
for circumstances under which an application filer who is attesting to 
a decrease in income for a tax filer, or is attesting to income because 
tax return data is unavailable, may utilize an alternate income 
verification process that includes annualized data from MAGI-based 
income sources and other electronic data sources approved by HHS. We 
solicited comment on what situations should justify use of the 
alternate process.
    We also proposed the verification process the Exchange must follow 
for a tax filer whose annual household income decreases by a certain 
amount. We proposed that if the Exchange requests additional 
documentation to resolve an inconsistency and the application filer has 
not responded to a request for additional information from the Exchange 
within a 90 day period and data sources indicate that an applicant in 
the tax filer's family is eligible for Medicaid or CHIP, the Exchange 
may not provide the applicant with eligibility for advance payments of 
the premium tax credit or cost-sharing reductions. We proposed that if 
at the end of the 90 day period the Exchange is unable to verify the 
application filer's attestation, the Exchange must determine the 
applicant's eligibility based on available data, in accordance with the 
process proposed in Sec.  155.310(g) and Sec.  155.330(f). In addition 
to the above standards, we proposed that the Exchange provide education 
and assistance to an application filer regarding the verification 
process for income and family/household size and solicited comments on 
strategies that the Exchange can employ to ensure that application 
filers understand the validation process and provide well-informed 
validations and attestations.
    For other situations in which the Exchange remains unable to verify 
an application filer's attestation, we proposed that the Exchange 
determine eligibility for advance payments of the premium tax credit 
and cost-sharing reductions for tax filers who do not meet the criteria 
for the alternate income verification process based on the tax filer's 
tax data. We also proposed that if an application filer does not 
respond to a request for additional information from the Exchange and 
data sources described in paragraph (c)(1) indicate that an applicant 
in the primary tax filer's family is eligible for Medicaid or CHIP, the 
Exchange will not provide the applicant with eligibility for advance 
payments of the premium tax credit or cost-sharing reductions based on 
the application.
    We proposed that the Exchange verify whether an applicant who 
requested an eligibility determination for advance payments of the 
premium tax credit or cost-sharing reductions is enrolled in an 
eligible employer-sponsored plan by accepting his or her attestation 
without further verification, except in cases in which information is 
not reasonably compatible with other data provided by the applicant or 
in the records of the Exchange. We solicited comments as to whether the 
Exchange could assume that an applicant would understand whether or not 
he or she is enrolled in an eligible employer-sponsored plan, and 
therefore rely upon applicant attestation in this area. We proposed 
that the Exchange may request additional information regarding whether 
an applicant is enrolled in an eligible employer-sponsored plan if an 
applicant's attestation is where an applicant's information is not 
reasonably compatible with other information provided by the applicant 
or in the records of the Exchange. We solicited comments regarding the 
best

[[Page 18364]]

data sources for this element of the process.
    In addition, we proposed that the Exchange must request from an 
applicant who requests an eligibility determination for advance 
payments of the premium tax credit or cost-sharing reductions to attest 
to his or her eligibility for qualifying coverage in an eligible 
employer-sponsored plan. We further proposed that the Exchange verify 
this information. We solicited comments regarding how the Exchange may 
handle a situation in which it is unable to gain access to 
authoritative information regarding an applicant's eligibility for 
qualifying coverage in an eligible employer-sponsored plan. We invited 
comment on the timing and reporting of information needed to verify 
whether an employed applicant is eligible for qualifying coverage in an 
eligible employer-sponsored plan, and the best methods for facilitating 
interaction among Exchanges for this purpose. Specifically, we 
solicited comment regarding two specific methods for the submission and 
collection of information regarding eligibility for qualifying coverage 
in an eligible employer-sponsored plan--the employee template and the 
employer central database.
    Comment: Many commenters questioned the criteria for using the 
alternative verification process to verify household income; in 
particular, commenters argued against the standard proposed Sec.  
155.320(c)(3)(iv) that limits the ability of the Exchange to follow the 
alternative verification process to situations in which tax data is not 
available, family size or filing status has changed or is reasonably 
expected to change, an applicant has filed for unemployment benefits, 
or when an application filer attests that the tax filer's annual 
household income has decreased or is reasonably expected to decrease 
from tax data obtained by the Exchange by 20 percent or more. Comments 
focused on the 20 percent threshold, which commenters believed was too 
high, particularly given the relatively low incomes of the population 
likely to request an eligibility determination for financial 
assistance, and would thus result in a substantial group of tax filers 
being unable to obtain advance payments of the premium tax credit 
commensurate with their household income, regardless of whether they 
were able to substantiate a lower income. Commenters supported a 
percentage threshold lower than 20 percent or a different measure 
altogether.
    Response: We recognize that utilizing the 20 percent minimum would 
result in a substantial number of tax filers who are unable to afford 
coverage due to significant changes in income and that we should modify 
our proposed rule so that an eligibility determination matches, as 
closely as possible, a tax filer's true circumstances. We note that 
section 1412(b)(2) of the Affordable Care Act describes that the 
Secretary must provide procedures for making eligibility determinations 
for advance payments of the premium tax credit, ``in cases where 
information included with an application demonstrates substantial 
changes in income * * * or other significant changes affecting 
eligibility''. The statute outlines a minimum set of circumstances that 
meet this standard; we interpret the statutory 20 percent or more 
decrease as congressional direction that any decrease of that magnitude 
must trigger an alternate verification process, but not to limit the 
Secretary's discretion to identify other significant changes in income 
that trigger an alternate verification process. We codified this 
provision in the proposed rule at Sec.  155.320(c)(3)(iv), along with 
the other minimum standards, and solicited comments as to whether this 
was an appropriate standard, or whether we should establish a different 
threshold.
    Based on an analysis performed by the Secretary,\5\ a family of 
four with household income of 200 percent of the FPL ($47,018 using 
projected 2014 figures) is projected to have a total premium, after 
advance payments, of $247 per month. A five percent decrease in income 
from $47,018 is $44,667 (190 percent of the FPL), would correspond to a 
total premium, after advance payments, of $217 per month, for a total 
difference in premium of around $360 per year. In addition, while 
advance payments are sensitive to every dollar of income, cost-sharing 
reductions are not; consequently, even very small changes that move a 
person across a threshold (150 percent FPL, 200 percent FPL, or 250 
percent FPL) can be very significant. For example, based on the same 
figures cited above, the difference in cost-sharing between a family at 
190 percent FPL and a family at 200 percent FPL is $1,000 per year, due 
to the change in eligibility for cost-sharing reductions at 200 percent 
FPL. The difference is $2,000 around 250 percent FPL, which is the 
upper limit for cost-sharing reductions based solely on household 
income. We believe that these are significant changes, which will be 
critical to recognize in order to ensure that eligible individuals can 
afford coverage.
---------------------------------------------------------------------------

    \5\ http://www.healthcare.gov/law/resources/reports/premiums01282011a.pdf.
---------------------------------------------------------------------------

    Therefore, in this final rule, we specify that the Exchange must 
use information other than tax data to verify income in cases in which 
an applicant attests that a change has occurred or is reasonably 
expected to occur, and as such, a tax filer's annual household income 
has decreased or is reasonably expected to decrease from his or her tax 
data. As noted above, we believe that any change in household income 
constitutes a change in circumstances that meets the ``significant 
changes affecting eligibility'' standard identified in section 
1412(b)(2) of the Affordable Care Act, given the sensitivity of the 
advance payment formula and the potential for large variations in cost-
sharing reductions with small shifts in income. This approach to 
implementing section 1412(b)(2) is further reinforced by the fact that 
requiring the Exchange to conduct an individualized analysis as to 
whether each tax filer's circumstances constitute a ``significant 
change'' in accordance with the statute would place a substantial 
administrative burden on the Exchange; to conduct such case-by-case 
analyses, the Exchange would need to apply different procedures to 
subgroups of tax filers, specifically around cost-sharing reduction 
thresholds. Overall, we believe that using this standard will increase 
the accuracy of income verification, the accuracy of eligibility 
determinations, and the equity of the process for tax filers without 
significantly increasing the administrative burden on the Exchange.
    We also make a change to another criterion for the alternate 
verification process described in Sec.  155.320(c)(3)(iv)(B); we 
include that when an applicant attests that members of the tax filer's 
family have changed or are reasonably expected to change, he or she 
qualifies for an alternate verification process. We add this provision 
in order to account for a situation in which the family members are 
different but the number of family members remains the same.
    In Sec.  155.320(c)(3)(v), we describe the alternate verification 
process for decreases in household income or situations in which tax 
data are unavailable. We move the language from Sec.  
155.320(c)(3)(ii)(C) of the proposed rule, which specified that the 
Exchange accept an applicant's attestation of projected annual 
household income, unless it was not reasonably compatible with tax 
data, to this section, and replace ``reasonably compatible'' with a 
standard of a decrease of ten percent or less from the tax data. We 
redesignate

[[Page 18365]]

Sec.  155.320(c)(3)(v) of the proposed rule as Sec.  155.320(c)(3)(vi), 
which specifies the verification process for larger decreases and 
situations in which tax data are unavailable. Taken together, these 
revisions address commenters' concerns regarding inequities in the 
proposed verification process by ensuring that there are procedures 
under which a tax filer can obtain advance payments of the premium tax 
credit commensurate with their household income when changes have 
occurred or are reasonably expected to occur, regardless of the size of 
any such changes.
    Comment: We received many comments recommending that HHS further 
define the term ``reasonably compatible'', as used throughout proposed 
Sec.  155.320(c) as the standard for assessing whether verification can 
be considered complete, or if additional information is necessary. 
Commenters suggested various approaches to establishing a more detailed 
standard, including, in the case of income, the use of an acceptable 
percentage of deviation between the amount reflected by the data and an 
application filer's attestation. Others recommended that the Exchange 
should consider an application filer's attestation to income reasonably 
compatible with electronic data even if there is a difference in the 
data and an application filer's attestation, as long as the difference 
does not significantly impact eligibility. Some commenters recommended 
that Exchanges maximize the use of self-attestation without further 
verification, which would speak to setting the ``reasonably 
compatible'' threshold at a higher level. Other commenters requested 
that HHS establish a standard that allows for flexibility in 
implementation, and a few commenters recommended removing the 
``reasonably compatible'' standard altogether. A few commenters 
recommended providing that the Exchange must always request additional 
evidence with the goal of achieving a more accurate projection of 
income or family size.
    Response: When assessing comments recommending that HHS define the 
``reasonably compatible'' standard proposed in Sec.  155.320(c), we 
weighed our desire for Exchange flexibility with the goal of providing 
greater consistency in income verification for applicants across 
Exchanges and a more streamlined process, in order to reduce burden for 
applicants and Exchanges. However, based on the comments received, we 
recognize that there is a need to define a specific threshold within 
which the Exchange would accept an applicant's attestation regarding 
projected annual household income, as opposed to engaging in a more 
burdensome process. Accordingly, as discussed in the previous response, 
the final rule specifies that the Exchange will accept an applicant's 
attestation to projected annual household income without further 
verification if it is no more than ten percent below his or her tax 
data. We believe that using this threshold will result in eligibility 
determinations that are accurate while limiting the administrative 
burden associated with completing additional verification processes for 
smaller decreases in income. We believe that this is particularly 
important given the age of available tax return information at the 
point of open enrollment, as well as the volatility in income among 
households that are likely to request an eligibility determination for 
insurance affordability programs. In particular, we believe that it is 
critical to focus the limited resources of Exchanges on ensuring that 
larger changes are subjected to additional scrutiny.
    In addition, we clarify that the process proposed in Sec.  
155.320(c)(3)(i) for verification of family size for purposes of 
eligibility for advance payments of the premium tax credit and cost-
sharing reductions follows the process specified in section 1411 of the 
Affordable Care Act, which specifies that the Secretary verify family 
size with the Secretary of the Treasury, and then implement alternative 
procedures to the extent that a change has occurred or tax data are 
unavailable.
    First, in paragraph (c)(1)(i)(A), the Exchange will request tax 
return data including data regarding family size. In paragraph 
(c)(3)(i)(A), we specify that an applicant will attest to the 
individuals that comprise an applicant's family for advance payments of 
the premium tax credit and cost-sharing reductions. We add paragraph 
(c)(3)(i)(B) to clarify that if an applicant attests that tax data 
represents an accurate projection of a tax filer's family size for the 
benefit year for which coverage is requested (that is, that no change 
has occurred or is reasonably expected to occur), the Exchange must use 
the family size information from the tax data to determine the tax 
filer's eligibility for advance payments of the premium tax credit and 
cost-sharing reductions. And in paragraph (c)(3)(i)(C), we specify that 
if tax data are unavailable, or an applicant attests that a change has 
occurred or is reasonably expected to occur, and as such, it does not 
represent an accurate projection of a tax filer's family size for the 
benefit year for which coverage is requested, the Exchange must accept 
his or her attestation to family size without further verification, 
unless it is not reasonably compatible with other information provided 
by the applicant or in the records of the Exchange.
    In paragraph (c)(3)(i)(C), we clarify that the assessment of 
reasonable compatibility is not with respect to the tax data, as 
paragraph (c)(3)(i)(C) is designed to address situations in which it is 
already clear that tax data are unavailable or not representative. We 
then maintain the provisions from the proposed rule specifying that if 
information regarding family size is not reasonably compatible, the 
Exchange must first utilize data obtained through other electronic data 
sources, and if that is unsuccessful, follow the inconsistency process 
in Sec.  155.315(f).
    Comment: We received comments suggesting that HHS clarify aspects 
of the income verification process in proposed Sec.  155.320; in 
particular, commenters asked that the final rule specify the sequencing 
of the process, so that a clear order for the execution of steps for 
Medicaid, CHIP, and advance payments of the premium tax credit and 
cost-sharing reductions is established. Commenters also asked that HHS 
allow Exchanges greater flexibility around the use of electronic data 
to verify household income. For example, one commenter recommended that 
in the event an applicant's current income data places them well below 
the income level for eligibility for advance payments of the premium 
tax credit or cost-sharing reductions, the Exchange not be required to 
also obtain the applicant's tax return data. Others questioned the 
overall usefulness of available tax return data given its age, and 
asked that Exchanges be permitted to look only at available current 
income data sources to verify household income for all insurance 
affordability programs.
    Response: We acknowledge commenters' desire to further streamline 
and simplify the eligibility and enrollment process by avoiding 
unnecessary steps to verify applicant information. Sections 1402(f)(3), 
1411(b)(3) and 1412(b)(1) of the Affordable Care Act provide that data 
from the most recent tax return information available must be the basis 
for determining eligibility for advance payments of the premium tax 
credit and cost-sharing reductions to the extent such tax data is 
available. HHS is working closely with Treasury and IRS to ensure that 
such data is readily accessible by the Exchange, to assist in 
facilitating the completion of an eligibility determination in a 
single, online session. We believe that the regulation is not the place 
to lay out

[[Page 18366]]

detailed, sequenced steps for verifying household income. As such, in 
Sec.  155.320(c)(3)(ii), we have made changes to allow the Exchange 
flexibility when sequencing the verification of annual household 
income; we altered the text such that the Exchange may present the 
applicant with his or her projected annual household income computed 
from the tax return information prior to requiring an attestation from 
the applicant or, in the alternative, to allow the Exchange to take an 
attestation from the applicant regarding a tax filer's projected annual 
household income and then verify whether the attestation is supported 
by the tax return information described in Sec.  155.320(c)(3)(i). 
Overall, we intend for the regulation to be neutral with regard to the 
sequencing of operations, and will provide such operational details 
through guidance.
    Comment: Commenters asked HHS to clarify whether, when verifying 
annual household income as described in proposed Sec.  155.320, the 
Exchange must rely on a tax filer's attestation to make a final 
determination of household income when the attestation and tax data are 
reasonably compatible, or whether the Exchange must rely on tax data.
    Response: We acknowledge commenters' concerns that the proposed 
regulation text at Sec.  155.320(c)(3)(ii) does not clearly describe 
the process the Exchange must follow in the event that the applicant 
attests that the income in the tax data represents an accurate 
projection of the household's projected annual household income. In 
this final rule, we include a provision in Sec.  155.320(c)(3)(ii)(B) 
which describes that, in this situation, the Exchange must determine 
the tax filer's eligibility for advance payments of the premium tax 
credit and cost-sharing reductions based on the income data from his or 
her tax return.
    Comment: A few commenters asked for clarification as to when it is 
appropriate to accept self-attestation of income. We also received 
comments asking for clarification on our use of self-attestations 
throughout the verification processes described in Sec.  155.315 and 
Sec.  155.320.
    Response: The Exchange may accept an applicant's attestation of her 
or her projected annual household income in a number of instances 
during the income verification process; however, it is important to 
note, that for purposes of verification of income for determining 
eligibility for advance payments of the premium tax credit and cost-
sharing reductions, the Exchange will never accept such an attestation 
without attempting to acquire tax data.Those instances in which the 
Exchange may accept an attestation without further verification when an 
application attests that as a result of a change or an expected change, 
a tax filer's income has increased, by any amount, above the projected 
annual household income calculated by the Exchange based on tax data, 
as described in Sec.  155.320(c)(3)(iii); and when an applicant attests 
that as a result of a change or an expected change, a tax filer's 
projected annual household income has decreased or is reasonably 
expected to decrease from the projected annual household income 
calculated based on tax data by ten percent or less, as described in 
Sec.  155.320(c)(3)(v).
    In response to comments regarding the use of self-attestation in 
the verification process, the processes described are designed to 
confirm information to the extent necessary to provide eligibility. In 
situations in which the Exchange uses self-attestation without further 
verification as the basis of eligibility, we have determined that this 
approach yields valid data and does not pose unacceptable levels of 
risk. We believe that this approach is particularly important in order 
to promote a seamless, real-time experience for as many applicants as 
possible. It is also important to note that strong program integrity 
protections will be in place and that all attestations will be provided 
under penalty of perjury.
    Comment: We received comments asking which procedures the Exchange 
must follow when an individual's unverified income meets the Medicaid 
or CHIP income threshold.
    Response: As indicated in Sec.  155.320(c)(2)(ii) of the proposed 
rule, if an individual's unverified current income meets the Medicaid 
or CHIP income threshold, the Exchange would verify his or her 
household income in accordance with Medicaid or CHIP rules specified in 
42 CFR 435.948 and 42 CFR 435.952. Similarly, if an individual attests 
to income in the Medicaid or CHIP eligibility range, the Exchange would 
need to follow the procedures outlined in 42 CFR 435.948 and 42 CFR 
435.952, since such individual would not be eligible for the 
alternative verification process, as indicated in Sec.  
155.320(c)(3)(iv). We maintain these provisions in this final rule.
    Comment: We received several comments requesting greater 
integration and alignment in standards and processes for verifying 
family/household size and household income across insurance 
affordability programs. Some asked for States to be given flexibility 
to align standards across insurance affordability programs. Commenters 
also recommended specific changes facilitating a closer alignment of 
the rules for determining family/household size and household income 
between Medicaid, CHIP and advance payments of the premium tax credit 
and cost-sharing reductions. Some recommended full integration, 
utilizing identical standards across insurance affordability programs.
    Response: Throughout Sec.  155.320(c), the standards for 
verification of family size and income for determining eligibility for 
advance payments of the premium tax credit and cost-sharing reductions 
closely follow the rules set forth in sections 1411 and 1412 of the 
Affordable Care Act and section 36B of the Code. We sought to align as 
closely as possible with the standards established for Medicaid and 
CHIP, but given statutory standards, we were limited in the degree of 
alignment we could achieve.
    With respect to family/household income and household size, we note 
that Medicaid/CHIP and advance payments both start with the family size 
and income counting rules in section 36B of the Code. From there, there 
are three key differences in how income must be measured in Medicaid/
CHIP and for advance payments and cost-sharing reductions. First, as 
noted in the proposed rule, section 1902(e)(14)(H) of the Social 
Security Act, as added by section 2002 of the Affordable Care Act, 
specifies that Medicaid eligibility will continue to be based on 
``point-in-time'', or current monthly income, while eligibility for 
advance payments of the premium tax credit and cost-sharing reductions 
is based on annual income. This is reflected in 42 CFR 435.603(h)(1). 
Second, 42 CFR 435.603(b) and (f) specifies that in certain situations, 
Medicaid and CHIP follow different household composition rules from 
those in section 36B of the Code, which then lead to counting income 
for a different group than would be counted for advance payments of the 
premium tax credit and cost-sharing reductions. These situations are 
discussed in detail in the preamble associated with 42 CFR 435.603.
    Third, 42 CFR 435.603(e) specifies that there are some exceptions 
to the use of the income counting rules of section 36B of the Code for 
purposes of eligibility for Medicaid and CHIP. These include special 
treatment for lump sum payments, scholarships, awards, or fellowship 
grants used for educational purposes and not for living expenses, and 
certain types of American Indian and Alaska Native income.

[[Page 18367]]

    Aside from the different time standard, in the majority of cases, 
the rules for counting household income and household/family size are 
the same across insurance affordability programs. In addition, we note 
that 42 CFR 435.603(i) specifies that in a situation in which an 
applicant is over the income threshold for Medicaid, but is under the 
income threshold for advance payments of the premium tax credit, the 
Medicaid agency will determine Medicaid eligibility using section 36B 
rules, which would likely result in Medicaid eligibility in most 
situations. We have also added an additional provision in Sec.  
155.345(e), which is discussed in the comment and response associated 
with that section.
    Lastly, we note that throughout subpart D, we use ``household 
size'' for purposes of Medicaid and CHIP, in order to align with 
Medicaid and CHIP regulations, and ``family size'' for purposes of 
advance payments of the premium tax credit and cost-sharing reductions, 
in order to align with Treasury regulations. To clarify this, we added 
Sec.  155.320(c)(3)(viii), which specifies that for purposes of advance 
payments of the premium tax credit and cost-sharing reductions, 
``family size'' means family size as defined in section 36B(d)(1) of 
the Code.
    Comment: We received a number of comments related to current income 
sources to be used by the Exchange in verifying household income. 
Commenters asked us to define those current income sources that the 
Exchange will use in the process proposed in Sec.  155.320(c)(1)(ii). 
Others asked whether current income information would be available via 
the Federally-managed data services hub.
    Response: Under Sec.  155.320(c)(1)(ii) of the proposed and this 
final rule, the Exchange must obtain the most current income data from 
those data sources described in existing Medicaid regulations at 42 CFR 
435.948(a). In order to access this current income data, we anticipate 
that the Exchange will leverage State Medicaid and CHIP agencies' 
existing relationships with current income sources, but we are also 
exploring the potential for supporting connections to sources of 
current income data through the data services hub.
    Comment: Several commenters had specific questions related to 
services available to support the income verification process through 
the data services hub. Specifically, commenters asked which data 
elements from the tax return would be available from the IRS via the 
data services hub, and recommended that individual data elements (for 
example, wages, profit and loss from business, deductions) would be 
more useful in verifying household income than a single MAGI data 
element.
    Response: We are working to identify those services which will be 
available to Exchanges to support the income verification process and 
will provide further detail in future guidance. We note that the 
section 6103(l)(21) of the Code identifies general categories of tax 
data that will be available for purposes of determining eligibility in 
insurance affordability programs. In addition, these categories are 
discussed in the response to question 8 in HHS' November 29, 2011 
document titled ``State Exchange Implementation Questions and 
Answers''.\6\
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    \6\ http://cciio.cms.gov/resources/files/Files2/11282011/exchange_q_and_a.pdf.pdf.
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    Comment: We received comments related to the treatment of American 
Indian and Alaska Native income. Some asked whether current State 
arrangements around the treatment of such income will be allowed to 
stand under the Exchange; others asked that the exemption for American 
Indian and Alaska Native income be referenced in the Exchange final 
rule and that materials be available to consumers so they can 
understand the availability of such exemptions.
    Response: In Sec.  155.320(c)(1)(ii) of the proposed rule, we 
reference 42 CFR 435.603(d) for purposes of income eligibility for 
Medicaid, which incorporates the applicable income exemptions for 
American Indians and Alaska Natives described under 42 CFR 
435.603(e)(3). This regulatory reference addresses the treatment of 
these exemptions and the future of existing arrangements with regard to 
American Indian and Alaska Native income with respect to Medicaid. We 
note that these income exemptions do not apply when verifying annual 
household income for advance payments of the premium tax credit and 
cost-sharing reductions, because the Affordable Care Act establishes 
specific definitions of ``household income'' and ``MAGI'' to use for 
determining eligibility for these benefits. Because of the statutory 
limits on the definition of household income for advance payment of 
premium tax credits and cost-sharing reductions, this final rule 
maintains the proposal to follow the rules described in section 36B of 
the Code.
    Comment: We received a comment recommending that HHS clarify that, 
for purposes of obtaining data regarding MAGI-based income for purposes 
of Medicaid and CHIP eligibility, the Exchange will initially request 
data from data sources described in 42 CFR 435.948(a), not from the 
applicant.
    Response: The specific sequencing of the process for collecting and 
verifying relevant information is subject to future operational 
analysis, and that we anticipate providing future guidance on this 
topic, including through the model electronic application.
    Comment: We received a number of comments related to proposed Sec.  
155.320(c)(4), which provides that the Exchange must provide education 
and assistance to an application filer regarding the family/household 
size and household income verification process. Several commenters 
suggested specific standards for the format and content of consumer 
education and assistance materials. Some commenters asked that a 
Federal standard for such materials be developed for Exchanges, and 
others advised that HHS encourage Exchanges to provide information 
specific to the alternative income verification process to ensure a 
smooth verification process.
    Response: There are several provisions throughout this final rule 
which provides that the Exchange must provide consumer tools and 
education related to the eligibility and enrollment process, in 
addition to the standard described in Sec.  155.320(c)(4), including a 
calculator and other tools, described in Sec.  155.205, and information 
regarding advance payments of the premium tax credit, described in 
Sec.  155.310(d)(2)(iii). We expect to issue future guidance on this 
topic.
    Comment: We received comments asking if the Exchange would have 
access to all child support data; and if so, suggesting that the 
Exchange must abide by specific data safeguards.
    Response: The Exchange would not be required to have access to 
child support data for purposes of verifying annual household income. 
Regardless, for data collected by the Exchange, privacy and security 
protections, described in Sec.  155.260 of this final rule, and 
standards for electronic transactions, described in Sec.  155.270 of 
this final rule, would also apply.
    Comment: Several commenters supported the proposal in Sec.  
155.320(d) for the Exchange to utilize self-attestation by the employee 
to verify enrollment in an eligible employer-sponsored plan. One 
commenter stated that HHS should give States the flexibility to use 
self-attestation or to use other methods of verification.
    Response: We accept these comments and maintain this provision in 
the final rule. Section 1411(d) gives authority to the Secretary to 
determine the appropriate means to verify certain

[[Page 18368]]

information that the applicant must submit in accordance with section 
1411(b)(4). We note that Sec.  155.315(h) of this subpart allows State 
flexibility, subject to approval by HHS, based on a finding that the 
alternative approach meets certain standards described in that section.
    Comment: Several commenters asserted that individuals enrolled in 
continuation coverage under the Consolidated Omnibus Budget 
Reconciliation Act (COBRA) or in an eligible employer-sponsored plan 
should have the opportunity to be conditionally determined eligible for 
advance payments of the premium tax credit and cost-sharing reductions, 
subject to termination prior to enrollment in a QHP. These commenters 
reasoned that individuals should not be forced into uninsured status in 
order to obtain a determination of eligibility for tax credits and risk 
remaining uninsured if they are found ineligible and the enrollment 
period for electing COBRA or coverage in an eligible employer-sponsored 
plan passes.
    Response: Section 36B(c)(2)(C)(iii) of the Code states that an 
individual who is enrolled in an eligible employer-sponsored plan is 
not eligible for advance payments of the premium tax credit; because of 
the statutory prohibition on providing cost-sharing reductions for any 
month that is not a month for which the enrollee is eligible for 
premium tax credits, this bar also applies to eligibility for cost-
sharing reductions. However, while an individual must terminate 
coverage in his or her employer-sponsored plan prior to the period for 
which he or she actually receives advance payments of the premium tax 
credit and/or cost-sharing reductions, we clarify that the individual 
need not terminate coverage to receive an eligibility determination 
that he or she is eligible to receive these payments and reductions. 
Accordingly, we have amended the language in Sec.  155.320(d)(1) of 
this final rule to clarify that an attestation regarding enrollment in 
qualifying coverage in an eligible employer-sponsored plan should be 
based on the applicant's reasonable expectation of enrollment in the 
benefit year for which coverage is requested.
    Comment: One commenter noted that the language in proposed Sec.  
155.320(d) seems to indicate that the decision whether or not the 
Exchange must verify beyond an applicant's attestation regarding 
enrollment in an eligible employer-sponsored plan is within the 
discretion of an Exchange, and requested clarification regarding 
whether this was an intentional wording.
    Response: We have amended the regulatory text to reflect the 
standard that an Exchange must verify an applicant's attestation using 
electronic data sources to the extent that an applicant's attestation 
is not reasonably compatible with other information provided by the 
applicant or in the records of the Exchange.
    This change is consistent with equivalent amendments made in this 
subpart, and provides that, if the Exchange finds that information 
provided by an applicant is not reasonably compatible, it must examine 
any information available through electronic data sources. As discussed 
in the proposed rule, examining data sources, when available, will help 
minimize the need to request paper documentation from applicants, and 
the burden for Exchanges to process such documentation. A more detailed 
explanation of the change from ``may'' to ``must'' can be found in the 
comment and response to Sec.  155.315. We also plan to release guidance 
for States regarding electronic data sources to support this 
verification.
    Comment: Commenters suggested a variety of operational solutions 
for carrying out the verification of an applicant's eligibility for 
and/or enrollment in an eligible employer-sponsored plan. These 
comments were largely in response to the accompanying preamble 
discussion regarding the two potential data sources an Exchange may use 
to support this verification--the employer/employee template and the 
central database. Several commenters expressed support for or against 
the template and central database options. A large group consisting of 
consumer advocacy groups, a labor union and a think tank expressed 
support for the standard template option. Each of these commenters 
added that employees should not be required to provide information 
regarding minimum value because this information is not readily 
accessible to employees. One commenter requested that HHS provide that 
employers must submit information regarding eligibility for and 
enrollment in employer-sponsored plans to Exchanges on an annual basis. 
One commenter said HHS should provide States with the option to develop 
algorithms to determine who can be expected to have access to 
qualifying coverage in an eligible employer-sponsored plan using the 
size of the applicant's employer and industry type instead of creating 
a new database. Commenters also supported the goal of leveraging 
existing data sources for the purposes of verifying eligibility for 
qualifying coverage in an eligible employer-sponsored plan. One 
commenter said that HHS should give States the flexibility to verify 
eligibility for qualifying coverage in an eligible employer-sponsored 
plan using already-existing data. One commenter stated that HHS should 
have employee W-2 forms available as a verification source.
    Response: We continue to consult with the Departments of Labor and 
Treasury regarding the optimal solution for gathering information for 
the purposes of verification of eligibility for qualifying coverage in 
an eligible employer-sponsored plan and will issue guidance on this 
topic. Both the template and database options we described in the 
proposed rule are being considered as operational solutions. We are 
also considering ways in which an individual could gather information 
from his or her employer for the purposes of this verification. A 
combination of these methods could provide the most accurate and 
reliable results, while gathering information from both of the relevant 
information sources--employees and employers. We are also considering 
additional options in which employees seeking coverage could provide 
other sources of documentation from his or her employer that could 
verify eligibility. We plan to issue guidance outlining one or more 
possible methods for comment that will help guide the collection of 
information necessary to verify eligibility for qualifying coverage in 
an eligible employer-sponsored plan. However, it should be noted that 
any database option may rely on voluntary submission of information 
regarding employee eligibility for qualifying employer-sponsored 
coverage by employers. Further, HHS acknowledges that building the 
functionality required to collect and retain information regarding 
employer-sponsored insurance coverage will be time and resource-
intensive, and is therefore is considering options for an interim 
approach for verification of eligibility for qualifying coverage in an 
eligible employer-sponsored plan. We plan to describe these interim 
options in forthcoming guidance. We also note that it is anticipated 
that initial guidance under 6103(l)(21) of the Code will not provide 
for sharing the contents of an applicant's Form W-2 with the Exchange.
    Comment: Some commenters said the Federal government should perform 
verification of eligibility for qualifying coverage in an eligible 
employer-sponsored plan as a service to States. These commenters cited 
limitations on

[[Page 18369]]

the ability of States to perform this verification. One commenter said 
that States with no individual income tax, specifically, would have 
difficulty making affordability determinations.
    Response: In the State Exchange Implementation Questions and 
Answers released on November 29, 2011, we indicated that we are 
exploring how the Federal government could manage services for 
verification of employer-sponsored minimum essential coverage. We note, 
though, that we do not believe that the absence of an individual State 
income tax return poses an obstacle to computing affordability, since 
the income verification process in Sec.  155.320(c)(3) of this final 
rule does not require the use of State income tax information.
    Comment: One commenter stated that, in the case of an inconsistency 
between an applicant's attestation and internal Exchange records, the 
burden to produce further documentation should be on the employee, not 
the employer.
    Response: We believe our proposed regulation followed the 
commenter's recommendation because the employee is the applicant. 
Section 155.315(f)(2)(ii) of this final rule describes that an 
applicant must provide further documentation if the applicant's 
attestation is inconsistent with other information sources.
    Comment: One commenter requested that HHS must establish two 
distinct processes for the determination of eligibility for advance 
payments of the premium tax credit by Exchanges under proposed Sec.  
155.320 and for the assessment of employer penalties by the Treasury.
    Response: The statute makes clear that the two processes are 
distinct. Under sections 1411 and 1412 of the Affordable Care Act, the 
Exchange will make eligibility determinations for advance payments of 
the premium tax credit and cost-sharing reductions, notify employers 
that a payment may be assessed and that the employer has a right to 
appeal to the Exchange, and provide information to the Treasury. The 
assessment of shared responsibility payments under section 4980H of the 
Code is within the jurisdiction of the Treasury.
    Comment: One commenter concurred with the language of Sec.  155.320 
of the Exchange Eligibility proposed rule, which provides that the 
Exchange must verify information for only those applicants seeking 
eligibility determinations for insurance affordability programs in 
order to minimize multiple employer interactions with the Exchange.
    Response: Verification of eligibility for qualifying coverage in an 
eligible employer-sponsored plan is necessary only when indicated as 
necessary in accordance with the statute. An Exchange is not required 
to verify eligibility for qualifying coverage in an eligible employer-
sponsored plan for an applicant who did not request an eligibility 
determination for all insurance affordability programs.
    Comment: One commenter asserted that HHS should declare that all 
employer-sponsored insurance offered to American Indians and Alaska 
Natives fails the affordability and minimum value standards. The 
commenter reasoned that information regarding affordability and minimum 
value will be difficult for this type of applicant to provide. In 
addition, the commenter stated that if an individual is eligible to 
receive services through the Indian Health Service (IHS), including 
eligibility for services from an IHS facility, or for services from a 
tribe or tribal organization, or Urban Indian Organization, the 
Exchange should not attempt to verify an attestation regarding 
eligibility for qualifying coverage in an eligible employer-sponsored 
plan because this population is exempt from the standard to maintain 
minimum essential coverage.
    Response: While we recognize that certain data elements requested 
from applicants for the purposes of this verification may be 
challenging to obtain, we believe that a wholesale exception for 
American Indians and Alaska Natives is not warranted or permissible 
under the statute, and are not providing for such an exception in this 
final rule.
    Comment: One commenter requested clarification on the issue of 
full-time employment and its relationship to eligibility for qualifying 
coverage in an eligible employer-sponsored plan. Specifically, the 
commenter asked whether full-time status will be requested during the 
verification process, whether the Exchange will consider it when making 
eligibility determinations for advance payments of the premium tax 
credit, and whether the affordability test depends on whether the 
applicant is a full-time employee. In addition, the commenter requested 
clarification regarding notification and how an Exchange should manage 
eligibility determinations for applicants with multiple employers.
    Response: Section 1411(b)(4)(B) of the Affordable Care Act 
specifies that an applicant must provide information including, 
``whether the enrollee or individual is a full-time employee.'' With 
that said, the affordability test and the determination of whether an 
applicant is eligible to receive advance payments of the premium tax 
credit and/or cost-sharing reductions is not dependent on the full-time 
status of the employee. Rather, this information is relevant for 
Treasury's determination as to whether a shared responsibility payment 
under section 4980H of the Code applies to an employer. Also, we note 
that in the case of an applicant who has more than one employer, the 
Exchange will evaluate information from existing data sources regarding 
all of the applicant's employers to determine eligibility for 
qualifying coverage in an eligible employer-sponsored plan.
    Comment: One commenter requested clarification regarding whether 
the Exchange will use tax data to ensure affordability of coverage for 
employees under proposed Sec.  155.320. The commenters asked whether 
the employer may use wage data, instead of household income data, in 
its affordability determination.
    Response: The Exchange will use the projected annual household 
income verified through the process described in Sec.  155.320(c)(3) of 
this final rule to compute the affordability of available coverage 
through an eligible employer-sponsored plan. The question of whether an 
employer may use wage data in determining whether its offered coverage 
meets affordability criteria is beyond the scope of this rule, and is 
within the authority of the Department of the Treasury. In September 
2011, the Department of the Treasury released IRS Notice 2011-73 (2011-
40 I.R.B. 474) requesting comments on a potential safe harbor 
permitting employers to use an employee's W-2 wages in determining the 
affordability of employer-sponsored minimum essential coverage for 
purpose of the employer shared responsibility provisions under Code 
section 4980H. In February 2012, the Department of the Treasury 
released Notice 2012-17 (issued jointly with HHS and the Department of 
Labor) confirming that it intends to issue proposed regulations or 
other guidance providing for this safe harbor.\7\
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    \7\ Frequently Asked Questions from Employers Regarding 
Automatic Enrollment, Employer Shared Responsibility, and Waiting 
Periods. February 9, 2012: http://www.dol.gov/ebsa/newsroom/tr12-01.html.
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Summary of Regulatory Changes

    We are finalizing the provisions proposed in Sec.  155.320 of the 
proposed rule, with the following modifications. In paragraph 
(c)(2)(i)(A), we adopted new language to describe the verification of 
household size for

[[Page 18370]]

Medicaid and CHIP, in order to align with the Medicaid Eligibility 
final rule. We redesignated paragraph (c)(3)(i)(B) as paragraph 
(c)(3)(i)(C), and added paragraph (c)(3)(i)(B), which clarifies that if 
an applicant attests that tax data represents an accurate projection of 
a tax filer's family size for the benefit year for which coverage is 
requested, the Exchange must use the family size information from the 
tax data to determine the tax filer's eligibility for advance payments 
of the premium tax credit and cost-sharing reductions. We also added 
paragraphs (c)(3)(i)(C) and (D), which clarifies that this paragraph 
applies when tax data are unavailable or when a change has occurred or 
is reasonably expected to occur such that the data does not represent 
an accurate projection of family size; and clarifies that the 
assessment of reasonable compatibility is with respect to data other 
than that from the tax return.
    We also make a technical change to Sec.  155.320(c)(2)(i)(B) to 
state that the Exchange ``must,'' rather than ``may,'' examine 
electronic data sources if information is found to be not reasonably 
compatible. This change was made in order to align with verification of 
other applicant information, and so that in the event the Exchange 
accepts an applicant's attestation without further verification but 
such attestation is not reasonably compatible with other information 
provided by the application filer or contained in the records of the 
Exchange, the Exchange must examine available data sources to verify 
the attestation. If the information in the data sources cannot be used 
to verify the attestation, the Exchange must request additional 
documentation in accordance with Medicaid regulations at 42 CFR 
435.952. This change was also made in order to align with changes made 
to the Medicaid regulations regarding verification of household size.
    We redesignated paragraph (c)(3)(ii)(B) as paragraph (c)(3)(ii)(C), 
and removed the phrase ``is requested and accept the application 
filer's attestation without further verification, except as provided in 
paragraph (c)(3)(ii)(C) of this section'' in order to clarify that the 
Exchange must proceed in accordance with the procedures in paragraph 
(c)(3)(ii)(C) after receiving such an attestation.
    We also added paragraph (c)(3)(ii)(B), which provides that the 
Exchange must request the applicant to attest regarding his or her 
projected annual household income. We have also added paragraph 
(c)(3)(ii)(C) which clarifies that if an applicant's attestation 
indicates that the tax data represents an accurate projection of a 
family's household income for the benefit year for which coverage is 
requested, the Exchange must use the household income information from 
the tax data to determine his or her eligibility for advance payments 
of the premium tax credit and cost-sharing reductions. In paragraph 
(c)(3)(iii)(B), we changed the term ``may'' to ``must'' to specify that 
if the Exchange finds that information provided by an applicant is not 
reasonably compatible, it must examine any information available 
through other electronic data sources. In paragraph (c)(3)(iv)(A), we 
replaced the phrase ``this is as a result of an individual not being 
required to file'' with ``an individual was not required to file.'' In 
paragraph (c)(3)(iv)(B), we added that the alternate verification 
process is also available for a tax filer whose family composition has 
changed or is reasonably expected to change; we also added the phrase 
``or members of the tax filer's family have changed or are reasonably 
expected to change.'' In paragraph (c)(3)(iv)(C), we removed, ``by more 
than 20 percent,'' and clarified that this criterion is based on an 
applicant's attestation that a change has occurred or is reasonably 
expected to occur. We added a paragraph (c)(3)(iv)(D) to allow a tax 
filer to qualify for the alternative verification process if the 
applicant attests that the tax filer's filing status has changed or is 
reasonably expected to change for the benefit year for which the 
applicants in his or her family are requesting coverage. Omitting this 
provision from the proposed rule was an oversight; this basis for use 
of an alternate income determination process is authorized in section 
1412(b)(2) of the Affordable Care Act.
    We removed proposed paragraph (c)(3)(vi); given changes made to 
this section of the regulation, this paragraph was no longer necessary. 
We redesignated proposed paragraph (c)(3)(v) as paragraph (c)(3)(vi), 
and added a new paragraph (c)(3)(v). In paragraph (c)(3)(v) of the 
final rule, we specified that if a tax filer qualifies for an alternate 
verification process and the applicant's attestation to projected 
annual household income is no more than ten percent below the annual 
household income computed from tax data, the Exchange must accept his 
or her attestation without further verification. In revised paragraph 
(c)(3)(vi), we specified that the process in proposed paragraph 
(c)(3)(vi) applies if a tax filer qualifies for an alternate 
verification process and the applicant's attestation to projected 
annual household income is greater than ten percent below the annual 
household income computed from tax data, or if tax data are 
unavailable.
    In paragraph (c)(3)(vi)(C), we clarified a reference to Sec.  
155.315(f) to include paragraphs (f)(1)-(4), which includes the 90 day 
period during which an individual may either present satisfactory 
documentary evidence or otherwise resolve the inconsistency. We also 
added paragraph (c)(3)(vi)(F), to describe that if, at the end of the 
90 day period the Exchange is unable to verify the applicant's 
attestation and the tax data described in (c)(3)(ii)(A) is unavailable, 
the Exchange must notify that applicant and discontinue the advance 
payments and cost-sharing reductions. We added this paragraph in order 
to explicitly describe the procedures the Exchange must follow when 
there is no data on which to rely at the conclusion of the 90 day 
period.
    We also added paragraphs (c)(3)(vii) and (c)(3)(viii), which 
clarify that the terms ``household income'' and ``family size'' in 
paragraph (c)(3) mean household income as specified in section 
36B(d)(2) of the Code, and family size as specified in section 
36B(d)(1) of the Code, respectively. To clarify the process for 
verifying eligibility for qualifying coverage in an eligible employer-
sponsored plan tracks, we amended paragraph (d)(1) to state that the 
Exchange must also verify whether an applicant reasonably expects to be 
enrolled in an eligible employer-sponsored plan for the benefit year 
for which coverage is requested. We amended paragraph (d)(2) by 
changing ``may'' to ``must'', which provides that an Exchange must 
obtain data from electronic data sources to verify an applicant's 
attestation that he or she is not enrolled in an eligible employer-
sponsored plan when an applicant's attestation is not reasonably 
compatible with other information provided by the applicant or in the 
records of the Exchange. We also added the word ``electronic'' in 
paragraph (d)(2) to create consistency with equivalent provisions in 
the subpart.
    We made several technical corrections. In paragraph (a)(2), we also 
changed the reference in Sec.  155.315 from paragraph (e) to (h). In 
paragraphs (c)(3)(i)(C) and (c)(3)(ii)(C), we clarified that when an 
applicant attests that tax return data is not representative of family 
size or household income for the benefit year for which coverage is 
requested, it is as a result of a change in circumstances, which aligns 
with section 1412 of the Affordable Care Act. In paragraph 
(c)(3)(iii)(A), we added ``in accordance with paragraph (c)(3)(ii)(B). 
Proposed paragraph (c)(3)(iv)(D) was

[[Page 18371]]

redesignated as paragraph (c)(3)(iv)(E). In paragraph (c)(3)(vi)(E), we 
renumbered the reference to Sec.  155.310(f) to Sec.  155.310(g), and 
the reference to Sec.  155.330(e)(1) through (e)(2) to Sec.  
155.330(f). Throughout paragraph (c)(3), we changed references to 
ensure that the paragraph consistently referred to the tax filer for 
verification of household income for purposes of advance payments of 
the premium tax credit and cost-sharing reductions, in order to align 
with the eligibility standards. We made several changes to paragraph 
(f) to align with the Medicaid final rule. In paragraph (c)(2)(i)(A), 
we changed references to the Medicaid Eligibility final rule to account 
for renumbering. We also added the reference to 42 CFR 435.945 to 
paragraph (c)(2)(ii). Throughout the section, as in the rest of the 
subpart, we replaced language regarding application filers providing 
attestations with references to applicants providing attestations, 
since the language in Sec.  155.300(c) provides overarching 
clarification that attestations for applicants can be provided by 
application filers.
g. Eligibility Redetermination During a Benefit Year (Sec.  155.330)
    In Sec.  155.330, we outlined procedures for redeterminations 
during a benefit year. We proposed to rely primarily on the enrollee to 
provide the Exchange with updated information during the benefit year, 
and solicited comments as to whether there should be an ongoing role 
for Exchange-initiated data matching beyond what was proposed in the 
proposed rule. We also solicited comments on whether the Exchange 
should offer an enrollee an option to be periodically reminded to 
report any changes that have occurred.
    We proposed that the Exchange redetermine the eligibility of an 
enrollee in a QHP during the benefit year in two situations: first, if 
an enrollee reports updated information and the Exchange verifies it; 
and second, if the Exchange identifies updated information through 
limited data matching to identify individuals who have died or gained 
eligibility for a public health insurance program.
    We also proposed that an individual who enrolls in a QHP with or 
without advance payments of the premium tax credit or cost-sharing 
reductions must report any changes to the Exchange with respect to the 
eligibility standards specified in Sec.  155.305 within 30 days of such 
change. Additionally, we proposed that the Exchange use the 
verification procedures at the point of initial application for any 
changes reported by an individual prior to using the self-reported data 
in an eligibility determination. We solicited comments on whether to 
allow the Exchange to limit those changes on which an individual must 
report, to changes in income of a certain magnitude. We noted that this 
provision would have no effect on whether an individual was liable for 
repayment of excess advance payments of the premium tax credit at 
reconciliation.
    We also proposed that the Exchange periodically examine certain 
data sources that are used to support the initial eligibility process 
to identify death and eligibility determinations for Medicare, 
Medicaid, CHIP, or the BHP, if applicable. We proposed to generally 
limit proactive examination to these pieces of information because of 
the reliability of these data sources and because the identified 
information provides clear-cut indications of ineligibility for 
enrollment in a QHP and advance payments of the premium tax credit and 
cost-sharing reductions.
    We further proposed to allow the Exchange to make additional 
efforts to identify and act on changes that may affect an enrollee's 
eligibility to enroll in a QHP to the extent that HHS approves a plan 
to modify the process.\8\ We indicated that such approval would be 
granted if HHS finds that a modification would reduce the 
administrative costs and burdens on individuals while maintaining 
accuracy and minimizing delay, that such changes would not undermine 
coordination with Medicaid and CHIP, and that any applicable provisions 
related to the confidentiality, disclosure, maintenance, or use of 
information will be met.
---------------------------------------------------------------------------

    \8\ This provision is proposed in the Exchange proposed rule at 
76 FR 41866 (July 15, 2011) and is addressed in this final rule at 
Sec.  155.330(d)(2).
---------------------------------------------------------------------------

    We solicited comments regarding whether and how we should approach 
additional data matching, whether the Exchange should modify an 
enrollee's eligibility based on electronic data in the event that he or 
she did not respond to a notice regarding the updated information, and 
whether there are other procedures that could support the goals of the 
redetermination process for changes during the benefit year.
    To the extent that the Exchange verifies updated information 
reported by an enrollee or identifies updated information through data 
matching, we proposed that the Exchange determine the enrollee's 
eligibility and provide an eligibility notice in accordance with the 
process described in Sec.  155.305 and Sec.  155.310, respectively. 
Additionally, we proposed that changes resulting from a redetermination 
during the benefit year be effective for the first day of the month 
following the notice of eligibility determination, and proposed to 
allow for an exception, subject to the authorization of HHS, in which 
the Exchange could establish a ``cut-off date'' for changes resulting 
from a redetermination during the coverage year. We solicited comment 
as to whether this should or should not necessitate an authorization 
from HHS, and if there should be a uniform timeframe across all 
Exchanges. In addition, we solicited comment as to whether this is the 
appropriate policy for the effective date for changes.
    Finally, we proposed that if the eligibility determination results 
in an individual being ineligible to continue his or her enrollment in 
a QHP through the Exchange, the Exchange maintain his or her 
eligibility for enrollment in a QHP through the Exchange for a full 
month after the month in which the determination notice is sent. 
However, as soon as eligibility for insurance affordability materially 
changes, we proposed that the Exchange discontinue advance payments of 
the premium tax credit and cost-sharing reductions in accordance with 
the effective dates specified in paragraphs (e)(1) and (e)(2). We 
solicited comment on this topic, as well as on approaches to ensuring 
that transitions between insurance affordability programs do not create 
coverage gaps for individuals.
    Comment: We received a number of comments regarding 
redeterminations conducted during the benefit year, as proposed in 
Sec.  155.330. While several commenters were supportive of the 
opportunity for an enrollee to have his or her eligibility redetermined 
prior to the annual redetermination, other commenters suggested that we 
limit or eliminate eligibility redeterminations during the benefit year 
in order to limit movement for enrollees between different insurance 
affordability programs and QHPs.
    Response: We feel it is important for the Exchange to accept and 
identify changes to help ensure that an enrollee's eligibility reflects 
his or her true circumstances, which will help minimize repayment of 
excess advance payments at reconciliation when income increases, 
increase the affordability of coverage when income decreases, and 
improve program integrity. Therefore, we maintain in the final rule the 
opportunity for eligibility redeterminations during the benefit year.
    Comment: Of those entities that commented on the process for 
handling

[[Page 18372]]

changes during the benefit year described in proposed Sec.  155.330, a 
number suggested limiting the scope of changes on which enrollees must 
report; these commenters stated that requiring reporting of any and all 
changes potentially impacting eligibility would substantially increase 
the administrative burden on both the Exchange and on enrollees. Many 
commenters recommended clarifying that an enrollee in a QHP who is not 
receiving advance payments of the premium tax credit or cost-sharing 
reductions would not be required to report changes in their household 
income or access to minimum essential coverage, as these are not 
considered when financial assistance is not present. Other commenters 
suggested limiting the reporting of changes in income; some recommended 
that enrollees be allowed and encouraged, but never required, to report 
changes in income, while others were in favor of a establishing a 
threshold for the reporting of income changes. Generally, those 
commenters who suggested limiting the changes that individuals must 
report also suggested that enrollees should be encouraged but not 
required to report all other changes impacting eligibility, such as 
changes in income and family size.
    Response: In response to commenters' suggestions, we have altered 
Sec.  155.330 in this final rule regarding the policy of reporting of 
changes during the benefit year. First, we clarify that the Exchange 
may not require an enrollee who did not request an eligibility 
determination for insurance affordability programs to report changes 
related to eligibility for insurance affordability programs, including 
changes in income or access to minimum essential coverage. We clarify 
that we mean an enrollee who, as of his or her most recent interaction 
with the Exchange, has not requested an eligibility determination for 
insurance affordability programs. In response to comments regarding 
which changes an enrollee must report, we amended the regulation text 
in the final rule to reflect different standards for changes related to 
income. As a result, we maintain that an individual must report a 
change related to eligibility for enrollment in a QHP through the 
Exchange (that is a change in residence, incarceration or citizenship 
and lawful presence) within 30 days of such change; however, we allow 
the Exchange to establish a reasonable threshold below which an 
individual is not required to report a change in income. We believe 
that allowing the Exchange to limit the changes the enrollee must 
report will reduce confusion for enrollees and administrative burden on 
the Exchange, while still ensuring that significant changes are 
captured. With that said, we clarify that this provision does not allow 
the Exchange to not process changes in income that are reported by 
enrollees, regardless of whether they meet the threshold.
    Comment: In response to our request for comment in this area, we 
received comments asking that Exchanges periodically remind individuals 
to report changes impacting their eligibility. We also received 
comments recommending that the Exchange provide education regarding 
what changes must be reported and how the reporting of changes may 
impact reconciliation.
    Response: We have added a provision at paragraph Sec.  
155.330(c)(2) of this final rule specifying that the Exchange must 
provide periodic electronic notifications regarding the standards for 
reporting changes to an enrollee who has elected to receive electronic 
notifications, unless he or she has declined to receive such periodic 
electronic notifications. We believe this will complement the provision 
allowing Exchanges to limit those changes in income an enrollee must 
report, by helping ensure that consumers are informed of the impact and 
importance of reporting any change to the Exchange during the benefit 
year. In addition, we believe that electronic communications will be 
minimally burdensome for the Exchange and for enrollees. Exchanges can 
determine the timing and frequency of such notices.
    Comment: A large number of commenters supported our policy proposed 
at Sec.  155.330(c) directing Exchanges to periodically initiate 
limited data matches to identify changes in enrollees' eligibility. A 
few commenters asked that we preserve Exchange flexibility to expand 
the scope of data matches and others asked that we provide that 
Exchanges must expand data matches to include income and other data; 
these commenters noted that such an expansion would help decrease the 
burden on enrollees to report changes and to decrease inaccuracy when 
enrollees fail to report. However, some commenters were against any 
Exchange-initiated data matches, including the proposal to allow 
Exchanges flexibility to expand the scope of data matches with HHS 
approval. These commenters stated that such data matches would increase 
movement between programs for enrollees; they also believe that 
enrollees are in the best position to report changes impacting their 
eligibility.
    Response: While we acknowledge commenters' calls for Exchange 
flexibility to expand data matching, we believe that allowing for 
unlimited data matching without the application of specific standards 
would be undesirable. Therefore, in the final rule, we maintain the 
flexibility provision we proposed in the paragraph redesignated in this 
final rule as Sec.  155.330(d)(2), with one change: we do not require 
HHS approval to expand data matching, but provide that the Exchange 
must adhere to specific standards. We also adopt new procedures in this 
final rule around the verification of data obtained through such 
expanded data matches, which is explained in more detail in comment 
response below. Together, these changes will reduce burden for the 
Exchange and allow the Exchange to take steps to increase the accuracy 
of eligibility determinations as technology and data sources evolve; 
furthermore, the Exchange must ensure that such data matches would 
reduce administrative costs and burdens on individuals, maintain 
accuracy, minimize delay and would not undermine coordination with 
Medicaid and CHIP.
    Comment: We received a number of comments on the provision proposed 
in Sec.  155.330(d), related to the verification process and enrollee 
notification following the Exchange identifying a change that affects 
eligibility. As noted previously, some commenters objected to any 
Exchange-initiated data matching; these concerns were based in part on 
discomfort with the Exchange making changes to an enrollee's 
eligibility in cases in which the enrollee did not respond to a notice 
regarding the change. Some suggested that the Exchange verify changes 
reported or identified through data matching in accordance with the 
standards proposed in Sec.  155.315 and Sec.  155.320. Several 
commenters suggested that enrollees be given advance notice of changes 
identified through data matching and that they be able to affirm all 
changes prior to the Exchange using the new information. A number of 
commenters recommended that the notice proposed in Sec.  155.330(d) 
contain a right to appeal.
    Response: For changes in eligibility identified by the Exchange 
through data matching, the procedures for notifying the enrollee should 
be more clearly outlined in the final rule. Therefore, in Sec.  
155.330(e)(2) of this final rule we provide that for changes identified 
through data-matching that do not impact household income, family size, 
or family composition, the Exchange must notify the enrollee of the new 
data and his or her projected eligibility determination, and allow the 
enrollee

[[Page 18373]]

30 days to notify the Exchange if the information is inaccurate. If the 
enrollee responds that the information is inaccurate, the Exchange must 
proceed with the inconsistency process described in Sec.  155.315(f); 
if the enrollee responds that the information is accurate or does not 
respond, the Exchange must redetermine the enrollee's eligibility based 
on the verified data obtained through the data matching process.
    For changes to household income, family size and family composition 
identified through data matching, we provide in Sec.  155.330(e)(3) of 
this final rule that the Exchange must notify the enrollee of the new 
data and his or her projected eligibility determination (including the 
amount of advance payments of the premium tax credit and the level of 
cost-sharing reductions), and allow the enrollee 30 days to respond to 
the notice. If the enrollee does respond confirming the information 
obtained by the Exchange or responds by providing more up to date 
information, the Exchange must redetermine the enrollee's eligibility 
based on the data obtained through the data matching process or by 
verifying the updated information provided by the enrollee. However, if 
the enrollee does not respond, the Exchange must maintain the 
enrollee's eligibility without considering the new information. Because 
data related to income, family size and family composition has the 
potential to impact both the amount of financial assistance received by 
the enrollee and his or her tax liability at reconciliation, we believe 
the procedures for acting on such information should be different from 
the procedures for acting on data that do not have an impact on income 
and family size, and that enrollees must actively confirm such changes. 
We also note that the Exchange must notify the enrollee of the 
determination made as a result of a redetermination conducted during 
the benefit year, as indicated in (e)(1)(ii), and that such notice will 
include the right to appeal, in accordance with Sec.  155.355(a).
    Comment: Several commenters suggested clarification of our policies 
related to effective dates, as proposed in Sec.  155.330(d). A number 
of commenters suggested that we align effective dates across part 155; 
among those suggestions was one to align the effective dates for 
redeterminations with effective dates for coverage under special 
enrollment periods, as described in Sec.  155.420. Further, we received 
comments which suggested that we establish a uniform cut-off date.
    Response: We recognize the need for greater alignment between the 
effective dates for redeterminations of eligibility with effective 
dates for coverage, as described in Sec.  155.420 of this final rule. 
As such, in the final rule, we provide in Sec.  155.330(f) of this 
final rule that changes resulting from redeterminations during the 
benefit year must be implemented for the first day of the month 
following the date of the redetermination notice; however, we allow the 
Exchange to establish a cut-off date after which redeterminations would 
be implemented in the following month, as long as the cut-off date is 
no earlier than the date established under Sec.  155.420(b)(1), (which 
is the 15th of the month) in order to effectuate coverage on the first 
of the following month. We believe that allowing the Exchange to 
establish such a cut-off date aligning with the cut-off date for 
coverage effective dates will facilitate administrative efficiency for 
the Exchange, if it chooses to align. Regarding comments requesting a 
uniform cut-off date, we wish to maintain Exchange flexibility to 
establish such a cut-off date, which is the same approach taken in 
subpart E, and so do not change the policy reflected in Sec.  
155.330(f)(2) in this final rule. In the paragraph newly designated as 
Sec.  155.310(f) in this final rule, we also include the effective 
dates of eligibility for redeterminations, since these were 
inadvertently not included in the proposed rule. We also clarify that 
when we state that the effective date is the date on which the Exchange 
must implement an eligibility determination, we mean the date on which 
the applicant's eligibility, for example his or her advance payments of 
the premium tax credit or cost-sharing reduction, is or can be applied 
to the cost of his or her coverage.
    Comment: We received a number of comments regarding the policy 
proposed in Sec.  155.330(e)(3), which provides that the Exchange must 
extend an enrollee's eligibility for enrollment in a QHP for a full 
month, without advance payments of the premium tax credit or cost-
sharing reductions, following a notice of redetermination terminating 
his or her eligibility for enrollment. Several commenters expressed 
concern regarding this provision citing a potential for liability to 
issuers when enrollees neglected to or were unable to pay premiums 
without financial assistance. Some commenters suggested that 
individuals must pay premiums in order to receive such coverage, or 
that the redetermination notice clearly indicate when coverage will be 
terminated and that the enrollee will be liable for premiums not paid. 
Others asked that we make clear that an enrollee may always choose to 
terminate his or her enrollment in a QHP sooner than the termination 
date included in paragraph (e)(3).
    Response: We acknowledge commenters concerns regarding the 
potential for QHP liability during the available extension of coverage 
described in proposed Sec.  155.330(e)(3), redesignated as Sec.  
155.330(f)(3). We will take into consideration such comments when 
developing the notice of eligibility determination sent to an enrollee 
when he or she loses advance payments of the premium tax credit after 
redetermination and ensure that an enrollee is aware of their 
responsibility to pay for his or her premium. Furthermore, the 
provision Sec.  155.430(d)(3) of this final rule, which allows the 
enrollee to maintain eligibility for enrollment in a QHP without 
advance payments or cost-sharing reductions until the last day of the 
month following the notice of termination of coverage is sent, also 
makes clear that an enrollee may terminate his or her enrollment sooner 
than such date. We also clarify that the final rule does not provide 
that an enrollee must pay a premium if he or she does terminate 
coverage sooner than the date described in Sec.  155.430(d)(3), but we 
acknowledge that this provision would not prevent an issuer from 
seeking out premiums owed.

Summary of Regulatory Changes

    We are finalizing the provisions proposed in Sec.  155.330 of the 
proposed rule, with several modifications: we specified in paragraph 
(b)(1), that an enrollee must report any change with respect to the 
eligibility standard specified in Sec.  155.305 within 30 days of such 
change; however, we added in paragraph (b)(1) exceptions to this 
standard as described in new paragraphs (b)(2) and (b)(3). In new 
paragraph (b)(2), we provide that individuals who did request an 
eligibility determination for all insurance affordability programs must 
not be required to report changes related to eligibility for insurance 
affordability programs. In new paragraph (b)(3), we specified that for 
changes in income, the Exchange may establish a reasonable threshold 
for such changes below which enrollees are not required to report. 
Also, in new paragraph (b)(4), we added that the Exchange must allow an 
enrollee, or an application filer on behalf of the enrollee, to report 
a change via all channels available for the

[[Page 18374]]

submission of an application, which are described in Sec.  155.405(c).
    We also created new paragraph (c), which describes the standards 
for the Exchange to verify changes reported by enrollees. We moved 
proposed paragraph (b)(2) and redesignated it as paragraph (c)(1) and 
added paragraph (c)(2), which describes that the Exchange must provide 
enrollees with periodic notifications regarding standards for reporting 
changes and the opportunity to report any change, to the extent the 
enrollee has elected to receive electronic notifications and has not 
opted out of periodic notifications regarding change reporting.
    In new paragraph (d)(2), we added the opportunity for the Exchange 
to make additional efforts to identify and act on changes related to 
eligibility for insurance affordability programs, in addition to 
eligibility for enrollment in a QHP as previously proposed. We also 
removed the language that provided the Exchange with flexibility to 
conduct data matching during the benefit year, contingent upon HHS 
approval of a change to the Exchange Blueprint and instead included 
that this flexibility is subject to compliance with specific standards, 
including that such efforts would reduce the administrative costs and 
burdens on individuals while maintaining accuracy and minimizing delay, 
that it would not undermine coordination with Medicaid and CHIP, and 
that applicable standards under Sec.  155.260, Sec.  155.270, Sec.  
155.315(i) of this section, and section 6103 of the Code with respect 
to the confidentiality, disclosure, maintenance, or use of such 
information will be met. We also add that such efforts must comply with 
the newly designated paragraphs (e)(2) and (3).
    In newly designated paragraph (e), we added paragraphs (e)(2) and 
(e)(3) to describe the procedures for redeterminations that Exchanges 
must follow upon identifying new information through data matching. In 
newly designated paragraph (e)(2), we specified that for all changes 
identified by the Exchange that are not related to income, family size 
and family composition, the Exchange must notify the enrollee of his or 
her projected eligibility determination and allow the enrollee 30 days 
from the date of the notice to inform the Exchange that such 
information is inaccurate. If the information is inaccurate, the 
Exchange must follow procedures related to resolving inconsistencies 
described in Sec.  155.315(f). If the enrollee does not respond within 
the 30 day period, the Exchange must redetermine his or her eligibility 
using the new information. In newly designated paragraph (e)(3), we 
specify that for changes identified by the Exchange that are related to 
income, family size and family composition, the Exchange must notify 
the enrollee of his or her projected eligibility determination and 
allow the enrollee 30 days from the date of the notice to respond to 
the notice. If the enrollee responds within the 30 day period, the 
Exchange must redetermine his or her eligibility in accordance with the 
procedures for redetermining enrollee-reported data. If the enrollee 
does not respond within the 30 day period, we specified that the 
Exchange must maintain the enrollee's eligibility determination without 
the updated information.
    In newly designated paragraph (f), we amended the provisions 
related to effective dates for redeterminations made in accordance with 
this section. In newly designated paragraph (f)(1), we clarified the 
exceptions to the provision regarding effective dates for implementing 
changes resulting from a redetermination. In newly designated paragraph 
(f)(2), we added that while an Exchange may determine a reasonable 
point in a month after which a change captured through a 
redetermination will not be effective until the first day of the month 
after the month specified in newly designated paragraph (f)(1). We 
clarify that such reasonable point must be no earlier than the cut-off 
date described in Sec.  155.420(b)(1) of this part. In newly designated 
paragraph (f)(3), we also added a new reference to the effective dates 
described in subpart E to accommodate for renumbering.
    We renumbered several paragraphs in this section to accommodate 
changes to the final rule. Also, in paragraph (d), which was previously 
designated as paragraph (c), we changed the title to ``periodic 
examination of data sources.''
h. Annual Eligibility Redetermination (Sec.  155.335)
    In Sec.  155.330, we proposed that the Exchange redetermine the 
eligibility of an enrollee in a QHP during a benefit year if it 
receives and verifies new information reported by an enrollee or 
identifies updated information through data matching. We solicited 
comments on whether the redetermination based on changes reported or 
identified during the year should satisfy the annual redetermination as 
well, and if so, whether this should be a Federal standard or an 
Exchange option. We also solicited comment on how the interaction 
between Exchange eligibility and updated tax data can be streamlined, 
and at what point annual redeterminations should occur. Finally, we 
solicited comment regarding whether and how we should approach data 
matching related to redeterminations, and whether there were 
alternatives that could support the goals of this process.
    We also proposed that the Exchange provide an enrollee with an 
annual redetermination notice and identified specific data elements 
that should be contained in the notice and solicited comment regarding 
the contents of the notice. In addition, we proposed that the Exchange 
direct an individual to report any changes relative to the information 
listed on the redetermination notice within 30 days of the date of the 
notice, and specified that the Exchange must verify any changes 
reported by the individual in response to the notice using the same 
verification procedures used at the point of initial application, 
including the provisions regarding inconsistencies.
    We also proposed that an enrollee must sign and return the 
redetermination notice. We solicited comment on policy and operational 
strategies to improve the accuracy of redeterminations. We also 
solicited comment as to what steps the Exchange could take to ensure 
that redetermination minimizes burden on individuals, QHPs, and the 
Exchange without increasing inaccuracies.
    After the conclusion of the 30 day notice period, we proposed that 
the Exchange determine an enrollee's eligibility based on the 
information provided to the enrollee in the redetermination notice, 
along with any information that an enrollee has provided in response to 
such notice that the Exchange has verified; notify the enrollee; and, 
if applicable, notify the enrollee's employer. If an enrollee does not 
sign and return the notice, we proposed that the Exchange redetermine 
an enrollee's eligibility based on the information provided in the 
notice. In addition, we proposed that to the extent that the Exchange 
is unable to verify a change reported by an enrollee as of the close of 
the 30 day period, the Exchange redetermine the enrollee's eligibility 
as soon as possible after completing verification.
    We solicited comment as to whether the effective dates for changes 
made as a result of an annual redetermination should be different from 
the effective dates for changes made as a result of a redetermination 
that occurs during the coverage year.
    Finally, we proposed that if an enrollee remains eligible for 
coverage in a QHP upon annual redetermination, the enrollee will remain 
in the QHP selected the previous year unless the

[[Page 18375]]

enrollee takes action to select a new QHP or terminate coverage.
    Comment: A number of commenters supported the provision in proposed 
Sec.  155.335(a) to conduct eligibility redeterminations on an annual 
basis. Many commenters highlighted that this would avoid administrative 
burden, costs, and loss of eligibility. Several commenters suggested 
that HHS not provide for more frequent redeterminations.
    Response: In the final rule, we maintain the standard in Sec.  
155.335(a) to redetermine eligibility on an annual basis. We address 
redeterminations during the coverage year in our responses to Sec.  
155.330.
    Comment: The majority of commenters recommended that the timing of 
annual redetermination as described in proposed Sec.  155.335 align 
with the annual open enrollment period as specified in Sec.  155.410. 
Some commenters suggested combining the annual open enrollment notice 
with the annual redetermination notice. Many commenters recommended 
that the annual redetermination notice be distributed prior to the 
start of the annual open enrollment period. One commenter suggested 
sending the annual redetermination notice no later than 45 days prior 
to annual open enrollment. Another commenter recommended that HHS 
provide that Exchanges must send annual redetermination notices to 
enrollees no later than June 15th of each year. Commenters also 
suggested giving Exchanges flexibility to determine the best way to 
conduct redeterminations.
    Response: In response to the large number of comments we received 
on this topic, we have set a timing standard in Sec.  155.335(d) of 
this final rule for annual redetermination to align with annual open 
enrollment. In Sec.  155.335(d)(1), we provide that the Exchange must 
provide the annual redetermination notice and the notice of annual open 
enrollment in a single, coordinated notice for the 2015 and 2016 
benefit year. We believe this will reduce confusion among consumers and 
reduce administrative burden. In Sec.  155.410(d), we specify that the 
notice of annual open enrollment will be provided no earlier than 
September 1 and no later than September 30. We expect that as the 
program matures, States may have a better understanding of the best 
time to release the annual redetermination notice, and therefore in 
Sec.  155.335(d)(2) of this final rule, starting with annual 
redeterminations for coverage effective on January 1, 2017, we provide 
flexibility for Exchanges to adjust the timing and coordination of the 
redetermination notice in future years. The Exchange may exercise this 
flexibility to provide separate notices, provided that the timing of 
the redetermination notice is no earlier than the date of the notice of 
annual open enrollment specified in 155.410(d) and allows a reasonable 
amount of time for the enrollee to review the notice, provide a timely 
response, and for the Exchange to implement any changes in coverage 
elected during the annual open enrollment period; this is to ensure 
that the enrollee has adequate time to review available plans and 
change plans, if applicable.
    Comment: We solicited comment regarding whether a redetermination 
during the benefit year should satisfy the annual redetermination 
standard. Several commenters opposed this concept. One commenter 
recommended that allowing a redetermination of eligibility during the 
coverage year to serve as a household's annual redetermination should 
be a State option. Several commenters recommended that HHS should not 
give Exchanges the flexibility to conduct redeterminations on a rolling 
basis. Commenters suggested that annual redetermination should occur at 
a consistent point in the year for all individuals when new tax data 
becomes available, regardless if eligibility was redetermined during 
the coverage year.
    Response: We decided not to allow redeterminations during the 
benefit year to satisfy the annual redetermination for an enrollee. Due 
to the fixed coverage period and a set annual open enrollment period, 
we believe allowing for a rolling annual redetermination would create a 
situation where the Exchange may redetermine an enrollee's eligibility 
but the enrollee would not be able to switch plans because they would 
not qualify for an enrollment period. Additionally, we believe that 
because the annual redetermination relies on tax data which is updated 
at a specific time each year, rolling annual redetermination would add 
unnecessary complexity to the streamlined redetermination process. 
Finally, we also believe that this approach will increase the 
predictability of Exchange staffing and other resource needs.
    Comment: Some commenters suggested HHS clarify that enrollees do 
not have to submit a new application to complete the annual 
redetermination process. Several commenters recommended that an 
individual's information from initial enrollment should be retained and 
used during the redetermination process. Accordingly, commenters 
suggested that an enrollee should never have to re-enter any 
information during the annual redetermination process that has not 
changed. A few commenters specified that States should use an ``ex 
parte'' redetermination process, in which the Exchange attempts to 
redetermine the enrollee's eligibility using information from external 
data sources; under such a process, the Exchange only contacts the 
enrollee if additional information is needed. Commenters also suggested 
that Exchanges and States should use a ``passive'' redetermination 
process, through which an enrollee notifies the Exchange that he or she 
agrees with the information included in a redetermination notice by not 
responding. Several commenters suggested that pre-populated forms or 
applications be used for annual redeterminations. Many commenters 
expressed support for the proactive role of the Exchange in obtaining 
data from external data sources to assist in annual redetermination.
    Response: We have maintained the provisions in Sec.  155.335(c) of 
this final rule that outline information to be presented on the annual 
redetermination notice. We believe this will increase retention rates 
by helping to minimize the risk of individuals losing coverage when 
they remain eligible. We also believe this process will reduce 
administrative burden on the Exchange by reducing the steps necessary 
to redetermine eligibility. Furthermore, we add language to paragraph 
(c)(3) providing that the notice of annual redetermination must include 
eligibility for Medicaid, CHIP or BHP, if applicable, since the updated 
tax return information and data regarding MAGI-based income may 
indicate eligibility for Medicaid, CHIP or BHP, in addition to 
eligibility for advance payments of the premium tax credit and cost-
sharing reductions.
    Comment: Several commenters recommended specific information for 
the content of the annual redetermination notice as specified in 
proposed Sec.  155.335(c). Items suggested include the date the 
redetermination will become effective, procedures to correct errors in 
data obtained or used in the enrollee's most recent eligibility 
determination, including the 30 day requirement to report changes 
specified in Sec.  155.335(e), or where individuals may obtain 
additional information or assistance, including the Exchange Web site, 
call center, Navigators and other consumer assistance tools. One 
commenter felt that notices regarding annual redeterminations may be 
confusing to many consumers. Some commenters recommended that notices 
comply with standards in Sec.  155.230 to

[[Page 18376]]

ensure meaningful access for limited English proficient enrollees. 
Others recommended that annual redetermination notices include 
information about rights to appeal.
    Response: We provide general standards for all notices from the 
Exchange in Sec.  155.230, which include accessibility and readability 
standards outlined in Sec.  155.205(b)(2) and (b)(3). We intend to 
provide further interpretation regarding issuance of the annual 
redetermination notice in future guidance which may include a model of 
the annual redetermination notice and detail on content.
    In response to comments, we would also like to clarify the 
differences between the notices outlined in Sec.  155.335(c) and Sec.  
155.310(g) of this final rule. The redetermination notice in Sec.  
155.335(c) is the pre-populated form which includes the enrollee's 
updated information, including--in the case of an enrollee who allowed 
the Exchange to determine his or her eligibility for insurance 
affordability programs--updated tax return information and updated 
current income information. In accordance with Sec.  155.335(e), this 
notice will be signed and returned by each enrollee to confirm 
information is up-to-date. After information on this notice has been 
verified and a final eligibility determination has been made, the 
Exchange will send a second notice described in Sec.  155.310(g), as 
finalized in this rule, to notify the enrollee of the final eligibility 
determination for the upcoming benefit year.
    Comment: Many commenters recommended that the final rule should 
specify that enrollees can report changes through the same channels 
available for the submission of an application (online, by phone, by 
mail, in person), as specified in proposed Sec.  155.405.
    Response: In 155.335(e)(2) of this final rule, we clarify that an 
enrollee or an application filer, on behalf of the enrollee, may report 
a change online, by phone, by mail, or in person. We identify these 
channels for an enrollee to provide additional information based on 
section 1413(b) of the Affordable Care Act and Sec.  155.405, which 
identify how an applicant may submit an application. As the annual 
redetermination will be functionally the same as a new application for 
the next benefit year, the use of the same procedures is appropriate. 
We have also added this provision to Sec.  155.330(b)(4), to allow an 
enrollee, or application filer on the enrollee's behalf, to report 
changes via the channels described in Sec.  155.405.
    Comment: Some commenters supported the standard set forth in the 
proposed rule that the verification processes related to changes 
reported as a part of the annual redetermination process specified in 
proposed Sec.  155.335(e) be consistent with the processes specified in 
proposed Sec.  155.315 and Sec.  155.320. Many commenters suggested HHS 
specify timeframes by which the Exchange must verify changes reported 
by the enrollee in response to the annual redetermination notice. One 
commenter suggested a time period of 10 days by which to conduct the 
verification. Another commenter believed States should have the 
flexibility to be able to determine any time constraints or 
verification processes related to changes reported in response to the 
annual redeterminations.
    Response: We support the standard to use the same verification 
processes for initial applications and for annual redeterminations. We 
believe that the timeliness standards for verification should be 
consistent with the standards Sec.  155.310(e); we intend to provide 
more guidance on the interpretation of the timeliness standard.
    Additionally, we would like to clarify that in order to conduct a 
redetermination as outlined in Sec.  155.335, the Exchange must obtain 
an authorization from an enrollee to request his or her tax data. We 
anticipate that this authorization will be obtained during the initial 
application process, and that such authorization could be accomplished, 
for example, by allowing enrollees a chance to opt out of authorizing 
the use of tax data. An enrollee must provide an authorization for the 
Exchange to obtain tax data for annual redeterminations only if he or 
she chooses to allow the Exchange to determine his or her eligibility 
for insurance affordability programs. We also clarify that without such 
authorization, the Exchange will be unable to access tax return 
information and, subsequently, conduct an eligibility redetermination 
for insurance affordability programs.
    The Secretary of Treasury will allow an individual to authorize the 
release of his or her tax data for use by the Exchange in verification 
of household income for a period of up to five years. In 155.335(k), we 
specify that the Exchange must have authorization from an enrollee in 
order to obtain his or her updated tax return information for purposes 
of conducting an annual redetermination. We specify that the Exchange 
may obtain this tax return information for a period of no more than 
five years, based on a single authorization. The Exchange must allow 
the individual to decline a five-year authorization or to authorize the 
Exchange to obtain tax return data for annual redetermination for a 
period of less than five years. We also specify that the Exchange must 
allow an individual to discontinue, change, or renew the authorization 
at any time. We expect that an enrollee will have an opportunity to 
reauthorize the Exchange to obtain tax return data whenever he or she 
reports changes, at annual redetermination, and in the course of other 
interactions with the Exchange. We believe this process will be 
minimally burdensome on the individual and on the Exchange.
    In 155.335(l), we clarify that to the extent that an enrollee has 
requested an eligibility determination for all insurance affordability 
programs and has not authorized the request of tax data, the Exchange 
will redetermine the enrollee's eligibility for enrollment in a QHP, 
but must notify the enrollee that the Exchange will not proceed with 
the redetermination process until such authorization has been obtained 
or the enrollee discontinues his or her request for an eligibility 
determination for insurance affordability programs.
    We also clarify that for purposes of providing updated data 
described in Sec.  155.335(b), we expect that the Exchange will obtain 
the updated information for enrollees who, as of their most recent 
interaction with the Exchange, has requested an eligibility 
determination for all insurance affordability programs; as such, for an 
enrollee who requested an eligibility determination for insurance 
affordability programs but who was determined ineligible for advance 
payments of the premium tax credits or cost-sharing reductions, the 
Exchange would obtain updated information at annual redetermination, to 
the extent that the applicable authorization was in place.
    Comment: We received a large number of comments expressing concern 
over the requirement for enrollees to sign and return the annual 
redetermination notice when no changes have occurred, as specified in 
proposed Sec.  155.335(f)(1). Commenters suggested the sign and return 
requirement was an unnecessary burden on consumers and Exchanges, since 
the Exchange is instructed to redetermine eligibility using the 
information on the notice even if the notice is not returned. A few 
commenters highlighted the current practice in Medicaid where annual 
redeterminations are completed without a signature required from the 
enrollee.
    Response: While signing and returning the redetermination notice

[[Page 18377]]

will add an additional step in the redetermination process, due to the 
financial responsibility imposed on an individual accepting an advance 
payment of the premium tax credit as part of the reconciliation 
process, we believe it is important to collect a signature from an 
enrollee as a means of ensuring that he or she accepts this 
responsibility.
    Comment: Several commenters supported proposed Sec.  155.335(e), 
which provided that an enrollee correct any erroneous information on 
the redetermination notice and report changes to the information on the 
annual redetermination notice within 30 days. A few commenters urged 
HHS to consider extending the period enrollees are given to return the 
notice with reported changes consistent with the language in the 
Medicaid proposed rule, which provides States with the authority to 
increase this time period to more than 30 days.
    Response: In the final rule, we maintain the standard of 30 days 
for an individual to report changes and believe this standard provides 
a reasonable amount of time for individuals to review the annual 
redetermination notice and submit changes as appropriate.
    Comment: Commenters recommended adopting the effective dates 
outlined for the annual open enrollment periods in proposed Sec.  
155.410(f) as the effective dates for annual redeterminations, except 
for enrollees who become eligible for Medicaid as a result of an annual 
redetermination. In those cases, commenter recommended that Medicaid 
eligibility and coverage be effective on the first day of the month in 
which the eligibility determination is made.
    Response: In Sec.  155.335(i) of the final rule, we have modified 
the language in the regulation text to clarify that the effective date 
for the annual redetermination will be the first day of the coverage 
year following the year in which the Exchange provided the annual 
redetermination notice in Sec.  155.335(c) or on the first day of the 
month following the eligibility notice to the enrollee in accordance 
with Sec.  155.330(f), whichever is later. The latter part of this 
clarification addresses situations in which the eligibility 
determination is made by the Exchange in the benefit year for which the 
applicant is seeking coverage. The effective dates for annual 
redetermination should not be confused with the dates by which the 
Exchange must make a QHP selection effective during the annual open 
enrollment period as specified in Sec.  155.410(f). Regarding 
commenters suggestions for the effective dates for individual 
determined eligible for Medicaid at annual redetermination, we clarify 
that coverage effective dates for Medicaid eligibility are governed by 
those standards found in Medicaid regulations at 42 CFR 435.915. In 
accordance with Sec.  155.310(d)(3), the Exchange must transmit 
enrollee information promptly and without undue delay to the State 
Medicaid or CHIP agency so that he or she may be enrolled in Medicaid 
or CHIP. We note that in accordance with section 36B(c)(2) of the Code, 
eligibility for premium tax credits (including the advance payments) 
and cost-sharing reductions will terminate when an individual is 
eligible for minimum essential coverage, including Medicaid and CHIP 
coverage.
    Comment: Several commenters supported the provision specified in 
proposed Sec.  155.335(i) to allow an enrollee who remains eligible for 
enrollment in a QHP upon annual redetermination to remain in his or her 
QHP without the need to re-select it. One commenter suggested the 
provision aligns with the goal of a simple and consumer-friendly 
Exchange. Another commenter emphasized that no enrollee should be 
removed from coverage until the enrollee has been given notice of an 
eligibility determination and the right to appeal.
    Response: We are finalizing without change the provision to allow 
an enrollee who remains eligible for enrollment in a QHP upon annual 
redetermination to remain in his or her QHP without the need to re-
select it. We believe this provision will minimize disruptions in 
coverage for eligible enrollees and administrative burden for the 
Exchange, QHP issuers, and enrollees. We also clarify that references 
to termination in this provision only relate to termination initiated 
by the enrollee, which we believe addresses the commenter's concern 
about notices and appeals.

Summary of Regulatory Changes

    We are finalizing the provisions proposed in Sec.  155.335 of the 
proposed rule, with the following modifications: in paragraph (a), we 
noted that annual redeterminations are limited based on the new 
language in paragraph (l) of this section. In paragraph (b), we 
clarified that in the case of an enrollee who has requested an 
eligibility determination for all insurance affordability programs in 
accordance with Sec.  155.310(b) of this subpart, the Exchange must 
request updated tax return information, if the enrollee has authorized 
the request of such tax return information. In paragraph (c), we added 
that the notice must also include an enrollee's projected eligibility 
determination, including eligibility for insurance affordability 
programs. In paragraph (d), we clarified the timing of the annual 
redetermination. For coverage effective January 1, 2015 and January 1, 
2016, the Exchange must satisfy the notice provisions of paragraph (c) 
of this section and Sec.  155.410(d) of this part through a single, 
coordinated notice. In paragraph (d)(2), we provided that for coverage 
effective January 1, 2017, the Exchange may send the annual 
redetermination notice separately from the notice of annual open 
enrollment, provided that certain restrictions on the timing of such 
notices are met.
    In paragraph (e) of this section we clarified that the Exchange 
must allow an enrollee or an application filer, on the enrollee's 
behalf, to report changes via the channels available for the submission 
of an application, as described in Sec.  155.405(c) of this part. We 
also added to paragraph (g)(1), that an application filer may sign and 
return the annual redetermination notice on an enrollee's behalf. In 
paragraph (i), we modified the standard for effective dates of annual 
redetermination to clarify that the Exchange must ensure that the 
annual redetermination is effective on the first day of the coverage 
year following the year in which the Exchange provided the notice in 
paragraph (c) of this section or in accordance with the rules specified 
in Sec.  155.330(f), regarding effective dates, whichever is later. In 
new paragraph (k), we added language to specify that the Exchange must 
have authorization from an enrollee in order to obtain updated tax 
return information for purposes of conducting an annual 
redetermination. We also describe that any single authorization will 
extend for a period of no more than five years, and that an individual 
may authorize the Exchange to obtain tax data for a period of less than 
five years, or not at all. We also provide that the enrollee must be 
able to discontinue, change or renew an authorization at any time. In 
new paragraph (l), we added language to specify that to the extent that 
an enrollee who has requested an eligibility determination for 
insurance affordability programs in accordance with Sec.  155.310(b) 
has not authorized the request of data described in paragraph (b), the 
Exchange must notify the enrollee in accordance with the timing 
described in paragraph (d), and not proceed with the redetermination 
process described in paragraphs (c) and (e) through (j) until such 
authorization has been obtained or the enrollee discontinues his or her 
request for an

[[Page 18378]]

eligibility determination for insurance affordability programs in 
accordance with Sec.  155.310(b).
    We also made a few technical corrections to this section including 
renumbering paragraphs (d) through (k) to account for additional 
regulation text and updated cross-references based on similar 
renumbering in other parts of this final rule. In paragraph (e)(1) we 
clarified that the reference to a notice is referring to the notice in 
paragraph (c) of this section. We also clarified that changes reported 
at annual redetermination must be verified according to the processes 
specified in Sec.  155.315 and Sec.  155.320. Finally, we clarified 
that the verification referred to in paragraph (h)(2) of this section 
is the same verification specified in paragraph (f) of this section.
i. Administration of Advance Payments of the Premium Tax Credit and 
Cost-Sharing Reductions (Sec.  155.340)
    In Sec.  155.340, we proposed reporting provisions for the Exchange 
related to advance payments of the premium tax credit and cost-sharing 
reductions. We proposed that in the event of a determination of an 
individual's eligibility or ineligibility for advance payments of the 
premium tax credit or cost-sharing reductions, including a change in 
the level of advance payments of the premium tax credit or cost-sharing 
reductions for which he or she is eligible, the Exchange provide 
information to the issuer of the QHP selected by the individual or in 
which the individual is enrolled.
    We also proposed that the Exchange provide eligibility and 
enrollment information to HHS to enable HHS to begin, end, or adjust 
advance payments of the premium tax credit and cost-sharing reductions. 
We solicited comment on whether the information could be used by HHS to 
support any reporting necessary for monitoring, evaluation, and program 
integrity. We solicited comment as to how this interaction can work as 
smoothly as possible and the scope of information that should be 
transmitted among the relevant agencies.
    We further proposed that the information transmitted to issuers 
include the information necessary to enable the issuer of the QHP to 
implement or discontinue the implementation, or modify the level of an 
individual's advance payment of the premium tax credit or cost-sharing 
reductions.
    We proposed to codify the reporting rules in sections 
1311(d)(4)(I)(ii) through (iii) and 1311 (d)(4)(J), which support the 
employer responsibility provisions of the Affordable Care Act. We 
proposed that when the Exchange determines that an applicant is 
eligible to receive advance payments of the premium tax credit based in 
part on a finding that his or her employer does not provide minimum 
essential coverage, or provides minimum essential coverage that is 
unaffordable as described in 26 CFR 1.36B-2(c)(3)(v) of the Treasury 
proposed rule, or does not meet the minimum value standard, as 
described in 26 CFR 1.36B-2(c)(3)(vi) of the Treasury proposed rule, 
the Exchange will provide this information to the Secretary of the 
Treasury. We proposed that the Exchange transmit such applicant's name 
and SSN to HHS, which will transmit it to the Secretary of the 
Treasury.
    In the event that an enrollee for whom advance payments of the 
premium tax credit are made or who is receiving cost-sharing reductions 
notifies the Exchange that he or she has changed employers, we proposed 
that the Exchange transmit the enrollee's name and SSN to HHS, which 
will transmit it to the Treasury. We also proposed that in the event an 
enrollee for whom advance payments of the premium tax credit are made 
or who is receiving cost-sharing reductions terminates coverage in a 
QHP through the Exchange during a benefit year, the Exchange transmit 
his or her name and SSN and the effective date of the termination of 
coverage to HHS, which will transmit it to the Treasury. We proposed 
that the Exchange will also transmit his or her name and the effective 
date of the termination of coverage to his or her employer. Finally, we 
proposed that the Exchange must comply with the standards related to 
reconciliation of the advance payments of the premium tax credit 
specified in section 36B(f)(3) of the Code and 26 CFR 1.36B-5 regarding 
reporting to the IRS and to taxpayers.
    Comment: We received a number of comments asking that we clarify 
how advance payments of the premium tax credit will be administered. 
Many comments suggested the use of electronic funds transfers, as well 
as electronic communications that are compatible with existing issuer 
infrastructure. Several commenters noted the importance of transparency 
and flexibility in establishing the standards regarding administration 
of the advance payment of the premium tax credit and cost-sharing 
reductions. Commenters suggested the need for further guidance on this 
topic.
    Response: In Sec.  155.340 of this final rule, we provide general 
standards for the exchange of information necessary for administration 
of advance payments of the premium tax credit and cost-sharing 
reductions, as well as to support the employer responsibility and 
reconciliation provisions of the Affordable Care Act. We anticipate 
providing more operational and procedural detail about these processes 
in future guidance.
    Comment: Several commenters recommended that the proposed Sec.  
155.340(a) include a specific timeliness standard for the Exchange to 
transmit information to facilitate the administration of advance 
payments of the premium tax credit and cost-sharing reductions to the 
applicable QHP and HHS. Commenters recommended that the timeliness 
standard reflect the ``real-time'' expectation, but to provide for 
exceptions in instances when systems are not functioning properly. Some 
commenters suggested that the regulation specify that all transactions 
be completed within one business day from the initiating event (for 
example, the completion of an eligibility determination).
    Response: In paragraph (d), we adopt, on an interim final basis, a 
timeliness standard that the Exchange must perform actions outlined in 
Sec.  155.340(a) to enable advance payment of premium tax credits and 
cost-sharing reductions ``promptly and without undue delay.'' We also 
adopt this standard for transmission of information described in Sec.  
155.340(b). We intend to interpret this standard in future guidance.
    Comment: Several commenters raised various privacy concerns in 
response to proposed Sec.  155.340(b)(2) and Sec.  155.340(b)(3)(i) 
prescribing that the Exchange transmit information to HHS when an 
enrollee changes employers and in the event that an individual for whom 
advance payments of the premium tax credit are made or who is receiving 
cost-sharing reductions terminates coverage from a QHP through the 
Exchange during a benefit year. Some commenters raised concerns over 
the amount of burden placed on Exchanges to provide this information to 
HHS and the Secretary of Treasury. A large number of commenters 
suggested that the information provided be limited to a minimum amount 
of information, only name and taxpayer ID number. Many commenters 
recommended striking, ``Social Security number,'' and replacing it 
with, ``taxpayer identification number.''
    Response: We codified the transactions specified in Sec.  
155.340(b)(2) and Sec.  155.340(b)(3)(i) from section 1311(d)(4)(I) of 
the Affordable Care Act, which specifies that they include name and 
taxpayer identification number. Accordingly, we have replaced, ``Social

[[Page 18379]]

Security number,'' with ``taxpayer identification number.'' We note 
that we have limited the information to be sent to HHS and to the 
Secretary of Treasury to be the information that is explicitly 
mentioned in section 1311(d)(4)(I). In addition, like all other 
activities related to personally identifiable information, the 
transactions specified in this section are subject to the privacy and 
security protections specified in Sec.  155.260 of this final rule. 
Regarding concerns of burden on the Exchange, in addition to this being 
a statutory standard, we believe that this will largely be an automated 
process and that the submission of information to HHS and the Secretary 
of Treasury will not be overly burdensome.
    Comment: A number of commenters sought more guidance on how cost-
sharing reductions will be implemented and monitored. Commenters 
suggested HHS provide flexibility and transparency in establishing 
standards related to cost-sharing reductions.
    Response: In Sec.  155.340 of this final rule, we specify that the 
Exchange will transmit information about an enrollee's eligibility to 
his or her QHP issuer in order to enable the QHP issuer to provide the 
correct level of cost-sharing reductions. We intend to provide future 
guidance on this issue and identify what we interpret to be the 
minimally necessary information for this purpose.

Summary of Regulatory Changes

    We are finalizing the provisions proposed in Sec.  155.340 of the 
proposed rule, with the following modifications: in Sec.  155.340(a) we 
replaced the terms applicant and enrollee with tax filer in connection 
with advance payments of premium tax credits because the tax filer is 
the eligible person for that benefit; we have retained the use of the 
terms applicant and enrollee in connection with cost-sharing reductions 
because that statute does not limit eligibility for that benefit to tax 
filers or tax payers. In Sec.  155.340(a)(2), we clarified that the 
Exchange must notify and transmit information necessary to enable the 
issuer of the QHP to implement, discontinue the implementation, or 
modify the level of an individual's advance payments of the premium tax 
credit or cost-sharing reductions, as applicable. In Sec.  
155.340(b)(2) and (b)(3)(i) of this section, we removed the standard 
that the Exchange transmit the enrollee's SSN and replaced it with 
taxpayer identification number. We also replaced the term 
``disenrolls'' with ``terminates coverage'' to align with language used 
in Sec.  155.430 of this part. We note that coverage terminations by 
the Exchange are limited to enrollment through the Exchange. For a more 
detailed discussion, please see the comment and response for Sec.  
155.430. We also add in paragraph (d) a timeliness standard for the 
transmissions of information described in paragraphs (a) and (b).
j. Coordination with Medicaid, CHIP, the Basic Health Program, and the 
Pre-Existing Condition Insurance Plan (Sec.  155.345)
    Based on comments and feedback to the proposed rule, we are 
revising the proposed rule to include paragraphs (a) and (g) of this 
section, and we are seeking comments on these provisions.
    In Sec.  155.345, we proposed standards for coordination across 
insurance affordability programs in order to implement a streamlined, 
simplified system for eligibility determinations and enrollment as part 
of the implementation of section 1413 of the Affordable Care Act. In 
this section, we also proposed standards for coordination between the 
Exchange and the Pre-Existing Condition Insurance Plan (PCIP), 
established in accordance with section 1101 of the Affordable Care Act.
    Specifically, we proposed that the Exchange enter into agreements 
with the State Medicaid or CHIP agencies as necessary to fulfill the 
Exchange responsibilities identified in this subpart. We proposed that 
as part of the eligibility determination process, the Exchange 
determine an applicant's eligibility for Medicaid and CHIP, in 
accordance with standards described in Sec.  155.305 of this subpart, 
notify the State agency administering Medicaid or CHIP of that 
determination, and transmit relevant information necessary for the 
timely enrollment of the eligible individual into coverage. Upon making 
a determination of eligibility for Medicaid or CHIP, we indicated that 
the Exchange must also notify the applicant of the determination. We 
suggested that the Exchange may also facilitate delivery system and 
health plan selection for Medicaid and CHIP and solicited comments 
regarding whether and how this integration of delivery system selection 
could best work for the Exchange, Medicaid, and CHIP.
    We also proposed that the Exchange perform a ``screen and refer'' 
function for those applicants who may be eligible for Medicaid in a 
MAGI-exempt category or an applicant that is potentially eligible for 
Medicaid based on factors not otherwise considered in this subpart. We 
proposed that the Exchange transmit eligibility information related to 
such application to the applicable State agencies promptly and without 
undue delay. In addition, we proposed that the Exchange provide advance 
payments of the premium tax credit and cost-sharing reductions to an 
individual who is found to be otherwise eligible while the agency 
administering Medicaid completes a more detailed determination.
    We also noted, based on our interpretation of proposed Treasury 
Sec.  1.36B-2(c)(2) published on the same day in the Federal Register, 
that an applicant who is referred to the Medicaid agency for additional 
screening and is enrolled in a QHP receiving advance payments of the 
premium tax credit in the interim would not be liable to repay advance 
payments if he or she is ultimately determined eligible for Medicaid 
and for any period of retroactive eligibility.
    We proposed that the Exchange provide an opportunity for an 
applicant who is not automatically referred to the State Medicaid 
agency for an eligibility determination to request a full screening of 
eligibility for Medicaid by such agency. We proposed that to the extent 
that an applicant requests such a determination, the Exchange will 
transmit the applicant's information to the State Medicaid agency 
promptly and without undue delay.
    We also proposed that the Exchange work with the agencies 
administering Medicaid and CHIP to establish procedures through which 
an application that is submitted directly to an agency administering 
Medicaid or CHIP initiates an eligibility determination for enrollment 
in a QHP, advance payments of the premium tax credit, and cost-sharing 
reductions. In addition, we proposed that the Exchange utilize a 
secure, electronic interface for the exchange of data for the purpose 
of determining eligibility, including verifying whether an applicant 
requesting an eligibility determination for advance payments of the 
premium tax credit and cost-sharing reductions has been determined 
eligible for Medicaid or CHIP, and other functions specified under this 
subpart. We also proposed that the Exchange utilize any model 
agreements established by HHS for the purpose of sharing data as 
described in this section. We solicited comment as to the content of 
these model agreements.
    Finally, we proposed to develop procedures for the transition of 
PCIP enrollees to coverage in QHPs offered through the Exchanges to 
ensure that PCIP enrollees do not experience a lapse in coverage. We 
solicited comment on additional responsibilities that should be 
assigned to an Exchange as part of this process, such as providing

[[Page 18380]]

dedicated customer service staff for PCIP enrollees or actions that may 
accelerate or further streamline eligibility determinations for PCIP 
enrollees.
    Comment: A large number of commenters supported a streamlined and 
coordinated eligibility determination process for all insurance 
affordability programs. A number of commenters also supported close 
alignment of policies between the Exchange and other insurance 
affordability programs to facilitate this streamlining and 
coordination. Commenters supported the standard specified in proposed 
Sec.  155.345(a) that the Exchange enter into agreements with Medicaid 
and CHIP agencies. A few commenters suggested that language be added to 
regulation text to ensure that the Exchange eligibility determinations 
for Medicaid and CHIP comply with State plans and interpretive policies 
and procedures of the State agency or agencies administering the 
Medicaid or CHIP programs.
    Response: We believe that agreements between the Exchange and other 
insurance affordability programs are important for ensuring such 
alignment and coordination across programs. We also note that in Sec.  
155.300(b) of this final rule, we specify that, in general, references 
to Medicaid and CHIP regulations in this subpart refer to those 
regulations as implemented in accordance with policies and procedures 
as applied by the State Medicaid or State CHIP agency or as approved by 
the State Medicaid or State CHIP agency. With that said, we have also 
added new Sec.  155.302 in this final rule that describes in greater 
detail the options available for configuring responsibilities related 
to eligibility determinations, which clarifies that there is an option 
under which the Exchange does not make Medicaid or CHIP eligibility 
determinations but is considered to be compliant with this final rule; 
in such situations, the State Medicaid and CHIP agencies exercise final 
control over eligibility determinations for Medicaid and CHIP for 
applications submitted to the Exchange.
    Additionally, we further clarify standards for coordination in 
Sec.  155.345(a) of this final rule to align with those outlined in the 
Medicaid final rule. Such standards are set to provide a clear 
delineation of responsibilities of each program to minimize burden on 
individuals, ensure prompt determinations of eligibility, enroll 
eligible individuals into the program promptly and without undue delay, 
and ensure compliance with the standards set forth in subpart D. We 
encourage States to work closely across the Exchange, Medicaid, and 
CHIP to simplify and streamline eligibility processes to maximize 
efficiency and minimize administrative costs. In addition, in response 
to comments regarding coordinating policies across insurance 
affordability programs to avoid negative outcomes for consumers, we 
have added new 155.345(f), which provides a special rule for the 
limited number of situations in which a tax filer's household income, 
as defined in section 36B(d)(2) of the Code, is less than 100 percent 
of the FPL for the benefit year for which coverage is requested, the 
Exchange determines that the tax filer is not eligible for advance 
payments of the premium tax credit based on Sec.  155.305(f)(2), and 
one or more applicants in the tax filer's household has been determined 
ineligible for Medicaid and CHIP based on income. This provision 
describes that the Exchange must provide information and explanation to 
the applicant and tax filer in such situations; we clarify that this 
language is new text, but that it is a means to address gaps in 
eligibility rules and procedures. This provision will only have an 
impact after the Medicaid rule in 42 CFR 435.603(i) is applied, which 
specifies that the Medicaid agency will determine Medicaid eligibility 
using section 36B rules, which should result in Medicaid eligibility in 
most cases. As such, we believe that the provision in paragraph (f) 
will be used in a very limited set of cases, but will ensure 
individuals are not affected by gaps in eligibility rules.
    Comment: Several commenters highlighted the importance of 
coordinating eligibility and enrollment for individuals who are 
determined eligible for Medicaid based on factors other than MAGI, for 
example those qualifying based on disability status. Many commenters to 
the proposed rule expressed concern that the Exchange standards in 
proposed Sec.  155.345(b) through (d), which relate to those 
individuals potentially eligible for Medicaid based on factors not 
otherwise mentioned in this subpart were overly vague. Commenters 
requested that HHS provide further details and guidance on the ``basic 
screening'' standard specified in proposed paragraph Sec.  
155.345(b)(1). Several commenters urged HHS to strengthen the standard 
and others suggested the Exchange should ask a question or a set of 
questions to assess whether a person is eligible for Medicaid on a non-
MAGI basis. Some commenters suggested striking a balance between 
gathering relevant information and not overburdening applicants with 
unnecessary questions. A few commenters suggested that States implement 
oversight mechanisms and protections to ensure that each applicant is 
directed to the most comprehensive benefits package to which he or she 
is entitled.
    Response: We clarified that the Exchange must assess the 
information provided by the applicant on his or her application to 
determine whether he or she is potentially eligible for Medicaid based 
on factors not otherwise considered in this subpart. We believe the 
term ``screening'' may have been misleading as the intention of the 
provision was to simply check the application for an indication that an 
applicant may be potentially eligible for Medicaid based on factors not 
otherwise considered, such as disability or age. We appreciate 
commenters' concerns that the Exchange only gather relevant information 
and not overburden applicants, and we believe that this approach will 
meet these standards.
    Comment: Many commenters raised concerns that individuals may be 
unaware of coverage that may be available to them and suggested that 
HHS clarify how an individual who is not found eligible for Medicaid 
based on MAGI will be notified of the opportunity to request a full 
eligibility determination for Medicaid. One commenter suggested that we 
provide example scenarios in the final rule to show when an applicant 
may be determined ineligible in a screening but eligible after a full 
screening. Another commenter suggested the basic screening on factors 
other than MAGI could be confused as an eligibility determination. Some 
commenters suggested amending language in proposed Sec.  155.345(c) 
such that the Exchange must notify applicants of the Medicaid programs 
that may be available to them so the applicant can request an 
appropriate determination of Medicaid eligibility from the State 
agency.
    Response: To address this concern, in Sec.  155.345(b) of this 
final rule, we specify that the Exchange will assess the information 
provided by the applicant on his or her application to determine 
whether he or she is potentially eligible for Medicaid based on factors 
other than MAGI. While not every individual who is potentially eligible 
for Medicaid based on non-MAGI factors will be identified through the 
assessment in Sec.  155.345(b), we believe that this provision will 
help identify a substantial portion of those individuals.

[[Page 18381]]

    We also clarify in Sec.  155.345(c) of this final rule that the 
Exchange will notify an applicant of his or her opportunity to request 
a full determination of eligibility for Medicaid and provide the 
applicant such opportunity. We anticipate that Exchanges will work with 
State Medicaid agencies to craft notice text that reflects the options 
available in specific States for Medicaid eligibility based on factors 
other than MAGI. We have added to paragraph Sec.  155.345(d) that the 
Exchange must notify the applicant during the application process that 
his or her application has been transmitted to the State Medicaid 
agency. We anticipate that such notices will be the subject of future 
guidance.
    Comment: Many commenters highlighted the importance of seamless 
transmissions between coverage programs. Some commenters suggested 
clarifying, ``promptly and without undue delay,'' and adding language 
providing that the Exchange must transmit the relevant information 
within 24 hours. A few commenters suggested that HHS establish 
standards for the State Medicaid agency to follow up on referrals it 
receives from the Exchange.
    Response: We believe it would be more appropriate to interpret such 
a standard in guidance, which will allow it to evolve with technology 
and supporting business processes.
    Comment: A few commenters also recommended aligning with Medicaid 
language to clarify that relevant information transmitted to Medicaid 
or CHIP agencies includes the electronic account containing the finding 
of Medicaid or CHIP eligibility, all information provided on the 
application, and any information obtained or verified by the Exchange 
in making such a finding.
    Response: We adopt the following standard to implement such a 
standard: the Exchange must transmit all information provided on the 
application and any information obtained or verified by, the Exchange 
to the State Medicaid agency. As discussed in more detail above, this 
Exchange final rule does not use the term ``electronic account'' but we 
believe that the scope of our standard appropriately aligns with the 
language in the Medicaid final rule on this point.
    Comment: The majority of commenters supported the standard to 
provide advance payments of the premium tax credit to individuals 
seeking a determination of Medicaid eligibility on a basis other than 
MAGI until the State Medicaid agency notifies the Exchange that the 
applicant is eligible for Medicaid. Commenters highlighted that this 
standard encourages applicants to obtain the most comprehensive 
coverage for which they are eligible. Commenters also noted this 
standard is vital to ensuring that consumers have access to continuous 
health coverage while they navigate the eligibility and enrollment 
process in their State. One commenter recommended that applicants be 
able to waive enrollment in a QHP while awaiting a Medicaid/CHIP 
determination.
    Response: We maintain this provision in the final rule. We clarify 
that this provision applies both when an applicant has not been 
determined eligible for Medicaid based on MAGI and either is referred 
by the Exchange to the State Medicaid agency based on screening, or 
requests a full Medicaid eligibility determination. We also clarify 
that an applicant is never required to enroll in a QHP while a full 
Medicaid determination is underway; the Exchange must provide 
eligibility, but it is the choice of the applicant whether to actually 
select a QHP. We also clarify that this provision would apply only to 
the extent that the responsibility to conduct a determination for 
Medicaid eligibility on bases other than MAGI has not been delegated to 
the Exchange, through an agreement between the Exchange and the State 
Medicaid agency.
    Comment: A few commenters said that the proposed process in Sec.  
155.345(d) for applications submitted directly to Medicaid, CHIP, or 
BHP was vague and should be clarified to specify that such agencies 
will screen applicants to determine whether they are eligible for 
enrollment in a QHP with or without advance payments of the premium tax 
credit and cost-sharing reductions, and then ``enroll'' eligible 
applicants. Many commenters supported the provisions in proposed Sec.  
155.345(d) that specified that an Exchange may not be required to 
duplicate any eligibility or verification findings that have already 
been made by agencies administering Medicaid, CHIP, or the BHP, where 
applicable. A few commenters suggested that language be added to 
clarify that Exchanges are not permitted, not simply ``not required,'' 
to duplicate eligibility and verification findings made by the Medicaid 
or CHIP agency.
    Response: In Sec.  155.345(g) of this final rule, we clarify our 
intention to maintain a streamlined eligibility determination process 
for consumers. Consistent with the Medicaid final rule, we add 
standards for how agencies administering Medicaid, CHIP, and BHP will 
transmit an application to the Exchange and how the Exchange will take 
the necessary steps to process such applications. We note that the 
Medicaid final rule provides additional information regarding the 
responsibilities of the Medicaid agency with regards to applications 
submitted directly to Medicaid. In Sec.  155.345(g)(2), we clarify that 
the Exchange must not duplicate any eligibility and verification 
findings already made by the transmitting agency, to the extent such 
findings are made in accordance with this subpart and in Sec.  
155.345(g)(3). We also clarify that the Exchange must not request 
information or documentation from the individual already provided to 
Medicaid, CHIP, or BHP that was included in the transmission to the 
Exchange. Additionally, in Sec.  155.345(g)(6) of this final rule, we 
specify that the Exchange must provide for following a streamlined 
process for eligibility determinations regardless of the agency that 
initially received an application. This provision is intended to ensure 
that an application that is submitted to a State Medicaid or CHIP 
agency follows the same processes for a complete MAGI-based 
determination of eligibility to enroll in a QHP, advance payments of 
the premium tax credit, and cost-sharing reductions.
    Comment: Commenters supported the provisions in proposed Sec.  
155.345(e) to use of a secure electronic interface to transmit data 
among the various agencies responsible for determining eligibility for 
the insurance affordability programs.
    Response: We maintain these provisions in the final rule. In 
addition to these standards, we have also further specified standards 
for data sharing in Sec.  155.260 in this final rule. More information 
can be found in the responses to comments found in that section.
    Comment: Several commenters requested guidance or standards in 
proposed Sec.  155.345(i) regarding the transition of Pre-existing 
Condition Insurance Plan (PCIP) enrollees into the Exchange, and many 
commenters provided specific suggestions as to what this guidance 
should consider. Some specific recommendations provided include that 
the Exchange should develop an agreement with PCIP; the Exchange and 
PCIP should coordinate to develop a letter informing PCIP enrollees of 
what they need to do to transition to the Exchange; customer service 
resources should be dedicated and trained to assist these enrollees to 
transition smoothly; and others provided recommendations regarding 
outreach, education, and information that should be provided to PCIP 
enrollees, frequently citing provider

[[Page 18382]]

directories as an example of information that needs to be clearly 
provided to PCIP enrollees. Some commenters recommended that 
information be transferred between the PCIP and Exchange programs to 
reduce the need for the Exchange to request duplicative information 
from PCIP enrollees and to ease their transition into the Exchange.
    Several commenters emphasized that flexibility be given to States 
to accommodate the transition of PCIP enrollees due to concerns related 
to the influx of large numbers of high-risk people. Some of these 
commenters recommended that HHS consider allowing the Exchange to 
transition PCIP enrollees into 2014 and years beyond. One commenter 
recommended that the Federal government should not assign specific 
responsibilities to State-operated Exchanges relating to transitioning 
PCIP enrollees into Exchanges, while another commenter suggested that 
HHS evaluate mechanisms to ensure that a distribution of enrollees is 
balanced among QHPs in the Exchange.
    Response: We will consider these comments as we develop future 
guidance to support a smooth transition of PCIP enrollees into the 
Exchange that minimizes disruption in the insurance marketplace to the 
greatest extent possible, while also ensuring that this population has 
access to affordable, high-quality health insurance.

Summary of Regulatory Changes

    We are finalizing the provisions proposed in Sec.  155.345 of the 
proposed rule, with several modifications: in Sec.  155.345(a), we 
clarified that the Exchange must provide HHS with copies of any 
agreements made with other agencies administering insurance 
affordability programs upon request. We clarified that agreements must 
include a clear delineation of the responsibilities of each program to 
minimize burden on individuals, ensure prompt determinations of 
eligibility and enrollment, including redeterminations, and ensure 
compliance with paragraphs (c), (d), (e), and (g) of this section. We 
also modified language in Sec.  155.345(b) to specify that for an 
applicant who is not eligible for Medicaid based on the standards 
specified in Sec.  155.305 of this subpart, the Exchange must assess 
the information provided on the application to determine whether he or 
she is potentially eligible for Medicaid based on factors included in 
the streamlined application, but not otherwise considered in this 
subpart.
    In Sec.  155.345(c) of this final rule, we added that the Exchange 
must provide, and notify an applicant of, the opportunity to request a 
full determination of eligibility for Medicaid. We also add that the 
Exchange must provide notification and opportunity for a full 
determination of eligibility for Medicaid when making a determination 
in accordance with Sec.  155.330 and Sec.  155. 335. We modified 
language in Sec.  155.345(d) to specify that if the Exchange identifies 
an applicant as potentially eligible for Medicaid or an applicant 
requests a full determination for Medicaid, the Exchange must transmit 
all information provided on the application and any information 
obtained or verified by the Exchange to the State Medicaid agency 
promptly and without undue delay.
    In addition, we clarified language in Sec.  155.345(e) to provide 
that if an applicant potentially eligible for Medicaid is otherwise 
eligible for advance payments of the premium tax credit and cost-
sharing reductions, the Exchange must provide the applicant with such 
advance payments of the premium tax credit or cost-sharing reductions 
until Medicaid notifies the Exchange that the applicant is eligible for 
Medicaid. We amended Sec.  155.345(f) to add a special rule to address 
situations in which a tax filer's household income is below 100 percent 
of the FPL for the benefit year for which coverage is requested, the 
tax filer is not eligible for advance payments of the premium tax 
credit based on Sec.  155.305(f)(2), and one or more applicants in the 
tax filer's household is ineligible for Medicaid and CHIP based on 
income, in which case the Exchange must provide the income information 
used in the Medicaid and CHIP determination to the applicant, and then 
repeat the verification process. We modified Sec.  155.345(g)(1) to 
include the standards set forth in the Medicaid final rule and outline 
that the Exchange must--(1) Accept, via secure electronic interface, 
all information provided on the application and any information 
obtained or verified by, the agency administering Medicaid, CHIP, or 
the BHP, if a BHP is operating in the service area of the Exchange, for 
the individual, and not require submission of another application; (2) 
not duplicate any eligibility and verification findings already made by 
the transmitting agency, to the extent such findings are made in 
accordance with this subpart; (3) not request information or 
documentation from the individual already provided to another insurance 
affordability program; (4) promptly and without undue delay determine 
eligibility of the individual for enrollment in a QHP, advance payments 
of the premium tax credit and cost-sharing reductions, in accordance 
with this subpart; and (5) provide for following a streamlined process 
for eligibility determinations regardless of the agency that initially 
received an application. Additionally, we renumbered paragraphs (c) 
through (i) to account for the changes described above.
    We also made two technical corrections. First, we amended the 
phrase ``providing advance payments of the premium tax credit'' to 
``providing eligibility for advance payments of the premium tax 
credit''. Second, we changed, ``Pre-Existing Condition Insurance 
Program'' to ``Pre-Existing Condition Insurance Plan'' to match the 
actual name of the plan.
k. Special Eligibility Standards and Process for Indians (Sec.  
155.350)
    In accordance with section 1402(d)(1) of the Affordable Care Act, 
in Sec.  155.350(a), we proposed that the Exchange determine 
eligibility for cost-sharing reductions for an applicant who is an 
Indian if he or she meets the standards related to eligibility for 
enrollment in a QHP and has household income that does not exceed 300 
percent of the FPL. We also proposed to clarify that the Exchange may 
only provide cost-sharing reductions to an individual who is an Indian 
if he or she is enrolled in a QHP. In addition, in Sec.  155.350(b) we 
provided that the Exchange must determine an applicant eligible for the 
special Indian cost-sharing rule in accordance with section 1402(d)(2) 
of the Affordable Care Act if he or she is an Indian, without requiring 
the applicant to request an eligibility determination that provides for 
collection or verification of income.
    We further proposed a two-phase process by which the Exchange must 
verify an individual's attestation that he or she is an Indian for 
purposes of determining whether he or she qualifies for these cost-
sharing rules. In paragraph (c)(1), we proposed that the Exchange must 
verify an applicant's attestation that he or she is an Indian if an 
applicant submits satisfactory documentation to support their 
attestation of citizenship or lawful presence in accordance with Sec.  
155.315(e). In paragraph (c)(2), we proposed that the Exchange must 
rely on any available electronic data sources that have been authorized 
by HHS. Lastly, if the process under (c)(1) does not occur or data 
sources are unavailable, the individual is not represented in the 
source, or the source is not reasonably compatible with the applicant's 
attestation, we proposed that

[[Page 18383]]

the Exchange follow the standard inconsistency procedures under Sec.  
155.315(e). We solicited comment on the availability and usability of 
electronic data sources, as well as best practices for accepting and 
verifying documentation related to Indian status.
    Comment: One commenter sought clarification about proposed Sec.  
155.350(b), which codifies section 1402(d)(2) of the Affordable Care 
Act. The commenter noted that this section appears to apply only to 
those services received at the IHS, and the commenter asked if it also 
applies to referrals to outside specialists, etc. The commenter further 
suggested that the proposed regulations appear to go beyond what the 
statute asks and recommends that the special cost-sharing provisions be 
limited to those services furnished through Indian Health Providers.
    Response: Our intent is to adhere to the statute. In accordance 
with section 1402(d)(2) of the Affordable Care Act, the cost-sharing 
rule described in Sec.  155.350(b) of this final rule is limited to 
only an item or service furnished directly by the Indian Health 
Service, an Indian Tribe, Tribal Organization, or Urban Indian 
Organization or through referral under contract health services.
    Comment: Several commenters generally requested that all applicants 
and potential applicants be given notice that there may be benefits and 
protections that apply if the applicant is an Indian. One commenter 
recommended that determining Indian status should be a one-time 
occurrence, and the commenter further requested that any data matching 
system used to identify eligible American Indians or Alaska Natives 
should only provide information essential to establish whether an 
individual is an Indian in order to protect the privacy of the 
individual from unwarranted intrusions. The commenter acknowledged that 
there will be cases in which further verification is necessary or where 
there is a gap in information available through data matching, and that 
there should be other vehicles by which an individual can establish 
qualifications for benefits and protections as an American Indian or 
Alaska Native. Another commenter suggested that any reasonable 
documentation be accepted, and lists a number of potential documents 
that would satisfy this policy. One commenter recommended that Indians 
with tribal enrollment cards should be able to submit their tribal 
enrollment number on their application.
    Response: We anticipate that verification of Indian status for 
purposes of determining eligibility for Exchange-related benefits will 
only be a one-time occurrence for applicants. Additionally, the 
utilization of any electronic data sources for purposes of verification 
of Indian status will be subject to the privacy and security standards 
outlined in Sec.  155.260 and Sec.  155.270 of this final rule, as is 
the case for all data acquired and used by the Exchange in the 
eligibility determination process. Lastly, under Sec.  155.350(c)(3) of 
this final rule, we reference section 1903(x)(3)(B)(v) of the Act for 
standards for acceptable documentation, which includes documents issued 
by Federally-recognized tribes. These standards for acceptable 
documentation provide uniformity in process for applicants claiming 
Indian status.
    Comment: A few commenters recommended that the Exchange accept 
self-attestation for verification of Indian status, stating that self-
attestation should be sufficient if the application questions are 
framed in a way that can be used to determine eligibility. One 
commenter suggested that verification of Indian status only be 
conducted when there are inconsistencies that cannot be resolved 
through simple explanation and attestation by the individual, or if 
there is some indication of fraud on the part of the individual, and 
further recommended that if electronic data sources are utilized to 
verify Indian status, that the only appropriate data source is the 
registration database used by Indian Tribe, Tribal Organization, or 
Urban Indian Organization programs.
    Response: We are maintaining the verification process described 
under Sec.  155.350 in this final rule. This verification is tied to a 
full exemption from cost-sharing, which could involve a substantial 
expenditure for the Federal government; consequently, we are specifying 
a more stringent process for verification though we note that Sec.  
155.315(h) allows the Exchange flexibility to modify this and other 
verification processes with HHS approval. In addition, we note that the 
documentation process described under Sec.  155.350(c)(3) is similar to 
the documentation process utilized by the IHS when determining 
eligibility for American Indians/Alaska Natives who seek services at 
IHS facilities. The standard for Exchanges is slightly different from 
the standard for such services, however, which means that the 
registration database for Indian Tribe, Tribal Organization, or Urban 
Indian Organization programs may not be a one-to-one match. With that 
in mind, we are working closely with the IHS and intend to work with 
States and tribes to determine whether and how electronic data can 
support this process.
    Comment: Several commenters recommended that American Indians be 
determined eligible for advance payments of the premium tax credit and 
cost-sharing reductions through the Exchange even if they have access 
to qualifying coverage in an eligible employer-sponsored plan, notably 
because cost-sharing may be more costly for the employer-sponsored plan 
in comparison to that for a QHP through the Exchange given the special 
cost-sharing benefits provided for Indians under section 1402(d) of the 
Affordable Care Act. Other commenters recommended that American Indians 
under 300 percent of the FPL should be exempt from both cost-sharing 
and premiums for QHPs through the Exchange.
    Response: The comment regarding eligibility for advance payments of 
the premium tax credit and cost-sharing reductions based on eligibility 
for qualifying coverage in an eligible employer-sponsored plan is 
addressed in responses associated with Sec.  155.320(e). Additionally, 
in accordance with section 1302(c)(3) of the Affordable Care Act, the 
definition of ``cost-sharing'' as provided does not include premiums; 
therefore, HHS does not interpret this statutory provision to say that 
the special cost-sharing benefits provided to Indians under section 
1402 of the Affordable Care Act includes an exemption from premiums for 
a QHP through the Exchange. Nothing in this final rule impacts an 
Indian's ability to access IHS facilities at no cost-sharing.

Summary of Regulatory Changes

    For the reasons described in the proposed rule and considering the 
comments received, we are finalizing the provisions proposed in Sec.  
155.350 of the proposed rule, with the following modifications: In 
paragraph (a)(1)(i), we clarify that in accordance with section 
1402(f)(2) of the Affordable Care Act, an applicant must be eligible 
for advance payments of the premium tax credit in order to receive 
cost-sharing reductions based in part on household income. In paragraph 
(a)(1)(ii), we add a citation to clarify that for purposes of cost-
sharing reductions under paragraph (a)(1), household income is defined 
in section 36B(d)(2) of the Code and FPL is defined in section 
36B(d)(3) of the Code.
l. Right to Appeal (Sec.  155.355)
    In Sec.  155.355, we proposed that an individual may appeal any 
eligibility determination or redetermination made by the Exchange, 
including determinations of eligibility for enrollment in a QHP, 
advance payments of the premium tax credit, and cost-

[[Page 18384]]

sharing reductions. We noted that we intend to propose the details of 
the individual eligibility appeals processes, including standards for 
the Federal appeals process, in future rulemaking.
    Comment: We received a number of comments in support of our 
proposal that the Exchange must provide a notice of the right to appeal 
and instructions on how to file an appeal of any aspect of an 
eligibility determination in accordance with proposed Sec.  155.310(g), 
Sec.  155.330(d), or Sec.  155.335(g). However, several commenters 
recommended that we provide greater detail around the appeals process 
in the final rule, including specific standards for the notice, 
coordination or integration with the Medicaid and CHIP appeals 
processes, and alignment of standards with Medicaid.
    Response: We acknowledge the importance of providing greater detail 
regarding the appeals process, and will do so in future rulemaking.

Summary of Regulatory Changes

    We are finalizing the provisions proposed in Sec.  155.355 of the 
proposed rule, with the following technical modifications: In paragraph 
(a), we added ``eligibility'' to describe the determination notice. We 
also edited the references to other sections of subpart D to account 
for renumbering.
5. 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.
a. Enrollment of Qualified Individuals into QHPs (Sec.  155.400)
    In Sec.  155.400, we proposed that the Exchange must: (1) Accept a 
QHP selection from an applicant who is determined eligible for 
enrollment in a QHP; (2) notify the issuer of the applicant's selected 
QHP; and (3) transmit information necessary to enable the QHP issuer to 
enroll the applicant. We also proposed that the Exchange send QHP 
issuers enrollment information on a timely basis, and sought comment as 
to whether we should establish a specific frequency for enrollment 
transactions, such as in real time or daily, in our final rule. 
Finally, to ensure that the Exchange and QHP issuers have identical 
plan enrollment records, we proposed that the Exchange maintain records 
of enrollment, submit enrollment information to HHS, and reconcile the 
enrollment files with the QHP issuers no less than monthly.
    Comment: With respect to proposed Sec.  155.400(a), several 
commenters recommended adding the limitation that the Exchange transmit 
``only'' information necessary to effectuate enrollment. Commenters 
further recommended HHS identify the information that Exchanges should 
transmit to QHP issuers.
    Response: We outline the limitations for information the Exchange 
may collect, use or receive in Sec.  155.260 of this final rule, which 
addresses privacy and security of information. Across all functions, 
the Exchange will only acquire, maintain, and disclose information that 
is necessary for Exchange operations. Specific data elements for 
transmission to QHP issuers will be identified at a later date.
    Comment: One commenter recommended allowing Exchanges to contract 
with safety net providers to conduct enrollment activities, similar to 
the activities they perform for Medicaid.
    Response: In general, the Exchange has discretion to contract with 
an eligible contracting entity to perform Exchange functions on its 
behalf, as outlined in Sec.  155.110 of this final rule. Furthermore, 
Sec.  155.210(c)(2)(viii) of this final rule allows for ``other public 
or private entities that meet the standards of this section,'' to serve 
as Navigators, including ``State or local human service agencies.''
    Comment: One commenter encouraged the Exchanges to initiate what it 
referred to as a preliminary ``pipeline'' reporting under proposed 
Sec.  155.400(a), so that QHP issuers would have a sense of the 
enrollment volume they might expect over the next month, particularly 
during, and leading up to open enrollment periods.
    Response: Exchanges have the flexibility to notify QHP issuers of 
the number of individuals who have received eligibility determinations 
for coverage through the Exchange, as well as to work with QHP issuers 
to define other operational communications that would streamline 
administration. We do not believe it is necessary or within statutory 
authority for Exchanges to share any personally identifiable 
information with QHPs about individuals who have not selected the QHP 
issuer's offering.
    Comment: Several commenters noted that the success of health reform 
hinges on individuals' ability to easily enroll in, and retain 
coverage. They generally recommended instituting enrollment processes 
that do not overburden individuals with paperwork and documentation.
    Response: We believe the streamlined application discussed in Sec.  
155.405 and the Internet Web site discussed in Sec.  155.205 of this 
final rule will help to achieve a streamlined process for all 
applicants. In addition, in Sec.  155.315(g) of this final rule, we 
codify a provision of the Affordable Care Act that specifies that an 
applicant does not have to provide information beyond the minimum 
necessary to support the eligibility and enrollment process.
    Comment: One commenter recommended that QHP issuers be responsible 
for the enrollment of participants in the Exchange in accordance with 
proposed Sec.  155.400(a), since they currently facilitate the 
enrollment process, and will continue to do so for products outside of 
the Exchange.
    Response: Prior to enrollment by the QHP issuer, the Exchange will 
need to transmit enrollment information to the QHP issuer because the 
individual must have an eligibility determination for coverage, and, if 
interested, for advance payments of the premium tax credit and cost-
sharing reductions. Furthermore, the Exchange must report enrollment 
information to HHS in order to initiate advance payments of the premium 
tax credit and cost-sharing reductions. Once enrollment information has 
been provided by the Exchange, the QHP issuer is ultimately responsible 
for effectuating enrollment.
    Comment: One commenter noted that the proposed provision in Sec.  
155.400(a)(2) for the Exchange to transmit information necessary to 
enable the QHP issuer to enroll the applicant, appears to be 
inconsistent with the proposed Sec.  155.205(b)(6), now redesignated in 
this final rule as Sec.  155.205(b)(5), which established that the 
Exchange Web site must have the capacity to allow enrollment. The 
commenter asked HHS to clarify whether these are intended as 
alternatives.
    Response: We have clarified language in this final rule at Sec.  
155.205(b)(5) to ensure that the Exchange Web site allows consumers to 
make a QHP selection, thereby initiating the enrollment process. 
Section 155.400(a)(2) of this final rule describes the subsequent step 
in the enrollment process, and establishes that Exchanges must transmit 
the QHP selection to the appropriate QHP issuer.
    Comments: Many commenters requested clarification on the definition 
of a ``timely'' transmittal of enrollment information from the Exchange 
to QHP issuers, as discussed in proposed Sec.  155.400(b)(1). Some 
suggested specifying ``daily,'' ``real-time,'' or leaving the 
definition to State flexibility.

[[Page 18385]]

    Response: In this final rule, we have modified the regulatory text 
in Sec.  155.400(b)(1) to be consistent with Sec.  155.340(d), which 
states that Exchanges must send eligibility information to both QHP 
issuers and to HHS promptly and without undue delay. We expect 
Exchanges will send each QHP issuer an automated file of applicable 
eligibility and enrollment transactions, and simply include HHS on the 
transmission. HHS will issue future guidance outlining standards and 
timing for these transmissions. We further expect Exchanges to use the 
monthly reconciliation standards outlined in Sec.  155.400(c) and Sec.  
155.400(d) to ensure consistency in enrollment records.
    Comment: A few health insurance issuers cautioned that the QHP 
issuer's acknowledgement of the receipt of an enrollment transaction 
under proposed Sec.  155.400(b)(2) is not a confirmation that the 
information is complete. The commenters stated that it should be the 
responsibility of the Exchange to ensure that the eligibility and 
enrollment information being sent to the QHP issuer is complete and 
accurate. One commenter recommended a strong file validation protocol, 
so that any incomplete or conflicting records were identified prior to 
submission.
    Response: The intent of the acknowledgement standard in Sec.  
155.400(b)(2) is to ensure that QHP issuers accept responsibility for 
completing an individual's enrollment. We expect Exchanges will 
establish a process by which the QHP issuer signifies that it has 
received complete and accurate enrollment information, and if it does 
not, promptly notifies the Exchange that the information is 
insufficient to complete enrollment.
    Comment: One commenter recommended that QHP issuers acknowledge the 
receipt of eligibility and enrollment information, as described in 
proposed Sec.  155.400(b)(2), to both the Exchange and the applicant, 
while one health insurance issuer recommended that State laws govern 
communication between QHP issuers and enrollees.
    Response: We clarify in part 156 the information that QHP issuers 
must provide to enrollees. As finalized in Sec.  156.260(b), the QHP 
issuer must provide notice of the effective date of coverage and must 
provide new enrollees an enrollment information package as an 
acknowledgement of enrollment as described in Sec.  156.265(e). 
However, we note that Exchanges may apply additional rules to ensure an 
optimal consumer experience, such as notifying the applicant that the 
Exchange has transmitted enrollment information to the QHP issuer.
    Comments: Several commenters requested clarification on reporting 
standards under proposed Sec.  155.400(c), including timing, format, 
and content. Some commenters requested that the HHS reporting standard 
be omitted. One State agency recommended that State regulators have 
unfettered access to all data sets used for and by Exchanges.
    Response: As noted above, HHS plans to provide guidance on timing, 
format, and content of the enrollment information transmissions 
required under Sec.  155.400 of this final rule. We have removed the 
standard in proposed Sec.  155.400(c) for Exchanges to submit 
enrollment information to HHS on a monthly basis, because Sec.  
155.400(b)(2) of this final rule directs Exchanges to send eligibility 
and enrollment information to HHS ``promptly and without undue delay.'' 
With respect to the comment on the ability of State regulators to have 
access to all data collected and used by Exchanges, we note that data 
sets that contain personally identifiable information, and that are 
used by an Exchange while the Exchange is fulfilling its 
responsibilities in accordance with Sec.  155.200(c), may only be 
disclosed if such disclosure is consistent with Sec.  155.260. 
Disclosures for other purposes must be consistent with applicable 
Federal and State laws.
    Comment: For the reporting and reconciliation standards outlined in 
proposed Sec.  155.400(c) and Sec.  155.400(d), one commenter requested 
clarification to ensure that Exchanges may collect monthly enrollment 
and termination data directly from insurers. The commenter sought to 
eliminate the need for the Exchange to collect this information on a 
case by case basis, compile it, and then reconcile it with issuers; all 
activities that the commenter stated are not feasible under a free 
market model where the Exchange Web site may not be tracking an 
individual's coverage choices.
    Response: Per subpart D of both the proposed and final rules, the 
Exchange must make a determination of an individual's eligibility in 
order for a person to enroll in a QHP through the Exchange. In 
addition, per Sec.  155.340(a), the Exchange must know which QHP a 
qualified individual has selected in order to make any advance payments 
of the premium tax credit. We do not believe that collection of 
enrollment data from issuers on a monthly basis would be sufficient to 
meet these standards, and therefore maintain the policy in Sec.  
155.400 of this final rule.
    Comment: Most commenters supported a minimum monthly reconciliation 
under Sec.  155.400(d), as long as Exchanges retained flexibility to 
reconcile more frequently. One health insurance issuer recommended 
reconciling only the cases with changes on a more frequent basis, while 
reconciling the full case load on a quarterly basis.
    Response: In this final rule, we maintain the requirement in Sec.  
155.400(d) for monthly reconciliation, and require Exchanges to 
reconcile enrollment information with HHS in addition to QHP issuers. 
Exchanges have flexibility to reconcile some or all cases more 
frequently. We expect that Exchanges will work to minimize enrollment 
discrepancies, to automate reconciliation where possible, and to 
streamline any manual reconciliation activities that remain necessary.

Summary of Regulatory Changes

    We are finalizing the standards proposed in Sec.  155.400 of the 
proposed rule with the following modifications: In Sec.  155.400(b) 
regarding the timing of data exchanges, we specify in the final rule 
that the Exchange must send enrollment information to both QHP issuers 
and HHS promptly and without undue delay. In Sec.  155.400(c) we remove 
the standard that Exchanges submit enrollment information to HHS on a 
monthly basis. In Sec.  155.400(d), we establish that Exchanges must 
reconcile enrollment information with both QHP issuers and HHS no less 
than on a monthly basis. We also made a few non-substantive edits to 
streamline the regulatory text.
b. Single Streamlined Application (Sec.  155.405)
    In Sec.  155.405, we proposed to codify that a QHP issuer must use 
the single streamlined application for qualified individuals and 
employers to enroll in QHPs through the Exchange. We also offered 
States the option to develop an alternative application, subject to 
approval by HHS. We sought comment regarding whether we should 
establish that applicants do not have to answer questions that are not 
pertinent to the eligibility and enrollment process.
    We further proposed that the Exchange must accept applications from 
multiple sources including the applicant, an authorized representative 
(as defined by State law), or someone acting responsibly for the 
applicant; and that an individual must be able to file an application 
online, by telephone, by mail, or in person. We solicited comment on 
whether an individual must be able to file an application in person.

[[Page 18386]]

    Comment: A handful of commenters urged that the application 
described in proposed Sec.  155.405(a) enable eligibility 
determinations for other human services programs such as the 
Supplemental Nutritional Assistance Program (SNAP) and Temporary 
Assistance for Needy Families (TANF) in addition to Medicaid, CHIP, and 
BHP.
    Response: In this final rule, we are only establishing that the 
application support eligibility for Exchange coverage and insurance 
affordability programs. With that said, States can decide to use HHS-
approved alternative applications that include human services programs.
    Comment: Some commenters suggested that all States should use the 
HHS-created application and requested that we strike proposed Sec.  
155.405(b) from this section, which pertains to alternative 
applications. Issuers were concerned that they could be subjected to 
too much variation in Exchange applications. Other commenters supported 
our proposal to give States flexibility to create an alternative 
application should they desire.
    Response: Section 1413(b)(1)(B) of the Affordable Care Act directs 
HHS to allow a State to develop and use its application, subject to 
compliance with standards. We do not believe that variations in 
applications will place a burden on QHP issuers since the necessary 
enrollment information will be consistent across Exchanges. In 
addition, we reiterate our position in the proposed rule that the 
single streamlined application has been developed to meet the 
requirement for a uniform enrollment form, as set forth in section 
1311(c)(1)(F) of the Affordable Care Act. We further clarify that the 
single streamlined application, or an HHS-approved Exchange alternative 
application, must be used for enrollment in a QHP through the Exchange 
only. Per Sec.  156.265 of the final rule, a QHP can satisfy the 
standard regarding use of the single streamlined application by 
directing the individual to file the single streamlined application 
with the Exchange, or ensuring the applicant received an eligibility 
determination for coverage through the Exchange through the Exchange 
Internet Web site.
    Comment: Numerous commenters urged HHS to add language to proposed 
Sec.  155.405 stating that the standard single streamlined application 
should not include questions that are not pertinent to the eligibility 
and enrollment process. Other commenters wanted to ensure that the 
application will collect demographic information beyond what is 
established in the statute.
    Response: The Exchange eligibility proposed rule and this final 
rule at Sec.  155.315(g) prohibit Exchanges from requiring information 
beyond the minimum necessary to support eligibility determinations for 
the Exchange and insurance affordability programs. This provision 
limits the application to information that is pertinent to the 
eligibility and enrollment process.
    Comment: Numerous commenters expressed support for allowing an 
applicant to file an application in person, as described in the 
preamble to Sec.  155.405 in the proposed rule. A handful of commenters 
also urged HHS to go further and establish that Exchanges must allow 
individuals to submit, change, or renew coverage at numerous locations, 
including social service offices, welfare offices, community-based 
organizations, and any other pathway that accepts applications for 
government health benefit programs. Some commenters expressed concern 
that the proposed regulation did not ensure effective communication for 
individuals with disabilities because it did not provide for assistance 
when filing an application in person. Other commenters suggested that 
HHS establish that Exchanges must provide in-person assistance in a 
number of different locations throughout States.
    Response: We are maintaining the standard that applicants should be 
able to file an application for an eligibility determination through 
the Exchange and other insurance affordability programs in person. We 
have added to regulation text in Sec.  155.405(c)(2)(iv) to establish 
that the facilities where someone files an application in person comply 
with the Americans with Disabilities Act. However, Exchanges have the 
flexibility to determine the venues at which applicants may file in 
person, which will allow Exchanges to configure staffing to meet the 
specific characteristics of each State. We encourage Exchanges to 
consider allowing enrollees to submit changes or complete the annual 
redetermination process at an in-person location. We are not, however, 
amending this in the final rule.
    Comment: A handful of commenters suggested that an Exchange could 
fulfill the standard to accept applications in person in accordance 
with proposed Sec.  155.405(c)(2) through its Navigator program. These 
commenters stated that in-person assistance may be burdensome for the 
States, but Navigators are a natural venue for such assistance.
    Response: An Exchange has flexibility in how it structures it 
Navigator program and may use such a program to meet the standard for 
in-person application filing and to provide assistance to individuals 
applying for coverage through the Exchange.
    Comment: Some commenters requested that the application provide 
meaningful access for individuals who are LEP, provide effective 
communication for individuals with disabilities, and also that the 
application be translated into a number of different languages. Some 
commenters recommended the application be translated into no fewer than 
15 languages.
    Response: We address meaningful access issues and concerns in Sec.  
155.205(c) as well as in Sec.  155.230(b) of this final rule. 
Additional guidance issued at a later date will coordinate our 
accessibility standards with insurance affordability programs, and 
across HHS programs, as appropriate, providing more detail regarding 
literacy levels, language services, and access standards.
    Comment: A significant number of commenters asked for clarification 
on who can qualify as an authorized representative to file an 
application on behalf of an applicant under proposed Sec.  
155.405(c)(1) and, in particular, on what HHS meant by ``someone acting 
responsibly for the applicant'' and how this role is different from an 
authorized representative. Other commenters asked for more details on 
the privacy standards that will be applied to authorized 
representatives and others assisting with the application process. 
Additionally, commenters thought that the final rule should specify 
that a Navigator cannot apply on behalf of the individual without the 
signed consent of an individual or an individual's parent, guardian, 
court-designated representative, or legally-approved family member.
    Response: We expect to provide future guidance regarding who may 
serve as an authorized representative; we intend for this to track 
against who can serve as an authorized representative under Medicaid. 
We also note that a single application may have both an application 
filer and an authorized representative. In paragraph Sec.  155.405(c) 
of this final rule, we state that an ``application filer'' may file the 
application, and we have added a corresponding definition in Sec.  
155.20 in this final rule that notes that an application filer includes 
authorized representatives as well as someone acting responsibly for 
the applicant, if

[[Page 18387]]

the applicant is a minor or incapacitated. This change clarifies 
situations when someone acting responsibly for the applicant might file 
an application. In addition, the privacy and security standards 
addressed in Sec.  155.260 apply to any person or entity that views or 
receives personally identifiable information from or on behalf of an 
applicant through the Exchange. Therefore, we believe that these 
standards will ensure appropriate privacy standards for authorized 
representatives and others assisting applicants. Further, the 
application process will include an authentication process. HHS expects 
to issue future guidance on the authentication process to verify an 
individual's identity. In addition, we expect that application 
assisters who are not Navigators, agents, or brokers will provide 
support for consumers during the application process, and we anticipate 
providing additional guidance regarding this role, including on 
appropriate privacy and security protections.
    Comment: Several commenters asked for clarification regarding 
whether mobile devices could be used to apply for coverage under 
proposed Sec.  155.405(c)(2). Many of these commenters recommended that 
the final rule establish that the single streamlined application must 
be available through mobile devices or mobile applications.
    Response: In this final rule, Exchanges must only provide an online 
application at this time (see Sec.  155.405(c)(2)(i)). Although it may 
be beneficial for applicants to be able to complete the application and 
the plan selection process using a mobile device, Exchanges do not have 
to provide this functionality given the short implementation timeframe.

Summary of Regulatory Changes

    We are finalizing the definitions proposed in Sec.  155.405 of the 
proposed rule, with a few small modifications: We changed the final 
rule in Sec.  155.405(b) from ``request'' to ``collect'' for 
consistency with other parts of the final rule. We replaced (c)(1)(i) 
through (c)(1)(iii) of the proposed rule with (c)(1) ``application 
filer,'' which incorporates the previous categories included in the 
proposed rule. In paragraph (c)(2), we have made minor clarifying 
edits. We codified the standard that an individual may file an 
application for coverage in person and clarified that reasonable 
accommodations must be made for individuals with disabilities.
c. Initial and Annual Open Enrollment Periods (Sec.  155.410)
    In Sec.  155.410, we proposed that the Exchange adhere to specified 
initial and annual open enrollment periods and indicated that qualified 
individuals and enrollees may begin or change coverage in a QHP at such 
times. We sought comment on the duration of the initial open enrollment 
period, which we proposed to be from October 1, 2013 to February 28, 
2014. We also requested comment on the proposed annual open enrollment 
period (October 15 to December 7 of each year) and whether we should 
consider an alternative annual enrollment period from November 1 
through December 15 of each year.
    We also proposed standards for effective dates based on the date 
when an individual's QHP selection is received. To coordinate coverage 
in a QHP with the advance payments of the premium tax credit, we 
proposed that coverage in a QHP may only begin on the first of the 
month. We sought comment as to whether we should consider twice monthly 
or flexible effective dates of coverage for individuals who forgo 
advance payment of the premium tax credit for the first partial month 
or who are not eligible for advance payments of the premium tax credit.
    We also proposed that the Exchange must send written notification 
to enrollees about the annual open enrollment period and sought comment 
on whether we should codify specific elements that must be included in 
the notification and timing of the notification. We further proposed 
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.
    Finally, we sought comment on whether Exchanges should 
automatically enroll individuals who received advance payments of the 
premium tax credit and then have coverage terminated from a QHP because 
the QHP is no longer offered, if such individual does not make a new 
QHP selection. We also sought comment on whether we should allow for 
automatic enrollment of individuals in specific circumstances, such as 
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. Lastly, we sought comment as to 
how far such automatic enrollment should extend if we were to allow it.
    Comment: Several commenters expressed concern about adverse 
selection with respect to the enrollment periods in proposed Sec.  
155.410 and Sec.  155.420. The commenters supported limited enrollment 
periods and opposed any flexibility for States to implement longer or 
more frequent enrollment periods.
    Response: In both the proposed and final rules, we have attempted 
to balance the risk of adverse selection with the need to ensure that 
consumers have adequate opportunity to enroll in QHPs through an 
Exchange. We believe that the enrollment periods described in Sec.  
155.410 and Sec.  155.420 of this final rule achieve that balance. As 
we describe later in this section, we believe that additional time is 
needed for the initial enrollment period, given that Exchanges are a 
new coverage option under the Affordable Care Act, and significant 
education and outreach will be needed to make individuals aware of this 
coverage opportunity.
    Comment: Several commenters requested more State flexibility with 
respect to the enrollment periods identified under proposed Sec.  
155.410 and Sec.  155.420. The commenters recommended States have 
flexibility to set their own enrollment periods and effective dates, 
especially those States already operating Exchanges. A few commenters 
requested State flexibility to extend enrollment periods, particularly 
for vulnerable populations.
    Response: Section 1311(c)(6) of the Affordable Care Act 
specifically directs the Secretary to provide for initial, annual and 
special enrollment periods. In both the proposed and final rule, we 
have tried to provide State flexibility while adhering to our 
responsibility under the statute to establish the enrollment periods 
identified under section 1311(c). Therefore, we have proposed and 
finalized in this rule the minimum uniform enrollment periods across 
all Exchanges, including a special enrollment period for individuals 
experiencing an exceptional circumstance.
    Comment: Almost all commenters supported the proposed start date of 
October 1, 2013 under proposed Sec.  155.410(b) for the initial open 
enrollment period. One State agency believed it was unrealistic to 
expect Exchanges to be operational prior to January 1, 2014, given the 
systems development challenges ahead. A few commenters requested 
flexibility to begin enrollment, or a ``pre-qualification'' period 
before October 1, 2013. Commenters recommended an

[[Page 18388]]

initial open enrollment period lasting as few as two months and as long 
as three years. The majority of commenters recommended a six-month 
initial open enrollment period, ending on March 31, 2014, one month 
later than in the proposed rule. Most commenters suggested that the 
longer initial open enrollment period would allow more time for 
individuals and families to learn about their coverage options, and 
more time for them to select a QHP. Finally, commenters recommended 
that individuals who enroll during the initial open enrollment period 
be permitted to change plans at least once without penalty during the 
Exchanges' first year of operation.
    Response: In this final rule, we maintain the start date of October 
1, 2013 for the start of the initial open enrollment period. Although 
coverage will not be effective until January 1, 2014, we believe that 
individuals and families need time to explore their coverage options 
and QHPs need time to process plan selections. We have extended the 
initial open enrollment period by one month--from February 28, 2014 to 
March 31, 2014. HHS's experience with the initial open enrollment 
period for Medicare's Prescription Drug Benefit Program supports an 
extended period. We have not extended the initial open enrollment 
period past March 31 in order to limit the risk of adverse selection, 
as expressed by commenters.
    Comment: Several commenters recommended a robust outreach campaign 
prior to the initial open enrollment period. One group recommended that 
health insurance issuers notify all individual market subscribers about 
their potential eligibility for financial assistance through an 
Exchange under this section.
    Response: We encourage Exchanges to leverage existing resources in 
their marketing efforts, including working with issuers to determine 
how they can participate most effectively. Section 155.205(e) of this 
final rule directs Exchanges to conduct outreach and education 
activities to educate consumers about the Exchange and to encourage 
participation.
    Comments: Several commenters representing State agencies and health 
insurance issuers expressed concern about effective dates proposed in 
Sec.  155.410(c). The commenters asserted that the specified minimum of 
eight days between plan selection and coverage effective date was too 
short, and that they needed as many as 30 days to make coverage 
effective. Commenters recommended that we ensure there is sufficient 
lag time between QHP selection and effective dates.
    Response: Based on the commenters' recommendation to allow more 
time between QHP selection and effective dates, we have modified the 
proposed QHP selection cutoff date in this final rule from the 22nd to 
the 15th of the month. As described in more detail below, we have also 
provided flexibility for Exchanges to work with QHP issuers to make 
coverage effective more quickly.
    Comment: Many commenters, namely consumer and patient advocates, 
were concerned that the proposed effective dates under Sec.  155.410(c) 
and Sec.  155.410(f) would lead to coverage gaps for individuals losing 
coverage mid-month. The commenters offered alternative effective dates, 
including twice monthly, continuous, and retroactive. Many commenters 
responded positively to our solicitation for comments on whether to 
allow mid-month or flexible effective dates for qualified individuals 
willing to forgo advance payments of the premium tax credit until the 
1st of the following month, or who are ineligible for such payments. 
Others requested that coverage be guaranteed for the 1st of the month 
for all qualified individuals, even when they select a QHP on the last 
day of the previous month. Finally, a few commenters recommended 
printable, temporary insurance cards that individuals could use until 
the enrollment process was completed.
    Response: We recognize the need to minimize coverage gaps, 
especially for vulnerable populations. However, the suggested 
alternatives could have negative consequences for Exchanges and QHP 
issuers, by increasing costs and administrative burden. Because the 
initial open enrollment period will be the Exchanges' first experience 
with enrollment, and many newly-eligible individuals will be seeking to 
enroll at the same time, we believe it is important to maintain 
administrative processes consistent with health insurance issuers' 
experience, while at the same time including flexibility for 
improvement as Exchanges and QHP issuers enhance their capabilities.
    In response to commenters' concerns, we have added two new options 
for earlier initial open enrollment period effective dates in Sec.  
155.410(c)(2) of this final rule. We have also added the same options 
for special enrollment period effective dates in Sec.  155.420(b)(3) of 
this final rule. An Exchange may adopt one or both options, provided 
that it demonstrate to HHS that all of the participating QHP issuers 
agree to effectuate coverage in a timeframe shorter than discussed in 
Sec.  155.410(c)(1)(ii) through Sec.  155.410(c)(1)(iii). We include 
this qualification because QHP issuers may need to implement 
administrative changes to accommodate the modified effective dates. We 
note that individuals seeking the earlier effective date described in 
Sec.  155.410(c)(2)(i)(B) must waive the benefit of advance payments of 
the premium tax credit and cost-sharing reductions if coverage is 
effectuated mid-month. However, individuals do not have to accept this 
earlier effective date. As an example, if all QHP issuers in State X 
agree that they can effectuate coverage eight days after QHP selection, 
and individual A makes a QHP selection on January 17th, 2014, the 
issuer may effectuate the coverage on January 25th, provided that the 
individual is willing to forgo advance payment of the premium tax 
credit for the seven days of coverage in January.
    Comment: In response to our request for comment in the preamble of 
proposed Sec.  155.410(d) on whether we should set a standard for the 
timing of the annual open enrollment notice, most commenters supported 
a standard for the Exchange to send a notice of annual open enrollment 
30 days prior to the start of enrollment, though one patient advocacy 
organization recommended 60 days' notice.
    Response: We have added a standard in this final rule in Sec.  
155.410(d) that the Exchange send the notice no earlier than September 
1st, and no later than September 30th of each year, in preparation for 
an October 15th annual open enrollment. Because subpart D of this final 
rule directs the annual redetermination notice to be combined with the 
annual open enrollment notice, we have allowed a 30 day window for 
States to produce and mail the combined notice. We believe that 60 days 
is too far in advance of annual open enrollment for enrollees to 
remember to take action.
    Comment: Many commenters representing patient and consumer advocacy 
groups recommended that proposed Sec.  155.410(d) establish an 
additional notice to be sent 30 days before the end of the annual open 
enrollment period to enrollees who had not yet selected a QHP. Some 
commenters recommended the use of social media and mass media to 
increase awareness of annual open enrollment.
    Response: We note that Exchanges may send additional notices and 
conduct outreach to assist consumers with enrollment, but we do not 
establish such notices as a minimum standard.
    Comment: A few commenters recommended that HHS provide a

[[Page 18389]]

model annual open enrollment notice and a process for deviating from 
that notice. Suggestions for the notice's content included: meaningful 
access standards, information about how to access brokers and 
application assisters, an explanation of the once-a-year nature of an 
annual enrollment period, the implications of going uninsured, and the 
criteria for qualifying for a special enrollment period. Several 
commenters recommended that the notice of annual eligibility 
redetermination described in proposed Sec.  155.335(c) be combined with 
the notice of annual open enrollment described in Sec.  155.410(d), 
into a single, streamlined notice.
    Response: HHS intends to provide Exchanges with a model notice in 
future guidance. The model will consider the content recommended above. 
In response to commenters' recommendation to combine and streamline 
notices, we have added timing standards to the notice of annual 
redetermination notice in Sec.  155.335(d) of this final rule.
    Comment: One commenter noted that health insurance issuers already 
send a notice of annual open enrollment. The commenter stated that if 
Exchanges did the same, as described in proposed Sec.  155.410(d), it 
would be duplicative and unnecessarily burdensome for Exchanges.
    Response: While it is possible that an Exchange or a State 
insurance regulator might direct health insurance issuers to send a 
notice of annual open enrollment, HHS is not imposing such a standard. 
We therefore do not believe Sec.  155.410(d) is duplicative, and we 
maintain it in the final rule. Issuers may continue to send such 
notices at their discretion.
    Comment: Several commenters, namely health insurance issuers, 
recommended a shorter annual open enrollment period under proposed 
Sec.  155.410(e), lasting between 30 and 45 days, to discourage adverse 
selection. Conversely, several other commenters recommend extending the 
annual open enrollment period until at least December 15th (for a total 
of at least 60 days), to give individuals and families more time to 
explore their coverage options. One commenter recommended quarterly 
instead of annual open enrollment periods, to increase opportunities 
for consumers to enroll. Commenters recommended annual open enrollment 
periods lasting between 30 and 90 days, with several recommending 
continuous open enrollment.
    Response: As noted above, the rule seeks to balance flexibility for 
consumers with the need to limit adverse selection. The 53-day length 
of the annual open enrollment period balances these competing 
interests, and gives individuals and families ample time to explore 
coverage options. Therefore we maintain the annual open enrollment 
start and end dates in Sec.  155.410(e) of this final rule.
    Comment: One health insurance issuer suggested limiting an 
enrollee's QHP selection during annual open enrollment in proposed 
Sec.  155.410(e) to only one metal level higher. For example, the 
commenter believed that enrollees should not be permitted to move from 
a bronze level QHP to a gold or platinum level QHP. In response to a 
similar proposal in Sec.  155.420(f) of the proposed rule to limit 
movement between QHPs during special enrollment periods, most 
commenters, with the exception of a few health insurance issuers, 
either objected to the provision outright, or recommended additional 
exceptions to allow movement between QHPs. One commenter noted that 
because the special enrollment periods were generally not tied to 
changes in an individual's health status, they did not pose a risk of 
adverse selection.
    Response: We have removed Sec.  155.420(f) from the final rule. We 
do not believe it is appropriate to limit enrollee movement between 
QHPs during the annual open enrollment period in Sec.  155.410(e), and 
we have not added the restriction requested by the commenter.
    Comment: With respect to the proposed annual open enrollment period 
under Sec.  155.410(e), many commenters were concerned that its overlap 
with the open enrollment periods for SHOP, Medicare and other Federal 
programs would create an unmanageable administrative workload at the 
end of each year. Some commenters suggested moving the Exchange's open 
enrollment until after the first of the year to better align it with 
tax filing season and with many employers' annual open enrollment 
periods. Others recommended staggered, individual-specific open 
enrollment periods. For example, periods could be linked to birthdays, 
to spread out enrollment over the course of the year. Others 
recommended that the annual open enrollment period reflect the current 
enrollment practices in the individual and small-group market, and at 
the least, align inside and outside the Exchange. Some commenters 
representing senior citizens supported the alignment with Medicare.
    Response: We recognize that the annual open enrollment period 
overlaps with that of other Federal programs. However, we believe that 
the alternatives suggested by commenters would lead to undesirable 
outcomes. For instance, aligning the annual open enrollment period with 
the tax season would mean that the coverage year and the tax year no 
longer align, and in the first year consumers could have more than 12 
months of coverage before receiving an opportunity to change QHPs. 
Further, the updated tax return information may not yet be available 
via the data services hub. We believe that a rolling open enrollment 
period, with individual-specific dates would add complexity for 
families and increase risk selection. It would also eliminate the 
ability to conduct a single enrollment campaign when consumers could 
take action. We therefore maintain the proposed open enrollment period 
in Sec.  155.410(e) of this final rule. With respect to the comment on 
aligning the enrollment period inside and outside the Exchange, we 
clarify that this rule only sets standards for Exchanges.
    Comment: In response to our request for comment on the issue of 
auto-enrollment, several State agencies supported the rule's lack of 
auto-enrollment standards, because they perceived it as permitting 
flexibility. A few commenters explicitly opposed auto-enrollment. The 
remainder of the commenters supported the option for Exchanges to auto-
enroll individuals who become unintentionally uninsured, but they 
expressed concerns over limiting an individual's right to choose his or 
her own QHP. Most commenters recommended that an Exchange send multiple 
notices to individuals facing potential auto-enrollment, and provide a 
30- to 90-day period for individuals to change QHPs after being auto-
enrolled.
    Response: We have established flexibility for the Exchange to auto-
enroll qualified individuals when the Exchange demonstrates to HHS that 
it has good cause to do so under Sec.  155.410(g) of this final rule. 
We expect to issue guidance outlining generally the circumstances under 
which HHS will approve Exchange auto-enrollment. HHS will also monitor 
auto-enrollment practices across Exchanges for appropriateness and 
effectiveness.
    Comment: A few commenters stressed that any QHP into which 
qualified individuals are auto-enrolled must meet women's reproductive 
needs, as well as the need for local providers. The commenters 
recommended that the QHP in which an individual is auto-enrolled 
resemble any previous QHP coverage the qualified individual had.
    Response: All QHPs must offer the essential health benefits 
established

[[Page 18390]]

under section 1302(b) of the Affordable Care Act, which includes 
coverage of maternity and newborn care. Also, all QHPs must comply with 
Exchange network adequacy standards that ensure a sufficient number and 
type of providers to assure that all services will be accessible 
without unreasonable delay, per Sec.  156.230. HHS will consider other 
commenter suggestions in developing guidance for Sec.  155.410(g) of 
this final rule.

Summary of Regulatory Changes

    We are finalizing the definitions proposed in Sec.  155.410 of the 
proposed rule, with the following modifications: in Sec.  155.410(b), 
we extended the end date of the initial enrollment period from February 
28, 2014 to March 31, 2014. In Sec.  155.410(c)(2), we modified the 
initial enrollment period effective date such that a QHP selection must 
be received by the Exchange by the 15th of the month to secure an 
effective date of the first day of the following month. We also 
provided Exchanges flexibility to effectuate coverage more quickly if 
all QHP issuers offering coverage through the Exchange agree with the 
earlier dates, but noted that advance payments of the premium tax 
credit and cost-sharing reductions cannot begin until the first of the 
month. We further specified in Sec.  155.410(d) that the Exchange must 
send the notice of annual open enrollment no earlier than September 
1st, and no later than September 30th of each year. Finally, in Sec.  
155.410(g) we added an option for Exchanges to automatically enroll 
qualified individuals at such time and in such manner as HHS may 
specify, and subject to the Exchange demonstrating to HHS that it has 
good cause to perform such automatic enrollments.
d. Special Enrollment Periods (Sec.  155.420)
    In Sec.  155.420, we proposed 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. We proposed 
special enrollment period effective dates that generally followed the 
proposed initial enrollment period effective dates in Sec.  155.410.
    For each special enrollment period we proposed a standard length of 
60 days from the date of the triggering event, unless the regulation 
specified otherwise. We requested comment on whether special enrollment 
periods, particularly those described in paragraphs Sec.  
155.420(d)(4), Sec.  155.420(d)(6), and Sec.  155.420(d)(7), should 
have an alternate trigger or start date. The special enrollment periods 
we proposed were triggered by the following events:
     A qualified individual and any dependents losing other 
minimum essential coverage. We provided several examples of loss of 
coverage, and we sought comment on our proposal to limit this special 
enrollment period to the loss of minimum essential coverage, rather 
than loss of any coverage.
     A qualified individual gaining or becoming a dependent 
through marriage, birth, adoption, or placement for adoption. We 
solicited comment on whether States might consider expanding the 
special enrollment period to include gaining dependents through other 
life events.
     An individual, not previously lawfully present, gaining 
status as a citizen, national, or lawfully present individual in the 
U.S.
     Consistent with the Medicare Prescription Drug Program, a 
qualified individual experiencing an error in enrollment.
     An individual enrolled in a QHP adequately demonstrating 
to the Exchange that the QHP in which he or she is enrolled 
substantially violated a material provision of its contract.
     An individual becoming newly eligible or newly ineligible 
for advance payments of the premium tax credit or experiencing a change 
in eligibility for cost-sharing reductions.
     New QHPs offered through the Exchange becoming available 
to a qualified individual or enrollee as a result of a permanent move.
     The individual is an Indian, as defined by the Indian 
Health Care Improvement Act. We solicited comment on the potential 
implications on the process for verifying Indian status for purposes of 
this special enrollment period.
     A qualified individual or enrollee meeting other 
exceptional circumstances, as determined by the Exchange or HHS. 
Similar to section 9801 of the Code, we proposed that loss of coverage 
does not include failure to pay premiums on a timely basis, including 
COBRA premiums prior to expiration of COBRA coverage. We also proposed 
that loss of coverage not include situations allowing for a rescission 
as specified in 45 CFR 147.128.
    We proposed that the Exchange allow an existing enrollee who 
qualifies for a special enrollment period to only change plans within 
the same metal level of coverage, as defined by section 1302(d) of the 
Affordable Care Act. We proposed a single exception for new eligibility 
for advance payments of the premium tax credit or change in eligibility 
for cost-sharing reductions. We requested comment as to whether we 
should provide an exception for catastrophic plan enrollees who become 
pregnant.
    Comment: Several commenters sought clarification on the types of 
documents needed to qualify for a special enrollment period, as 
described in proposed Sec.  155.420(a). Some requested that the same 
verifications used for determining eligibility for coverage also be 
used to verify eligibility for a special enrollment period. Others, 
namely State agencies, requested State flexibility for determining 
special enrollment period eligibility.
    Response: Exchanges must verify information outlined in Sec.  
155.315 of the rule in order to make an eligibility determination, 
which includes a determination of eligibility for enrollment periods, 
per Sec.  155.305(b). Exchanges will be able to determine eligibility 
for most special enrollment periods using the information available 
through verifications outlined in Sec.  155.315. However, given that 
the eligibility criteria for some of the special enrollment periods in 
Sec.  155.420 do not directly align with the criteria to establish 
eligibility for coverage through the Exchange or insurance 
affordability programs in Sec.  155.315, we expect Exchanges will use 
other verification standards and processes to determine eligibility for 
those particular special enrollment periods.
    Comment: Several commenters recommended adding standards for 
Exchanges, QHP issuers and employers to notify an individual about his 
or her potential eligibility for a special enrollment period under 
proposed Sec.  155.420(a). For example, commenters recommended that 
employers include a notice about employees' potential eligibility for a 
special enrollment period with any health benefit change materials, or 
that QHP issuers notify enrollees who report a change in address.
    Response: HHS will issue guidance pertaining to notices that may 
include information on special enrollment periods. We expect that 
Exchanges will include information about all enrollment periods both on 
their Web site and other informational resources.
    Comment: Many commenters expressed general concerns about adverse 
selection. The commenters requested that individuals be limited to only 
one special enrollment period per month, and recommended limiting 
individuals' movement between QHPs

[[Page 18391]]

during some or all special enrollment periods.
    Response: While we recognize the need to limit the risk of adverse 
selection, we do not believe it is necessary to limit special 
enrollment periods, given the nature of the types of special enrollment 
periods. We received similar comments on the issue of limiting 
enrollees' movement between QHPs during open and special enrollment 
periods, and have responded to them in preamble for Sec.  155.410(e) 
and Sec.  155.420(f), respectively.
    Comment: A few commenters suggested that the special enrollment 
periods described in this section be aligned more closely with HIPAA 
rules for consistency inside and outside the Exchange. A few other 
commenters instead recommended aligning the special enrollment periods 
more closely with Medicare's special enrollment periods.
    Response: Section 1311(c)(6) of the Affordable Care Act establishes 
that Exchange special enrollment periods follow those specified in 
section 9801 of the Code (the HIPAA special enrollment periods) and 
reflect those available under part D of title XVIII of the Act. The 
final rule balances these two parameters by adopting relevant 
provisions from each. In response to comments requesting closer 
alignment with HIPAA rules, we have added regulatory text to Sec.  
155.420(b)(2) to ensure first-of-the-month effective dates for 
qualified individuals who gain or become dependents through marriage, 
and for qualified individuals who lose minimum essential coverage. We 
have also aligned more closely with HIPAA rules by clarifying what is 
included under loss of minimum essential coverage in Sec.  155.420(e).
    Comment: Many commenters made suggestions for effective dates under 
Sec.  155.420(b) similar to those made for the proposed Sec.  
155.410(c) and Sec.  155.410(f) on effective dates during the initial 
and annual open enrollment periods.
    Response: With the exception of the cases noted above in Sec.  
155.420(b)(2), we have modified the special enrollment period effective 
dates in proposed Sec.  155.420(b) to align with initial enrollment 
period effective dates in Sec.  155.410(c) of this final rule. Our 
reasoning follows the same logic for both sections of the rule.
    Comment: Several commenters recommended 30-day special enrollment 
periods, under proposed Sec.  155.420(c), consistent with the HIPAA 
standard, while several others supported the proposed 60-day periods, 
consistent with several special enrollment periods under the Medicare 
Prescription Drug Benefit Program. Several commenters recommended 
extending the periods for as long as 120 days, particularly for 
vulnerable populations.
    Response: Regarding the length of Exchange special enrollment 
periods outlined in Sec.  155.420(c) of the final rule, our experience 
with the Medicare Prescription Drug Benefit Program informs our 
decision to adopt the 60-day window, which generally conforms with 
several special enrollment periods in the Medicare Prescription Drug 
Benefit Manual that extend for two months beyond the month of a 
triggering event. We believe that this approach will give consumers the 
time they need to explore their coverage options through the Exchange, 
following a change in life circumstances. We have not extended the 
length of the enrollment period due to concerns about adverse 
selection. Exchanges may grant special enrollment periods in advance of 
a triggering event, so long as the effective date of coverage does not 
occur before the triggering event, and so long as there is no overlap 
in coverage for which the individual receives advance payments of the 
premium tax credit or cost-sharing reductions while enrolled in other 
minimum essential coverage.
    Comment: Several commenters, namely health insurance issuers, asked 
HHS not to add any additional special enrollment periods to those 
listed in proposed Sec.  155.420(d). Several other commenters 
recommended additions to the rule, including special enrollment periods 
for certain changes in plan provider networks, exhaustion of the COBRA 
disability extension, denial of services due to a provider's moral or 
religious opposition, and pregnancy.
    Response: The Affordable Care Act establishes that Exchange special 
enrollment periods follow those specified in section 9801 of the Code 
and part D of title XVIII of the Act. The additional special enrollment 
periods suggested by commenters are not specified in the Code, nor are 
they similar enough to those available under the Act for HHS to include 
them in the final rule. Therefore the final rule implements the statute 
without additions. We note, however, that the special enrollment period 
for exceptional circumstances in Sec.  155.420(d)(9) of this final rule 
provides an additional opportunity for enrollment when unforeseen 
circumstances arise.
    Comment: Regarding proposed Sec.  155.420(d)(1), for individuals 
losing minimum essential coverage, many commenters sought clarification 
about what coverage it included. Several commenters questioned whether 
an individual would be eligible for this special enrollment period if 
offered COBRA, and how the policy related to proposed Sec.  155.420(e) 
and the Treasury proposed rule. Many commenters also sought assurance 
that loss of coverage included loss of coverage through Medicaid, CHIP 
and the BHP. One health insurance issuer recommended that loss of 
Medicaid or CHIP only be included if it is the result of a reported 
change in household income to an Exchange that disqualifies the 
individual or family from Medicaid or CHIP. A few health insurance 
issuers supported the language in proposed Sec.  155.420(d)(1) 
specifying loss of ``minimum essential coverage,'' as opposed to any 
coverage, because it limits adverse selection by prohibiting 
individuals from dropping their substandard coverage when they became 
sick or injured. A few other commenters recommended Exchange 
flexibility to offer special enrollment periods to individuals losing 
non-minimum essential coverage.
    Response: The Exchange establishment proposed rule preamble 
provides several examples of loss of coverage, including loss of 
Medicaid and CHIP, in accordance with section 9801(f)(3) of the Code. 
The examples remain accurate for this final rule. We have further 
clarified Sec.  155.420(e) in this final rule by specifying that loss 
of coverage includes those circumstances described in 26 CFR 54.9801-
6(a)(3)(i) through (iii). This clarification aligns the special 
enrollment more closely with section 9801 of the Code. An individual 
could lose eligibility for Medicaid or CHIP as a result of a reported 
change in household income, or as a result of other circumstances.
    Qualified individuals are eligible for the loss of minimum 
essential coverage special enrollment period described in Sec.  
155.420(d)(1), even if offered COBRA. The Treasury proposed rule 
defines COBRA coverage as minimum essential coverage only if the 
individual enrolls in such coverage. Therefore, if an individual elects 
and enrolls in COBRA, he or she cannot qualify for this special 
enrollment period until exhausting COBRA, as described in Sec.  
155.420(e), but if the individual does not elect COBRA, he or she may 
take advantage of the Exchange special enrollment period. Regarding the 
recommendation to allow Exchanges to offer this special enrollment 
period to individuals losing non-minimum essential coverage, we have 
not adopted this policy in

[[Page 18392]]

deference to the status the statute gives to minimum essential 
coverage.
    Comment: Regarding the special enrollment period for individuals 
gaining or becoming a dependent as described in proposed Sec.  
155.420(d)(2), many commenters made arguments for either limiting or 
for expanding the list of life events through which an individual 
becomes or gains a dependent. Several commenters recommended adding 
domestic partners, partners joined in civil unions, or dependents 
gained through guardianship. Several other commenters recommended that 
State law determine the types of dependents allowed.
    Response: For the same reasons as described above, we do not find 
legal grounds for expanding the definition of dependents for the 
purpose of the special enrollment period described in Sec.  
155.420(d)(2). Therefore, we retain this provision in this final rule 
without modification.
    Comment: Regarding the special enrollment period for individuals 
becoming lawfully present, outlined in proposed Sec.  155.420(d)(3), 
several commenters questioned whether an individual moving from one 
lawfully present category to another would be granted this special 
enrollment period if it affected his or her eligibility for certain 
types of coverage.
    Response: To qualify for coverage without advance payments of the 
premium tax credit or cost-sharing reductions through an Exchange under 
the special enrollment period described in both the proposed and final 
rule at Sec.  155.420(d)(3), the individual cannot have been previously 
lawfully present.
    Comment: Regarding the special enrollment periods for errors in 
enrollment, and for contract violations, outlined in proposed Sec.  
155.420(d)(4) and Sec.  155.420(d)(5) respectively, several commenters 
sought clarification on the kinds of events that would trigger them, 
and how individuals would demonstrate such events. A few health 
insurance issuers recommended appeals processes, either in conjunction 
with, or instead of these special enrollment periods. They recommended 
various limitations on the special enrollment period for errors in 
enrollment, and one commenter recommended that it be removed from the 
rule all together. Several other commenters sought clarification as to 
which entities are considered ``agents of the Exchange or HHS,'' and 
recommended that at least QHPs be included as such agents.
    Response: The special enrollment periods in Sec.  155.420(d)(4) and 
Sec.  155.420(d)(5) of this final rule are generally consistent with 
those offered under the Medicare Prescription Drug Program, as noted 
above. We expect Exchanges to develop guidance and standard operating 
procedures for considering requests for this special enrollment period. 
We encourage Exchanges to do so in consultation with health insurance 
issuers and other stakeholders. HHS may also provide future guidance to 
help Exchanges in operationalizing this special enrollment period.
    Comment: Regarding the special enrollment period for individuals 
newly eligible or ineligible for advance payments of the premium tax 
credit, outlined in proposed Sec.  155.420(d)(6), a couple of 
commenters sought clarification as to whether an individual newly 
released from incarceration would qualify for the special enrollment 
period, even if he or she did not qualify for advance payments of the 
premium tax credit or did not experience a change in cost-sharing 
reductions.
    Response: Qualified individuals newly released from incarceration 
are eligible for the special enrollment period afforded to individuals 
who gain access to a new QHP as a result of a permanent move, as 
outlined in Sec.  155.420(d)(7) of this final rule and as described 
further below.
    Comment: A couple of commenters recommended that the special 
enrollment period for individuals newly eligible or ineligible for 
advance payments of the premium tax credit, outlined in proposed Sec.  
155.420(d)(6), clarify that individuals may not qualify for this 
special enrollment period if they become eligible for an increase or 
decrease in their existing advance payments of the premium tax credit. 
Conversely, one commenter responding to HHS' request for comment 
recommended that this kind of special enrollment period be offered to 
all individuals who experience a change in income resulting in 
recalculation of their advance payments of the premium tax credit.
    Response: The final rule specifies that individuals may only 
qualify for this special enrollment period in Sec.  155.420(d)(6) if 
they are newly eligible or ineligible for advance payments of the 
premium tax credit, and we do not believe clarification is necessary, 
as requested by the commenter. That said, if an individual experiences 
a change in his or her existing payments of the premium tax credit in 
tandem with a change in level of cost-sharing reductions, the 
individual could qualify for this special enrollment period.
    Comment: One commenter recommended dividing the special enrollment 
period in proposed Sec.  155.420(d)(6) into two distinct periods--one 
for individuals gaining eligibility for advance payments of the premium 
tax credit or experiencing a change in cost-sharing reductions, and a 
second for individuals whose employer-sponsored coverage ceases to meet 
affordability or minimum value standards.
    Response: While we have not added a special enrollment period 
specifically for individuals whose employer-sponsored coverage ceases 
to meet affordability or minimum value standards, as recommended by the 
commenter, we clarify in Sec.  155.420(e) that loss of minimum 
essential coverage includes those circumstances described in 26 CFR 
54.9801-6(a)(3)(i) through (iii). We believe that between the special 
enrollment periods offered for loss of minimum essential coverage in 
Sec.  155.420(d)(1) and for employer-sponsored coverage becoming 
unaffordable in Sec.  155.420(d)(6), individuals will have ample 
opportunities to enroll in coverage through the Exchange.
    Comment: Regarding the special enrollment period for permanent 
moves, outlined in proposed Sec.  155.420(d)(7), one health insurance 
issuer recommended that the provision be revised so that it would only 
be a triggering event if an enrollee moves permanently outside the 
service area of his or her existing QHP. Several health insurance 
issuers also recommended that individuals who move across State lines 
receive an eligibility determination from the Exchange in their new 
State.
    Response: The special enrollment period in Sec.  155.420(d)(7) is 
similar to the special enrollment period under part D of title XVIII of 
the Act, as directed by section 1311(c)(6) of the Affordable Care Act. 
Both are intended to afford individuals the full range of plan options 
when they relocate. Individuals moving to a new State should receive an 
eligibility determination from their new State's Exchange. Qualified 
individuals are responsible for reporting a permanent move.
    Comment: Several commenters recommended that a special enrollment 
period be triggered by the date of a permanent move described in Sec.  
155.420(d)(7), while others recommended it be triggered by the date the 
individual reports the move to the Exchange, with a time-limited time 
window in which to report it. In cases where an individual's 
eligibility for employer-sponsored coverage terminates or changes, in 
response to proposed Sec.  155.420(d)(1) and (d)(6) respectively, 
several commenters recommended that the period be

[[Page 18393]]

triggered by the date the employee learns of the termination or change. 
Other commenters recommended that it be triggered by the actual date of 
the termination of or change in coverage. In cases where an individual 
becomes newly eligible for advance payments of the premium tax credit 
or experiences a change in cost-sharing reductions, in response to 
proposed Sec.  155.420(d)(6), several commenters recommended that the 
period be triggered by the date the individual experienced a change in 
circumstances, while others recommended it be triggered by the date of 
the Exchange's official eligibility determination. Several other 
commenters recommended less structured approaches, such as leaving the 
trigger up to the consumer with the change in circumstances, or 
allowing the particular circumstances to dictate the trigger. Many 
commenters also recommended that individuals be permitted to seek 
special enrollment periods in advance of a known triggering event.
    Response: We expect to issue guidance to help Exchanges determine 
how to define the triggering events and consider the recommendations 
received. We believe it is critical to establish a balance between 
minimizing gaps in coverage and the need to avoid coverage overlaps 
when premium tax credits are involved. Exchanges may grant special 
enrollment periods in advance of a triggering event, so long as the 
effective date of coverage does not occur before the triggering event, 
and so long as there is no overlap in coverage for which the individual 
receives advance payments of the premium tax credit or cost-sharing 
reductions while enrolled in other minimum essential coverage.
    Comment: Regarding the special enrollment period for Indians, 
outlined in proposed Sec.  155.420(d)(8), some commenters expressed 
support, while others either opposed it or recommended that States have 
flexibility to adopt their own special Indian provisions. Many 
commenters sought further clarification on how the Exchange would 
verify an individual's status as an Indian. Some disagreed with the 
definition of Indian outlined by HHS in proposed Sec.  155.420(d)(8), 
and some provided a detailed legal analysis to support their position. 
Others recommended allowing special enrollment periods more frequently 
than once per month in cases where any QHP network excludes Indian 
Health Service, tribal, or urban Indian providers or when a QHP drops 
such providers from its network.
    Response: Consistent with the proposed rule, HHS is codifying the 
special monthly enrollment period for Indians in accordance with 
section 1311(c)(6)(D) of the Affordable Care Act. Sections 155.300 and 
155.350(c) of this final rule address comments submitted regarding the 
definition of Indian and verification of an individual's status as an 
Indian as it relates to eligibility for cost-sharing reductions. The 
same verification rules apply to eligibility for this special 
enrollment period. As stated above, we do not believe that there is 
legal flexibility to include additional special enrollment periods.
    Comment: Regarding the special enrollment period for individuals 
with exceptional circumstances, outlined in proposed Sec.  
155.420(d)(9), many commenters supported the broad language, while 
several others recommended more specificity. A few commenters 
recommended that States, not HHS, determine the exceptional 
circumstances.
    Response: We have modified the language in Sec.  155.420(d)(9) to 
permit individuals to request a special enrollment period by 
demonstrating to their Exchange that they meet exceptional 
circumstances. The modified language establishes that individuals must 
demonstrate such circumstances in accordance with guidelines issued by 
HHS. Consistent with examples outlined in the proposed rule preamble, 
HHS's guidance for this special enrollment period will outline 
circumstances when HHS may grant special enrollment periods directly, 
such as in cases of natural disasters.
    Comment: A few commenters supported the exclusion from special 
enrollment periods when individuals failed to pay their premiums on a 
timely basis, outlined in proposed Sec.  155.420(e), while several 
other commenters explicitly opposed this provision. Several commenters 
only opposed the exclusion for individuals who failed to pay their 
COBRA premium on a timely basis, noting that many people are likely to 
elect COBRA without realizing that there are more affordable coverage 
options through the Exchange.
    Response: The limitation described in Sec.  155.420(e) reflects 
similar limitations in both section 9801 of the Code, and part D of 
title XVIII, as directed by section 1311(c)(6) of the Affordable Care 
Act. As stated in the response to comments on Sec.  155.420(d)(1) (for 
individuals losing minimum essential coverage) individuals are free to 
decline COBRA and instead enroll in a QHP through the Exchange. We have 
also added clarification to Sec.  155.420(e) to indicate which 
circumstances are included under loss of minimum essential coverage.
    Comment: While a few health insurance issuers supported the limits 
on special enrollment periods outlined in proposed Sec.  155.420(f), 
most commenters either opposed the provision outright, or recommended 
additional exceptions, such as exceptions for pregnant women, or for 
the special enrollment periods described in proposed Sec.  
155.420(d)(2), Sec.  155.420(d)(4), Sec.  155.420(d)(5), and Sec.  
155.420(d)(8). One commenter noted that because the special enrollment 
periods were generally not tied to changes in an individual's health 
status, they did not pose a risk of adverse selection.
    Response: We have removed Sec.  155.420(f) from the final rule 
because special enrollment periods are generally not tied to changes in 
an individual's health status, and are unlikely to increase the 
potential for adverse selection. Just as qualified individuals are free 
to move between metal levels during the initial and annual open 
enrollment periods, they are also free to do so during special 
enrollment periods.

Summary of Regulatory Changes

    We are finalizing the standards proposed in Sec.  155.420 of the 
proposed rule, with several modifications: in Sec.  155.420(b) related 
to effective dates, we modified the special enrollment period effective 
dates such that a QHP selection must be received by the Exchange by the 
15th of the month to secure an effective date of the first day of the 
following month. We provided Exchanges flexibility to effectuate 
coverage more quickly by demonstrating to HHS that all QHP issuers 
offering coverage through the Exchange agree with the earlier dates, 
but noted that advance payments of the premium tax credit and cost-
sharing reductions cannot begin until the first of the month. This 
limitation on advance payments of the premium tax credit and cost-
sharing reductions also applies to individuals enrolling mid-month as a 
result of birth, adoption or placement for adoption. As an exception to 
the effective dates above, we specified in Sec.  155.420(b)(2)(ii) that 
in the case of marriage or in the case where a qualified individual 
loses minimum essential coverage, the Exchange must always ensure 
coverage is effective on the first day of the following month, 
consistent with HIPAA rules. We clarify that to qualify for the special 
enrollment period under Sec.  155.420(d)(9) individuals must 
demonstrate their exceptional circumstances to the Exchange, in 
accordance with guidelines issued by HHS. In Sec.  155.420(e) we 
clarify that loss of coverage includes those

[[Page 18394]]

circumstances described in 26 CFR 54.9801-6(a)(3)(i) through (iii). 
Finally, we remove the restrictions in Sec.  155.420(f) that had 
previously prohibited individuals from moving between metal levels 
during special enrollment periods.
e. Termination of Coverage (Sec.  155.430)
    We proposed 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 proposed that the Exchange may initiate termination of an 
enrollee's coverage in a QHP, and must permit a QHP issuer to terminate 
such coverage under a specific list of circumstances: the enrollee is 
no longer eligible for coverage; the enrollee obtains other minimum 
essential coverage; payment of premiums cease; the enrollee's coverage 
is rescinded in accordance with Sec.  147.128 of this title; the 
enrollee's QHP is terminated or decertified; or the enrollee changes 
from one plan to another during the annual open enrollment or a special 
enrollment period in accordance with sections Sec.  155.410 and Sec.  
155.420.
    We also proposed that the Exchange 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 promptly and without undue delay, establish terms for reasonable 
accommodations for individuals with mental or cognitive conditions, and 
retain records in order to facilitate audit functions.
    Additionally, we proposed 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, provided that the 
Exchange and QHP receive reasonable notice. We proposed that if the 
Exchange or the QHP do not receive reasonable notice, the last day of 
coverage is the first day after a reasonable amount of time has passed. 
We proposed 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 solicited comments regarding how Exchanges can work 
with QHP issuers to implement this proposal. We also proposed standards 
for termination effective dates in the case of a termination by the 
Exchange or a QHP as a result of an enrollee changing QHPs. Finally, we 
proposed that for individuals not covered by the previous termination 
effective dates, the last day of coverage would be either the 
fourteenth or the last day of the month, depending on when termination 
of coverage was initiated.
    Comment: A handful of commenters asked us to clarify what length of 
time would qualify as ``reasonable notice,'' as referenced in the 
proposed rule in Sec.  155.430(b)(1). Some commenters suggested 24 
hours while others suggested 30 days. The most common suggestion was 14 
days. Other commenters requested that the final rule specify the 
methods consumers may use to notify their intent to terminate coverage.
    Response: In this final rule, we clarify in Sec.  155.430(d)(1) 
that ``reasonable notice'' is defined as 14 days from the requested 
date of termination. We want to ensure that individuals who have access 
to other coverage sources do not need to maintain Exchange coverage 
longer than necessary. In Sec.  155.430(d)(2)(ii) of the final rule, we 
further state that the date of termination of coverage is 14 days from 
the request if the enrollee does not give reasonable notice to 
terminate coverage. We also note in Sec.  155.430(d)(2)(iii) that 
coverage may be terminated in fewer than 14 days, per the request of 
the individual, if his or her QHP issuer is able to effectuate 
terminations more quickly. We do not specify how an individual will 
notify the Exchange that they wish to terminate coverage; rather, we 
leave this up to States to define how such transmissions may be 
received. This is in part because a request for termination may be 
received through either the Exchange or the QHP, and also because we 
wish to allow maximum flexibility to Exchanges.
    Comment: Several commenters requested clarification regarding how 
the grace period for non-payment of premiums would work for individuals 
receiving advance payments of the premium tax credit and whether these 
policies differ for those who are not.
    Response: We clarify in Sec.  155.430(b)(2)(ii)(A) and (B) of this 
final rule that the grace periods for non-payment of premiums are not 
the same for individuals receiving advance payments of the premium tax 
credit and other enrollees. The 90-day grace period for non-payment of 
premiums for individuals receiving advance payments of the premium tax 
credit is addressed in Sec.  156.270(d). In Sec.  155.430(d)(5) of the 
final rule, we clarify that the last day of coverage for individuals 
not receiving advance payments of the premium tax credit should be 
consistent with existing State laws regarding grace periods for non-
payment.
    Comment: One commenter suggested that Exchanges be allowed to 
designate either the Exchange or the QHP to receive termination 
notifications in order to reduce duplication. A few commenters did not 
support the proposed standard in Sec.  155.430(c) that QHP issuers 
report termination of coverage data to HHS because of privacy concerns.
    Response: We did not accept the commenter's recommendation. 
Regardless of which entity the enrollee contacts to terminate coverage, 
the Exchange and QHP issuers will need to notify the other entity of 
the enrollee's coverage status to keep updated enrollment records. In 
addition, HHS needs to know when coverage is terminated to stop advance 
payments of the premium tax credit. As such, we maintain the reporting 
standards in Sec.  155.430(c) in this final rule.
    Comment: A few commenters asked that language in proposed Sec.  
155.430(c)(3), which directs QHP issuers to make reasonable 
accommodations when terminating coverage for individuals with mental or 
cognitive conditions, be broadened to include all individuals with 
disabilities, not just individuals with mental or cognitive 
disabilities.
    Response: We broaden the final rule in Sec.  155.430(c)(3) to state 
that reasonable accommodations must be undertaken when terminating 
coverage for individuals with disabilities as defined by the Americans 
with Disabilities Act.
    Comment: A handful of commenters thought that provisions of section 
2703 of the PHS Act were in conflict with the termination provisions 
contained in the Exchange establishment proposed rule in Sec.  
155.430(d)(2) because the proposed rule outlined dates of termination 
when an enrollee gains other minimum essential coverage. Commenters 
interpreted this to mean that an individual must terminate his or her 
Exchange coverage and said that issuers cannot terminate an 
individual's coverage because they gain access to other minimum 
essential coverage.
    Response: We removed language indicating that a QHP must terminate 
an enrollee's coverage should they gain access to other minimum 
essential coverage in the final rule. Therefore, we do not believe 
there is a conflict with section 2703 of the PHS Act. We note, however, 
that the enrollee would no longer be eligible for advance payments of 
the premium tax credit or cost-sharing reductions if they have access 
to other minimum essential coverage.
    Comment: Several commenters requested that CMS put in place

[[Page 18395]]

``safeguards'' so as to minimize or eliminate coverage gaps for 
individuals who become newly eligible for Medicaid, CHIP, or the BHP. 
Other commenters requested that individuals not have their Exchange 
coverage terminated when they become eligible but do not enroll in 
Medicare. Many other commenters recommended that the final rule state 
that individuals cannot be automatically terminated from Exchange 
coverage should they be found eligible for Medicaid, CHIP, or the BHP.
    Response: In order to address these concerns, we have added Sec.  
155.430(d)(2)(iv) to the final rule to specify that if an individual 
enrolls in Medicaid, CHIP, or the BHP and wishes to terminate his or 
her Exchange coverage, then the last day of Exchange coverage is the 
day before such other coverage begins. We note that neither the 
proposed nor the final rule state that individuals will automatically 
be terminated from Exchange coverage should they be found eligible for 
Medicare. We also note that we remove proposed Sec.  155.430(d)(4) from 
this final rule because the provisions are no longer necessary given 
the termination dates outlined in Sec.  155.430(d)(1-6) of the final 
rule.
    Comment: Some commenters requested that the Exchange establish a 
broad definition of ``minimum essential coverage,'' as well as 
flexibility in terms of when coverage is terminated because an enrollee 
gains access to other minimum essential coverage.
    Response: We do not define minimum essential coverage in this final 
rule as this definition is included in section 5000A(f) of the Code. 
Individuals do not have to terminate coverage and QHP issuers must not 
terminate coverage when an individual becomes enrolled in other minimum 
essential coverage unless such individual requests a termination. In 
Sec.  155.430(d)(2) of this final rule, we clarify that the last day of 
coverage when an enrollee gains access to other minimum essential 
coverage is the date requested by the enrollee, should they give 
reasonable notice unless the QHP issuer can effectuate the termination 
earlier, or, the day before new coverage begins if the enrollee becomes 
eligible for Medicaid, CHIP, or the Basic Health Program. Individuals 
and QHP issuers do not have to terminate coverage when an individual 
becomes enrolled in other minimum essential coverage. However, if an 
individual is eligible for or enrolled in other minimum essential 
coverage, such individual may no longer be included in the coverage 
family, as indicated in Sec.  155.305(f)(1)(B) and can no longer 
receive advance payments of the premium tax credit or cost-sharing 
reductions.
    Comment: A few commenters asked that HHS track reasons for 
termination of coverage.
    Response: Additional details regarding data that must be submitted 
to HHS will be addressed in future guidance.
    Comment: Several commenters noted that the proposed termination 
effective date in Sec.  155.430(d)(3) was inaccurate as it was 
prospective, when rescission is by definition retrospective.
    Response: We removed Sec.  155.430(d)(3) in the final rule to 
eliminate a date of termination for a rescission in accordance with 
Sec.  147.128. The termination of coverage date will vary based on the 
situation.

Summary of Regulatory Changes

    We are finalizing the definitions proposed in Sec.  155.430 of the 
proposed rule, with the following modifications: we clarified paragraph 
(b)(1) to specify that an enrollee must be permitted to terminate his 
or her coverage, including as a result of obtaining other minimum 
essential coverage. In new paragraph (b)(2)(A), we clarified that 
enrollees receiving advance payments of the premium tax credit will be 
terminated from coverage when the grace period described in Sec.  
156.270 is exhausted. In Sec.  155.430(c)(2) we clarified that the 
Exchange must transmit data on terminations to QHP issuers and HHS 
promptly and without undue delay. We also broadened the regulation text 
in Sec.  155.430(c)(3) regarding individuals with disabilities to state 
that QHP issuers must create standards to accommodate all individuals 
with disabilities when terminating such individuals' coverage, and 
defined individuals with disabilities as those groups identified under 
the Americans with Disabilities Act. In addition, in paragraph Sec.  
155.430(d)(1) we defined ``reasonable notice'' given by the enrollee to 
the Exchange or QHP issuer to terminate coverage as 14 days.
    In paragraph Sec.  155.430(d)(2), we described the last day of 
coverage as the date specified by the enrollee; fourteen days after the 
termination date requested by the enrollee, if the enrollee does not 
provide reasonable notice; or fewer than 14 days if the individual's 
QHP issuer is able to terminate coverage more quickly. Paragraph (d)(3) 
was added to clarify that for an enrollee who is no longer eligible for 
coverage through the Exchange, the last day of coverage is the last day 
of the month following the month in which notice described by Sec.  
155.330(e) is sent by the QHP. We noted in new paragraph (d)(4) that 
for an enrollee receiving advance payments of the premium tax credit, 
the last day of coverage will be the last day of the first month of the 
grace period. In paragraph (d)(5) we noted that the last day of 
coverage for non-payment of premiums for enrollees not receiving 
advance payment of the premium tax credit is in accordance with State 
law.
6. Subpart H--Exchange Functions: Small Business Health Options Program 
(SHOP)
    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). States that choose to 
operate an Exchange may also merge SHOP with the individual market 
Exchange.
a. Standards for the Establishment of a SHOP (Sec.  155.700)
    In Sec.  155.700, we proposed the general standard that an Exchange 
must provide for the establishment of a SHOP that meets the standards 
of this subpart.
    Comment: Some commenters requested that, in the case of a State 
that establishes either a SHOP or an Exchange serving the individual 
market, but not both, the Secretary certify this as an Exchange in 
accordance with the Affordable Care Act.
    Response: Section 1311(b) of the Affordable Care Act envisions an 
Exchange that both facilitates the purchase of QHPs and provides for 
the establishment of a SHOP. We interpret this to mean that a State 
that fails to fulfill both standards has not established an Exchange in 
accordance with the Affordable Care Act.
    Comment: Some commenters proposed that the SHOP may want to fulfill 
additional functions outside the scope of the proposed rule in order to 
offer employers a streamlined experience when managing their employee 
benefits. These commenters proposed that the SHOP sell other types of 
insurance, administer COBRA on behalf of participating employers, 
administer flexible spending accounts, assist small employers in 
setting up Section 125 plans, and oversee wellness programs.
    Response: Section 155.1000(b) directs the Exchanges to only offer 
health plans that have been certified as QHPs. We will take these 
comments into account as we consider future guidance on the offering of 
other products on the Exchange.
    Comment: One commenter requested that we clarify the meaning of 
``coordination'' and sharing of

[[Page 18396]]

information between the Exchange and the SHOP as described in the 
preamble to the proposed rule.
    Response: As discussed in the proposed rule, there are many 
economies of scale that may arise from integrated Exchange and SHOP 
establishment. We believe that there are natural opportunities for the 
Exchange and the SHOP to benefit from shared data sources and 
coordinated activities.
    Comment: One commenter discussed the possible use of health 
reimbursement arrangements from multiple employers as a means of 
purchasing coverage through the SHOP, aggregating premium contributions 
from multiple employers to support the employee's purchase of a QHP.
    Response: The possible use of different forms of health 
reimbursement arrangement to purchase coverage through the Exchange or 
the SHOP is beyond the scope of this final rule, and will be addressed 
in future guidance.

Summary of Regulatory Changes

    We are finalizing the provisions proposed in Sec.  155.700 of the 
proposed rule, with one modification: in new paragraph (b), we added a 
definition of ``group participation rule.''
b. Functions of a SHOP (Sec.  155.705)
    In Sec.  155.705, we proposed the minimum functions of a SHOP. The 
SHOP must carry out all the functions of an Exchange described in this 
subpart and in subparts C, E, and K of this part, except for standards 
related to individual eligibility determinations, enrollment standards 
related to qualified individuals, standards related to the premium tax 
credit calculator, standards related to exemptions from the individual 
coverage requirement, and standards related to the payment of premiums 
by individuals, Indian tribes, tribal organizations, and urban tribal 
organizations.
    We also proposed that a SHOP must adhere to additional enrollment 
and eligibility standards described in Sec.  155.710, Sec.  155.715, 
Sec.  155.720, Sec.  155.725, and Sec.  155.730. In addition, the SHOP 
must at a minimum facilitate the special enrollment periods described 
in Sec.  156.285(b)(2). Specifically, we proposed that all of the 
special enrollment periods that apply to individual market coverage in 
the Exchange also apply in the SHOP, with the exception of special 
enrollment periods associated with a change in citizenship status or 
lawful presence or eligibility for advance payments of the premium tax 
credit or cost-sharing reductions. We noted that the proposed rule did 
not eliminate any special enrollment periods established by other laws 
(including, but not limited to, HIPAA (Pub. L. 104-191)). We also 
clarified that the two exceptions described above also apply to 
qualified employees in a SHOP. We invited 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.
    We proposed that a qualified employer may choose a level of 
coverage under section 1302(b) of the Affordable Care Act, within which 
a qualified employee may choose an available plan at that level of 
coverage. We also provided flexibility for a SHOP to choose additional 
ways for qualified employers to offer one or more plans to their 
employees and listed several potential options. We sought comment on 
our proposed approach, which established a standard for employee choice 
within a level of cost sharing while providing SHOPs the option to 
offer broader employee choices among plans of different levels of cost 
sharing.
    We also invited comment on whether QHPs offered in the SHOP should 
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.
    To simplify the administration of health benefits among small 
employers, we proposed 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. We further 
proposed that the SHOP collect from employers offering multiple 
coverage options a single cumulative premium payment.
    We proposed three unique criteria for certification for a SHOP: 
rate setting and premium payment standards; enrollment period 
standards; and enrollment process standards. Specifically, we proposed 
that the SHOP direct all QHP issuers to make any changes to rates at a 
uniform interval that is either monthly, quarterly, or annually. As 
described in Sec.  155.725, we proposed to permit rolling enrollment in 
a SHOP, which allows qualified employers to purchase coverage in QHPs 
at any point during the year. We invited comment on whether we should 
allow a more permissive or restrictive timeframe than monthly, 
quarterly, or annually. We also invited comment on what rates should be 
used to determine premiums during the plan year.
    We also proposed that if a State merges the individual and small 
group risk pools, the Exchange may only offer QHPs to employers and 
employees that meet the deductibles set forth in section 1302(c)(2)(A) 
of the Affordable Care Act. If a State does not merge the individual 
and small group risk pools, we proposed that a SHOP may only make small 
group QHPs available to qualified employees.
    Finally, we proposed to codify the statutory option for States to 
allow insurers in the large group market to sell large group products 
to large groups through the SHOP beginning in 2017.
    Comment: We received several comments regarding the proposed 
exclusion of a premium calculator from the minimum functions for the 
SHOP in proposed Sec.  155.705(a)(3). Some commenters requested that a 
premium calculator be included, arguing that it assists employers in 
estimating their total costs. Other commenters noted that instead of 
providing individuals with an estimation of their cost of coverage 
after any applicable tax credits or cost sharing reductions, a premium 
calculator in the SHOP may show employees their premiums after any 
applicable employer contributions.
    Response: We believe that a premium calculator will assist 
employees in determining their cost of coverage after any applicable 
employer contribution at little to no additional burden on SHOPs or 
employers. Therefore, we have added new Sec.  155.705(b)(11) in this 
final rule to clarify that a SHOP must provide a premium calculator to 
qualified employers. To support States in developing a premium 
calculator for the SHOP, HHS will provide model computer code.
    Comment: In response to the proposed Sec.  155.705(b)(1), which 
stated that a SHOP must facilitate the special enrollment periods 
described in Sec.  156.285(b)(2), many commenters expressed concern 
about the preamble discussion regarding a lack of a special enrollment 
period in SHOP based on change in immigration or citizenship status. 
These commenters recommended that, rather than clarifying that a SHOP 
would not need to offer a special enrollment period based on a change 
in immigration or citizenship status, HHS should clarify that special 
enrollment periods in SHOP should be based on whether an individual is 
newly hired by a ``qualified'' employer or whether an individual 
becomes a newly eligible ``qualified employee.'' Further, commenters 
recommended that HHS clarify that new hires or newly eligible qualified 
employees should not need a

[[Page 18397]]

special enrollment period because the qualified employers should allow 
them to enroll at any time during the plan year.
    Response: We have modified the language in Sec.  155.725(g) and 
Sec.  156.285(b) in this final rule to clarify the provision of an 
enrollment period for an employee who becomes a ``qualified employee'' 
rather than just new hires. We believe this clarification more 
accurately reflects the intent that enrollment periods will be provided 
to those who become qualified employees outside of the initial or 
annual open enrollment period, such as employees who have, for example, 
completed an employer's waiting period for benefits, changed from part 
time to full time status, or are newly hired.
    Comment: We received numerous comments in response to proposed 
Sec.  155.705(b)(2) and (3) on the employee and employer choice 
provisions. Many commenters supported additional employee choice 
options, such as offering plans across cost-sharing levels. Other 
commenters supported more limited employee choice options, often 
expressing concern that allowing employee choice across cost-sharing 
levels and even within a cost-sharing level would result in substantial 
risk selection. Some commenters supported broad employer choice to 
offer either a wider or narrower range of employee choices, including 
offering a single QHP. Several commenters suggested that the Affordable 
Care Act directs the SHOP to give employers the option to offer a 
single QHP. One commenter suggested initially implementing a pure 
employer choice model with no employee choice. A few commenters 
suggested adding a defined contribution model to the list of additional 
choice options from the preamble to the proposed rule.
    Response: We believe the proposed rule appropriately balances the 
employee choice standards of the Affordable Care Act with flexibility 
for SHOPs to allow employers greater choice in their plan offering 
options. Under this model, employees will likely have more plan choice 
than they currently have in the small group market, where traditionally 
an employer offers only one plan to its employees.\9\ However, nothing 
in the Affordable Care Act limits a SHOP's ability to offer an employer 
additional options, including choice across cost-sharing levels. We 
believe that States and SHOPs are best positioned to strike the proper 
balance among competing priorities: flexibility, meaningful consumer 
choice, and protection of the market against risk selection. Thus, we 
have retained the proposed wording of Sec.  155.705(b)(2) and (b)(3) in 
the final rule.
---------------------------------------------------------------------------

    \9\ Exhibit 4.2: Among Firms Offering Health Benefits, 
Percentage of Covered Workers in Firms Offering One, Two, or Three 
or More Plan Types, by Firm Size, 2011, Employer Health Benefits 
2011 Annual Survey. Kaiser Family Foundation.
---------------------------------------------------------------------------

    We also note specifically that the SHOP may allow employers to 
offer only one plan to its employees. We believe this is supported by 
section 1312 of the Affordable Care Act, which defines a ``qualified 
employer'' as a small employer that elects to make all full-time 
employees eligible for one or more QHPs offered in the small group 
market through the Exchange. However, we do not believe that this 
definition establishes that the SHOP must give employers the option to 
offer only a single plan.
    With regard to the comments on defined contribution, we note that 
the method through which an employer offers QHPs to its employees is 
independent of how the employer chooses to contribute toward the 
premium cost of coverage.
    Comment: One commenter expressed concern that allowing employers to 
enroll their qualified employees into a single QHP may trigger the 
application of ERISA, and that the Affordable Care Act was intended to 
supersede ERISA and provide stronger Federal and State protections to 
consumers.
    Response: Issues on the application of ERISA are within the purview 
of Department of Labor. In this rule, we clarify that a SHOP may permit 
employers to offer employees a single QHP.
    Comment: One commenter on proposed Sec.  155.705 requested that HHS 
clarify whether the employer or the SHOP will be responsible for 
maintaining records on employee QHP selections, and further expressed 
concern that the employer would be unable to monitor its employees' QHP 
selections.
    Response: As described in Sec.  155.705(b)(4)(i) of this final 
rule, the SHOP is responsible for providing each qualified employer 
with a bill listing the employees enrolled under that employer, the QHP 
each employee is enrolled in, and the cost of the QHP.
    Comment: We received several comments regarding the proposed Sec.  
155.705(b)(4), which stated that a SHOP must provide a ``single bill'' 
to qualified employers and aggregate premium payments from employers. 
Many commenters supported this proposal, noting that it was essential 
to the effective operation of providing employees with a choice of QHP 
and should ease the burden on small employers of administering group 
health benefits. Some commenters recommended that the single bill list 
for each employee the portion of the premium the employee is 
responsible for and the portion of the premium for which the employer 
is responsible, while others suggested that the SHOP assist employers 
in calculating an average premium for its employees. In contrast, other 
commenters suggested that premium aggregation should not be a minimum 
function of the SHOP or should be optional for employers not providing 
their employees with a choice of QHP. Some commenters noted that health 
plans currently provide their own the billing services and that a 
standard on the SHOP to aggregate premiums may add to the 
administrative cost of selling QHPs through the SHOP.
    Response: We believe that premium aggregation dramatically 
decreases the burden on an employer of participating in the SHOP by 
permitting the employer to write a single check for the total premium 
amount due. We do not believe that SHOP premium aggregation will 
increase the administrative burden on issuers who already perform 
billing services, because such issuers will no longer have to submit, 
track, and support a large number of paper bills to individual 
employers. Further, we believe that the process of resolving 
discrepancies will be simplified, since the issuer only needs to 
reconcile with one entity--the SHOP.
    Additionally, we believe that bills provided by the SHOP should 
contain in addition to the total amount due by the employer, the 
portion of each employee's premium for which the employer is 
responsible and the portion for which the employee is responsible, and 
have revised paragraph Sec.  155.705(b)(4)(i) of this final rule to 
reflect this clarification. We note that this information may be 
collected on the SHOP single employer application. The SHOP may also 
include an average premium on the billing statement to assist employers 
in smoothing premium costs between employees.
    Comment: Some commenters responding to proposed Sec.  155.705 
requested clarification regarding procedures for dispute resolution for 
potential scenarios where the SHOP failed to remit payment to QHP 
issuers in a timely manner or failed to collect the correct amount from 
employers. One commenter recommended that proposed Sec.  155.720(d) 
allow a grace period for employees and employers for making premium 
payments based on evidence of a ``good faith'' effort.

[[Page 18398]]

    Response: Because States vary dramatically in statutory and 
regulatory standards related to non-payment or late payment of 
premiums, we do not believe a Federal uniform standard and process 
could effectively prevent such errors. Instead, we encourage SHOPs to 
create standard operating procedures regarding the payment and 
remittance of premiums. We also recommend that SHOPs standardize grace 
periods across QHPs. Because proper oversight of the flow of funds is 
essential, we direct the SHOP to maintain records and evidence of 
standard accounting procedures in order to allow for effective auditing 
of the premium aggregation service.
    Comment: Commenters generally supported the option for a State to 
merge the individual and small group markets subject to the provisions 
of proposed Sec.  155.705(b)(7).While commenters had a variety of views 
on the advisability of merging the markets, most commenters agreed 
that, if a State merges the markets, QHPs offered to small employers in 
the merged market must meet the maximum deductible provision in section 
1302(c) of the Affordable Care Act. One commenter said that QHPs in a 
merged market should not be subject to a maximum deductible, and 
another commenter stated that there should be no restrictions on the 
deductible in the small group market.
    Response: We do not believe that the statute allows issuers who 
participate in a merged market to be exempted from offering small 
businesses the maximum deductible in the Affordable Care Act; 
therefore, we are finalizing Sec.  155.705(b)(7) as proposed.
    Comment: Commenters expressed concern that limiting employees to 
small group market QHPs rather than in any QHP that meets the maximum 
deductible provision in section 1302(c) of the Affordable Care Act may 
make it more difficult to achieve portability of coverage across 
employment situations, including periods of unemployment and self-
employment, and may complicate the aggregation of employer 
contributions from different employers. The commenters asked that the 
standard be changed or removed in the final rule.
    Response: While we understand the concern about portability between 
small group and individual market products, section 1311(b)(1)(B) of 
the Affordable Care Act clearly states that the SHOP is ``designed to 
assist qualified employers in the State who are small employers in 
facilitating the enrollment of their employees in QHPs offered in the 
small group market in the State.'' We have therefore retained the 
language in Sec.  155.705(b)(8) in this final rule.
    Comment: Several commenters expressed concerns about the 
possibility of adverse selection and other market disruptions that 
might result from a State's choice to allow large group market issuers 
to offer QHPs in the large group market through the SHOP. Two 
commenters specifically expressed concern about an automatic SHOP 
expansion to the large group market. Several commenters recommended 
that States not expand the SHOP; one commenter suggested that HHS delay 
the expansion; and one commenter asked that HHS create safeguards to 
prevent adverse selection. Finally, one commenter asked that we 
interpret section 1312(f)(2)(b) of the Affordable Care Act to allow 
States the latitude to expand the SHOP earlier than 2017.
    Response: Section 2701(a)(5) of the PHS Act provides that if the 
State exercises the option of offering large group market QHPs in the 
SHOP, the rating rules in section 2701 that apply to the small group 
market will also apply to all coverage offered in that State's large 
group market, except for self-insured group health plans. A State must 
specifically elect the expansion. We also do not believe that we have 
the authority to delay--or to allow earlier implementation of--the 
State's ability to make this election. Accordingly, we are not 
modifying the final rule to provide for any such modifications.

Summary of Regulatory Changes

    We are finalizing the provisions proposed in Sec.  155.705 of the 
proposed rule, with the following modifications: in paragraph 
(b)(4)(i), we clarified the data elements that must be included in the 
monthly bill sent by the SHOP. In new paragraph (b)(4)(iii), we added a 
standard for the SHOP to maintain books, records, documents, and other 
evidence of accounting procedures and practices of the premium 
aggregation program for each benefit year for at least 10 years, to 
conform to the standards for the individual Exchange. We also clarified 
in paragraph (b)(5) that the SHOP must ensure that each QHP meets the 
certification standards in Sec.  156.285. In new paragraphs (b)(10) and 
(11), we noted that the SHOP may authorize minimum participation 
standards on certain conditions, and established that the SHOP must 
develop a premium calculator to assist qualified employers and 
employees. Finally, we made several technical clarifications and 
modifications.
c. Eligibility Standards for SHOP (Sec.  155.710)
    In Sec.  155.710, we proposed the eligibility standards for 
qualified employers and qualified employees seeking to purchase 
coverage through a SHOP, and proposed to codify the general standard 
that the SHOP make QHPs available to qualified employers. Specifically, 
we proposed that the SHOP ensure that an entity is a small employer, or 
an employer with no fewer than one employee and no more than 100 
employees, unless a State elects to limit enrollment in the small group 
market to employers with no more than 50 employees until January 1, 
2016.
    We also proposed to define ``employer,'' ``small employer,'' and 
``large employer'' based on the PHS Act, and to adopt the PHS Act 
methodology for counting employees, where employees are counted equally 
regardless of their status as a part time employee or full time 
employee. Noting that States use a variety of methods to determine 
employer size for purposes of determining eligibility for the small 
group market, we solicited comment on this approach.
    We further proposed that the SHOP must ensure a qualified employer 
provides an offer of coverage through a SHOP to all of its full-time 
employees, and that the employer can elect to cover all employees 
through the SHOP serving the employer's principal business address or 
by providing coverage to each eligible employee through the SHOP 
serving the employee's primary worksite. In cases where the employer 
elects to cover all employees through the SHOPs serving their 
worksites, we proposed that a SHOP must accept the application of such 
an employer, subject to any minimum participation rules authorized by 
the SHOP. In addition, we proposed to allow an employer participating 
in the SHOP to continue its participation if the number of workers 
employed fluctuates after the employer's initial eligibility 
determination. We also clarified that only an employee who receives an 
offer of coverage through the SHOP from a qualified employer may be a 
qualified employee.
    Comment: Many commenters addressed the question of whether 
businesses consisting entirely of sole proprietors, 2 percent S-
corporation shareholders, and their family members, with no common law 
employees, should be eligible to purchase coverage through a SHOP. 
Several commenters were in favor of either including sole proprietors 
in the definition of eligible employer or allowing States to decide 
whether to expand their definition of a small group to encompass sole 
proprietors, stating that this would be analogous to the HIPAA 
interpretation that States could extend HIPAA protections to more

[[Page 18399]]

employers. Other commenters suggested deferring to State definitions of 
small group to avoid confusion and minimize possible differences 
between the SHOP and the outside market.
    Many commenters supported allowing sole proprietors to choose 
either Exchange individual market or SHOP coverage. Some commenters 
suggested deferring to State law to allow those States to continue 
offering small group coverage to sole proprietors. Many other 
commenters supported the proposed rule's exclusion of sole proprietors 
from the small group market, noting that the current rationale for 
allowing sole proprietors to purchase in the small group market--to 
provide access to a guaranteed issue product with modified community 
rating--will not be relevant in 2014 because of individual market 
reforms. Several of these commenters suggested that the final rule make 
clear that sole proprietors are eligible for coverage in the Exchange. 
Two commenters suggested using the COBRA standard to determine the 
number of employees, which would also exclude sole proprietors. Other 
commenters who supported the rule as proposed suggested that allowing 
sole proprietors and S-corporation owners a choice between markets 
would create possible adverse risk selection.
    Response: The Affordable Care Act and the proposed rule base their 
definitions of ``employer,'' ``employee,'' ``small employer,'' and 
``large employer'' on the definitions in the Public Health Service Act 
(PHS Act). Section 2791 of the PHS Act incorporates by reference the 
definition of employee in section 3(6) of ERISA. Further, section 2791 
provides that an employer is defined by reference to section 3(5) of 
ERISA. To be an employer eligible to purchase coverage through the 
SHOP, the employer must employ at least one common law employee. Under 
29 CFR 2510.3-3, an employee would not include a sole proprietor or the 
sole proprietor's spouse.
    We find no authority to interpret what constitutes a group health 
plan differently than set forth in the proposed rule. And, we note that 
even though both markets will have guaranteed issue and similar rating 
rules, enrollment of individuals is limited to the annual open 
enrollment period while enrollment of groups can occur throughout the 
year. We have therefore retained the definitions in proposed Sec.  
155.20, and our interpretation of what constitutes a group health plan.
    Comment: A number of commenters addressed the issue of how 
employees should be counted in determining employer size. Commenters 
noted that States use different methods to calculate employer group 
size when determining small group market eligibility. Several 
commenters noted that there are also different Federal methods for 
determining employer size for different purposes, and that these 
differing methods may be confusing to small employers. While some 
commenters supported the proposed approach, to count all full-time and 
part-time employees, other commenters suggested specific alternatives, 
including but not limited to a full-time equivalent method like that 
used in section 4980H of the Code, as added by section 1513 of the 
Affordable Care Act, to determine whether an employer is a large 
employer; the full-time equivalent method used to determine whether 
Federal COBRA continuation of coverage standards apply; or counting 
full-time employees only. Finally, a number of commenters suggested 
that each Exchange defer to the applicable State's method of 
determining group size or transitioning from current State methods of 
counting employees to a Federal method.
    Response: CMS has previously issued guidance on determining 
employer size that includes part-time employees in the count.\10\ For 
example, the method described in the preamble to the proposed rule 
would count part-time employees as full employees. A second method 
proposed in a 2004 proposed rule issued by the Department of the 
Treasury, the Department of Labor, and HHS, in which the number of 
full-time equivalent employees is determined.\11\ Because of the range 
of comments received to the proposed rule and because the method of 
counting employees has implications that extend beyond the operation of 
the SHOP, we are not finalizing at this time a rule for determining 
employer size. We are considering future rulemaking to address the 
method of determining employer size for purposes of deciding whether an 
employer is a small employer or a large employer.
---------------------------------------------------------------------------

    \10\ HCFA Insurance Standards Bulletin Series No. 99-03 
(September 1999), posted online at https://www.cms.gov/HealthInsReformforConsume/downloads/HIPAA-99-03.pdf.
    \11\ Notice of Proposed Rulemaking for Health Coverage 
Portability: Tolling Certain Time Periods and Interaction with the 
Family and Medical Leave Act Under HIPAA Titles I and IV, 69 CFR 
78000-78825.
---------------------------------------------------------------------------

    Comment: Several commenters suggested that the proposed rule 
articulate the method of determining whether a small employer is 
subject to or exempt from the shared responsibility standards, since 
that determination is different from the determination of eligibility 
for participation in the SHOP.
    Response: Formal guidance about the method of determining whether a 
small employer is subject to the shared responsibility provisions is 
outside the scope of this final rule.
    Comment: Several commenters supported the flexibility of the 
employer and employee eligibility standards in proposed Sec.  155.710, 
including allowing employers with worksites in the service areas of 
multiple SHOPs to offer coverage to their employees through the SHOP 
serving the employees' worksites. Some commenters requested 
clarification regarding the coordination of information necessary for 
the effective implementation of such an eligibility standard. Other 
commenters requested clarification of how employer groups can calculate 
premiums in a way that mitigates the effects of age rating in instances 
where workers obtain coverage through more than one Exchange. Finally, 
one commenter recommended that employee eligibility be limited to the 
State in which the employer's headquarters is located.
    Response: We recognize the benefits of allowing employers in 
multiple States flexibility regarding the SHOPs in which they may opt 
to enroll. We believe this eligibility standard does not establish a 
significant level of coordination between SHOPs, though nothing in this 
section would preclude a SHOP from establishing processes or standard 
operating procedures to coordinate across service areas. Employers 
electing to participate in multiple SHOPs must meet the eligibility 
standards of each SHOP in which they wish to participate and prior to 
2017 may not employ more than 100 employees in total in accordance with 
section 1312(f)(2) of the Affordable Care Act. We acknowledge, however, 
that standards related to the calculation of premiums in the small 
group market may vary from State to State in a manner that does not 
allow differences in cost due to age or location to be spread easily 
among all employees across State lines.
    Comment: One commenter objected to the proposed Sec.  
155.710(b)(2), which stated that the SHOP must ensure that a qualified 
employer provides an offer of coverage through the SHOP to all full-
time employees because it places an administrative burden on the SHOP 
and would be difficult to enforce. Other commenters suggested that a 
multi-employer plan should be able to offer

[[Page 18400]]

coverage to its participants through the SHOP only to the employees of 
a participating small employer covered under a collective bargaining 
agreement.
    Response: Our eligibility process allows the SHOP to accept an 
attestation by an employer that it will offer coverage to all of its 
full-time employees, minimizing the commenter's concern about burden. 
Multiemployer plans that qualify as QHPs may offer coverage in SHOP 
but, like other QHPs, must follow rules applicable to QHPs. 
Additionally, we intend to address commenters' concerns surrounding 
multi-employer plans in future guidance.
    Comment: One commenter suggested that additional guidance might be 
needed with regard to multi-employer plans purchasing coverage through 
the SHOP, particularly with regard to determining the work site, 
establishing eligibility and enrollment procedures, billing and premium 
collection, and other administrative procedures.
    Response: Multiemployer plans can play a role as an aggregator of 
premium contributions, and an arranger of coverage, and intend to 
address commenters' concerns in future guidance.

Summary of Regulatory Changes

    We are finalizing the provisions proposed in Sec.  155.710 of the 
proposed rule without substantive modification.
d. Eligibility Determination Process for SHOP (Sec.  155.715)
    In Sec.  155.715, we proposed that a SHOP determine eligibility 
consistent with the standards described in Sec.  155.710. Specifically, 
we proposed that a SHOP must verify either through the attestation of 
the employer or through additional methods developed by the SHOP, that 
a qualified employer has fulfilled all of the standards specified in 
Sec.  155.710, including that the employer is a small employer, it is 
offering coverage through the SHOP to all full-time employees, as well 
as verifying that at least one employee works in the SHOP's service 
area.
    Consistent with the statutory directive for HHS to provide a 
single, streamlined application form, we also proposed that the SHOP 
use only two application forms: one for qualified employers and one for 
qualified employees. We further proposed 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 application but 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. We also proposed 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 
addition, similar to the individual market Exchange standards, we 
proposed that the SHOP notify an employer or employee seeking coverage 
of the SHOP's eligibility determination and the employer or employee's 
right to appeal.
    Finally, we proposed that if a qualified employer ceases to 
purchase 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 its termination of coverage prior to such 
withdrawal and termination. We solicited comments on whether this 
notification must inform the employee about his or her eligibility for 
a special enrollment period in the Exchange and about the process of 
being determined eligible for insurance affordability programs.
    Comment: We received several comments regarding the eligibility 
determination process for employees proposed in Sec.  155.715. Some 
commenters opposed the processes for individual employee verification, 
stating that the process may increase the administrative burden on 
businesses. Others suggested that the SHOP should not verify employee 
eligibility and questioned the Secretary's authority for such 
verifications. Commenters recommended that any SHOP eligibility process 
conform to the standards of sections 1411(g) and 1411(h) of the 
Affordable Care Act. Some additionally proposed an alternative process 
whereby employers applying for coverage in a SHOP present a list of 
qualified employees with reference to associated Employment 
Identification Numbers (EIN) in order to prevent employer and employees 
applicants from gaming the eligibility process. Commenters additionally 
recommended that the final rule prohibit the SHOP from collecting 
information for verification of citizenship status or eligibility for 
the advance payment of the premium tax credit, as described in sections 
1411(b)(2) or 1411(c) of the Affordable Care Act.
    Response: We note that in accordance with Sec.  155.705(a), SHOPs 
must comply with the standards of part 155 subpart C including the 
privacy and security standards of Sec.  155.260 and Sec.  155.270. 
These sections implement section 1411(g) of the Affordable Care Act.
    The employee eligibility process as proposed would direct the SHOP 
to verify only that an employee applying for coverage through the SHOP 
is a qualified employee--an employee offered coverage by a qualified 
employer. We believe that such verification is necessary to ensure the 
effective operation of the SHOP and the prevention of abuse. An 
employee applying to the SHOP for coverage may easily be both verified 
and determined to be a qualified employee by the SHOP solely on the 
list of qualified employees provided to the SHOP by the employer.
    Because citizenship verification is the responsibility of the 
employer at the time of hiring, we have added language in this final 
rule to clarify that the SHOP will not perform re-verification of 
citizenship status.

Summary of Regulatory Changes

    We are finalizing the provisions proposed in Sec.  155.715 of the 
proposed rule, with the following modifications: in new paragraph 
(c)(3), we clarified that a SHOP may only collect the minimum 
information necessary to verify the information provided in an 
application. In new paragraph (c)(4) we reiterated that the SHOP may 
not perform individual eligibility determinations as described in 
sections 1411(b)(2) or 1411(c) of the Affordable Care Act. In paragraph 
(d)(1)(iv)(A), we established that the SHOP must mention an employer's 
right to appeal in any notice of denial of eligibility. In paragraph 
(g)(2), we specified that the SHOP must ensure that any employees 
affected by a qualified employer's withdrawal from the SHOP are 
notified and receive information about other coverage options. Finally, 
we made several changes throughout this section to improve the 
precision of the language used.
e. Enrollment of Employees Into QHPs Under SHOP (Sec.  155.720)
    In Sec.  155.720, we proposed that the SHOP establish a uniform 
enrollment timeline and process, standardized to a plan year, for all 
employers and QHPs in the SHOP. In addition, we proposed that the SHOP 
must ensure that qualified employees who select a QHP are notified of 
the effective date of coverage, whether such notice is executed by the 
QHP or by the SHOP.
    We also proposed that information maintained by the SHOP must 
include records of qualified employer participation and qualified 
employee enrollment, and that reconciliation of enrollment information 
with QHPs

[[Page 18401]]

occur at least monthly. We invited comments on whether we should 
establish target dates or guidelines so that multi-State qualified 
employers are subject to consistent rules.
    Finally, we proposed that if a qualified employee voluntarily 
terminates coverage from a QHP, the SHOP must notify the individual's 
employer.
    Comment: Several commenters suggested that proposed Sec.  
155.720(a) clarify the duties of the SHOP and QHP issuers when 
facilitating employee enrollment into QHPs.
    Response: Section 155.705 directs a SHOP to carry out the minimum 
functions in other subparts of the part. Consistent with the proposed 
rule, Sec.  155.720(c)(2) of the final rule directs a SHOP to fulfill 
the standards of Sec.  155.400, which establishes standards related to 
enrollment of individuals into QHPs.
    Comment: One commenter requested clarification that QHP issuers do 
not have to participate in both the SHOP and individual Exchanges.
    Response: Nothing in this part establishes that an issuer must 
participate in both the SHOP and the individual Exchange. However, we 
note that Exchanges may wish to establish such participation in both 
markets as a condition of certification.
    Comment: One commenter to this section recommended automatic 
enrollment of employees into new QHPs when there are mergers between 
QHP issuers or when one QHP offered by a specific QHP issuer is no 
longer offered, but there are other options available to the individual 
through the same QHP issuer.
    Response: We believe that States may wish to take variable 
approaches to managing the enrollment; and therefore, we are not 
establishing a standard to offer automatic enrollment in this final 
rule.
    Comment: Several commenters to proposed Sec.  155.720(b) 
recommended that the final rule afford States further flexibility with 
respect to enrollment timelines. A few commenters suggested that the 
SHOP base its timelines on eligibility rules for enrollment on the 
current market practices. A few commenters recommended that the final 
rule exclude any target dates and guidelines in Sec.  155.720, while 
another commenter recommended that the rule establish basic guidelines 
and leave the selection of exact dates to the SHOP. Yet another 
commenter expressed concern that the proposed rule did not provide 
sufficient flexibility for industries that typically begin coverage on 
October 1 and recommended that SHOPs be permitted to provide special 
group enrollment for those groups or amend the rule to afford States 
greater flexibility to address those circumstances. Conversely, another 
commenter proposed that Sec.  155.720 include target dates and 
guidelines so that multi-State employers are subject to consistent 
rules. One commenter supported similar enrollment processes and 
timelines across QHPs to allow qualified employees the greatest 
opportunity to select preferred plans and ease administrative burden 
for multi-State employers.
    Response: We believe that Sec.  155.720 provides adequate 
flexibility for a State to develop its process in a way that is most 
suitable to local situations. Thus, we have not included specific dates 
in the section and have allowed States flexibility to address specific 
needs or concerns, including current market environment and special 
industries.
    Comment: Two commenters responding to this section and Sec.  
155.725 recommended that HHS develop a transaction standard with 
respect to collected enrollment information.
    Response: We plan to provide guidance on the timing, format, and 
content of the enrollment information transmissions to QHP issuers.
    Comment: Several commenters suggested proposed Sec.  155.720(e) 
specify how SHOPs can ensure that QHPs provide notices to employees of 
effective coverage dates. One commenter supported the policy that SHOPs 
be held accountable for employees receiving notices of effective dates 
of coverage. One commenter recommended that QHPs transmit confirmation 
of enrollment to the SHOP, and another urged HHS not to add a standard 
that the SHOP must send a duplicate notification to the enrollee.
    Response: SHOPs must be able to enforce the notification standard; 
we believe that Sec.  155.720 provides a State with the flexibility to 
establish its SHOP enrollment timeline, procedures, and enforcement 
mechanisms that work best for the particular State. The QHP should be 
responsible for sending notification; we have clarified in Sec.  
155.720(e) of this final rule that a QHP, and not the SHOP, must send 
the notification.
    Comment: In response to proposed Sec.  155.720(f) and (g), one 
commenter opposed the policy for the SHOP to reconcile information and 
keep records, noting that it is unclear under the Affordable Care Act 
why SHOP should maintain records.
    Response: The reconciliation of information and the retention of 
records of participants and participant information by the SHOP is a 
necessary standard for the smooth operation of the SHOP and effective 
oversight of the SHOP.
    Comment: Several commenters to proposed Sec.  155.720(g) supported 
the idea of reconciliation of enrollment information but disagreed on 
the frequency and on who should determine the frequency. One 
recommended that this paragraph establish monthly reconciliation and 
that SHOPs allow QHPs to query a SHOP at any time for information on 
qualified employers and employees. A few commenters recommended 
flexibility for States to establish reporting and auditing standards.
    Response: We recognize the need for periodic reconciliation of 
enrollment information between the SHOP and the QHPs. However, States 
should have the flexibility to determine how often such reconciliation 
is necessary, provided that reconciliation is completed no less 
frequently than once per month. Therefore, we are not adding a more 
specific standard in the final rule.
    Comment: In response to the standards in proposed Sec.  155.720(h) 
related to termination of a qualified employee, some commenters 
recommended allowing SHOPs to ensure that disenrollment requests from 
current employees to come through the employer because such a process 
would ensure the employer receives notification and is able to 
communicate to the employee the potential consequences of 
disenrollment. One commenter recommended that an employee who ends 
employment should consult with the employer regarding available 
coverage options after employment ends. Another commenter recommended 
the notification standard be placed on the QHP issuer and not on the 
SHOP.
    Response: We believe that Sec.  155.720(h) of this final rule 
ensures that an employer will receive appropriate notification while 
preserving an employee's ability to terminate coverage without the 
added step of consulting with the employer or creating an additional 
administrative burden on the employer. We believe that the notification 
standard should remain with the SHOP and that the associated 
administrative burden will be minimal.

Summary of Regulatory Changes

    We are finalizing the provisions proposed in Sec.  155.720 of the 
proposed rule, with the following modification: in paragraph (f), we 
clarified that SHOPs must retain records for ten years, which is 
changed from the proposed seven years. We added new paragraph (i),

[[Page 18402]]

which directs the SHOP to report to the IRS employer participation and 
employee enrollment information for tax administration purposes. 
Finally, we made a few technical modifications to streamline the 
regulation text.
f. Enrollment Periods Under SHOP (Sec.  155.725)
    In Sec.  155.725, we proposed that the SHOP adhere to the start of 
the initial open enrollment period for the Exchange, which is October 
1, 2013 for coverage effective January 1, 2014, and ensure that QHP 
issuers adhere to coverage effective dates in accordance with Sec.  
156.260. We noted that the initial open enrollment date represents the 
first date employers may begin participating in the SHOP. In addition, 
to align enrollment processes between the SHOP and the small group 
market, we proposed a rolling enrollment process in the SHOP whereby 
qualified employers may begin participating in the SHOP at any time 
during the year.
    We invited comment on two provisions related to SHOP enrollment: 
that qualified employers may enroll or change plans once per year or 
during an applicable special enrollment period; and that an employer's 
plan may not align with the calendar year.
    We also proposed an annual employer election period in advance of 
the annual open enrollment period, during which time a qualified 
employer could modify the employer contribution towards the premium 
cost of coverage and the plans it intended to offer to employees during 
the next plan year. We noted that this annual election period may be 
specific to each qualified employer and therefore must occur at a fixed 
point in the plan year, not at a fixed point during the calendar year. 
In addition, we proposed that the SHOP must notify participating 
employers that their annual election period is approaching, and 
solicited comment on this standard and whether we should establish that 
the notice be sent at a specified interval (for example, 30 days before 
the relevant election period).
    We solicited comment on our proposal that the SHOP establish an 
annual employee open enrollment period for qualified employees, to 
occur at a fixed point during the plan year, during which the employee 
would have the option to renew or change coverage. We proposed that 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. We also 
proposed that the SHOP establish effective dates of coverage for 
qualified employees consistent with Sec.  155.720. Finally, we proposed 
that if an enrollee remains eligible for coverage in a QHP through the 
SHOP, the individual will remain in the QHP selected during the 
previous plan year with limited exceptions, in which case the 
individual would be disenrolled at the end of the coverage year. We 
invited comments on our approach to differentiating individual and 
small group market enrollment and the proposed structure for initial, 
rolling, and annual open enrollment through the SHOP.
    Comment: In response to proposed Sec.  155.725(a), some commenters 
opposed aligning the enrollment periods in Sec.  155.725 with the 
individual Exchange and recommended that SHOP enrollment should be 
aligned with other group markets.
    Response: In Sec.  155.725(a), we align the SHOP initial open 
enrollment period with an individual Exchange for the first opportunity 
when coverage may be purchased through the SHOP. Under Sec.  
155.725(b), we establish rolling enrollment in the SHOP, which we 
believe is consistent with current practice in the small group market 
where plan years do not necessarily correspond to calendar years. We 
have retained these provisions in the final rule.
    Comment: In response to the standards in proposed Sec.  
155.725(a)(2), one commenter requested clarification that effective 
dates depend on the completion of eligibility and enrollment standards, 
and recommend that such standards must be met by December 7, 2013 to 
secure a coverage effective date of January 1, 2014.
    Response: A SHOP must permit an individual to enroll in a QHP only 
after a qualified employee has been determined eligible and has 
completed any enrollment standards. We believe that the standards in 
Sec.  155.410 of this final rule provide sufficient time for QHP 
issuers to effectuate enrollment.
    Comment: A few commenters on this section recommended adding a 
standard that SHOPs develop a plan to encourage maximum enrollment 
during the initial open enrollment period, noting concerns about 
adverse selection if certain employers wait to enroll until health care 
needs make it more advantageous. One commenter recommended allowing 
employers to pro-rate their initial year of participation and then 
begin their next plan year on January 1st of the following year to 
minimize public confusion and aid implementation.
    Response: We believe that States have the flexibility under the 
rule to best assess their local market environment and to develop plans 
to encourage enrollment and discourage adverse selection.
    Comment: Many commenters on proposed Sec.  155.725(e) recommended 
that the annual employee open enrollment period last at least 30 days. 
Some commenters recommended that open enrollment should be standardized 
for all QHPs. Several supported a notification period for employees 
before the annual enrollment period. One commenter recommended the 
employer, and not the SHOP, decide the open enrollment period, and a 
few commenters recommended the Federal government defer to States to 
establish open enrollment periods.
    Response: We have added language to Sec.  155.725(e) of this final 
rule establishing a standardized open enrollment period of at least 30 
days. We note that States will have the flexibility to establish open 
enrollment periods based on the specific market landscape of the State, 
and believe that Sec.  155.725 provides that flexibility. We further 
believe that employees should receive a notification in advance of the 
open enrollment period and have added a standard in new Sec.  
155.725(f) that the SHOP provide notification to qualified employees of 
the open enrollment period in advance of the period.
    Comment: Several commenters on proposed Sec.  155.725(d) supported 
the policy that the SHOP must notify the employer in advance of the 
annual employer election period. A few supported a notification period 
of 30 days or at least 30 days, one requested flexibility in 
determining when employers must be notified, and one recommended that 
the notification period align with the outside market to prevent 
additional administrative burden on QHPs. Conversely, one commenter 
opposed a notification standard for the SHOP, stating that this 
function is currently handled by health insurance issuers.
    Response: We believe that the SHOP should provide notification of 
the open enrollment period but do not believe that we should prescribe 
specific timing for the notification. We believe that Sec.  155.725 of 
the proposed rule provides the SHOP with the requested flexibility for 
notification timing. Finally, we note that the SHOP is the appropriate 
entity to notify employers because a single employer could have 
employees enrolled in QHPs across several issuers. Therefore, we are 
not changing this standard in the final rule.
    Comment: A few commenters on proposed Sec.  155.725(c) recommended 
that the annual employer election

[[Page 18403]]

period last at least 30 days. One commenter recommended that an 
employer must submit an application to participate in SHOP at least 120 
days prior to the start of the plan year.
    Response: We recognize the importance of an annual employer 
election period of at least 30 days and have added language to Sec.  
155.725(c) to that effect. However, we note that States have the 
flexibility to establish longer annual employer election periods if 
they so choose.
    Comment: In response to proposed Sec.  155.725(h), one commenter 
requested clarification on the auto-enrollment process where a QHP 
ceases to exist and an individual does not select another QHP.
    Response: Auto-enrollment in the SHOP is only applicable per 
redesignated Sec.  155.725(i) of this final rule in situations in which 
a qualified employee enrolled in a QHP through the SHOP remains 
eligible for coverage. In such cases, the employee will remain in the 
QHP selected during the previous year unless the qualified employee 
terminates coverage, enrolls in another QHP, or the QHP is no longer 
available. We note that if a QHP ceases to exist, resulting in a loss 
of minimum essential coverage for the enrollee, the enrollee will be 
eligible for a special enrollment period per Sec.  155.725(a)(3). We 
also note that under Sec.  156.290(b), a QHP issuer that does not seek 
recertification with the Exchange for a QHP must provide written notice 
to each enrollee. However, in these cases where an enrollee's former 
QHP is no longer available, there is no auto-enrollment standard in the 
SHOP should the individual not select another QHP during a special 
enrollment period or open enrollment period.
    Comment: Many commenters offered feedback on the proposed Sec.  
155.725(g), which stated that the SHOP must establish effective dates 
of coverage for enrollees in the SHOP. A few commenters requested that 
the final rule clarify the SHOP's obligation to establish coverage 
effective dates. One commenter recommended that coverage take effect on 
the first day of the month following the date of enrollment for 
enrollment transactions completed by the 20th of the month. In cases 
where enrollment is completed after the 20th, the commenter recommended 
that coverage take effect on the first day of the month that follows 
the next month. In contrast, some commenters disagreed with the policy 
that SHOPs must establish effective dates of coverage, noting that 
employers and carriers currently perform this function.
    Response: Per redesignated Sec.  155.725(h) of this final rule, the 
SHOP must establish coverage effective dates consistent with Sec.  
155.720. We believe that a single policy of effective dates in the SHOP 
ensures consistency and note that we proposed using the same effective 
dates as the individual Exchange for the initial enrollment period in 
order to increase the administrative simplicity for Exchanges and 
issuers. We believe the Sec.  155.410 standards provide sufficient time 
for processing enrollment information before the effective date of 
coverage. Therefore, we are finalizing redesignated Sec.  155.725(h), 
as proposed. We further note that a SHOP must not only establish 
effective dates but must also ensure notification of the effective 
dates in accordance with Sec.  155.720.
    Comment: Some commenters to Sec.  155.725 recommended that 
employees receive advance notice if the QHP in which they are enrolled 
will no longer be offered through the SHOP for the upcoming plan year. 
Another commenter recommended that employees in this circumstance 
receive advance notice of other affordable options, including insurance 
affordability programs.
    Response: We note that Sec.  156.285(d)(1)(ii) of this final rule 
directs any QHP issuer that chooses not to renew its participation in 
the SHOP to notify affected enrollees and qualified employers. We 
believe that this notification standard, combined with the annual open 
enrollment period, provides sufficient opportunity for enrollees to 
review their coverage options and make a new plan selection. Therefore, 
we are not adding a notification standard in this section.
    Comment: Several commenters on proposed Sec.  155.725(f) supported 
the policy that SHOPs provide coverage to any new employees hired 
outside of the initial or annual open enrollment period and that SHOPs 
be able to make that coverage available on the employee's first day of 
employment. One commenter recommended a predetermined, regulated length 
of time for the enrollment period. One commenter expressed concern with 
the limited ability to amend an employee's coverage and recommended 
that employees have an opportunity to state a case for needing to 
change coverage similar to special enrollment rules. One commenter 
suggested that there should be a special enrollment period if an 
employer reduces its contribution. Other commenters questioned how this 
standard relates to probationary periods, specifically the Affordable 
Care Act provision that permits group plans to impose waiting periods 
of no more than 90 days for coverage of new employees.
    Response: In general, we recognize the importance of providing 
coverage to new employees hired outside of the initial or annual open 
enrollment. Thus, we have clarified in redesignated Sec.  155.725(g) of 
this final rule to assure that the SHOP provides an employee who 
becomes a qualified employee a period to seek coverage that would be 
effective on the first day of becoming a qualified employee rather than 
on the first day of employment. This revision refines the standard to 
encompass not only new employees, but also situations where an employee 
moves from part to full time status or completes a waiting period. In 
the case of a waiting period, an employee could become a qualified 
employee under Sec.  155.710(e) when the qualified employer makes an 
offer of coverage after the waiting period is over. It still retains 
the ability for a new and qualified employee to seek coverage on the 
first day of employment. States will be able to set a time for this 
period under Sec.  155.720. We believe that Sec.  155.725 does not 
preclude a State from creating special enrollment periods in addition 
to the ones established by the rule.
    Comment: One commenter on proposed Sec.  155.725(h) recommended 
that because eligibility of a qualified employee to enroll in a QHP 
through the SHOP is available on the basis of employment by a qualified 
employer, the employer should be responsible for renewing its 
employees' coverage at the end of a plan year.
    Response: We believe that Sec.  155.725(c) adequately addresses 
that concern by specifically establishing that a SHOP must provide 
qualified employers with an annual election period in which a qualified 
employer may change its participation in the SHOP for the next year, 
including the method it makes QHPs available to qualified employees, 
the level of employer contribution, the level of coverage offered, and 
the QHP or plans offered. Therefore, we are finalizing this provision 
as proposed.

Summary of Regulatory Changes

    We are finalizing the provisions proposed in Sec.  155.725 of the 
proposed rule, with the following modifications: in new paragraph 
(a)(3) we clarified that a SHOP must provide the special enrollment 
periods described in Sec.  155.420, with the exception of those 
described in paragraphs (d)(3) and (6) of that section. We provided in 
paragraph (c) that the SHOP must allow qualified employers a period of 
no less than 30 days to alter plan selections prior to the

[[Page 18404]]

open enrollment period. We established in paragraph (e) that the annual 
employee open enrollment period must be standardized, and must be at 
least 30 days. In new paragraph (f), we direct the SHOP to provide 
notification to a qualified employee of the annual open enrollment 
period. In redesignated paragraph (g) we clarified that the SHOP must 
offer an enrollment period to newly qualified employees. Finally, we 
redesignated proposed paragraphs (f), (g), and (h) as paragraphs (g), 
(h), and (i), respectively, and made several minor changes throughout 
this section to make the regulation text more precise and to add 
clarity.
g. Application Standards for SHOP (Sec.  155.730)
    In 155.730, we outlined the proposed application-related standards 
for participation in the SHOP. Specifically, we proposed that the SHOP 
use a single employer application and the information the application 
should collect (that is, employer name and address, number of 
employees, employer identification number, list of qualified employees 
and SSNs). We sought comment on what, if any, other employer 
information SHOPs should collect via the employer application.
    Similarly, we proposed that the SHOP must use a single employee 
application for each employee to collect eligibility information and 
QHP selection. We noted that a SHOP may modify or reduce the individual 
Exchange application for SHOP applicants, if desired and subject to 
approval by the Secretary. We also proposed that a SHOP may also use a 
model single employer application and model single employee application 
created by HHS or an alternative application approved by HHS. Finally, 
we proposed that the SHOP must allow employers and employees to submit 
their eligibility and enrollment information consistent with Sec.  
155.405(c).
    Comment: We received several comments regarding the preamble 
discussion in the proposed rule that the SHOP should not make 
eligibility determinations for Medicaid or CHIP. Many commenters 
recommended that the final rule outline a role for the SHOP in 
providing information about these programs.
    Response: There are a number of ways that employees can learn about 
insurance affordability programs. We do not think that the application 
for SHOP is the most effective venue for providing this information.
    Comment: We received several comments related to the limitations on 
the information that may be collected on SHOP applications in 
accordance with proposed Sec.  155.730(a). Some commenters requested 
that the final rule not impose any limitations on the information that 
the SHOP may request of employees, noting that such restrictions could 
limit how well the SHOP can serve qualified employers and qualified 
employees. Other commenters supported the proposed rule's focus on a 
simple application standard and limiting the information collected to 
information necessary to facilitate applications, eligibility 
determinations, and enrollment.
    Response: We believe that limiting the collection of information on 
the application to data relevant for eligibility determinations, 
enrollment, and reporting by the SHOP or by QHP issuers balances the 
need to minimize the burden placed on applicants with the information 
needs of the SHOP and QHP issuers. Therefore, we are finalizing the 
provisions of Sec.  155.730(a) as proposed.
    Comment: One commenter suggested that the application collect the 
NAIC code of each employer applying to the SHOP under proposed Sec.  
155.730(a).
    Response: We do not believe that it is essential for the SHOP 
application to collect each employer's NAIC code, since it is beyond 
what is minimally necessary for the purpose of the SHOP.
    Comment: Some commenters were strongly opposed to the standard that 
the SHOP collect the social security number (SSN) of employees on the 
employer application in accordance with proposed Sec.  155.730(a)(4). 
These commenters stated that effective alternate methods of 
authenticating employees exist, recommended that this standard be 
removed from the final rule.
    Response: While employees may be effectively authenticated without 
the employer providing employee SSN on the employer application, 
employee taxpayer identification numbers (most commonly an employee's 
SSN) are needed for QHP issuers to comply with the standards of section 
1502 of the Affordable Care Act. Although we retain the employees' 
names and taxpayer identification numbers as elements of the employer 
application, we have clarified in Sec.  155.715(c)(4), that the SHOP 
may not re-verify the citizenship status of the employee or make a 
determination of eligibility for an advance payments of the premium tax 
credit. We note that employees already provide their Social Security 
number to employers for a variety of purposes and this information is 
disclosed by the employer to both State and Federal agencies of for 
such purposes as unemployment insurance and tax purposes.
    Comment: Some commenters requested that the SHOP be permitted to 
adopt an alternative employer or employee application without obtaining 
formal approval from HHS, as proposed in Sec.  155.730(e), in order to 
prevent the delay in the adoption of such applications. Other 
commenters agreed with the proposed policy that HHS approve any 
alternative application to ensure it meets the standards of this 
section.
    Response: The HHS review of any proposed alternative application is 
intended to ensure that it conforms to the standards proposed in this 
section. Therefore, we are maintaining the standard under Sec.  
155.730(e), as proposed.

Summary of Regulatory Changes

    We are finalizing the definitions proposed in Sec.  155.730 of the 
proposed rule, with two modifications. In paragraph (e) we clarified 
that a SHOP may develop and submit for HHS approval an alternative 
application for employers and employees. Additionally, in new paragraph 
(g) we provide for additional safeguards to address commenters concern 
regarding the collection and use of dependent information for purposes 
other than processing enrollment in a QHP and made several minor 
changes throughout this section to make the regulation text more 
precise and to add clarity.
7. Subpart K--Exchange Functions: Certification of Qualified Health 
Plans
    This subpart codifies section 1311(d)(4)(A) of the Affordable Care 
Act, which establishes 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 clarifies the Exchanges' responsibility related to 
the inclusion in the Exchange of certain multi-State plans. We note 
that as States establish Exchanges, each State has choices related to 
certification of QHPs for the Exchange through the piece of 
legislation, executive order, or charter that creates the Exchange. 
Alternatively, the Exchange itself may be able to exercise discretion 
under existing State and Federal law.
a. Certification Standards for QHPs (Sec.  155.1000)
    In Sec.  155.1000, we proposed the overall responsibilities of an 
Exchange to certify QHPs. We proposed that QHPs must have in effect a 
certification issued or recognized by the Exchange as QHPs

[[Page 18405]]

and that an Exchange may only make available as a QHP a health plan 
that has in effect a certification issued or recognized by the Exchange 
as a QHP. We proposed to define a multi-State plan as a plan under 
contract with OPM to offer a multi-State plan that offers 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 standards for QHPs; and meets Federal rating standards in 
accordance with section 2701 of the PHS Act, or a State's more 
restrictive rating standards, if applicable.
    We proposed that an Exchange may certify a QHP if the QHP meets 
minimum certification standards described in subpart C of part 156 and 
if the Exchange determines the QHP is in the interest of qualified 
individuals and qualified employers in the State. We noted than an 
Exchange could adopt an ``any qualified plan'' certification, engage in 
selective certification, or negotiate with plans on a case-by-case 
basis; the proposal also permitted an Exchange to establish additional 
certification criteria.
    Comment: A few commenters requested that HHS redefine a multi-State 
plan in proposed Sec.  155.1000(a) as a plan that is described under 
section 1334 of the Affordable Care Act to ensure continuous alignment 
between this final rule and forthcoming regulations on multi-State 
plans promulgated by the U.S. Office of Personnel Management (OPM).
    Response: We believe the commenters' approach would better align 
this final rule with forthcoming regulations on multi-State plans. 
Therefore, we are revising the regulation text in final Sec.  155.1000 
to reference section 1334 of the Affordable Care Act. The final rule in 
this subpart has been revised throughout to acknowledge the role of OPM 
in certifying multi-State plans.
    Comment: Several commenters requested additional information on how 
the Office of Personnel Management will administer multi-State plans. 
Commenters proposed specific recommendations, including that OPM deem 
existing health plans that operate in multiple States as multi-State 
plans, or that multi-State plans include protections for certain types 
of benefits (for example, benefits related to end-stage renal disease).
    Response: The standards and processes related to multi-State plans 
will be addressed in forthcoming regulations implementing section 1334 
of the Affordable Care Act promulgated by OPM. These issues are outside 
the scope of this final rule, which only addresses multi-State plans in 
connection with Exchange obligations to recognize multi-State plans as 
certified by OPM.
    Comment: Several commenters requested that HHS clarify the language 
in proposed Sec.  155.1000(c)(2) permitting an Exchange to certify a 
QHP if the Exchange determines that such QHP is in the interest of 
qualified individuals and qualified employers.
    Response: We interpret Sec.  155.1000(c)(2), as proposed and as 
finalized, as providing an Exchange with broad discretion to certify 
health plans that otherwise meet the QHP certification standards 
specified in part 156 in a way that best meets the needs of local 
consumers and businesses. We refer commenters to pages 41891 and 41892 
of the Exchange establishment proposed rule for a more comprehensive 
discussion of the strategies an Exchange could use to apply the 
``interest'' test, including consideration of the reasonableness of the 
expected costs supporting the QHP's premium and cost-sharing structure, 
past performance of the QHP issuer, quality improvement activities, 
enhancements of provider networks, the QHP service area, or past rate 
increases.
    Comment: A few commenters requested that HHS clarify the meaning of 
the exclusions in proposed Sec.  155.1000(c)(2)(i) through (iii), which 
place certain limits on an Exchange's ability to exercise the 
``interest'' test described in proposed Sec.  155.1000(c)(2).
    Response: As proposed and as finalized, Sec.  155.1000(c)(2)(i)-
(iii) codifies sections 1311(e)(1)(B)(i)-(iii) of the Affordable Care 
Act, which limits an Exchange's ability to apply the ``interest'' test 
in certifying qualified QHPs. Specifically, we clarify that an Exchange 
cannot exclude an otherwise eligible QHP on the sole basis that it is a 
fee-for-service plan, through the use of premium price controls, or 
because the QHP covers treatments or services necessary to prevent 
patient deaths that the Exchange determines are inappropriate or too 
costly.
    Comment: One commenter requested that the final rule clarify that 
any certification standards or processes developed in accordance with 
this section apply uniformly to any subsidiary Exchanges. Another 
commenter requested that a QHP issuer be permitted to operate 
statewide, even where subsidiary Exchanges cover smaller service areas.
    Response: There may be multiple compelling and appropriate reasons 
for a State to create additional standards, or to take a different 
approach to certification, in different market regions. For example, a 
State may wish to employ different contracting strategies in a highly 
competitive, urban service area versus a rural service area. Further, 
we believe that the definition of an Exchange in Sec.  155.20 and the 
authority to have a regional or subsidiary Exchange provided in Sec.  
155.140 establish that a subsidiary or regional Exchange not only must 
meet all Exchange responsibilities, but also have the same authority 
and discretion as an Exchange that serves an entire State. Therefore, 
we are not establishing uniform standards for subsidiary Exchanges 
within a State; we note, however, that HHS must review and approve 
subsidiary Exchanges. We expect that States will consider the 
implications of developing subsidiary Exchanges, including the 
potential effects on issuer participation in the State.
    Comment: One commenter generally expressed concern about aligning 
market rules and consumer protections inside and outside of the 
Exchange.
    Response: We note that nothing in the final rule limits a State's 
ability to adjust market and other rules outside of the Exchange to 
better align with the rules and protections that exist within the 
Exchange.

Summary of Regulatory Changes

    We are finalizing the provisions proposed in Sec.  155.1000 of the 
proposed rule, with the following modification: we revised the 
definition of a multi-State plan in paragraph (a) to mean a QHP that is 
offered in accordance with section 1334 of the Affordable Care Act, to 
ensure ongoing consistency with forthcoming regulations implementing 
this section. In paragraph (b), we amended the provision to clarify the 
language.
b. Certification Process for QHPs (Sec.  155.1010)
    In Sec.  155.1010, we proposed that the Exchange establish 
procedures for the certification of QHPs that are consistent with the 
certification criteria outlined in Sec.  155.1000(c). We also proposed 
that a multi-State plan offered through OPM be deemed certified by an 
Exchange and noted that multi-State plans will need to meet all the 
standards for a QHP, as determined by OPM. To ensure consumers have a 
robust selection of QHPs during the open enrollment period, we further 
proposed that the Exchange complete the certification of QHPs prior to 
the open enrollment periods established in Sec.  155.410. Finally, we 
proposed that the Exchange monitor QHP issuers for demonstration

[[Page 18406]]

of ongoing compliance with certification standards.
    Comment: In response to proposed Sec.  155.1010(a) on QHP 
certification, a number of commenters expressed support for Exchange 
flexibility in designing the certification process. Conversely, several 
commenters recommended a uniform, national set of certification 
standards and processes and proposed specific features, such as that 
the certification process consider past premium increases, an issuer's 
medical loss ratio, quality information, or provider payment standards. 
Several commenters requested that the final rule provide additional 
detail on the certification standards that Exchanges will use to 
evaluate QHPs.
    Response: We recognize the importance of ensuring a basic set of 
uniform consumer protections across all Exchange markets through the 
setting of minimum certification standards for QHP issuers. We believe 
that States are best positioned to adapt and expand on these standards 
to meet the needs of consumers served by the Exchange, given local 
market conditions. Therefore, while Exchanges have discretion to 
identify certification standards above and beyond those provided for in 
the final rule, including the features suggested by commenters, we are 
not specifying additional elements in this final rule.
    Comment: Many commenters expressed support for a specific 
contracting model the Exchange could adopt in accordance with proposed 
Sec.  155.1010(a); of these, approximately half endorsed an ``any 
willing plan'' approach, in which the Exchange would contract with all 
QHPs that meet the relevant certification criteria. The other half of 
the commenters favored more proactive forms of ``active purchasing,'' 
including selective contracting with QHPs.
    Response: As we noted in the preamble to the Exchange establishment 
proposed rule, we believe that an Exchange's certification approach may 
vary based upon market conditions and the needs of consumers in the 
service area. Accordingly, in this final rule, we offer flexibility to 
Exchanges on several elements of the certification process, including 
the contracting model, so that Exchanges can appropriately adjust to 
local market conditions and consumer needs. An Exchange could adopt its 
contracting approach from a variety of contracting strategies, 
including an any-qualified plan approach, a selective contracting model 
based on predetermined criteria, or direct negotiation with all or a 
subset of QHPs. Therefore, we are not prescribing a specific 
contracting model in this final rule.
    Comment: Many commenters expressed support for the provisions in 
Sec.  155.1010(b) of the proposed rule related to the deemed 
certification of multi-State plans and emphasized the importance of 
creating a level playing field for all QHPs within an Exchange. Several 
commenters recommended that the final rule clarify that multi-State 
plans and CO-OPs will be treated identically to other plans; for 
example, multi-State plans and CO-OPs would comply with any additional 
certification criteria established by an Exchange, and could be 
excluded in States that selectively contract.
    Response: The final rule establishing the CO-OP program, ``Patient 
Protection and Affordable Care Act; Establishment of Consumer Operated 
and Oriented Plan (CO-OP) Program,'' published at 76 FR 77392 (December 
13, 2011) directs CO-OPs to comply with all standards generally 
applicable to QHP issuers. We anticipate that specific standards for 
multi-State plans will be described in future rulemaking by OPM in 
accordance with section 1334 of the Affordable Care Act.
    We note that the Affordable Care Act specifically provides a 
deeming process for multi-State plans and CO-OPs. Based on this fact, 
we do not believe these plans can be excluded from participation, 
including in Exchanges that adopt selective certification approaches.
    Comment: Several commenters supported flexibility for States to 
establish a certification timeline for QHPs, as provided in proposed 
Sec.  155.1010(c). In contrast, some commenters recommended that the 
final rule specify a certification timeline or suggested specific times 
by which health plans must be certified as QHPs, such as 10 months 
prior to the beginning of the relevant open enrollment period.
    Response: In developing the certification timeframe, an Exchange 
may need to consider market conditions in the State, including the 
potential for participation by new QHP issuers. As a result, we are not 
establishing a specific deadline by which an Exchange must complete 
certification, other than that certification must be completed prior to 
the open enrollment period for those QHPs that will be made available 
during open enrollment. We have revised the regulation text by 
replacing the proposal that all QHPs must be certified before the 
beginning of the relevant open enrollment period with a standard that 
all QHPs offered during an open enrollment period must be certified 
before the beginning of such period. We encourage Exchanges to certify 
QHPs before the open enrollment period to the extent possible, and to 
consider the needs of consumers, issuers, and other stakeholders when 
establishing certification timelines.
    Comment: Multiple commenters requested clarification as to how 
Exchanges will continually monitor compliance with certification 
standards as described in proposed Sec.  155.1010(d). Several 
commenters offered specific recommendations related to ongoing 
monitoring, including that HHS establish a national complaint tracking 
database; that QHPs demonstrate compliance rather than placing the 
burden of proof on Exchanges; that HHS establish penalties for non-
compliance; and that Exchanges consider network adequacy and provider 
payment practices.
    Response: The Exchange is generally responsible for monitoring 
ongoing QHP compliance with certification standards. There are existing 
and variable mechanisms for monitoring health plan performance; 
therefore, we believe Exchanges are best positioned to develop a 
process and infrastructure for monitoring QHP performance in the 
Exchange. This could include coordination with State departments of 
insurance, reviews of health plan performance, and other approaches. We 
note that the final rule gives Exchanges the express authority to 
decertify a QHP at any time for non-compliance with certification 
standards, including the discretion to establish sanctions for non-
compliance.
    Comment: Several commenters requested that the final rule clarify 
whether a multi-State plan may cover non-excepted abortion services if 
its service area includes one or more States where coverage of such 
services is prohibited by State law.
    Response: Specific standards for multi-State plans will be 
described in future rulemaking published by OPM in accordance with 
section 1334 of the Affordable Care Act.
    Comment: A few commenters requested that Exchanges be permitted to 
contract with other State agencies, such as the State department of 
insurance, to certify, recertify, and decertify QHPs for participation 
in the Exchange.
    Response: Exchanges may enter into agreements with eligible 
entities in accordance with Sec.  155.110, including other State 
agencies, to perform Exchange functions such as QHP certification. The 
Exchange is responsible for establishing processes for QHP 
certification, recertification,

[[Page 18407]]

and decertification. The Exchange may choose to carry out these 
functions by contracting with the State department of insurance or 
another appropriate entity, but must retain ultimate accountability for 
the certification and review of QHPs in accordance with Sec.  155.110.
    Comment: A few commenters addressed the certification processes for 
the individual Exchange and SHOP under proposed Sec.  155.1010(a). 
While some commenters recommended that the certification process be 
identical for both Exchanges, others supported two distinct processes 
in States where the individual Exchange and SHOP are separately 
administered.
    Response: The administrative structure of the individual Exchange 
and SHOP may vary by State. Further, the final rule offers significant 
flexibility to Exchanges in designing the certification process and 
does not prescribe a particular approach. Therefore, the final rule 
neither prescribes a single, uniform process nor two complementary 
processes for certification.

Summary of Regulatory Changes

    We are finalizing the provisions proposed in Sec.  155.1010 of the 
proposed rule, with the following modifications: we redesignated 
proposed paragraphs (c) and (d) as final paragraphs (a)(1) and (a)(2) 
to clarify that the certification timeline and the direction for 
Exchanges to monitor QHPs for ongoing compliance are considered part of 
the certification process. In paragraph (a)(1), we added language to 
increase flexibility for an Exchange to certify a QHP during the 
benefit year by replacing the proposal that all QHPs must be certified 
before the beginning of the relevant open enrollment period with a 
standard that all QHPs offered during an open enrollment period must be 
certified before the beginning of such period. We revised the language 
in paragraph (b) to clarify that both multi-State plans and CO-OPs must 
be recognized by the Exchange as certified (we have previously 
finalized that Exchanges must recognize CO-OP QHPs in 45 CFR 
156.520(e)(1), published at 76 FR 77414).
c. QHP Issuer Rate and Benefit Information (Sec.  155.1020)
    In Sec.  155.1020, we proposed 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. Specifically, we proposed to codify the 
statutory direction in section 1311(e)(2) of the Affordable Care Act 
that an Exchange 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 also solicited comment 
on how to best align section 2794 of the PHS Act and section 1311(e)(2) 
of the Affordable Care Act with respect to review of rates. Finally, we 
proposed that the Exchange must, at least annually, receive from QHP 
issuers information on rates, covered benefits, and cost sharing for 
each QHP, in a form and manner specified by HHS.
    Comment: Many commenters expressed support for the standard in 
proposed Sec.  155.1020(a) that an Exchange ensure that any rate 
increase justification is prominently posted on the QHP issuer's Web 
site. Several commenters requested clarification of the meaning of 
``prominently'' posted or made specific recommendations that, for 
example, the Exchange Web site link to the justification on the 
issuer's Web site, that the Exchange Web site separately post the 
justification, or that the Exchange Web site include a pop-up 
``warning'' to enrollees who select a QHP for which there was a recent 
rate increase.
    Response: In the final rule, we have amended Sec.  155.1020(a) to 
direct the Exchange to provide access to the rate increase 
justification posted on the issuer's Web site. We believe that this 
additional standard would provide greater transparency, and make it 
easier for consumers to access information about rate increases when 
considering QHPs. We note that nothing in this final rule would 
preclude an Exchange from separately posting an issuer's justification 
or otherwise informing consumers about rate increase justifications, as 
suggested by commenters.
    Comment: A few commenters recommended that the final rule specify 
that the Exchange must collect rate justifications in accordance with 
proposed Sec.  155.1020(a) in a timely manner.
    Response: The Exchange must collect rate justifications in advance 
of the annual certification or recertification process, so that the 
Exchange can meaningfully consider the information when determining 
whether to make a QHP available through the Exchange. This is implicit 
in the operation of Sec.  155.1010 and Sec.  155.1020. However, 
recognizing that Exchanges may establish different timelines for 
certification and recertification within the parameters described in 
Sec.  155.1010, we do not establish a separate uniform date for the 
collection of such justifications in the final rule.
    Comment: One commenter requested that HHS clarify that any 
discussion of the State Insurance Commissioner or State department of 
insurance in the preamble to the proposed rule encompasses any relevant 
State regulator.
    Response: While the statute gives the Exchange this authority, we 
believe that that the intent of Sec.  155.1020 is that the Exchange 
consider recommendations from the State agency or official responsible 
for complying with section 2794(b) of the PHS Act.
    Comment: Many commenters suggested ways Exchanges could consider 
rate increase justifications under proposed Sec.  155.1020(b). Some 
commenters favored a rigorous rate review process that would go beyond 
the functions currently performed by State regulators, such as by 
collecting additional information from QHP issuers implementing rate 
increases (for example, evidence of efforts to control costs through 
value-based benefit designs).
    In contrast, several other commenters recommended that the final 
rule reaffirm the traditional role of States in reviewing rates. 
Commenters further urged HHS to minimize the potential for duplication 
and inconsistency by encouraging the Exchange to leverage a State's 
program under section 2794 of the PHS Act to review rates. One 
commenter requested that the final rule clarify that an Exchange's 
ability to act in response to a rate increase would be limited to 
deciding whether to make a QHP available through the Exchange.
    Response: We encourage the Exchange to leverage existing State rate 
review processes to the extent appropriate. As we highlighted in the 
preamble to the proposed rule, such coordination could include posting 
or adopting the same format used for rate justifications submitted to 
the State. However, we note that in some cases an Exchange may engage 
in more in-depth consideration of QHP issuers' justifications when 
determining whether to make a QHP available on the Exchange. As a 
result, we do not limit the ability of Exchanges to conduct additional 
reviews of rate increase justifications, although we recommend that 
Exchanges consider the administrative burden on issuers associated with 
any such reviews. We

[[Page 18408]]

note that an Exchange's consideration of rate increases is limited to 
whether a QHP should be made available on the Exchange.
    Comment: In response to the provision in proposed Sec.  155.1020(b) 
that an Exchange consider rate increases, many commenters requested 
that HHS clarify how the Exchange must incorporate such review into the 
QHP certification process. A few commenters recommended that excessive 
rate increases be considered cause for refusal of certification or 
decertification. Conversely, one commenter recommended that Exchanges 
initially not consider rate increases in the certification of QHPs, and 
that in later years the level or review would be proportional to the 
size of the rate increase. Finally, a few commenters requested that the 
final rule clarify how HHS will oversee Exchange review of rate 
increases.
    Response: An Exchange may choose from a variety of approaches with 
respect to QHP issuer rate increases. For example, an Exchange may 
exercise the discretion provided in Sec.  155.1000(c)(2) by opting to 
not make available QHPs implementing rate increases that the Exchange 
determines are not sufficiently justified. Other Exchanges may choose 
to rely more heavily on the process and determinations made by the 
applicable State regulator. Therefore, we are not prescribing a 
specific process or standard that the Exchange must follow in its 
consideration of rate increase justifications in this final rule.
    Comment: One commenter requested that the final rule clarify the 
applicability of the provisions in this section to multi-State plans.
    Response: Standards and processes related to multi-State plans will 
be addressed in future rulemaking by OPM in accordance with section 
1334 of the Affordable Care Act. Because OPM will administer contracts 
with multi-State plans, we anticipate that OPM may collect certain 
data, including rate and benefit data, from multi-State plans. To avoid 
duplicate reporting and minimize administrative burden, we have amended 
proposed Sec.  155.1020(b) and (c) to clarify that OPM will provide a 
process for rate increase consideration of multi-State plans and a 
process for multi-State plans to submit rate and benefit information, 
respectively.
    Comment: Two commenters requested the meaning of the standard in 
proposed Sec.  155.1020(b)(1)(iii) that an Exchange consider any excess 
of rate growth outside versus inside the Exchange. One commenter 
requested clarification of whether HHS will establish a uniform, 
national limit on rate increases. Another commenter requested that HHS 
clarify the meaning of premium price controls. One commenter 
recommended that the final rule discourage or prohibit the Exchanges 
from holding down rates and creating ``spillover'' increases outside 
the Exchange or in other States, for multi-State plans. Finally, one 
commenter recommended that the rate review function inside and outside 
of the Exchange be combined.
    Response: As indicated in the preamble to the proposed rule, we 
encourage Exchanges to work closely with State departments of insurance 
when considering issuer rate increases. With respect to Sec.  
155.1020(b)(1)(iii), we note that an Exchange should consider the rate 
of growth in rates for similar products that are offered outside versus 
inside the Exchange, which may help the Exchange in its consideration 
of rate increase justifications.
    The term premium price controls is not defined in section 1311(e) 
of the Affordable Care Act, which this provision implements. We note 
that review of rate information in accordance with this section is the 
responsibility of the Exchange; therefore, we are not defining the term 
``premium price controls'' or setting a national limit in this final 
rule.
    Comment: A few commenters requested that the final rule clarify the 
content and timing of reporting of the rate and benefit information 
described in proposed Sec.  155.1020(c). One commenter recommended that 
the information be reported twice per year. Several commenters urged 
HHS to direct the Exchange also collect information on benefit 
exclusions.
    Response: We intend to clarify the format and content of data 
submission in accordance with this section in future guidance. Because 
the purpose of the collected information is to support the QHP 
certification process, the timing is implicit in the operation of this 
provision in conjunction with Sec.  155.1010(a). We note that we 
interpret Sec.  155.1020(c)(1) to direct Exchanges to collect rate 
information for pediatric dental benefits offered in accordance with 
section 1302(b)(1)(J) of the Affordable Care Act, and for any benefits 
in excess of the other benefits offered under section 1302(b) of the 
Affordable Care Act. Exchanges will need to be able to identify such 
information to support the administration of advance payments of the 
premium tax credit.

Summary of Regulatory Changes

    We are finalizing the provisions proposed in Sec.  155.1020 of the 
proposed rule, with a few exceptions. In paragraph (a), we added that 
the Exchange must provide access to rate justification information on 
its Internet Web site. We also clarified throughout this section that 
the U.S. Office of Personnel Management will determine the process by 
which OPM will consider rate increases and by which multi-State plans 
submit rate and benefit information to the Exchange.
d. Transparency in Coverage (Sec.  155.1040)
    In Sec.  155.1040, we proposed how section 1311(e)(3) would be 
implemented: that Exchanges direct health plans seeking certification 
as QHPs to submit transparency information outlined in Sec.  156.220 to 
the Exchange, HHS, and other entities. We also proposed to direct the 
Exchange to monitor the use of plain language by QHP issuers when 
making available QHP transparency data, consistent with guidance 
developed jointly by the Secretary of HHS and the Secretary of Labor. 
In addition, we proposed that the Exchange direct QHP issuers to make 
cost-sharing information available to enrollees.
    Comment: With respect to proposed Sec.  155.1040(a), several 
commenters recommended that Exchanges serve as data aggregators for 
transparency information. One commenter requested that Exchanges be 
permitted to contract with other entities to collect and analyze 
transparency data.
    Response: While we believe some Exchanges may wish to aggregate 
transparency data across QHPs to facilitate the comparison of plans, 
other Exchanges may prefer not to take on this function, and others may 
contract with another entity to collect and analyze transparency data 
consistent with Sec.  155.110. Regardless, by law, we note that the 
Exchange must condition certification of a QHP on its submission of 
such transparency data in accordance with Sec.  156.220.
    Comment: A few commenters recommended that HHS consult with 
consumers and other stakeholders in developing plain language guidance 
in accordance with proposed Sec.  155.1040(b). Other commenters 
suggested specific elements to include (for example, translation 
services). One commenter recommended that QHP issuers be permitted to 
attest to the use of plain language to reduce the administrative burden 
on the Exchange.
    Response: We note that ``plain language'' is defined in Sec.  
155.20. HHS and the Department of Labor will jointly develop and issue 
guidance on best practices of plain language writing, and

[[Page 18409]]

will inform the public about the process for developing such guidance.
    Comment: Several commenters recommended that the Exchange Web site 
inform consumers of their ability to request cost-sharing information 
from QHP issuers in accordance with proposed Sec.  155.1040(c) of this 
section.
    Response: We will consider including sample language to this effect 
in the Exchange Web site template.
    Comment: Multiple commenters requested that HHS clarify the 
oversight and enforcement process for data reporting in accordance with 
proposed Sec.  155.1040(a), including by specifying any sanctions that 
the Exchange may impose on QHP issuers for failure to report the data. 
One commenter specifically recommended that QHP issuers be directed to 
prepare compliance reports addressing transparency data and consumer 
inquiries regarding cost sharing.
    Response: We expect that each Exchange will develop a compliance 
and enforcement approach that will apply to this and other 
certification standards.

Summary of Regulatory Changes

    We are finalizing the provisions proposed in Sec.  155.1040 of the 
proposed rule, with the following modification: in paragraph (a) we 
clarified that the U.S. Office of Personnel Management will determine 
the process through which multi-State plans submit transparency data.
e. Accreditation Timeline (Sec.  155.1045)
    In Sec.  155.1045, we proposed that the Exchange establish the time 
period within which any QHP issuer that is not already accredited must 
become accredited following certification of a QHP. This provision is 
consistent with Sec.  156.275, in which we proposed that all QHP 
issuers must be accredited with respect to their QHPs within the 
timeframe established by the Exchange.
    Comment: We received many comments in response to our proposed 
standard to allow Exchanges to determine a uniform period following 
certification by which QHP issuers must be accredited. A number of 
commenters agreed with our proposal that the States should be given 
flexibility to determine this timeline. Several other commenters 
disagreed with our proposal to allow Exchanges to set the timeline for 
accreditation for QHPs and requested that HHS establish a Federal 
timeline for accreditation that all Exchanges must follow. Several 
commenters suggested appropriate accreditation timelines for HHS to 
establish. Another commenter suggested that allowing QHP certification 
without accreditation runs counter to the intent of the law and State 
autonomy in determining the accreditation timeline fails to offer 
adequate consumer protection.
    Response: We maintain our regulation text as stated in the proposed 
rule. We believe that this proposal is consistent with our efforts to 
ensure that Exchanges have the discretion to implement QHP issuer 
standards that best meet the needs of their Exchange enrollees. To draw 
new issuers to the Exchange, we note that an Exchange may want to 
provide issuers with additional time beyond initial certification to 
become accredited. Section 1311(c)(1)(D)(ii) of the Affordable Care Act 
clearly provides for the Exchange to establish the timeframe.
    Comment: We received a single comment to our proposed provision in 
Sec.  155.1045 requesting that plans be allowed to select their own 
accrediting entity. We also received a comment suggesting criteria that 
the Secretary should use to recognize accrediting entities.
    Response: We expect to engage in future rulemaking to adopt a 
process and criteria for the recognition of accrediting entities.

Summary of Regulatory Changes

    We are finalizing the provisions proposed in Sec.  155.1045 of the 
proposed rule with the clarification that the Office of Personnel 
Management will establish the accreditation period for multi-State 
plans as part of the certification of those plans.
f. Establishment of Exchange Network Adequacy Standards (Sec.  
155.1050)
    To ensure that Exchange network adequacy standards are appropriate 
for QHP issuers and reflect local patterns of care, we proposed in 
Sec.  155.1050 that each Exchange ensure that enrollees of QHPs have a 
sufficient choice of providers. We discussed, in preamble, different 
measures of network adequacy and solicited comment on whether the final 
rule should set Federal minimum network adequacy standards or direct 
the Exchanges to set specific types of standards, including additional 
qualitative or quantitative standards. We also requested 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.
    Comment: A few commenters requested that HHS clarify how the 
network adequacy standards will be monitored and enforced. Commenters 
recommended that the Exchange report on oversight of network adequacy, 
or use specific tactics to monitor network adequacy (for example, 
secret shopper events, monitoring of appointment wait times).
    Response: Many States direct health insurance issuers to evaluate 
the adequacy of their provider networks on an ongoing basis and monitor 
network adequacy in their traditional role of regulating health 
insurance. We encourage Exchanges to coordinate with State departments 
of insurance in monitoring QHP networks for sufficient access, and this 
final rule provides Exchanges with discretion to establish their own 
monitoring procedures to assure ongoing compliance. We anticipate that 
Exchanges will identify a variety of tools and strategies to monitor 
QHP compliance with all certification standards, including standards 
related to network adequacy. Accordingly, we are not prescribing 
specific oversight and enforcement strategies in this final rule.

Summary of Regulatory Changes

    We are finalizing the provisions proposed in Sec.  155.1050 of the 
proposed rule, except that we are revising the regulation text to 
clarify that an Exchange must ensure that each QHP complies with 
network adequacy standards established in accordance with Sec.  
156.230.We are reorganizing the regulation text for increased clarity 
and flow by moving the network adequacy standard to Sec.  156.230. In 
addition, the regulation text is revised to clarify that the U.S. 
Office of Personnel Management will ensure compliance with network 
adequacy standards for multi-State plans as part of the certification 
of those plans. Finally, for reasons described in Sec.  156.230, we 
clarified that a QHP issuer may not be prohibited from contracting with 
any essential community provider. For a complete discussion of the 
comments on network adequacy standards, please refer to Sec.  156.230.
g. Service Area of a QHP (Sec.  155.1055)
    In Sec.  155.1055, we proposed that Exchanges have a process to 
establish or evaluate the service areas of QHPs to determine whether 
the following criteria are met: (1) the service area covers a minimum 
geographical area that meets certain conditions, and (2) 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.
    Comment: Many commenters supported the service area standard in

[[Page 18410]]

proposed Sec.  155.1055(a). However, several commenters recommended 
alternative standards, such as that all QHPs must serve the entire 
Exchange service area, the entire State, areas smaller than a county, 
or contiguous areas. Some commenters suggested that HHS refrain from 
requiring QHPs to offer coverage Statewide to ensure that local health 
plans may participate, while others encouraged Exchanges to align 
standards with market-wide standards.
    Response: Under the proposed and final rule policy, Exchanges have 
the ability to establish or evaluate QHP service areas in such a way 
that would allow for participation by local health plans, provided that 
such standard is established without regard to the factors listed in 
Sec.  155.1055(b). We recommend that Exchanges consider aligning QHP 
service areas with rating areas established by the State in accordance 
with section 2701(a)(2) of the PHS Act. To the extent QHPs operate 
within such uniform service areas, this policy would facilitate 
consumers' ability to compare premiums of QHPs, promoting competition 
within the Exchange market. Furthermore, aligning QHP service areas 
with rating areas may simplify consumer understanding and Exchange 
administration of eligibility determinations for premium tax credits, 
which may be complex if QHP service areas are highly individualized.
    Comment: Several commenters expressed concern that allowing 
Exchanges to set unique service area standards would conflict with 
existing State standards that are meant to prevent against 
discriminatory service areas.
    Response: We acknowledge that some States already have in place 
service area standards that protect against red-lining and other 
``cherry-picking'' practices where the issuer only offers plans to 
geographic areas that are expected to have lower risk. We believe that 
Sec.  155.1055 of this final rule provides a sufficiently broad 
standard such that an Exchange operating in a State with equally or 
more protective service area standards that prevent discrimination 
could use those standards for QHP issuers as well. To the extent that 
the broad standard here is more protective than existing State law, 
however, the Exchange must apply this regulatory standard to QHPs.
    Comment: One commenter requested examples of the ``necessary'' or 
``nondiscriminatory'' standards in proposed Sec.  155.1055(b). Another 
commenter suggested that the Medicare Advantage precedent would be 
useful in determining whether service of part of a county would fall 
under necessary or non-discriminatory standards. Two commenters 
suggested that HHS specifically incorporate the parameters relating to 
a small geographic service area contained in the Medicare manual.
    Response: We believe that the Medicare Advantage ``county integrity 
rule'' described in 42 CFR 422.2 (defining service area) is a useful 
resource for evaluating service areas, and we noted in the preamble to 
the proposed rule that the service area standard in Sec.  155.1055 
mirrors the standard established by Medicare Advantage (76 FR 41866, at 
41894 (July 15, 2011)). While we believe that the standards set forth 
by Medicare Advantage guidance provide examples of how to apply this 
standard, we note that States have discretion to interpret ``necessary, 
non-discriminatory, and in the best interest of qualified individuals 
and qualified employers.'' For example, if a State has an existing 
service area standard that ensures service areas are not discriminatory 
and are in the best of the consumer, then the Exchange could decide to 
establish its service areas to be the same as the existing State 
standard. However, this provision provides authority for an Exchange to 
set stricter QHP standards if it observes service areas that 
specifically exclude certain areas.
    Comment: A number of commenters requested clarification on the 
difference between a service area and a rating area.
    Response: A rating area, as described in Sec.  156.255(a) and 
section 2701(a)(2) of the PHS Act, is a geographic area established by 
a State that provides boundaries by which issuers can adjust premiums 
in accordance with section 2701(a)(1)(A)(ii) of the PHS Act. In 
contrast, a service area is the geographic area in which an individual 
must reside or be employed (in accordance with standards outlined in 
Sec.  155.305 and Sec.  155.710) in order to enroll in a given QHP. As 
noted previously, we recommend that Exchanges consider aligning QHP 
service areas with rating areas to foster competition, promote consumer 
understanding, and reduce administrative complexity.
    Comment: One commenter recommended that HHS encourage States to 
establish service areas in accordance with proposed Sec.  155.1055 as 
soon as possible using county or other existing area boundaries, noting 
that new regional boundaries will increase administrative and 
logistical complexity of assembling a provider network.
    Response: QHP issuers will need to understand QHP standards as 
early as practicable, and we encourage Exchanges to be transparent and 
clear about standards as far in advance of QHP certification as 
possible. As noted above, Exchanges do not need to establish new 
service area boundaries if existing service areas are not 
discriminatory.
    Comment: Several commenters voiced concern about the lack of an 
overarching standard that Exchanges ensure a sufficient number of 
health plans in all geographic areas of an Exchange.
    Response: In general, we clarify that the expectation of Sec.  
155.105(b)(3) is that, to the extent possible, an Exchange must ensure 
that QHPs are available throughout the entire State. We encourage 
Exchanges to establish or negotiate service areas with QHP issuers to 
ensure that residents living in the Exchange service area have access 
to QHPs.
    Comment: A few commenters suggested that the final rule 
specifically establish that service areas of QHPs cannot be drawn to 
avoid dividing Tribal communities and reservations, or former 
reservations, into different service areas.
    Response: We note that Sec.  155.1055(b) establishes that QHP 
service areas be established in a non-discriminatory manner. We 
encourage the Exchange to consider the impact of QHP service areas on 
Tribal communities when evaluating or developing service areas and to 
initiate Tribal consultation in connection with these issues.
    Comment: A few commenters recommended the final rule add ``economic 
factors'' to the list of factors by which a QHP issuer cannot establish 
service areas in proposed Sec.  155.1055(b). Another set of commenters 
were concerned that the proposed rule only prevented discriminatory 
service areas within counties, but not between counties.
    Response: We believe that this provision adequately addresses the 
underlying causes of ``red-lining,'' which is to exclude populations 
that are high utilizing, high cost, or medically-underserved. In 
addition, while Sec.  155.1055(a) addresses discriminatory service area 
practices within a county, Sec.  155.1055(b) establishes that the 
general service area delineations must be established without regard to 
a variety of factors that could be used to ``cherry-pick'' healthy from 
unhealthy risk by geography.

Summary of Regulatory Changes

    We are finalizing the provisions proposed in Sec.  155.1055 of the 
proposed rule with a modification to strengthen the language that 
directs Exchanges to ensure that the service area standards are met.

[[Page 18411]]

h. Stand-alone Dental Plans (Sec.  155.1065)
    In Sec.  155.1065, we proposed that an Exchange allow limited scope 
stand-alone dental plans to be offered as stand-alone plans or in 
conjunction with a QHP, provided that the plans furnish at least the 
pediatric essential dental benefit described under section 
1302(b)(1)(j) of the Affordable Care Act. We also proposed 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. We also proposed to allow an 
Exchange to certify a health plan 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 requested comment on whether some of the QHP certification 
standards and consumer protections, such as a network adequacy, should 
also apply to stand-alone dental plans as a Federal minimum and what 
limits Exchanges may face on placing certification standards on dental 
plans given that they are excepted benefits. We also invited comment on 
whether we should set specific operational minimum standards related to 
allocation of advance payments of the premium tax credit, calculating 
actuarial value, and ensuring the availability of pediatric dental 
coverage in the Exchange. Lastly, in response to comments to the RFC, 
we requested comment on whether we should establish that all dental 
benefits must be offered and priced separately from medical coverage, 
even when offered by the same QHP issuer.
    Comment: With respect to proposed Sec.  155.1065(b), one commenter 
interpreted section 1311(d)(2)(B)(ii) of the Affordable Care Act to 
mean that an Exchange must allow a stand-alone dental plan to offer 
coverage in an Exchange. The commenter requested clarification on 
whether the partnering of a QHP with stand-alone dental plans as their 
subcontractors for pediatric dental care would be consistent with this 
provision.
    Response: We interpret the phrase regarding the offering of stand-
alone dental plans ``either separately or in conjunction with a QHP'' 
to mean that the Exchange must allow stand-alone dental plans to be 
offered either independently from a QHP or as a subcontractor of a QHP 
issuer, but cannot limit participation of stand-alone dental products 
in the Exchange to only one of these options.
    Comment: A number of commenters expressed concern regarding the 
applicability of cost-sharing limits and annual and lifetime limits to 
stand-alone dental plans. Commenters requested clarity on whether such 
limits applied, and cautioned that if stand-alone dental plans do not 
have to comply with the same out-of-pocket, annual, and lifetime limit 
standards that would apply QHPs, then there would be an unlevel playing 
field.
    Response: We accept the recommendation of commenters that cost-
sharing limits and the restrictions on annual and lifetime limits 
should apply to stand-alone dental plans for coverage of the pediatric 
dental essential health benefit. The Affordable Care Act directs any 
issuer that must meet the coverage standards in section 1302(a) to 
cover each of the ten categories; thus, any issuer covering pediatric 
dental services as part of the essential health benefits must do so 
without annual or lifetime limits as defined under the Affordable Care 
Act and its implementing guidance, even if such issuers are otherwise 
exempt from the provisions of Subparts I and II of Part A of Title 
XXVII of the PHS Act (including PHS Act section 2711) under PHS Act 
section 2722. We note that for any benefit offered by a stand-alone 
dental plan beyond those established under section 1302(b)(1)(J) of the 
Affordable Care Act, standards specific to the essential health 
benefits would not apply. We plan to provide more detail in the future 
regarding how a separately offered pediatric dental essential health 
benefit would be considered under standards that apply to a full set of 
essential health benefits.
    Comment: With respect to proposed Sec.  155.1065(b), several 
commenters specifically recommended that stand-alone dental plans be 
directed to offer a child-only pediatric dental plan. The commenters 
were concerned that an Exchange with only family dental coverage 
options and QHPs that do not have to cover the pediatric dental benefit 
would decrease the enrollment of children in dental coverage, as the 
advance payment of the premium tax credit would only be applicable to 
the pediatric dental essential health benefit. Others were concerned 
that the stand-alone dental plans would not have capacity to cover all 
potential enrollees which, combined with the exemption for QHPs to not 
offer the pediatric dental coverage when stand-alone dental plans are 
available, would create insufficient access to child-only options.
    Response: In this final rule, Sec.  155.1065(a)(3) would apply the 
standard of Sec.  156.200(c)(2) to offer a child-only plan to stand-
alone dental plans certified to be offered through the Exchange. In the 
new paragraph Sec.  155.1065(d), we direct an Exchange to consider the 
collective capacity of stand-alone dental plans during certification to 
ensure sufficient access to pediatric dental coverage. By ``sufficient 
access,'' we mean to convey that Exchanges should ensure that, when 
combined, stand-alone dental plans have the capacity (in terms of 
solvency and provider network) to provide child-only coverage to all 
potential children enrolling in coverage through the Exchange.
    Comment: A set of commenters addressed the request for comment in 
the proposed rule on whether the final rule should establish that QHPs 
must separately offer and price coverage for the pediatric dental 
essential health benefit so that consumers have the potential to enroll 
in dental coverage that is different from the dental benefits offered 
by the QHP they selected. Some suggested a standard for QHPs to 
separately price and offer pediatric dental coverage so consumers could 
make direct comparisons based on premium, cost-sharing, and benefits. 
Other commenters stated that it would be easier for consumers if the 
benefits were bundled. A number of commenters also recommended that HHS 
direct QHPs to offer medical-only options without pediatric dental 
coverage.
    Response: If an Exchange determines that having QHPs separately 
offer and price pediatric dental coverage is in the interest of the 
consumer, as described in Sec.  155.1000(c), then the Exchange may 
establish such standard as a condition of QHP certification. Otherwise, 
QHPs are not uniformly directed to separately price and offer pediatric 
dental coverage under this final rule.
    Comment: A few commenters urged HHS to allow health plans outside 
of the Exchange to have the same exemption as QHPs inside the Exchange, 
in that health plans would not have to cover pediatric dental if a 
stand-alone plan existed in the market.
    Response: This request is outside the scope of this final rule, 
which addresses explicitly the standards for QHPs. Section 
1302(b)(4)(F) of the Affordable Care Act specifically addresses the 
exemption in terms of QHPs offered through an Exchange.
    Comment: With respect to proposed Sec.  155.1065(b), a small number 
of commenters requested that Exchanges ensure that stand-alone dental 
plans are offered as both fee-for-service plans and managed care plans.
    Response: Section 1311(e)(1)(B)(i) prohibits the Exchange from 
excluding a plan from the Exchange because it is a fee-for-service 
plan.
    Comment: Several commenters suggested that a way to indicate to 
QHPs

[[Page 18412]]

that they will not have to cover pediatric dental coverage would be to 
issue a request for proposals to stand-alone dental plans in advance of 
the QHP certification process.
    Response: We have not set any operational standards in Sec.  
155.1065. Each Exchange has discretion in determining how to implement 
this provision.
    Comment: With respect to proposed Sec.  155.1065(c), many 
commenters voiced support for allowing an Exchange to direct issuers of 
stand-alone dental plans to comply with any QHP certification standards 
and consumer protections, with some specifying network adequacy and 
cost-sharing standards. Many commenters stated that certification 
standards are necessary to ensure a level playing field between 
pediatric dental coverage offered through QHPs or stand-alone products. 
A few commenters requested that HHS direct Exchanges to establish 
uniform certification and recertification standards for medical and 
stand-alone dental plans. A small number of commenters recommended that 
HHS not establish standards for stand-alone dental plans, or specified 
certain standards that should not apply, such as quality and 
accreditation. One commenter suggested that QHP issuers not have to 
comply with any standard that does not apply to stand-alone dental 
plans for the offering of pediatric dental coverage.
    Response: We are persuaded by comments suggesting that stand-alone 
dental plans comply with QHP certification standards, as such standards 
will help ensure a consistent level of consumer protections as QHPs. 
Accordingly, we have added a new provision to Sec.  155.1065(a)(3) 
establishing that stand-alone dental plans must comply with QHP 
certification standards, except for those certification standards that 
cannot be met because the stand-alone dental plans covers only 
pediatric dental benefits. For example, to the extent that 
accreditation standards specific to stand-alone dental plans do not 
exist, such plans would not have to meet Sec.  155.1045. We also note 
that the Exchange may establish certification standards that are 
specific to the unique nature of stand-alone dental plans. For example, 
an Exchange can set a different network adequacy standard for stand-
alone dental plans than for medical plans. For the purposes of this 
provision, any application of QHP standards to stand-alone dental plans 
by the Exchange would only apply to stand-alone dental plans offered 
through the Exchange.
    Comment: A small number of commenters sought clarification on 
whether stand-alone vision plans could be offered through the 
Exchanges. Other commenters also sought clarification about the 
offering of other types of insurance that are not health plans, such as 
disability insurance.
    Response: HHS is still evaluating this issue and plans to provide 
more details regarding the offering other coverage through an Exchange 
in future guidance.

Summary of Regulatory Changes

    We are finalizing the provisions proposed in Sec.  155.1065 of the 
proposed rule, with three modifications: in paragraph (a)(2), we 
clarify that section 2711 of the PHS Act would apply to the pediatric 
dental essential health benefit covered by a stand-alone dental plan. 
In new paragraph (a)(3), we established that stand-alone dental plans 
must comply with all QHP certification standards subject to certain 
exceptions. In new paragraph (c) we directed Exchanges to consider 
whether stand-alone dental plans will provide sufficient access to the 
pediatric dental essential health benefit during certification of 
stand-alone dental plans. Finally, we redesignated proposed paragraph 
(c) as paragraph (d).
i. Recertification of QHPs (Sec.  155.1075)
    In Sec.  155.1075, we proposed that the Exchange implement 
procedures for the recertification of health plans as QHPs that include 
a review of the general certification criteria outlined in Sec.  
155.1000(c). We also proposed to permit the Exchange to determine the 
frequency for recertifying QHPs. We invited comment on whether we 
should outline specific standards associated with the term length for 
recertification. In addition, we proposed that, after reviewing all 
relevant information and determining whether to recertify a QHP, the 
Exchange must notify a QHP issuer of its recertification status and 
take appropriate action. Finally, we solicited comments on the 
appropriateness of the proposed recertification deadline of September 
15 of the applicable calendar year.
    Comment: With respect to the recertification process described in 
proposed Sec.  155.1075(a), many commenters provided feedback on our 
proposal to permit Exchanges to establish the frequency of 
recertification. While some commenters supported the flexibility 
provided in the proposed rule, others recommended that HHS establish 
the frequency for recertification and offered specific recommendations 
about the recertification interval, such as every one year, three 
years, or as-needed based on certain ``triggering'' events.
    Response: We believe that Exchanges are best positioned to 
establish the frequency of or other parameters for recertification that 
reflect local market conditions or existing State regulatory processes. 
We believe varying intervals for recertification and approaches could 
be appropriate in some circumstances, and therefore are not 
establishing a uniform frequency for recertification in this final 
rule.
    Comment: Multiple commenters recommended that specific elements be 
considered during the recertification process described in proposed 
Sec.  155.1075(a), such as a QHP issuer's complaint history, sanctions 
imposed by State regulators, or interaction with tribes and/or American 
Indian/Alaska Native populations. Commenters also suggested that the 
recertification process include a review of the QHP's network and 
engagement with essential community providers.
    Response: An Exchange must establish a recertification process that 
includes a review of the minimum certification criteria outlined in 
Sec.  155.1000(c) of the final rule, and must monitor QHPs for ongoing 
compliance with certification criteria, as specified in Sec.  
155.1010(d). At its discretion, an Exchange may establish additional 
recertification criteria or review processes, if the Exchange believes 
such criteria will improve the consumer experience.
    Comment: While some commenters supported the proposed 
recertification deadline of September 15th of the applicable calendar 
year as indicated in proposed Sec.  155.1075(b), others recommended 
greater flexibility for States or an alternate deadline, such as August 
15 of each year.
    Response: Recertification should be completed, and the appropriate 
parties notified, in advance of the open enrollment period so that 
consumers, issuers, and Exchanges have sufficient time to prepare for 
and make decisions about the upcoming plan year. In the proposed rule, 
we set forth the dates for the initial and annual open enrollment 
periods. In this final rule, we believe it is also appropriate to 
establish the annual deadline for recertification. We believe that the 
proposed deadline of September 15th provides sufficient time for 
Exchanges and issuers to participate in a robust recertification 
process, and also ensures that consumers will be fully informed of 
their plan choices at the start of each open enrollment period. 
Therefore, we are finalizing the proposed recertification deadline of 
September 15th in this rule.

[[Page 18413]]

Summary of Regulatory Changes

    We are finalizing the provisions proposed in Sec.  155.1075 of the 
proposed rule, except that in paragraph (a) we clarified that, 
consistent with the revisions to Sec.  155.1010, multi-State plans and 
CO-OPs are not subject to the Exchange recertification process.
j. Decertification of QHPs (Sec.  155.1080)
    In Sec.  155.1080, we proposed that the Exchange implement 
procedures for the decertification of health plans as QHPs, which we 
defined as the termination by the Exchange of the certification status 
and offering of a QHP. We also proposed that the Exchange must 
establish an appeals process for health plans that have been 
decertified. We requested comments generally on the proposed 
decertification process and asked specifically whether there were other 
appropriate authorities that could assist Exchanges in the 
decertification process. Finally, we proposed that if a QHP is 
decertified, the Exchange must provide notice of the decertification to 
parties who may be affected, including the QHP issuer, enrollees of the 
decertified QHP, HHS, and the State department of insurance.
    Comment: With respect to the decertification process proposed in 
Sec.  155.1080(b), some commenters supported the flexibility given to 
Exchanges to design the decertification process in the proposed rule, 
while other commenters suggested specific approaches to 
decertification. A few commenters requested that the final rule 
identify ``triggering events'' for decertification, such as a 
determination that a QHP's network is inadequate; others requested that 
HHS provide additional clarification on when decertification would be 
appropriate.
    Response: We continue to provide Exchanges discretion in designing 
the decertification process and making decertification decisions. The 
final rule establishes that an Exchange may decertify a QHP at any time 
for failure to comply with the minimum certification standards 
described in Sec.  155.1000(c), and any additional certification 
standards established by the Exchange. We believe that this flexibility 
is necessary to allow an Exchange to tailor its process for compliance 
and decertification to be appropriate for the market conditions in the 
State. The Exchange is responsible for establishing the decertification 
process, including the approach used to identify plans that are out of 
compliance with certification standards or the associated sanctions.
    Comment: One commenter requested additional information on whether 
multi-State plans may be decertified through the process described in 
proposed Sec.  155.1080(b).
    Response: The Affordable Care Act establishes a deeming process for 
multi-State plans; as a result, we clarify that multi-State plans are 
exempt from the Exchange's recertification and decertification 
processes.
    Comment: Several commenters requested that HHS clarify the 
consequences of an Exchange's failure to decertify plans that are out 
of compliance with certification standards as described in proposed 
Sec.  155.1080(c), and recommended that Exchanges be directed to 
decertify non-compliant QHPs.
    Response: QHPs with persistent or significant compliance issues 
should be decertified and removed from the Exchange; however, we 
recognize that Exchanges may, for example, wish to pursue intermediate 
sanctions for minor violations of certification standards that do not 
adversely impact consumers, so long as such actions are consistent with 
applicable law. While it is our expectation that an Exchange would 
decertify a QHP that is not compliant with certification standards or 
where the health and safety of an enrollee may be at-risk, this final 
rule permits Exchanges to explore a variety of oversight and 
enforcement strategies, up to and including decertification. We intend 
to address oversight of Exchanges through future implementation and 
rulemaking under section 1313 of the Affordable Care Act.
    Comment: One commenter recommended that an Exchange be permitted to 
certify new plan(s) to replace decertified QHP(s) during the benefit or 
plan year in accordance with proposed Sec.  155.1080(c).
    Response: We believe it is important for QHPs to be certified prior 
to the open enrollment period to ensure all consumers have the same 
plan options, and are aware of those options before they make their 
plan selections. However, we believe that an Exchange should have the 
option to replace a decertified QHP with another QHP in certain cases, 
for example if the decertification of a QHP resulted in no or few QHP 
choices in some regions of an Exchange's service area. We have revised 
the regulation text in Sec.  155.1010(a)(1) to provide additional 
flexibility for an Exchange to certify QHPs during the benefit year by 
replacing the proposal that all QHPs must be certified before the 
beginning of the relevant open enrollment period with a standard that 
all QHPs offered during an open enrollment period must be certified 
before the beginning of such period.
    Comment: A few commenters requested that the final rule clarify 
that QHPs decertified in accordance with proposed Sec.  155.1080(c) may 
retain non-Exchange membership.
    Response: Decertification would not affect enrollees who purchased 
QHP coverage directly or not through the Exchange, because such 
members' enrollment occurred outside the Exchange. However, such a plan 
could no longer be marketed as a QHP following decertification and the 
population enrolled in that plan through the Exchange would be provided 
a special enrollment period to transfer to a different QHP in 
accordance with Sec.  155.420(d) and Sec.  155.430(b)(2)(iv). While the 
Exchange regulates enrollment through the Exchange, any sanctions or 
other actions related to a QHP's non-Exchange membership would be at 
the discretion of the State insurance commissioner.
    Comment: A few commenters requested additional information on the 
appeals process described in proposed Sec.  155.1080(d) or suggested 
specific parameters, such as 30 days to file and 30 days to hear an 
appeal.
    Response: Consistent with the authority to design the 
decertification process, the Exchange is responsible for outlining the 
parameters of the appeals process, including timing, what entity will 
hear appeals, and other factors.
    Comment: Several commenters endorsed a special enrollment period 
for individuals whose QHP has been decertified under proposed Sec.  
155.1080(c), and advocated that enrollees be permitted to change levels 
of coverage during such special enrollment period. One commenter 
recommended that consumers receive a special enrollment period if the 
QHP in which they are enrolled appeals a decertification. One commenter 
recommended that enrollees be given 63 days to enroll in other 
coverage, while another suggested that coverage by the decertified QHP 
continue until enrollees make new plan selections.
    Response: Enrollees would have an opportunity to select a new QHP 
once a QHP has been decertified. Allowing enrollees to switch plans in 
advance of a formal determination could create unnecessary disruption 
in the Exchange.
    Consistent with Sec.  155.410, enrollees whose QHP is decertified 
would have access to a special enrollment period lasting 60 days from 
the date of the decertification. We believe that 60 days is a 
sufficient amount of time to select a new QHP. Finally, as described in 
the

[[Page 18414]]

comment and response to Sec.  155.410, we are revising the regulation 
text to permit enrollees to change levels of coverage during a special 
enrollment period.
    Comment: One commenter requested clarification on why HHS needs to 
receive information on decertified QHPs, as in proposed Sec.  
155.1080(e)(3).
    Response: HHS needs access to information on decertification of 
QHPs for a number of policy and operational reasons. For example, HHS 
will need to administer a termination of advance payments of the 
premium tax credit and payment of cost-sharing reductions to issuers of 
decertified QHPs.
    Comment: Several commenters proposed standards for notices related 
to decertification and non-renewal identified in proposed Sec.  
155.1080(e), such as that the notices be available in multiple 
languages, identify appropriate consumer resources, or include 
information targeted to specific populations such as American Indians 
and Alaska Natives. Alternatively, a few commenters recommended that 
HHS publish model notices. Finally, one commenter recommended that the 
final rule direct Exchanges and QHP issuers to confirm receipt of 
notices related to decertification and non-renewal.
    Response: Under this final rule, all notices to consumers issued by 
the Exchange must conform to the minimum standards outlined in Sec.  
155.230, while notices issued by a QHP issuer must conform to standards 
established by Sec.  156.250. These include protections for individuals 
with limited English proficiency or disabilities, and establish that 
all notices be written in plain language. Further, to the extent that 
State law or Exchange policies provide for greater accessibility or 
additional content, an Exchange may provide notices that exceed the 
minimum standards in this final rule.
    We believe that establishing a standard that Exchanges and QHP 
issuers confirm that each notice of decertification or non-renewal has 
been received by the appropriate enrollee would place a significant 
burden on Exchanges and issuers and could demand resources that are 
better used for other customer service functions. Further, we believe 
it is consistent with the current practices of many other programs to 
rely upon the contact information provided by each enrollee without 
confirming that each mailing has been successfully received.
    Comment: One commenter requested that HHS clarify that in the case 
of a SHOP, each enrollee, and not each employer, must receive a notice 
of decertification or non-renewal described in proposed Sec.  
155.1080(e), as appropriate.
    Response: For purposes of SHOP, each enrollee must receive a notice 
of decertification or non-renewal. We note that Sec.  156.285(d)(1)(ii) 
directs QHP issuers offering QHPs through a SHOP to provide notices to 
both enrollees and qualified employers.

Summary of Regulatory Changes

    We are finalizing the provisions proposed in Sec.  155.1080 of the 
proposed rule, except that in paragraph (b) we clarified that, 
consistent with the revisions to Sec.  155.1010, multi-State plans and 
CO-OPs are not subject to the Exchange decertification process.

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

    Part 156 contains the proposed standards for QHPs and QHP issuers 
that are intended to promote robust and meaningful consumer choice.
1. Subpart A--General Provisions
a. Basis and Scope (Sec.  156.10)
    Proposed Sec.  156.10 of subpart A specified the general statutory 
authority for the ensuing regulation and noted 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. We did not receive specific comments 
on this section and are finalizing the provisions as proposed.
b. Definitions (Sec.  156.20)
    Most of the terms that we proposed to define in this section refer 
to terms proposed in Sec.  155.20. Beyond these terms, we proposed that 
the term ``benefit design standards'' mean the ``essential health 
benefits package'' defined in section 1302(a) of the Affordable Care 
Act. We did not receive comments on this section that were not 
addressed elsewhere, and are finalizing the definitions as proposed.
c. Financial Support (Sec.  156.50)
    In Sec.  156.50, we proposed that participating issuers pay user 
fees to support ongoing operations of an Exchange, if a State chooses 
to impose such fees. We proposed to define the term ``participating 
issuer'' to mean an issuer offering plans that participate in the 
specific function that is funded by the user fee. We further proposed 
that participating issuers pay any fees assessed by a State-based 
Exchange, consistent with Exchange authority outlined in Sec.  155.160.
    Comment: Several commenters on proposed Sec.  156.50 recommended 
that HHS modify the definition of ``participating issuer'' by 
simplifying and broadening the proposed definition. Specifically, two 
commenters requested that HHS clarify whether the proposed definition 
would mean that Exchanges would charge user fees in proportion to an 
issuer's participation in specific Exchange functions.
    Response: The definition proposed in Sec.  156.50 is structured to 
accommodate the variety of functions that an Exchange could perform. We 
note that the proposed definition does not direct an Exchange to pro-
rate or otherwise tailor user fees to the specific functions in which 
an issuer participates. Rather, an Exchange could, but is not directed 
to, charge uniform user fees to all participating issuers. We note that 
the Affordable Care Act suggests user fees charged to participating 
issuers as a means for States to ensure that an Exchange is self-
sustaining. We track that statutory language in this final rule when 
using the term participating issuer.
    Comment: A few commenters recommended that Sec.  156.50(b) of the 
final rule clarify that participating issuers must pay all assessments 
established by an Exchange, whether structured as user fees or 
otherwise.
    Response: We believe that participating issuers are responsible for 
paying any assessments established by an Exchange irrespective of how 
such assessments are structured. Therefore, we are revising the 
regulation text in Sec.  156.50 of this final rule to reflect this 
clarification.

Summary of Regulatory Changes

    We are finalizing the provisions proposed in Sec.  156.50 of the 
proposed rule, with the following modifications: in paragraph (b), we 
clarified that a participating issuer must remit user fees to a State-
based or a Federally-facilitated Exchange. We further clarified in 
paragraph (b) that a QHP issuer must remit any fees charged by the 
Exchange in accordance with Sec.  155.160, whether structured as user 
fees or otherwise.
2. Subpart C--Qualified Health Plan Minimum Certification Standards
    Section 1311(c)(1) of the Affordable Care Act authorizes the 
Secretary, by regulation, to establish criteria for the certification 
of health plans as QHPs; we implement that authority in this subpart. 
The proposed rule clarified that, unless otherwise noted, the standards 
for QHPs proposed in this subpart do not supersede existing State

[[Page 18415]]

laws or regulations applicable to the health insurance market 
generally, apply specifically to the certification of QHPs for 
participation in the Exchange, and do not exempt health insurance 
issuers from any generally applicable State laws or regulations.
a. QHP Issuer Participation Standards (Sec.  156.200)
    In Sec.  156.200, we outline the proposed standards on QHP issuers 
as a condition of participation in the Exchange. These include: (1) 
Complying with the standards in this subpart; (2) complying with the 
proposals established in accordance with subpart K of part 155, and in 
the small group market, Sec.  156.705; (3) ensuring that each QHP 
complies with the benefit design standards defined in Sec.  156.20; (4) 
being licensed and in good standing to offer health insurance in the 
State; (5) implementing and reporting on quality improvement strategies 
consistent with section 1311(g) of the Affordable Care Act; (6) paying 
applicable user fees; and (7) complying with standards related to risk 
adjustment under part 153. We noted that States may choose to establish 
additional conditions for participation beyond the minimum standards 
established by the Secretary. We also proposed that 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 applicable standards.
    We also outlined the set of proposed standards with which a QHP 
issuer must comply related to the offering of a QHP, and specified that 
the QHP issuer must comply with the standards set forth in this subpart 
on an ongoing basis. The offering standards included: (1) Offering at 
least one QHP in the silver and gold coverage level; (2) offering a 
child-only plan at the same level of coverage; and (3) offering the QHP 
at the same premium rate when the QHP is offered directly by the issuer 
or through an agent or broker (implemented through Sec.  156.255(b)). 
Finally, we proposed that a QHP issuer not discriminate on the basis of 
race, color, national origin, disability, age, sex, gender identity or 
sexual orientation.
    Comment: Several commenters requested that HHS clarify the standard 
that a QHP issuer be in ``good standing'' to offer health insurance in 
proposed Sec.  156.200(b)(4). While many commenters supported the 
proposed provision as written, a few suggested that HHS strengthen the 
standard. Conversely, one commenter recommended that ``in good 
standing'' be defined to exclude minor violations. One commenter 
recommended that QHP issuers be held accountable for demonstrating good 
standing, such as by providing an attestation from the relevant State 
regulator.
    Response: As described in the preamble to the proposed rule, we 
interpret ``good standing'' to mean that an issuer faces no outstanding 
sanctions imposed by a State's department of insurance. Therefore, the 
specific violations or infractions that would jeopardize standing may 
vary by State. With respect to determining licensure and standing, 
Exchanges may wish to use a number of means, such as attestation or 
verifying the information directly with State departments of insurance. 
Accordingly, we do not prescribe a specific process in this final rule, 
but instead allow Exchanges discretion in determining the best way to 
substantiate licensure and standing.
    Comment: Several commenters requested that HHS harmonize quality 
reporting standards in proposed Sec.  156.200(b)(5) with other public 
programs, suggested quality measures HHS could consider to evaluate 
QHPs, and made specific recommendations regarding both the quality 
improvement strategy and quality rating system. Commenters also 
requested that national quality standards be utilized and quality used 
as a factor in QHP certification decisions. Other commenters requested 
that quality information be publicly reported to consumers to inform 
QHP selection.
    Response: We will provide additional detail on the content and 
manner of quality reporting under this section in future guidance.
    Comment: In response to proposed Sec.  156.200(c)(1), one commenter 
recommended that plans be permitted to achieve the bronze level of 
coverage over time, while participating in an Exchange as a QHP.
    Response: Section 1301(a)(1)(B) of the Affordable Care Act directs 
a QHP to provide the essential health benefits package, which includes 
compliance with the level of coverage standards outlined in section 
1302; therefore, a health plan that does not meet the bronze level of 
coverage cannot be certified as a QHP and made available through the 
Exchange. HHS will issue future rulemaking on section 1302, but the 
Affordable Care Act does not provide for a transitional process to 
achieving the coverage levels.
    Comment: Many commenters offered feedback on the standard for QHP 
issuers to offer a corresponding child-only plan for any QHP offered 
through the Exchange, described in proposed Sec.  156.200(c)(2). 
Several commenters recommended that HHS permit individuals up to age 26 
to enroll in child-only coverage; two commenters recommended that 
instead of offering a separate child-only plan, QHP issuers be directed 
or permitted to accept enrollees of any age into a QHP offered to 
single qualified applicants.
    Response: Section 1302(f) of the Affordable Care Act directs a QHP 
issuer that offers a non-catastrophic plan on the Exchange to offer an 
identical child-only plan. We clarify that a QHP issuer could satisfy 
this standard by offering a single QHP to qualified applicants seeking 
child-only coverage, as long as the QHP includes rating for child-only 
coverage in accordance with applicable premium rating rules. Section 
1302(f) further specifies that for purposes of this standard, a child-
only plan is available to individuals under age 21 at the beginning of 
the benefit year. We lack the authority to alter the age limitation for 
enrollment into a child-only plan.
    Comment: In response to this section, a few commenters requested 
that HHS confirm whether a QHP may contract with providers that serve 
specific populations, such as tribal health care providers, without 
violating the anti-discrimination provisions in proposed Sec.  
156.200(e).
    Response: The anti-discrimination provisions included in Sec.  
156.200(e) are intended to protect enrollees and potential enrollees 
from discriminatory practices on the basis of race, color, national 
origin, disability, age, sex, gender identity, or sexual orientation. A 
QHP issuer may contract with health care providers that are authorized 
or directed by law to serve specific populations, such as Indian health 
providers, without violating these provisions. We note that a QHP 
issuer must meet all standards related to network adequacy and 
essential community providers specified in Sec.  156.230 and Sec.  
156.235, respectively.
    Comment: With respect to proposed Sec.  156.200 in general, several 
commenters recommended that certain issuers, such as Medicaid managed 
care organizations, church plans and union plans, be permitted to offer 
certified QHPs on a limited-issue basis.
    Response: As established in section 1301(a) of the Affordable Care 
Act, all QHPs must be offered by licensed health insurance issuers that 
are subject to the guaranteed issue provisions, effective January 1, 
2014. Under section 2702 of the PHS Act, these issuers must issue 
coverage to any individual who applies

[[Page 18416]]

for coverage in a particular health plan. Though the statute allows 
issuers to stop accepting new enrollees to preserve financial solvency 
or due to provider network capacity under section 2702(c) and (d), 
respectively, the issuer must close off enrollment, or begin accepting 
new enrollees again, uniformly rather than selectively. We note that 
HHS will address the authority under 2702 under separate rulemaking.
    We recognize the potential for significant movement of individuals 
between the Exchanges and Medicaid, as well as the potential for 
members of a family to be covered separately under the Exchange, 
Medicaid, and CHIP. We recognize that QHPs offered by Medicaid managed 
care organizations (MMCOs) may be able to play an important role in 
keeping family members covered under a common issuer and in the same 
provider network, promoting continuity of coverage, and mitigating the 
potential negative effects of ``churning'' between Medicaid and the 
Exchanges. HHS may provide additional guidance on this topic in the 
future. Additionally, we intend to address commenters' concerns 
surround multi-employer plans in future guidance.
    Comment: A few commenters recommended that each Exchange include at 
least one QHP that is also a Medicaid MCO to minimize enrollee churn. A 
handful of commenters recommended that the Exchange be directed to deem 
Medicaid MCOs and other safety net health plans as QHPs. Similarly, one 
commenter recommended that safety net health plans be permitted to 
achieve licensure gradually while participating in the Exchange.
    Response: Medicaid MCOs must meet the same standards as other plans 
to become QHPs. However, we note that Exchanges have discretion to 
develop specific certification criteria in a manner that might 
facilitate participation by Medicaid MCOs, including the establishment 
of the accreditation timeline as specified in Sec.  155.1045 and the 
setting of QHP service areas in Sec.  155.1055. We also note that there 
may be opportunities to leverage the Exchange Web site in a manner that 
would allow the Exchange to identify issuers that participate in both 
the Exchange and Medicaid managed care.
    Comment: A few commenters requested that HHS clarify States' 
ability to develop additional certification and participation standards 
for QHPs.
    Response: We clarify that nothing in this section precludes an 
Exchange from establishing additional certification criteria or issuer 
participation standards beyond those specified in the final rule if in 
the interest of qualified individuals and qualified employers served by 
the Exchange, per final Sec.  155.1000(c) and the preamble discussion 
for that section in this final rule.

Summary of Regulatory Changes

    We are finalizing the provisions proposed in Sec.  156.200 with the 
following modification: we have removed proposed paragraph (c)(3) 
related to offering a QHP at the same premium rate inside and outside 
of the Exchange to avoid duplication of Sec.  156.255(b).
b. QHP Rate and Benefit Information (Sec.  156.210)
    In Sec.  156.210, we proposed that a QHP's rates must be applicable 
for an entire benefit year or, for the SHOP, plan year. We also 
proposed that QHP issuers submit rate and benefit information to the 
Exchange and that a QHP issuer submit a justification for a rate 
increase prior to the implementation of such increase for purposes 
described more fully in Sec.  155.1020. Additionally, we proposed that 
QHP issuers post rate increase justifications on their Web sites so 
they can be viewed by consumers, enrollees, and prospective enrollees.
    Comment: Several commenters supported the provision in proposed 
Sec.  156.210(a) that QHP issuers set rates for an entire benefit or 
plan year. Conversely, some commenters recommended an exception for 
plans participating in the SHOP, or to accommodate Federal or State 
regulatory changes.
    Response: All QHPs, including those participating in the SHOP, must 
offer a set rate for an entire benefit or plan year. We note that while 
QHP issuers in SHOP may establish new rates quarterly or annually, 
issuers must charge the same contract rate for a plan year. We note 
that most Federal and State regulatory changes are proposed well in 
advance of becoming effective, so the number of regulatory changes that 
would take effect in the middle of a benefit or plan year will be 
limited. Therefore, no exceptions are provided in the final rule.
    Comment: One commenter recommended that QHP issuers notify 
enrollees in advance of any rate increase.
    Response: The final rule strengthens the transparency standards 
regarding rate increases. In Sec.  155.1020, QHP issuers must submit to 
the Exchange a justification for a rate increase prior to the 
implementation of the rate increase. Potential and current enrollees 
will be able to compare QHPs and rates through the Exchange Web site. 
Accordingly, we are not adding an additional notice obligation to this 
section.
    Comment: Several commenters offered feedback on the scope of the 
standard to post rate increase justifications in proposed Sec.  
156.210(c). While some commenters recommended posting of all rate 
increases, others recommended that posting be limited to rate increases 
determined unreasonable by a State's program for the review of rates 
under section 2794 of the PHS Act.
    Response: The Affordable Care Act, at section 1311(e), demands the 
posting of all rate increase justifications submitted by a QHP issuer. 
Therefore, Sec.  156.210(c) establishes that all rate increase 
justifications must be posted, irrespective of whether the increase is 
subject to review by a State's program under section 2794 of the PHS 
Act to determine if it is an unreasonable increase or the determination 
of such review. We continue to encourage Exchanges to leverage existing 
State processes, including a State's program under section 2794 of the 
PHS Act, to minimize the potential burden on QHP issuers associated 
with this section.
    Comment: In response to the provision in proposed Sec.  156.210(c) 
that QHP issuers submit and post rate increase justifications, a few 
commenters recommended that HHS clarify that such justifications must 
be written in plain language and must not be deceptive.
    Response: We encourage Exchanges to use the rate increase 
justifications submitted as part of the State's program under section 
2794 of the PHS Act, because the format for these justifications were 
developed with input from the National Association of Insurance 
Commissioners and incorporates consumer-friendly language.

Summary of Regulatory Changes

    We are finalizing the provisions proposed in Sec.  156.210 of the 
proposed rule without modification.
c. Transparency in Coverage (Sec.  156.220)
    In Sec.  156.220, we proposed a transparency standard as a 
condition for certification of QHPs in accordance with section 
1311(e)(3) of the Affordable Care Act. The proposed rule listed 
specific data elements that issuers must provide, from the Affordable 
Care Act: (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

[[Page 18417]]

practices; (7) information on cost sharing and payments with respect to 
any out-of-network coverage; and (8) information on enrollment rights 
under title I of the Affordable Care Act. We sought comment on whether 
QHP issuers should be directed to submit this information to the 
Exchange and other entities, or to make such information available to 
the Exchange and other entities. We also proposed that QHP issuers 
provide the specified information in plain language. Finally, we 
proposed 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.
    Comment: Many groups commented on the data elements included in 
Sec.  156.220(a) of the proposed rule. Several commenters supported the 
proposed rule as written, with one commenter recommending that HHS 
maintain the list as proposed without additional elements. However, 
other commenters, suggested specific enhancements or clarifications to 
the proposed approach or requested that HHS establish uniform standards 
and methodologies. A few commenters recommended that HHS include 
reporting of additional data elements, such as information about 
condition-based exclusions. Some commenters requested that HHS provide 
sample forms, define key terms, or outline a specific reporting format 
(for example, a summary statement accompanied by data tables).
    Other commenters recommended elements or approaches to transparency 
reporting, such as segmenting data by enrollee demographics, collecting 
information at the issuer level, or reporting at the product level. A 
few commenters provided recommendations on where transparency 
information should be submitted and where the information should be 
made available. One commenter encouraged HHS to apply the same 
standards to all plan types, including catastrophic plans. Several 
commenters recommended that HHS collect transparency data annually. 
Finally, one commenter stated that these standards should be extended 
to Medicaid and CHIP populations.
    Response: We believe that QHP issuers should submit transparency 
information in a manner and timeframe that maximizes the utility of 
such information to the Exchange, HHS, and individuals. HHS intends 
that the reporting obligations established in this section and Sec.  
155.1040 will be aligned with the transparency reporting standards 
under section 2715A of the PHS Act. HHS, together with the Departments 
of Labor and the Treasury, will coordinate guidance on the transparency 
in coverage standards. As a result, we are not describing specific data 
formats, definitions, or frequency of reporting with respect to Sec.  
155.1040 in this final rule. We note that data reporting for Medicaid 
and CHIP plans is outside the scope of this final rule.
    Comment: Several commenters agreed with the plain language 
provision in proposed Sec.  156.220(c) as written. In addition, several 
commenters requested that HHS clarify how it will enforce plain 
language standards, with some expressing concern about the Exchange or 
HHS being able to check the accuracy of the plain language information 
submitted by QHP issuers. The commenters recommended that HHS direct 
QHP issuers to provide data with plain language information.
    Response: We note that each Exchange will be responsible for 
ensuring QHP issuer compliance with this standard. HHS and the 
Department of Labor will jointly develop and issue guidance on best 
practices of plain language writing, which will assist Exchanges in 
determining whether issuers are using plain language, as defined in 
Sec.  155.20.
    Comment: We received a number of comments supporting the cost-
sharing transparency in proposed Sec.  156.220(d). Several commenters 
recommended that the provision be amended to allow the consumer to be 
able to request information by phone, fax, email, or online. One 
commenter requested that HHS clarify whether the obligation to provide 
enrollee cost-sharing information is prospective or retrospective in 
nature. Several commenters recommended that HHS establish that the 
cost-sharing information be provided free of charge by QHP issuers to 
the enrollees.
    Response: As noted previously, HHS will coordinate with the 
Departments of Labor and Treasury on guidance for the transparency in 
coverage standards.

Summary of Regulatory Changes

    We are finalizing the provisions proposed in Sec.  156.220 of the 
proposed rule without modification.
d. Marketing and Benefit Design of QHPs (Sec.  156.225)
    To preserve a level playing field within and outside of the 
Exchange and to leverage existing State activities, we proposed in 
Sec.  156.225 that QHP issuers must to comply with any applicable State 
laws and regulations regarding marketing by health insurance issuers as 
a certification standard, as established by section 1311(c)(1)(A) of 
the Affordable Care Act. We also proposed to prohibit QHP issuers from 
employing marketing practices that have the effect of discouraging 
enrollment of individuals with significant health needs and sought 
comment on the best means for an Exchange to monitor QHP issuers' 
marketing practices to determine whether such activities are taking 
place. Additionally, we invited comment on a broad prohibition against 
unfair or deceptive marketing practices by all QHP issuers and their 
officials, agents, and representatives, and on whether HHS should 
establish a standard that QHP issuers not misrepresent the benefits, 
advantages, conditions, exclusions, limitations or terms of a QHP.
    Comment: Many commenters offered feedback on whether the final rule 
should include a broad prohibition against deceptive marketing 
practices. A number of commenters supported such a prohibition and 
suggested specific Federal standards that HHS could adopt, such as 
Medicare Advantage, Medicare Prescription Drug Program, or Medicaid 
standards. Conversely, many commenters supported State flexibility with 
respect to marketing rules and oversight. A few commenters expressed 
concern that a Federal standard could be overly restrictive.
    Response: States have significant experience with, and existing 
infrastructure to support, monitoring and oversight of health plan 
marketing activities. The National Association of Insurance 
Commissioners (NAIC) has provided guidance to the States in the form of 
the Model Unfair Trade Practices Act. The Model Act has been adopted by 
45 States and the District of Columbia. The NAIC has also issued an 
Advertisements of Accident and Sickness Insurance Model Regulation, 
which has been adopted by 42 States. Both the Model Act and Model 
Regulation are extensive and position States to address misleading or 
deceptive practices. As a result, we are finalizing the marketing 
standards with the flexibility afforded in the proposed rule.
    Comment: Many commenters offered standards or clarifications for 
inclusion in proposed Sec.  156.225(b), such as a list of 
discriminatory versus acceptable marketing practices; a prohibition on 
inducements and other tactics prone to abuse; secret shopper events; 
focus group testing of marketing materials; and standardized 
compensation for agents and brokers in the Exchange.
    Response: We note that the above tactics could be appropriately 
included in an Exchange's monitoring and

[[Page 18418]]

oversight activities, as well as its marketing rules. While we are not 
establishing that an Exchange implement specific standards for the 
reasons described in the preceding response, we encourage Exchanges to 
consider a variety of standards, tools, and strategies to promote 
transparent and consumer-oriented conduct in the Exchange.
    Comment: Many commenters urged HHS to codify the statutory 
prohibition against benefit designs that have the effect of 
discouraging enrollment of higher-need consumers in Sec.  156.225(b) of 
the final rule.
    Response: We note that section 1311(c)(1)(A) specifically prohibits 
QHP issuers from utilizing benefit designs that have the effect of 
discouraging enrollment by higher-need individuals. We have modified 
Sec.  156.225(b) in this final rule to codify the statutory 
prohibition.
    Comment: A few commenters recommended that the Exchange be 
permitted to decertify QHPs based on improper marketing practices.
    Response: Section 155.1080 of the final rule gives the Exchange the 
authority to decertify a QHP at any time for failure to comply with 
certification standards, including standards related to marketing 
practices.
    Comment: Several commenters recommended that HHS repeat the anti-
discrimination standards established in Sec.  156.200(e) in this 
section.
    Response: We believe that the broad prohibition on discrimination 
in Sec.  156.200(e) clearly bars discrimination in marketing practices 
as well as other operations of the QHP issuer, and that repeating this 
language in Sec.  156.225 is unnecessary.
    Comment: Several commenters encouraged HHS to establish a level 
playing field with respect to marketing inside and outside of the 
Exchange. Specifically, a few commenters recommended that the final 
rule clarify that QHP issuers must comply with all State laws and 
regulations that govern marketing other health insurance products, such 
as statutes prohibiting unfair or deceptive acts or practices.
    Response: We note that adopting the proposed rule's approach would 
ensure QHPs conform to any standards, laws, or regulations that govern 
the marketing of non-QHP health insurance products in a State.
    Comment: Several commenters recommended that HHS direct Exchanges 
to report on oversight activities related to marketing. A few 
commenters additionally recommended that an Exchange Blueprint detail 
the Exchange's proposed approach to marketing oversight.
    Response: Exchanges are responsible for ensuring compliance with 
the marketing standards of this section. States have significant 
experience in regulating marketing of health insurance issuers, and 
Exchanges may leverage the current monitoring practices of States with 
respect to marketing of health insurance. As a result, we are not 
imposing an additional reporting obligation for Exchanges in this area.
    Comment: In response to the concern expressed in the proposed rule 
preamble that certain groups (for example, Medicare beneficiaries) may 
be vulnerable to deceptive marketing tactics, one commenter suggested 
that the Exchange electronically verify whether QHP enrollees are also 
enrolled in other coverage.
    Response: We encourage Exchanges to develop a variety of strategies 
to identify improper marketing practices. We note that subpart D of 
this final rule provides for electronic verification of some types of 
other coverage in Sec.  155.320(b).
    Comment: A handful of commenters recommended that HHS establish a 
mechanism to receive consumer complaints related to marketing 
practices.
    Response: Consumers who encounter marketing practices that they 
believe are deceptive or improper should be able to report such 
practices to the Exchange or State regulator, as appropriate. Because 
the Exchange is responsible for monitoring marketing of QHPs and taking 
any appropriate action, we believe that establishing a separate Federal 
complaint reporting mechanism is unnecessary.

Summary of Regulatory Changes

    We are finalizing the provisions proposed in Sec.  156.225 of the 
proposed rule, with the following modifications: in paragraph (b) we 
codified statutory language prohibiting QHP issuers from employing 
benefits designs that could discourage enrollment of individuals with 
significant health needs. Accordingly, we added ``and Benefit Design'' 
to the title of this section.
e. Network Adequacy Standards (Sec.  156.230)
    In Sec.  156.230, we proposed the minimum criteria for network 
adequacy in order for health plans to be certified as QHPs. We proposed 
that QHP issuers meet network adequacy standards established by the 
Exchange in accordance with Sec.  155.1050 and consistent with the 
provisions of section 2702(c) of the PHS Act as amended by the 
Affordable Care Act. In the proposed rule, the network adequacy 
standard, stated in proposed Sec.  155.1050, established ``sufficient 
choice of providers'' as the touchstone of whether a provider network 
is adequate. The preamble discussion identified several different 
measures of network adequacy and sought comment on whether to include 
additional qualitative and quantitative standards to measure network 
adequacy.
    We proposed that a QHP issuer make its health plan provider 
directory available to the Exchange electronically and to potential 
enrollees and current enrollees in hard copy upon request, and that the 
directory identify providers who are no longer accepting new patients. 
We sought comment on standards we might set to ensure that QHP issuers 
maintain up-to-date provider directories. We refer commenters to the 
summary of proposed Sec.  155.1050 in this final rule and to the 
preamble to the proposed rule for additional discussion of the proposed 
policy.
    Comment: Many commenters offered feedback on the network adequacy 
standard, initially included in proposed Sec.  155.1050. Some 
commenters supported the flexibility provided to States in the proposed 
rule, noting that such flexibility could facilitate the alignment of 
markets inside and outside of the Exchange. Conversely, many commenters 
recommended that HHS establish a national, uniform standard for network 
adequacy. These commenters offered numerous standards HHS could adopt, 
including the NAIC Managed Care plan Network Adequacy Model Act, or the 
current standards for Medicare Advantage plans, Medicaid managed care 
plans, or TRICARE plans. Finally, a few commenters generally requested 
that HHS clarify the meaning of ``sufficient number'' of providers.
    Response: A number of competing policy goals and considerations 
come into play with examinations of network adequacy: that QHPs must 
provide sufficient access to providers; that Exchanges should have 
discretion in how to ensure sufficient access; that a minimum standard 
in this regulation would provide consistent consumer protections 
nationwide; that network adequacy standards should reflect local 
geography, demographics, patterns of care, and market conditions; and 
that a standard in regulation could misalign standards inside and 
outside of the Exchange. In balancing these considerations, we have 
modified Sec.  156.230(a)(2) in this final rule to better align with 
the language used in the NAIC Model Act. Specifically, the final

[[Page 18419]]

rule establishes a minimum standard that a QHP's provider network must 
maintain a network of a sufficient number and type of providers, 
including providers that specialize in mental health and substance 
abuse, to assure that all services will be available without 
unreasonable delay. We believe this modification provides additional 
protection for consumers by communicating our expectations with respect 
to the number and variety of providers that should be present in a 
QHP's provider network. Further, the modified standard establishes a 
baseline (``all services * * * without unreasonable delay'') against 
which network adequacy can be measured. We note that nothing in the 
final rule limits an Exchange's ability to establish more rigorous 
standards for network adequacy. We also believe that this minimum 
standard allows sufficient discretion to Exchanges to structure network 
adequacy standards that are consistent with standards applied to plans 
outside the Exchange and are relevant to local conditions. Finally, 
placing the responsibility for compliance on QHP issuers, rather than 
directing the Exchange to develop standards, is more consistent with 
current State practice.
    Comment: Several commenters urged HHS to codify the potential 
additional standards listed in the preamble to the proposed rule 
(access without unreasonable delay, reasonable proximity of providers 
to enrollees' homes or workplaces, ongoing monitoring process, and out-
of-network care at no additional cost when in-network care is 
unavailable), with the largest number of commenters expressing support 
for the provision of out-of-network care at no additional cost when in-
network care is unavailable. Other commenters recommended specific 
alternatives to these elements, such as a ``60 minutes or 60 miles'' or 
``15-20 minutes'' standard.
    Response: Based on comments, we have modified Sec.  156.230(a)(2) 
in this final rule to codify the standard that services must be 
available without unreasonable delay. With respect to the other 
specific suggestions offered by commenters, we are concerned that the 
proposed standards may not be compatible with existing State regulation 
and oversight in this area. We believe that the modification to final 
Sec.  156.230(a)(2) strikes the appropriate balance between assuring 
access for consumers and recognizing the historical flexibility and 
responsibility given to States in this area.
    Comment: Several commenters recommended that the final rule 
strengthen access protections in medically underserved, rural, or 
professional shortage areas, and for vulnerable populations, such as 
limited English proficient individuals or individuals with 
disabilities. With respect to medically underserved areas, some 
commenters suggested approaches that HHS could take, such as supporting 
higher payment rates in these areas. Others advocated for State 
flexibility to develop local solutions. One commenter requested that 
the final rule clarify that a QHP's network cannot be deemed inadequate 
in a professional shortage area.
    Response: We did not accept comments recommending specific, 
national standards given that network adequacy is typically--and 
diversely--regulated by States. As described above, we amended Sec.  
156.230(a)(2) in this final rule to clarify that the provider networks 
maintained by QHP issuers must offer access to all services without 
unreasonable delay. We believe that this modified standard enhances 
protections for all Exchange consumers, including vulnerable 
populations, while preserving flexibility for States to develop local 
solutions to ensure access. Furthermore, we believe that the standards 
for inclusion of essential community providers in QHP provider networks 
in proposed Sec.  156.235 will also help to strengthen access in 
medically-underserved areas and for vulnerable populations.
    Comment: Many commenters recommended that the network adequacy 
provisions include specific provider types, such as pediatricians, 
tribal health care providers, mental health professionals, teaching 
hospitals, or women's health care providers.
    Response: While QHP networks should provide access to a range of 
health care providers, we are concerned that mandating inclusion of a 
list of specified provider types would detract from the larger issue of 
broadly ensuring access to the full range of covered services (that is, 
essential health benefits). Accordingly, we have modified Sec.  
156.230(a)(2) of this final rule to require QHP issuers to maintain 
networks that include sufficient numbers and types of providers, 
including providers that specialize in mental health and substance 
abuse, to ensure access to all services. We specifically highlight 
mental health and substance abuse services because we recognize that 
the essential health benefits will create new demands for access to 
mental health and substance abuse services, and that such services have 
traditionally been difficult to access in low-income and medically 
underserved communities. By highlighting mental health and substance 
abuse providers in the network adequacy standard, we seek to encourage 
QHP issuers to provide sufficient access to a broad range of mental 
health and substance abuse services, particularly in low-income and 
underserved communities. In addition, we are clarifying in Sec.  
155.1050 of this final rule that, because inclusion of essential 
community providers is related to network adequacy, a QHP issuer may 
not be prohibited from contracting with any essential community 
provider described in final Sec.  156.235(c). We urge States to 
consider local demographics, among other elements, when developing 
network adequacy standards and note that nothing in the final rule 
would preclude an Exchange from identifying specific provider types 
that are particularly essential in a State.
    Comment: A few commenters recommended that the final rule direct 
QHP networks to maintain growth capacity, or the ability to accept 
additional enrollees or utilization.
    Response: We believe that the higher standard in Sec.  
156.230(a)(2) of this final rule helps address the commenters' 
concerns. Further, we believe that the reference to section 2702(c)(2) 
of the PHS Act, included in section 1311(c)(1) of the Affordable Care 
Act, implies Congressional intent to protect current enrollees from 
unreasonable delays in access to care if QHPs expand enrollment too 
quickly. Therefore, we are not prescribing a uniform growth capacity 
standard for all Exchanges in the final rule, though we note that an 
individual Exchange would be able to set such a standard.
    Comment: A few commenters supported the language in the preamble to 
the proposed rule encouraging Exchanges and QHP issuers to consider 
broadly defining the providers that can furnish primary care services. 
However, other commenters raised concerns about this broader definition 
and noted that other programs, such as Medicare and Medicaid, identify 
a limited set of providers who may be considered primary care 
providers.
    Response: We continue to encourage Exchanges to consider a broader 
definition of the types of providers who may furnish primary care 
services, because this should improve access to such services for 
consumers, particularly those in medically underserved or rural areas. 
We also recognize that the definition of a ``primary care provider'' 
should be consistent across health insurance programs to the extent 
possible, and we

[[Page 18420]]

encourage Exchanges to be mindful of existing definitions and 
approaches in other health insurance programs when outlining 
corresponding standards for QHP issuers participating in the Exchange. 
All provider contracts executed by QHP issuers participating in the 
Exchange must be fully compliant with State scope of practice laws.
    Comment: A few commenters requested that HHS provide technical 
assistance on the various network adequacy benchmarks that are 
available (for example, NAIC, Medicare Advantage, TRICARE, Medicaid 
managed care) as States develop Exchange standards.
    Response: We continue to work with States on a variety of issues 
related to Exchange establishment and operations, and will consider 
providing more specific technical assistance on existing network 
adequacy standards in the future.
    Comment: Several commenters recommended that additional items be 
included in QHP provider directories described under proposed Sec.  
156.230(b), such as each provider's specialty, affiliation, licensure, 
or languages spoken. A few commenters requested that HHS establish that 
the provider directory must be easily searchable for Indian Health 
Service/Tribal/Urban (I/T/U) providers. Finally, a few commenters 
recommended that provider directories include non-physician providers.
    Response: Consistent with current industry practice, we expect QHP 
issuers' provider directories to include information on each provider's 
licensure or credentials, specialty, and contact information, which 
could include any institutional affiliation. The Exchange may establish 
additional data elements that QHP issuers must include, such as 
identifying Indian Health Service/Tribal/Urban (I/T/U) providers.
    We note that while a provider directory could include appropriate 
non-physician providers, we afford Exchanges discretion regarding their 
inclusion in the provider directory. A provider directory that includes 
providers whose scope of practice is limited should generally identify 
the services that the provider is contracted to perform, for example, 
by displaying such providers only when consumers search for certain 
services (for example, primary care).
    Comment: Multiple commenters recommended that the Exchange 
consolidate QHP provider directories as described in the preamble to 
the proposed rule. Conversely, some commenters recommended maximum 
flexibility for QHP issuers to submit provider information.
    Response: We encourage, but do not direct, Exchanges to consolidate 
QHP provider directories to make it easier for consumers to locate the 
QHPs in which their providers participate. Exchanges may also want to 
establish links to the provider directory on a QHP issuer's Web site.
    Comment: Several commenters requested that HHS clarify how 
frequently QHP issuers must update provider directories under proposed 
Sec.  156.230(b). Recommendations offered by commenters ranged from in 
real time to annually. A few commenters raised concerns about the 
proposed standard that directories identify providers who are not 
accepting new patients, noting that this could result in continuous 
updates.
    Response: We afford each Exchange with discretion to provide 
guidance to QHP issuers with respect to the updating of provider 
directories, including how frequently issuers must identify providers 
who are no longer accepting new patients. We urge Exchanges to consider 
the appropriate balance between supporting consumer choice and the 
burden on QHP issuers associated with this standard (which should be 
lower for electronic directories than for hard copy directories). 
Further, in establishing such standards, we expect Exchanges to 
consider the information needs of current versus potential enrollees.
    Comment: A few commenters recommended that HHS establish that 
provider directories developed in accordance with proposed Sec.  
156.230(b) must offer meaningful access to individuals with limited 
English proficiency and/or disabilities, for example by making 
directories available by phone.
    Response: We note that, because they are made available to 
enrollees, provider directories must meet the standards for 
applications, forms, and notices established in Sec.  155.230 of this 
final rule, which include accommodations for individuals with limited 
English proficiency and/or disabilities.
    Comment: A few commenters suggested that QHP issuers be directed to 
notify enrollees if their particular provider drops out of the network.
    Response: Although a provider's contracting status has significant 
implications for patients--especially those who regularly see a 
particular provider for treatment of a chronic or complex condition--we 
do not set a uniform standard for notification of individual patients 
if their providers drop out of the QHP's network. Such a uniform 
standard on QHPs might not be consistent with practices in the non-
Exchange market, and would raise QHP administrative costs.
    Comment: HHS received comments that section 408 of the Indian 
Health Care Improvement Act (IHCIA), should be interpreted to obligate 
QHPs to include health programs operated by the IHS, Tribes, Tribal 
organizations, and Urban Indian organizations as providers in their 
networks. Several commenters also recommended that HHS clarify the 
applicability of section 206 of the ICHIA to QHPs.
    Response: The primary purpose of section 408 of IHCIA is to deem 
Indian health providers as eligible to receive payment from Federal 
Health Care Programs for health care services provided to Indians if 
certain standards are met. Eligibility to receive payment under section 
408 of IHCIA does not depend on in-network status with a QHP. Section 
206 of IHCIA provides that all Indian providers have the right to 
recover from third party payers, including QHPs, up to the reasonable 
charges billed for providing health services, or, if higher, the 
highest amount an insurer would pay to other providers to the extent 
that the patient or another provider would be eligible for such 
recoveries. We believe that section 206 will foster network 
participation because it benefits QHPs to contract with Indian health 
providers to establish the payment terms to which the parties agree. 
Accordingly, we are not modifying the regulation text to reflect this 
comment.

Summary of Regulatory Changes

    We are finalizing the provisions proposed in Sec.  156.230 of the 
proposed rule with the following modification: in new paragraph (a)(2), 
we modified the standard previously proposed in Sec.  155.1050 to 
clarify that a QHP issuer must maintain a provider network that is 
sufficient in number and types of providers to assure that all services 
will be accessible without unreasonable delay. We also specifically 
include providers that specialize in mental health and substance abuse, 
because mental health and substance abuse services are essential health 
benefits and because mental health parity applies to QHPs.
f. Essential Community Providers (Sec.  156.235)
    In Sec.  156.235, we proposed that a health plan's network must 
include a sufficient number of essential community providers who 
provide care to predominantly low-income and medically-underserved 
populations to

[[Page 18421]]

be certified as a QHP. We solicited comment on how to define a 
sufficient number of essential community providers. We also defined the 
types of providers included in the definition of essential community 
providers consistent with the Affordable Care Act, which specifically 
identifies 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 also solicited 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.
    In the preamble to this section, we acknowledged that two 
provisions of the Affordable Care Act regarding payment of essential 
community providers and payment of Federally Qualified Health Centers 
(FQHCs) may conflict and invited comment on this issue. We also invited 
comment on specific payment and contracting issues related to Indian 
health providers. Finally, we requested comment on other special 
accommodations that should be made when contracting with Indian health 
providers, such as the use of a standardized Indian health provider 
contract addendum.
    Comment: HHS received many comments seeking clarity on the proposed 
standard in Sec.  156.235(a) that QHPs include in their provide 
networks a ``sufficient'' number of essential community providers. Many 
commenters recommended that QHP issuers include in their provider 
networks all essential community providers in the area; contract with 
any willing essential community provider; or contract with certain 
types of providers, such as family planning providers. Some commenters 
suggested HHS define sufficiency based on specific ratios of enrollees 
to providers, maximum travel times, or the Need for Assistance 
worksheet used by the Health Resources and Services Administration.\12\ 
One commenter suggested that HHS base the sufficiency standard in part 
on the Health Professions Shortage Areas, Medically Underserved Areas 
and Medically Underserved Populations designated by the Health 
Resources and Services Administration.
---------------------------------------------------------------------------

    \12\ Available at: http://www.hrsa.gov/grants/apply/assistance/NAP/forms/9needforassistance.pdf.
---------------------------------------------------------------------------

    In contrast, other commenters supported the proposed rule and urged 
HHS to maintain a broad definition of ``sufficient'' that allows 
Exchanges to establish standards appropriate for their States. A number 
of commenters urged HHS to strike a balance between having QHP issuers 
provide enrollees with adequate access to care from essential community 
providers and allowing QHP issuers to employ innovative network designs 
that improve quality and contain costs.
    Response: Based on comments received, we believe that additional 
clarification of the ``sufficiency'' standard is necessary. 
Accordingly, we have modified final Sec.  156.235(a) to direct that 
each QHP's network have a sufficient number and geographic distribution 
of essential community providers, where available, to ensure reasonable 
and timely access to a broad range of such providers for low-income, 
medically underserved individuals in the QHP's service area, in 
accordance with the Exchange's network adequacy standards. We believe 
that this approach more clearly articulates our expectations with 
respect to sufficiency than the standard included in the proposed rule 
with respect to essential community providers while continuing to 
balance the accessibility of essential community providers with network 
flexibility for issuers. We emphasize that Exchanges have the 
discretion to set higher, more stringent standards with respect to 
essential community provider participation, including a standard that 
QHP issuers offer a contract to any willing essential community 
provider. HHS intends to monitor the effectiveness of this provision in 
ensuring access to essential community providers, and it may be subject 
to further modification.
    Comment: HHS received several comments suggesting that QHP issuers 
be exempt from the standard in proposed Sec.  156.235(a) to include 
essential community providers in their provider networks if the 
Exchange's service area does not include low-income or medically-
underserved populations.
    Response: Section 1311(c)(1)(C) of the Affordable care Act directs 
all QHP issuers to include essential community providers in their 
provider networks; therefore, we have not amended the regulation to 
provide the exemption suggested by the commenter. Further, we note that 
the statute and final rule acknowledge that essential community 
providers may not be available throughout a QHP's service area. We 
believe that the inclusion of ``where available'' in both places 
creates flexibility for QHP issuers to contract with essential 
community providers in a manner that reflects the relative availability 
of these providers and the needs of local communities.
    Comment: A number of commenters urged us to address the services 
that a QHP issuer should cover when provided by an essential community 
provider in its provider network, as described in proposed Sec.  
156.235(a)(1). Some commenters suggested that QHP issuers be directed 
to cover all services furnished by the essential community provider. 
Some commenters expressed concern that QHP issuers might contract with 
essential community providers for a few services, thus fulfilling the 
essential community provider ``sufficiency'' standard but prohibiting 
access to the full breadth of services through such providers.
    Response: While we believe the statutory directive to include 
essential community providers in QHP provider networks must translate 
to meaningful access to care for low-income and medically underserved 
populations, section 1311(c)(1)(C) of the Affordable Care Act provides 
that nothing in the standard to include essential community providers 
obligates a QHP to cover any specific medical procedure. We generally 
anticipate and expect QHP issuers will contract with essential 
community providers for all services furnished by the provider that are 
otherwise covered by the QHP.
    Comment: Several commenters supported an exemption from the 
standards in this section for staff-model health plans or integrated 
delivery system-based health plans, though one commenter urged HHS to 
make such an exemption contingent upon the organization demonstrating 
that its provider network still provides meaningful access to all forms 
of care to potential enrollees in the service area. One commenter 
suggested that HHS establish a provision similar to Medicaid's 
``freedom of choice'' provision in 42 U.S.C. 1396(a)(23) in order to 
allow enrollees in staff-model QHPs to receive covered services from 
other providers if needed at no additional cost to the enrollee; the 
commenter specifically cited concerns that a religiously-sponsored 
integrated delivery health plan may not offer a full range of 
reproductive health services. Conversely, several commenters opposed 
any exemption for staff-model or integrated delivery system plans.
    Response: Based on comments, we are persuaded that the obligation 
to contact with essential community providers should address the unique 
contracting structure of staff-model health plans and integrated 
delivery system-based health plans that provide a majority of services 
``in-house.'' We are concerned that

[[Page 18422]]

establishing a standard for such plans to contract with essential 
community providers would result in these plans having to alter their 
business models, which may obviate the benefits of integration. In the 
proposed rule, we noted that we were weighing whether to provide 
consideration for plans that solely provide services ``in-house''. In 
light of comments, however, we recognize that staff model and highly 
integrated delivery system plans do not provide services solely ``in 
house''; rather, as a practical matter, they must provide some level of 
out-of-network services (for example, emergency services) and often 
must contract with Centers of Excellence or certain specialists to 
provide patients with access to highly specialized services. As a 
result, we have added under final Sec.  156.235(b) a provision 
directing Exchanges to offer an alternate standard for plans with a 
majority of services furnished by ``in-house'' providers. Under the 
alternate standard, health insurance issuers that provide a majority of 
covered professional services through employed physicians or through a 
single contracted medical group may demonstrate their ability to 
provide an equivalent level of service accessibility for low-income and 
medically underserved individuals. We note that this alternate standard 
does not permit an Exchange to grant any QHP issuer a wholesale 
exception to standards related to essential community providers.
    Comment: In response to the discussion in the preamble to the 
proposed rule, many commenters urged HHS to clarify the term 
``generally applicable payment rates'' and ensure that essential 
community providers are reimbursed at a reasonable level by 
establishing minimum reimbursement standards for all essential 
community providers. Suggestions for such a benchmark included the 
Medicaid prospective payment system (PPS) rate under 42 U.S.C. 
1396a(bb), Medicare rates, or a reimbursement rate at least equal to 
the issuer's negotiated rate with a similarly situated non-essential 
community provider. Commenters also recommended that QHPs offer 
``generally applicable payment rates'' by service line to ensure that 
plans do not mask low rates for particular services by providing higher 
rates for less-utilized service, or otherwise discriminate against 
essential community providers in contract negotiations.
    Response: QHP issuers should not discriminate against essential 
community providers through contract negotiations, or otherwise attempt 
to circumvent the obligation to include such providers in-network by 
offering unfavorable rates. In this final rule, we are not specifically 
establishing that a generally applicable payment rate be based on a 
particular benchmark or be calculated using a particular method (for 
example, by service line), but clarify that ``generally applicable 
payment rate'' means, at a minimum, the rate offered to similarly 
situated providers who are not essential community providers as defined 
in this section.
    Comment: In response to the discussion in the preamble to the 
proposed rule, many commenters offered feedback on the appropriate 
payment rates for Federally-qualified health centers, or FQHCs. Several 
commenters supported payment of Medicaid PPS rates to all FQHCs some 
commenters advocated that Exchange provide wrap-around payments to 
FQHCs, as is currently the practice in State Medicaid programs. Other 
commenters supported payment of the issuer's generally applicable 
payment rates, while other commenters recommended allowing payment of 
mutually agreed upon rates. A few commenters offered unique suggestions 
not explicitly contemplated in the proposed rule, such as negotiating 
based on Medicare rates or permitting States to establish payment rates 
for essential community providers.
    Response: The Affordable Care Act, at section 1302(g), establishes 
payment of FQHCs at the applicable Medicaid PPS rate. However, the 
Affordable Care Act also supports, at section 1311(c)(2), payment of 
essential community providers, including FQHCs, at the QHP issuer's 
generally applicable payment rate. We are amending the regulation text 
in final Sec.  156.235(e) to codify both sections 1302(g) and 
1311(c)(2) of the Affordable Care Act. We interpret these two 
provisions to mean that a QHP issuer must pay an FQHC the relevant 
Medicaid PPS rate, or may pay a mutually agreed upon rate to the FQHC, 
provided that such rate is at least equal to the QHP issuer's generally 
applicable payment rate.
    Comment: Several commenters suggested that, rather than direct QHP 
issuers to contract with essential community providers under proposed 
Sec.  156.235(a), Exchanges should provide incentives for QHP issuers 
to contract with essential community providers.
    Response: Including essential community providers in QHP provider 
networks is a minimum certification standard specifically established 
by Section 1311(c)(1)(B) of the Affordable Care Act. This does not 
preclude Exchanges from offering incentives to QHP issuers (such as 
priority placement on the Exchange Internet Web site) to contract with 
more essential community providers than the Federal minimum standard.
    Comment: In response to the list of essential community providers 
in proposed Sec.  156.235(b), many commenters recommended inclusion of 
specific provider types, including but not limited to rural health 
clinics, community mental health centers, family planning clinics, Ryan 
White Care Act providers, pediatricians and children's hospitals, 
tribal health care providers, providers that serve limited English 
proficient populations, school-based clinics, or the entirety of a 
health system that includes a 340(B) or disproportionate share 
hospital. Some commenters also expressed concern about the potential 
for exclusion of or discrimination against specific types of essential 
community providers, such as those that are academic medical centers, 
by issuers, States or Exchanges. Conversely, a few commenters 
recommended that each State define essential community providers.
    Response: We acknowledge that a wide variety of health care 
providers and institutions serve low-income and medically underserved 
individuals, and we note that the definition of essential community 
providers contained in the proposed rule encompasses a broad range of 
providers that serve low income and underserved communities, including 
FQHCs, disproportionate share hospitals, Ryan White Care Act Title II 
and III grantees, and urban Indian organizations. We clarify that the 
list of essential community providers provided in paragraphs (c)(1) and 
(c)(2) are not an exhaustive list and are not meant to exclude QHP 
issuers from contracting with other providers that serve predominantly 
low-income, medically underserved individuals.
    In Sec.  156.235(c) of the final rule, we are finalizing the 
proposed rule definition, with a slight modification. Based upon 
comments regarding the potential for exclusion of or discrimination 
against essential community providers and consistent with the intent 
explicit in section 1311(c)(1)(C) of the Affordable Care Act that 
access to essential community providers be maximized in QHPs, we 
clarify that any provider that meets the criteria for an essential 
community provider in Sec.  156.235(c), or met the criteria on the 
publication date of this regulation unless the provider lost its status 
under Sec.  156.235(c)(1) or (c)(2) thereafter as a result of violating 
Federal law, must be considered an essential community provider. We 
intend to monitor this policy and revisit as necessary.

[[Page 18423]]

    We note that the definition in the final rule, taken from the 
section 1311(c)(1)(C) of the Affordable Care Act, provides a test to 
determine whether a provider is an essential community provider and a 
non-exhaustive list of examples. An Exchange may apply the test 
contained in the definition (providers that serve predominantly low-
income, medically underserved individuals) to a particular service area 
to identify additional essential community providers. Finally, we note 
that each QHP provider network must be sufficient in number and types 
of providers to assure that all services, including mental health and 
substance abuse services, will be accessible without unreasonable 
delay.
    Comment: A few commenters recommended that HHS develop a standard 
Indian Addendum for contracting with tribal health care providers.
    Response: We recognize that furnishing QHP issuers with a standard 
Indian Addendum to a provider contract may make it easier for QHP 
issuers to contract with Indian providers. We note that QHP issuers may 
not be aware of the various Federal authorities that govern contracting 
with Indian health providers, and such an Addendum may lower the 
perceived barrier of contracting with Indian providers. We plan to 
develop a template for contracting between QHP issuers and tribal 
health care providers. While we do not uniformly mandate that QHP 
issuers use the template, we believe that QHP issuers will find it in 
their interest to adopt such a template when contracting with Indian 
providers. We also note that Exchanges may elect to direct QHP issuers 
to use the Indian Addendum when contracting with Indian providers.
    Comment: One commenter recommended that all entities designated as 
essential community providers qualify for special drug pricing under 
section 340B(a)(4) of the Public Health Service Act. Conversely, 
another commenter requested that the final rule clarify that QHP 
issuers are not obligated to contract with all 340(B) pharmacies. One 
commenter suggested that HHS work with States and Exchange governing 
boards to ensure that providers have a clear understanding of how key 
340(B) principles apply in the Exchange context in order to avoid 
confusion and violation of 340(B) anti-diversion rules.
    Response: This rule concerns the establishment and operation of 
Exchanges and the certification standards for QHPs; nothing in this 
final rule changes or affects the operation of section 340(B) of the 
Public Health Service Act. As a result, requests to interpret section 
340B of the Public Health Service Act are outside the scope of this 
final rule.

Summary of Regulatory Changes

    We are finalizing the provisions proposed in Sec.  156.235 of the 
proposed rule, with the following modifications: in paragraph (a)(1) we 
modified QHP issuer's contracting responsibilities with respect to 
essential community providers to reflect a reasonable access standard 
and a broad range of providers standard. In new paragraph (a)(2) we 
added an alternate standard for QHP issuers that provide a majority of 
professional services with ``in-house'' providers. In paragraph (c), we 
clarified the definition of an essential community provider. We also 
added new paragraphs (d) and (e) to interpret and implement Affordable 
Care Act section 1311(c)(2) (regarding payment rates to essential 
community providers) and section 1302(g) (regarding payment of FQHCs); 
in doing so we indicate that QHP issuers and FQHCs may negotiate rates 
and mutually agree on a payment rate other than the Medicaid PPS rate.
g. Treatment of Direct Primary Care Medical Home (Sec.  156.245)
    In Sec.  156.245, we proposed to permit QHP issuers to provide 
coverage through a direct primary care medical home (PCMH) that meets 
the standards established by HHS, provided that the QHP meets all 
standards otherwise applicable. We requested comment on what standards 
HHS should establish under this section.
    Comment: Multiple commenters recommended that direct PCMHs 
described in proposed Sec.  156.245 be accredited, or comply with 
existing industry standards such as the Joint Principles of the 
Patient-Centered Medical Home \13\ developed by the Patient Centered 
Primary Care Collaborative. Other commenters expressed general support 
for PCMHs or provided data on the effectiveness of the PCMH model.
---------------------------------------------------------------------------

    \13\ Available at: http://www.pcpcc.net/content/joint-principles-patient-centered-medical-home.
---------------------------------------------------------------------------

    Response: We believe that Exchanges offer an opportunity to advance 
innovative models of delivery that can improve the care experience for 
patients and providers. Consistent with this overall goal, we have 
structured the direct PCMH provision to encourage, rather than limit, 
innovative care models. While we recognize the importance of 
accreditation and quality assurance, we are not establishing that 
direct PCMHs be accredited in order to participate in QHP networks. We 
encourage QHP issuers to consider the accreditation, licensure, or 
performance of all network providers.
    Comment: Several commenters suggested that the definition of direct 
PCMHs in proposed Sec.  156.245 be expanded to include accountable care 
organizations or specialists who serve as a patient's ``health home.''
    Response: While non-primary care clinicians can play a significant 
role in care coordination, particularly for patients with multiple or 
complex conditions, the statute specifically provides for inclusion of 
primary care medical homes. We do not interpret that phrase as 
including providers of non-primary care services, such as specialists. 
However, we note that nothing in this section prohibits or limits a QHP 
issuer's ability to pursue other innovative care models or contracting 
structures, such as increasing payments to specialists who coordinate 
an individual's care, or contracting with accountable care 
organizations.
    Comment: A few commenters requested that HHS clarify what 
coordination is contemplated between a QHP and a contracted direct PCMH 
under proposed Sec.  156.245.
    Response: QHP issuers that choose to contact with direct PCMHs for 
primary care services will need to consider how to promote a seamless 
consumer experience. For example, the QHP issuer should ensure that 
enrollees understand how to use the direct PCMH model, identify which 
services will be provided by the direct PCMH and which will not, and 
have clear information on how to access specialists and other non-
primary care providers.
    Comment: Several commenters generally recommended that HHS 
encourage QHP issuers to contract with direct PCMHs, direct issuers to 
contact with a specific number of direct PCMHs, establish that a 
certain percentage of network providers must be affiliated with direct 
PCMHs, or direct QHP issuers to report on the number of in-network 
direct PCMHs.
    Response: While we believe that an Exchange could create incentives 
for QHP issuers to contract with direct PCMHs, such incentives are more 
appropriately considered within the context of local provider market 
conditions, including the relative availability of direct PCMHs. As a 
result, we are not directing Exchanges to create incentives for 
contracting with direct PCMHs. We encourage Exchanges to promote, and 
QHP issuers to explore,

[[Page 18424]]

innovative models of delivery along the care spectrum.

Summary of Regulatory Changes

    We are finalizing the provisions proposed in Sec.  156.245 of the 
proposed rule without modification.
h. Health Plan Applications and Notices (Sec.  156.250)
    In Sec.  156.250, we proposed basic standards for the format of 
applications and notices provided by the QHP issuer to the enrollee, 
specifically that QHP issuers must adhere to the standards established 
for notices in Sec.  155.230.
    We received a number of comments on this section. Because Sec.  
156.250 cross-references to Sec.  155.230, we have responded to all 
comments on applications and notices in Sec.  155.230. Accordingly, we 
are finalizing Sec.  156.250 as proposed.
i. Rating Variation (Sec.  156.255)
    Consistent with the rating rules established in the Affordable Care 
Act, we proposed Sec.  156.255 to codify the statutory provision that 
allows QHP issuers to vary premiums by the rating areas established 
under section 2701(a)(2) of the PHS Act. We further proposed that each 
QHP issuer 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 also proposed 
that a QHP issuer cover all 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. We sought comment on how we might structure family rating 
categories while adhering to section 2701(a)(4) of the PHS Act, which 
establishes that any family rating using age or tobacco rating may only 
apply those rates to the portion of the premium that is attributable to 
each family member.
    Additionally, we requested comment on how to apply four family 
categories when performing risk adjustment. We also invited comment on 
alternatives to the four categories for defining family composition, 
and how to balance potential consumer confusion associated with more 
categories while maintaining plan offerings and rating structures that 
are similar to those that are currently available in the health 
insurance market. Finally, we noted that we were also considering 
whether to direct QHP issuers to cover an enrollee's tax household, 
including for purposes of applying individual and family rates, and 
sought comment on the potential considerations of this approach.
    Comment: A few commenters asked why the proposed rule did not 
address section 1312(c) of the Affordable Care Act related to a single 
risk pool.
    Response: The proposed rule and this final rule only address 
standards that are unique to Exchanges, QHP issuers and QHPs. The 
single risk pool provision applies to health insurance issuers in the 
individual and small group market and to enrollees who do not enroll in 
health plans through the Exchange. Therefore, it is outside the scope 
of this final rule. We anticipate future rulemaking on other Affordable 
Care Act provisions that apply to insurance markets generally.
    Comment: One commenter suggested that the final rule establish a 
process whereby a State demonstrates that existing State laws related 
to rating outside of the Exchange will not undermine the Exchange.
    Response: We are continuing to evaluate the relationship and 
interaction of State rating laws, the market reform provisions in 
section 2701 of the PHSA, and the provisions to implement the Exchange 
standards. We may issue further guidance in the future.
    Comment: In response to the proposed Sec.  156.255(a) on rating 
areas, one commenter suggested that we codify the standard that rating 
areas must be applied consistently inside and outside of the Exchange, 
which we discussed in preamble of the proposed rule (76 FR 41901). A 
few commenters requested that HHS establish a standard set of criteria 
for rating area boundaries that reflect actual differences in health 
costs within a State.
    Response: Section 2701(a)(2) of the PHS Act directs States to 
establish rating areas, which will be reviewed by the Secretary of HHS. 
Section 1301(a)(4) of the Affordable Care Act directly references the 
rating areas outlined in section 2701(a)(2) of the PHS Act, which 
ensures that the rating areas are applied consistently both inside and 
outside the Exchange. The requested provision is outside the scope of 
this final rule; we anticipate future rulemaking on other Affordable 
Care Act provisions that apply to insurance markets generally.
    Comment: Several commenters requested that HHS more clearly define 
what ``same plans'' would need to be offered at the same premium rate 
for proposed Sec.  156.255(b). The commenters raised concerns that 
issuers would offer two plans with very minor differences and then 
charge a different premium for what is essentially the same plan, which 
could result in adverse selection against the Exchange.
    Response: We believe that, generally, this provision means that 
health plans that are substantially the same as a QHP should charge the 
same premium and encourage States to use this standard when evaluating 
compliance with this provision. HHS may further clarify this standard 
in future rulemaking or guidance.
    Comment: Several commenters voiced support for proposed Sec.  
156.255(b), while others had questions regarding whether user fees 
charged for enrollment would undermine the same premium provision. Some 
commenters suggested that HHS direct Exchanges to apply user fees to 
QHPs offered outside of the Exchange in order to ensure pricing parity.
    Response: We clarify that States have substantial flexibility in 
establishing a funding mechanism for an Exchange to meet the self-
sustaining provision of section 1311(d)(5) of the Affordable Care Act, 
implemented in this final rule at Sec.  155.160. As noted in the 
statute and the regulation text, user fees on QHPs are one mechanism to 
achieve this status. Such fees may be set based on a broad or narrow 
set of issuers, on enrollment volume, including enrollment that is not 
through the Exchange, or be set without regard to enrollment.
    Comment: Several commenters suggested that we direct QHP issuers to 
offer QHPs outside of the Exchange.
    Response: Nothing in Federal law prohibits a QHP issuer from 
offering the QHP for sale directly to an individual or through an 
agent/broker in addition to through the Exchange. We note that a State 
law may address this issue. Further, enrollees in such a plan would not 
qualify for advanced payments of premium tax credits, among other 
Exchange benefits.
    Comment: In response to proposed Sec.  156.255(c), several 
commenters raised issues regarding rating rules that were discussed in 
the proposed rule, including the incorporation of the tobacco rating 
factor described in section 2701(a)(1)(A)(iv) of the PHS Act (76 FR 
41901). Other commenters made suggestions about the application of a 
rating structure to a tax household.
    Response: In the final rule, we have removed proposed Sec.  
156.255(c), which addresses rating categories. We anticipate that 
implementation of section 2701(a)(1)(A) of the PHS Act will establish 
standards that apply to health insurance issuers in the individual and 
small group market, including QHP issuers.

[[Page 18425]]

Summary of Regulatory Changes

    We are finalizing the provisions proposed in Sec.  156.255 of the 
proposed rule, with the exception of removing paragraph (c).
j. Enrollment Periods for Qualified Individuals (Sec.  156.260)
    In Sec.  156.260, we proposed that QHP issuers must accept and 
enroll qualified individuals during the initial open enrollment period, 
during the annual open enrollment period thereafter, and during special 
enrollment periods, as applicable. We further proposed that QHP issuers 
adhere to the effective dates of coverage established in Sec.  155.410 
for all enrollment periods in the Exchange, and provide enrollees with 
notice of effective dates of coverage.
    Comment: HHS received many comments about enrollment periods in 
accordance with Sec.  155.410 and Sec.  155.420, which are summarized 
and addressed in those sections of the final rule. One commenter 
remarked specifically on proposed Sec.  156.260 and requested that HHS 
clarify whether a QHP could refuse enrollment to an applicant 
previously proven to have committed fraud.
    Response: A QHP issuer may not refuse enrollment to a new applicant 
who has previously proven to have committed fraud. We note that section 
2703(b) of the PHS Act, with which QHP issuers must comply, includes an 
exception to the guaranteed renewability standard in certain instances 
of fraud, but includes no parallel exception for new coverage. We 
further note that Sec.  156.270(a) permits QHP issuers to rescind 
coverage under certain circumstances.

Summary of Regulatory Changes

    We are finalizing the provisions proposed in Sec.  156.260 of the 
proposed rule, with a minor technical modification and no substantive 
changes.
k. Enrollment Process for Qualified Individuals (Sec.  156.265)
    In Sec.  156.265, we proposed that QHP issuers adhere to the 
Exchange's process for enrollment in QHPs, which includes standards for 
the collection and transmission of enrollment information. 
Additionally, we proposed that QHP issuers use the application adopted 
in accordance with Sec.  155.405 when accepting applications from 
individuals seeking to enroll in a QHP through the Exchange enrollment 
process. After collecting the uniform enrollment information from an 
applicant, we proposed that the QHP issuer send the information to the 
Exchange, in accordance with the standards established in Sec.  155.260 
and, as applicable, Sec.  155.270.
    Consistent with the standards established in accordance with Sec.  
155.260 and in Sec.  155.270, we proposed that QHP issuers receive 
enrollment information electronically from the Exchange. We sought 
comment on the frequency with which plans should receive electronic 
enrollment information. We also proposed that QHP issuers abide by the 
premium payment process established by the Exchange and described in 
Sec.  155.240.
    We further proposed that QHP issuers provide enrollees in the 
Exchange with an enrollment package, and the summary of benefits and 
coverage document. We solicited comment on what should be included in 
an enrollment package. Finally, we proposed that QHP issuers reconcile 
enrollment files with the Exchange no less than once a month, and that 
QHP issuers acknowledge the receipt of enrollment information in 
accordance with Exchange standards established in Sec.  155.400.
    Comment: Some commenters recommended that proposed Sec.  156.265(b) 
prohibit agents, brokers and Web-based entities from performing 
eligibility determinations.
    Response: An agent, broker, or Web-based entity cannot perform 
eligibility determinations as part of enrollment through the Exchange. 
We note that section (b)(2)(A) of 36B of the Internal Revenue Code as 
amended by the Affordable Care Act establishes that an individual must 
enroll ``through the Exchange'' in order to access advance payments of 
the premium tax credit and cost-sharing reductions. However, in Sec.  
155.220(c)(1), we specify that an individual can be enrolled in a QHP 
through the Exchange with the assistance of an agent or broker only if 
the agent or broker ensures that the individual receives an eligibility 
determination through the Exchange Web site.
    Comment: In response to the provisions described in proposed Sec.  
156.265(b), several commenters suggested that an individual have an 
eligibility determination before enrolling in a QHP. Other commenters 
expressed concern regarding the privacy of individuals' information 
when a QHP issuer facilitates the enrollment of an individual through 
the Exchange as described in proposed Sec.  156.265(b), particularly 
when the individual seeks an eligibility determination. One commenter 
suggested that the QHP issuer refer individuals to the Exchange to 
carry out activities related to eligibility and enrollment.
    Response: An individual must receive an eligibility determination 
from the Exchange before enrolling in a QHP through the Exchange. 
Accordingly, we have added new paragraph Sec.  156.265(b)(1) to clarify 
that the QHP issuer may only enroll a qualified individual after the 
Exchange has notified the QHP issuer that the individual has been 
determined eligible consistent with the standards identified in part 
155 subpart D, and on the basis of enrollment information sent from the 
Exchange to the QHP issuer. In addition, in Sec.  156.265(b)(2), we 
specify that QHP issuers must direct the individual to file an 
application with the Exchange or ensure the applicant receives an 
eligibility determination for coverage through the Exchange through the 
Exchange Internet Web site. These provisions ensure that the 
applicant's information is collected only by the Exchange and thus 
firewalled from issuers and agents and brokers and accordingly 
protected. We do not provide regulatory standards for enrollment in a 
QHP that is not enrollment through the Exchange and defer to issuers as 
to their business practices for that. We reiterate that the assistance 
and protections described in part 155 apply to Exchange enrollment.
    Protecting the personal health and other information provided by 
potential enrollees during the eligibility and enrollment process is 
critical. Further, we note that when the QHP issuer conducts relevant 
enrollment functions on its own behalf, that appears to be an activity 
covered by the HIPAA privacy and security rules in part 164.
    Comment: HHS received a few comments in response to proposed Sec.  
156.265(d), which obligates issuers to follow the premium payment 
process established in Sec.  155.240. One issuer recommended that 
payment directly to the QHP serve as the last resort for enrollees, 
another commenter requested that enrollees retain this option in the 
final rule. One commenter suggested that the enrollee pay only one 
entity (that is, the Exchange or the QHP issuer) for the entire benefit 
year. Finally, one commenter suggested that the Exchange be directed to 
aggregate premiums to avoid unpredictable administrative costs for 
issuers.
    Response: As this option is statutorily established under section 
1312(b) of the Affordable Care Act, consumers must have the option to 
remit premium payments directly to QHP issuers. Therefore, we are 
maintaining the language in Sec.  155.240(a), which directs an Exchange 
to allow enrollees to pay

[[Page 18426]]

premiums directly to QHP issuers. For a full discussion of issues 
related to premium payment, please refer to the responses to comment in 
Sec.  155.240.
    Comment: Many commenters offered suggestions related to the 
enrollment package described under proposed Sec.  156.265(e). Many 
commenters recommended that HHS establish meaningful access standards; 
standards suggested by commenters included language written at the 6th 
grade level, in-language ``taglines'' in fifteen languages directing 
enrollees to oral translation services, or existing HHS Limited English 
Proficiency guidance. Other commenters recommended that the package 
include information about how to file a complaint. Some commenters 
suggested that HHS direct issuers to follow existing State and Federal 
law governing the contents of enrollment packages.
    Response: The enrollment information package is subject to the 
accessibility and readability standards established in Sec.  156.250, 
which cross-references the access standards set forth in section Sec.  
155.230(b); therefore, we have not amended the regulation text in this 
section because it would be duplicative. States have the flexibility to 
establish that the enrollment package include information on grievance 
and appeal rights, but we note that this information is already 
described in the summary of benefits and coverage as specified in 
guidance published by the Departments of HHS, Labor, and the Treasury 
under PHS Act section 2715, which an enrollee would receive at 
essentially the same time. We also note that issuers must continue to 
follow existing law regarding the content of the enrollment package.
    Comment: One commenter suggested that QHP issuers be able to attach 
the individual's choice of QHP to the individual's application to 
determine eligibility when that application originates with the QHP 
issuer.
    Response: HHS will consider comments recommending that an 
individual's QHP selection be included in an application that is 
initiated with the QHP issuer as we develop guidance.

Summary of Regulatory Changes

    We are finalizing the provisions proposed in Sec.  156.265 of the 
proposed rule, with the following modifications: We have rewritten 
paragraph (b) to describe more clearly the process to enroll an 
applicant through the Exchange when the applicant approaches the QHP 
issuer directly. We modified paragraph (e) to state that the enrollment 
information package must comply with accessibility and readability 
standards in Sec.  155.230(b). We eliminated paragraph (f) referencing 
the summary of benefits and coverage document. Because of the 
elimination of the paragraph on summary of benefits and coverage, the 
remaining provisions have redesignated numbers.
l. Termination of Coverage for Qualified Individuals (Sec.  156.270)
    In Sec.  156.270, we proposed standards for QHP issuers regarding 
the termination of coverage of individuals enrolled in QHPs through the 
Exchange, and proposed that a QHP issuer may terminate coverage for 
non-payment of premium, fraud and abuse, and relocation outside of the 
service area, among other situations permitted by the Exchange. 
Additionally, we proposed that QHP issuers provide a notice of 
termination of coverage to the enrollee and the Exchange, consistent 
with the standards for effective dates in Sec.  155.430. We solicited 
comment on the information that should be included in the termination 
notice.
    We also proposed standards for QHP issuers regarding the 
application of the grace period for non-payment of premiums by 
individuals receiving advance payments of the premium tax credit. 
Specifically, we proposed that 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, we clarified that the QHP 
issuer must pay all appropriate claims, apply any payment received to 
the first billing cycle in which payment was delinquent, and continue 
to collect the advance payments of the premium tax credit on behalf of 
the enrollee from the department of the Treasury.
    We also proposed to direct QHP issuers to provide a notice to 
enrollees who are delinquent on premium payments and sought comment on 
the potential elements of such a notice. Additionally, we proposed that 
QHP issuers maintain records of terminations of coverage in accordance 
with Exchange standards as established in Sec.  155.430. Finally, we 
proposed that QHP issuers abide by the effective dates for termination 
of coverage as described in Sec.  155.430.
    Comment: Many commenters were concerned that the notices described 
in proposed Sec.  156.270(b) and (e) should meet meaningful access 
standards and are accessible for LEP individuals and for individuals 
with disabilities.
    Response: QHP notices must meet standards for LEP individuals and 
for individuals with disabilities. Section 156.250 of the final rule 
states that all notices from a QHP issuer must meet the standards 
outlined in Sec.  155.230(b).
    Comment: Some commenters were concerned that a QHP issuer could 
terminate coverage under this section without sufficient notice. Other 
comments urged HHS to track reasons for termination of coverage for 
oversight purposes. Finally, a few commenters asked us to clarify how 
QHP issuers and the Exchange would share information about termination 
of coverage.
    Response: In response to comments, we have added paragraph (b)(1) 
to the final rule to state that QHP issuers must notify enrollees at 
least 30 days prior to terminating coverage, and further that the 
notice must include a reason for termination. We also added 
156.270(b)(2) to the final rule to state that the QHP issuer must 
notify the Exchange of the termination effective date and reason for 
termination.
    Comment: A significant number of commenters voiced concerns that 
the proposed policy in Sec.  156.270(d) that directed QHP issuers to 
pay all appropriate claims during the 3-month grace period would 
exacerbate adverse selection and increase premiums across enrollees. 
Several commenters representing the insurance industry specifically 
noted that under the proposed policy, rates would be built with an 
assumption that some portion of enrollees would pay 9 months of premium 
for 12 months of full coverage.
    Several alternatives were suggested, such as allowing QHP issuers 
to pend claims after the first 30 days of non-payment, which would 
allow the issuer to put a hold on claims until the end of the grace 
period, at which point such claims would be paid if the premiums were 
paid, or denied if the premiums were not paid. Another commenter 
suggested allowing QHP issuers to deny coverage for certain categories 
of services, such as elective, non-emergency procedures, additions of 
new household members, or new prescription drugs. Other commenters 
suggested that each Exchange be allowed to determine the payment 
policy, and some recommended that Exchanges be responsible for helping 
to pay outstanding premiums or for seeking payment of outstanding 
premiums from an individual.
    Response: We did not accept the recommendation that each Exchange 
set its own standard. Advance payments of the premium tax credit are 
directly tied to the grace period. Thus the grace period's parameters 
will have an impact on potential Federal tax liability of consumers and 
on Federal administration of the advance payments

[[Page 18427]]

of the premium tax credit. As a result, it is critical that the Federal 
government establish a uniform grace period policy to balance the 
potential impacts on the consumer's tax liability, coverage liability 
for issuers and providers, and appropriate administration of advance 
payments of the premium tax credit.
    However, we are persuaded that the proposed standards should be 
adjusted in this final rule to decrease the opportunities for risk 
manipulation, adverse selection, and premium increases. In Sec.  
156.270(d)(1) and (d)(2) of the final rule, we now direct QHP issuers 
to pay all appropriate claims for services provided during the first 
month of the grace period. We believe that the first month of non-
payment is the month in which an enrollee is the most likely to resume 
timely payments, and thus is the time period in which it is most 
important to ensure seamless coverage. As such, issuers should 
adjudicate claims as they would for any enrollee that pays his or her 
premium in full. However, we acknowledge that as the amount owed by an 
enrollee increases during the 3-month grace period, the risk of non-
payment increases as well. To decrease the financial risk to issuers, 
and to individuals as described below, the final rule now permits QHP 
issuers to pend claims in the second and third months. We note that QHP 
issuers may still decide to pay claims for services rendered during 
that time period in accordance with company policy or State laws, but 
the option to pend claims exists. If the individual settles all 
outstanding premium payments by the end of the grace period, then the 
pended claims would be paid as appropriate. If not, the claims for the 
second and third months could be denied. The grace period under this 
final rule represents an extended time for enrollees to catch up on 
premium payments before coverage is terminated. Several considerations 
informed this amended approach.
    First, the statutory 3-month grace period is substantially longer 
than many current grace periods and only applies to recipients of 
advance payments of the premium tax credit, assuming they have paid at 
least one monthly premium. In light of this fact, a grace period policy 
that is significantly different from the rest of the market could 
produce markedly different premiums between the Exchange and non-
Exchange markets. The final rule approach helps mitigate these concerns 
by aligning the grace period claims payment standards more closely with 
current industry practices.
    Second, in accordance with section 36B of the Code, individuals may 
incur a tax liability for any advance payments of the premium tax 
credit that are paid on their behalf for a month that such individual 
did not pay his or her portion of the premium. Under the policy in the 
proposed rule, an individual would potentially be liable for three 
months of advance payments of the premium tax credit, which could be 
substantial in some instances. Given the potential for a large tax 
liability on the part of enrollees receiving advance premium tax 
credits that fail to pay their residual premiums to QHP issuers, we 
believe that a retroactive termination date is appropriate to mitigate 
excessive individual financial exposure. Under the final rule policy, 
an individual's financial exposure would be limited to the first 
month's advance payment of the premium tax credit if the individual did 
not pay his or her portion of the premium for that month. We have 
provided several examples below to illustrate how the new grace period 
policy would work:

Grace Period Examples:

    Assumptions for a monthly premium:

--Premium: $500.
--Advance premium tax credit share of premium: $450.
--Enrollee share of premium: $50.
--First month of grace period: March.
--Individual pays enrollee share of premium for January and February 
coverage.
    Example #1: Individual misses $50 payment that is due February 
28 for March coverage. Individual realizes mistake and pays $100 on 
March 31st for March and April coverage, satisfying all obligations 
for premium payments through the end of March.
    [cir] Issuer adjudicates claims for March consistent with normal 
practices (that is, for non-grace periods)
    [cir] Individual will have full coverage for March and April
    [cir] Individual has paid full premium for March and April as is 
eligible for premium tax credit for March and April.
    Example #2: Individual misses $50 payment that is due February 
28 for March coverage and misses $50 payment that is due March 31st 
for April coverage. Individual Pays $150 on April 30 for March, 
April and May coverage.
    [cir] Issuer adjudicates claims for March
    [cir] Coverage continues for April and May (2nd and 3rd months 
of the grace period), but:
    [ssquf] Providers are notified of the potential for a denied 
claim.
    [ssquf] Issuer pends claims for services performed in April and 
May until individual pays outstanding premiums.
    [ssquf] Individual has paid full premium for March, April and 
May as is eligible for premium tax credit for March, April and May.
    Example #3: Same facts as Example 2 except that 
individual does not pay enrollee's share of premium for March, April 
or May.
    [cir] Coverage terminated retroactively to March 31
    [cir] Issuer can deny claims for services rendered during April 
and May. Providers could then seek payment directly from the 
individual for any services provided during that time.
    [cir] Individual may have additional tax liability attributable 
to the $450 for the advance payment of the premium tax credit paid 
on his or her behalf for March's coverage. The exact amount of 
additional tax liability would be determined in accordance with the 
rules for tax credit reconciliation under section 36B of the Code.

    Comment: Several commenters supported the proposed standards in 
Sec.  156.270(d) that QHP issuers pay all appropriate claims during the 
3-month grace period for enrollees receiving advance payments of the 
premium tax credit. Commenters said this would protect providers that 
render services to such enrollees during the grace period. A few 
commenters were also concerned about the timing of claims, and 
suggested that QHP issuers be obligated to pay claims based on the date 
the service was rendered, and not the date the claim was submitted.
    Response: We understand that pended claims increase uncertainty for 
providers and increase the burden of uncompensated care. The obligation 
to pay all appropriate claims established in the proposed rule was 
intended to protect providers during an extended grace period. However, 
given the significant concerns regarding premium increases and the 
potential tax liability to consumers, we were concerned that this 
approach did not strike the right balance. Because we share providers' 
concerns about incurring claims during the grace period that are not 
ultimately paid, we now establish in Sec.  156.270(d)(3) of the final 
rule that QHP issuers notify providers who submit claims for services 
rendered during the second and third months of the grace period that 
any such claims will be pended, and potentially not reimbursed by the 
QHP issuer if the individual does not settle outstanding premium 
payments. We believe that there are technology-based approaches to 
provide this notification. We also clarify in Sec.  156.270(d)(1) that 
the application of the grace period to claims is based on the date the 
service was rendered, and not the date the claim was submitted.
    Comment: Some commenters suggested that the 3-month grace period 
proposed in Sec.  156.270(d) should be

[[Page 18428]]

shorter, and that HHS refrain from establishing additional rules. Other 
commenters suggested extending the grace period to 6 months, at least 
for the first few years.
    Response: As stated in the proposed rule, section 
1412(c)(2)(B)(iv)(II) of the Affordable Care establishes that QHP 
issuers ``receiving advance payments of the premium tax credit with 
respect to an individual enrolled in the plan shall * * * allow a 3-
month grace period for non-payment of premiums before discontinuing 
coverage'' (76 FR 41902). We do not believe that the statute provides 
the flexibility to alter the grace period timeframe.
    Comment: Several commenters requested clarification on whether the 
grace period described in proposed Sec.  156.270(d) would be triggered 
by a full non-payment of premium or a partial non-payment of premium.
    Response: The 3-month grace period applies whenever the QHP issuer 
has received payment of less than the full amount of the enrollee's 
share of the premium for a given month. It is our understanding that 
issuers have varying practices related to the triggering of a grace 
period, with some issuers initiating a grace period for any payment 
that is not the full premium and others initiating a grace period only 
if the individual has not submitted an amount above some threshold. 
However, in order to be consistent with policy related to the advance 
payments of the premium tax credit, the enrollee must pay the full 
amount of his or her portion of the premium or the grace period would 
be triggered.
    Comment: Several commenters voiced concerns about the potential for 
gaming during the grace period described in proposed Sec.  156.270(d). 
Commenters suggested that we take action to prevent people from 
habitually paying 9 months of premiums, stopping premium payment for 3 
months, and then enrolling in a new QHP to start the process over 
again. Commenter suggestions included: requiring payment of all 
outstanding premiums before enrollees can change issuers, enroll in a 
different QHP, or re-enroll in a QHP; establishing a 60-day waiting 
period for individuals who have been terminated for coverage due to 
non-payment of premiums but seeking re-enrollment in another QHP; 
allowing issuers to seek reimbursement for claims paid during the grace 
period from enrollee after termination; issuing a late enrollment 
penalty or establish a pre-existing condition exclusion period for 
individuals seeking re-enrollment after termination due to non-payment 
of premiums; prohibiting enrollment in a QHP until the following open 
enrollment period; prohibiting someone who has been terminated due to 
non-payment of premiums from qualifying for a special enrollment period 
later in the year; imposing penalties for repeat offenders, increasing 
premiums; allowing QHP issuers to collect the first and last month's 
premium at the time of application; and finally, limiting grace periods 
to one year. Other commenters recommended that States have the 
flexibility to establish their own protections against opportunistic 
consumer behavior.
    Response: We did not adopt the recommendations regarding non-
issuance of coverage for individuals who have outstanding premium 
payments for a previous QHP because we believe that there are 
implications for rescissions, guaranteed issue, and pre-existing 
condition policies. HHS will continue to explore options for 
incentivizing appropriate use of the grace period, either through 
future rulemaking or in the context of general insurance market 
reforms. We will also consider the implications for automatic 
redeterminations and reenrollment in instances where individuals have 
had their coverage terminated for non-payment of premiums. Gaming will 
not only affect issuers, but also represents potential for misuse of 
the advance payments of the premium tax credits. Given the compelling 
Federal financial stake in grace period, HHS will monitor this issue 
moving forward and will continue to work on the development of policies 
to prevent misuse of the grace period.
    Comment: Many commenters voiced support of the continued issuance 
of advance payments of the premium tax credit on behalf of enrollees 
during the 3-month grace period, as proposed in Sec.  156.270(e). Some 
commenters suggested that if QHP issuers were allowed to terminate 
coverage retroactively, then QHP issuers should be directed to return 
the advance payments of the premium tax credits.
    Response: We have maintained the proposed rule policy that QHP 
issuers must continue to receive advance payments of the premium tax 
credit being paid on behalf of an enrollee in a grace period. In 
addition, we included in Sec.  156.270(e)(2) an instruction for QHP 
issuers to return advance payments of the premium tax credit for the 
second and third months of the grace period for individuals who exhaust 
the grace period without paying outstanding premiums, because such 
individuals will have their coverage terminated retroactively to the 
end of the first month of the grace period. We note that, consistent 
with section 36B of the Code, individuals may owe a tax liability as a 
result of advance payments of the premium tax credit paid on their 
behalf during a month in which they did not pay their portion of the 
premium. Under the final rule, individuals will have a liability as a 
result of the advance payment of the premium tax credit for the first 
month of the grace period if they never pay their portion of the first 
month's premium. If an individual exhausts the grace period without 
paying all outstanding premiums, QHP issuers can terminate coverage 
retroactive to the end of the first month of the grace period and deny 
claims that were pended. An issuer who terminated coverage in this 
fashion would be obligated to return the advance payments of the 
premium tax credit made on behalf of the individual for the second and 
third months of the grace period.
    Comment: Some commenters requested clarification of the proposed 
policy in Sec.  156.270(g) regarding whether a partial payment could 
extend the grace period once it has already been triggered, or if only 
full payment of all outstanding premiums would allow an individual to 
resolve a grace period. Commenters supported the resetting of the grace 
period only when all outstanding payments are made.
    Response: The grace period may only be reset be if an individual 
has paid all outstanding premiums. We believe that a ``rolling'' grace 
period that moves the initial date of the grace period in correlation 
with any payment made by an individual would be not only confusing to 
consumers but administratively burdensome, particularly in light of the 
revised payment policy described in paragraph (d). Therefore, in this 
final rule, we have added language to clarify this policy in Sec.  
156.270(g). Once a grace period has been initiated by a QHP issuer, the 
individual has three months to settle all outstanding premium payments, 
at which time the grace period is either resolved and pended claims are 
paid or the individual's coverage is terminated.
    Comment: Commenters requested clarification on the proposed policy 
in Sec.  156.270(g) regarding whether a QHP issuer could terminate 
coverage retroactively to the last date of payment, or whether the 
termination was prospective from the end of the 3-month grace period. 
Commenters also requested clarification regarding how advance payments 
of the premium tax credit and payments to providers would be reconciled 
if the date of termination were retroactive.

[[Page 18429]]

    Response: We clarify in final Sec.  156.270(g) that if an 
individual exhausts the grace period without settling all outstanding 
premium payments, then the QHP issuer can terminate coverage 
retroactively to the first day of the second month in the grace period. 
We understand that many States allow issuers to terminate to the last 
paid date of coverage. In addition, HHS issued rules concerning 
rescissions of health insurance coverage, under which issuers are 
permitted to cancel coverage retroactively due to a failure to timely 
pay premiums (PHS Act section 2712; 45 CFR 147.128). However, the final 
Exchange standards for QHP issuers add more consumer protections than 
the generally applicable PHS Act's standards. During the first month, 
full coverage will be provided and the QHP issuer will be able to keep 
the advance payment of the premium tax credit. As a result, we treat 
the last day of the first month of the grace period as the ``last paid 
date.'' We note that the enrollee may be obligated to repay the advance 
payment of the premium tax credit for the first month in the form of an 
additional tax liability if the individual does not pay the enrollee's 
portion of the premium. For purposes of claims payment, the QHP issuer 
must treat the first month of the grace period as if the full premium 
has been paid. However, the QHP issuer may pursue collection of the 
individual's portion of the premium; if the individual pays the unpaid 
enrollee portion of the premium, the individual would retain the 
potential to be eligible for the premium tax credit for that month.

Summary of Regulatory Changes

    We are finalizing the provisions proposed in Sec.  156.270 of the 
proposed rule, with the following modifications: We added paragraph 
(b)(1) to note that a QHP issuer must provide the enrollee with a 
notice of termination of coverage at least 30 days prior to 
effectuating termination. We added paragraph (b)(2) to clarify that the 
QHP issuer must give reason for termination in a notice. We have also 
amended the proposed policy regarding the statutory 3-month grace 
period for individuals receiving advance payments of the premium tax 
credit. As described in paragraphs (d) through (g), QHP issuers will 
now be directed to pay appropriate claims in the first month only of 
the grace period, and will be able to pend claims in the second and 
third months. QHP issuers must notify providers who submit claims that 
an enrollee is in the second or third month of the grace period and 
that a claim may be denied if the outstanding premiums are not paid in 
full. Finally, QHP issuers must retain advance payments of the premium 
tax credit made on behalf of an individual for the first month, and 
must return such payments for the second and third months to the 
Department of the Treasury. Finally, we redesignated proposed 
paragraphs (g) and (h) as (h) and (i), respectively, to accommodate 
other changes to this section.
m. Accreditation of QHP Issuers (Sec.  156.275)
    In Sec.  156.275, we proposed to codify the statutory provision 
that a QHP issuer be accredited on the basis of local performance in 
each of the nine categories listed in the Affordable Care Act, where 
``local performance'' means performance of the QHP issuer in the State 
in which it is licensed. We further specified that a QHP issuer must be 
accredited by an entity recognized by HHS. We also proposed that a QHP 
issuer must obtain its accreditation within a time period established 
by the Exchange under Sec.  155.1045.
    Comment: In general, commenters supported accreditation as a 
condition of QHP certification. One commenter voiced concern over the 
cost of private accreditation and the impact on participation of 
issuers in Exchanges. Commenters also suggested additional areas that 
HHS should include in standards for accreditation beyond those 
specified in the proposed rule, including specific clinical measure 
sets that should be included, among others. Another commenter asked 
that new accreditation models be reviewed that are specifically 
developed for the individual and small group market. One commenter 
asked for clarification if States would be able to establish more 
stringent accreditation standards beyond the Federal minimum.
    Response: While we understand that accreditation can be a costly 
and resource-intensive process for issuers, it is established in the 
Affordable Care Act for certification of QHPs. At this time we are also 
not adding any additional standards for accreditation beyond what is 
specified in the Affordable Care Act. The Affordable Care Act is clear 
as to which criteria should be included in accreditation standards and 
we are codifying the statute in this regard. We clarify that Exchanges 
may impose accreditation standards that are more stringent than those 
contained in the Affordable Care Act.
    Comment: Several commenters suggested specific entities that should 
be recognized by HHS and asked that more than one accrediting entity be 
recognized. Other commenters asked HHS to specify which accreditation 
entities would be selected and requested including both private and 
public entities.
    Response: We will be issuing future rulemaking to establish a 
process by which accrediting entities will be recognized. Comments that 
requested specific products be considered for accreditation are beyond 
the scope of this rule.
    Comment: A commenter did not support the proposal to direct issuers 
to authorize the release of their accreditation survey.
    Response: We codify the obligation that issuers authorize the 
release of their accreditation survey to the Exchange and HHS. We 
believe that this is necessary to monitor the accreditation of QHP 
issuers beyond what can be learned from a simple reporting of 
accreditation status. We are also exploring the extent to which data 
submitted on the accreditation survey may be used to fulfill quality 
reporting standards, which may help alleviate potential reporting 
burden on Exchanges and issuers.
    Comment: In general, commenters supported establishing a timeline 
for accreditation of QHP issuers under proposed Sec.  156.275(b). 
However, several commenters disagreed with our proposal to allow 
Exchanges to set the timeline and requested that HHS establish a 
Federal timeline for accreditation that all Exchanges must follow. 
Commenters also provided recommendations on appropriate accreditation 
timelines for HHS to establish, ranging from one to several years. 
Other commenters suggested that there should be a transition period for 
new plans to become accredited.
    Response: The Affordable Care Act, at section 1311(c)(1)(D)(ii) 
clearly provides for the Exchange to establish the timeframe. 
Consistent with the statute, we believe that Exchanges are in the best 
position to determine the accreditation timeline for QHP issuers 
operating in their States. Exchanges are familiar with local market 
conditions and the needs of their constituents. Therefore, we are 
maintaining the regulation text as proposed.

Summary of Regulatory Changes

    We are finalizing Sec.  156.275 as proposed.
n. Segregation of Funds for Abortion Services (Sec.  156.280)
    In Sec.  156.280, we proposed to implement section 1303 of the 
Affordable Care Act by codifying the statutory provisions. This 
codification includes the non-discrimination clause for providers and 
facilities, a voluntary

[[Page 18430]]

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 standards related to such services. We 
solicited comment on the related model guidelines issued by HHS and the 
Office of Management and Budget on September 20, 2010,\14\ noting that 
we intended the model guidelines to serve as the basis for the final 
rule.
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    \14\ Available at: http://www.whitehouse.gov/sites/default/files/omb/assets/financial_pdf/segregation_2010-09-20.pdf.
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    Comment: A large number of commenters offered feedback on proposed 
Sec.  156.280. Of these, many expressed general support for or 
opposition to abortion coverage in Exchanges. A number of commenters 
supported specific provisions of the proposed rule and recommended that 
they be finalized; for example, the voluntary choice provision for QHP 
issuers and the provision on the applicability of emergency services 
laws. Conversely, a few commenters recommended changes to the proposed 
provisions--such as that each Exchange be directed to include one QHP 
that covers non-excepted abortion services. A few commenters requested 
that HHS provide additional technical guidance on the provisions in 
section 1303 of the Affordable Care Act; for example, a few commenters 
suggested specific clarifications to the pre-regulatory model 
guidelines that describe high-level principles for QHP issuers' 
segregation plans, while other commenters recommended that Exchanges be 
directed to review the actuarial value of abortion coverage calculated 
by QHP issuers. Commenters also recommended that HHS clarify the 
provisions regarding separate payments for non-excepted abortion and 
all other services, specifically whether QHP issuers must collect 
separate payments from all enrollees or only from those receiving 
Federal financial assistance, whether QHP issuers may satisfy the 
separate payment provision by providing each enrollee with an itemized 
bill, and whether an enrollee's coverage would be terminated for 
failure to comply with the separate payment provision. A few commenters 
requested that HHS strengthen anti-discrimination protections for 
providers or expand the conscience protection. Finally, a few 
commenters raised concerns regarding provisions that HHS believes are 
addressed elsewhere in the final rule, such as privacy of individuals' 
QHP selections, and accessibility standards and other protections for 
QHP notices and plan information.
    Response: We considered the comments received on this section, and 
are finalizing the provisions of proposed Sec.  156.280 without 
modification, with the exception of finalizing the pre-regulatory model 
guidelines on issuer segregation plans released by HHS and the Office 
of Management and Budget.\15\ Where future guidance is issued on this 
section, these comments will be taken into account.
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    \15\ Available at: http://www.whitehouse.gov/sites/default/files/omb/assets/financial_pdf/segregation_2010-09-20.pdf.
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Summary of Regulatory Changes

    We are finalizing the provisions proposed in Sec.  156.280 of the 
proposed rule, with the following modifications: we redesignated 
paragraph (e)(5)(ii) as (e)(5)(iv). In new paragraphs (e)(5)(ii) and 
(e)(5)(iii), we codified the pre-regulatory model guidelines on 
segregation of funds published by the Office of Management and Budget 
and the Assistant Secretary for Financial Resources as proposed.
o. Additional Standards Specific to the SHOP (Sec.  156.285)
    In Sec.  156.285, we proposed rating and premium payment standards 
for QHP issuers participating in the SHOP, including a proposal that 
the QHP issuer accept aggregated premiums, abide by the rate setting 
timeline established by the SHOP, and charge the same contract rate for 
a plan year. We also proposed that QHP issuers must accept and enroll 
applicants during the annual open enrollment period described in Sec.  
155.725 and the special enrollment periods described in Sec.  155.420 
(excluding paragraphs (d)(3) and (d)(6)), and they must ensure 
effective dates of coverage in accordance with Sec.  155.410(c). We 
solicited comment on whether to direct QHPs in the SHOP to allow 
employers to offer dependent coverage.
    We also proposed that QHP issuers abide by the SHOP enrollment 
timeline process standards, including the standards that QHP issuers 
must frequently accept electronic transmission of enrollment 
information from the SHOP, provide all new enrollees with the 
enrollment information package, and provide qualified employers and 
employees with the summary of cost and coverage document. We further 
proposed that QHP issuers reconcile enrollment files with the SHOP at 
least monthly. Additionally, we proposed that QHP issuers abide by the 
SHOP standards for acknowledgement of the receipt of enrollment 
information and issue qualified employees a policy that aligns with the 
qualified employer's plan year and contract.
    We also proposed 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. We 
noted that the QHP issuer would be directed to provide the qualified 
employers and employees with a notice of termination of coverage of 
enrollees and QHP non-renewal to ensure that the qualified employer is 
aware of the changes in coverage for its employees and the availability 
of coverage in the SHOP. We indicated that a QHP issuer must terminate 
all enrolled qualified employees of the withdrawing employer if the 
employer chooses to stop participating in the SHOP.
    Comment: In response to proposed Sec.  156.285(b), one commenter 
recommended that the employer, and not the SHOP, establish the specific 
standards and dates for open enrollment and special enrollment periods.
    Response: We believe that States should have the flexibility in 
establishing their enrollment periods based on the specific market and 
employer circumstances in the State, as it often does today for the 
small group market.
    Comment: One commenter recommended that proposed Sec.  
156.285(b)(2) specify that employees who enroll during a special 
enrollment period should be allowed to purchase coverage at the same 
rates as those employees who enrolled during the annual open enrollment 
period for that plan year.
    Response: We note that Sec.  156.210 directs an issuer to set rates 
for an employer that will remain in effect for the employer's entire 
plan year.
    Comment: One commenter suggested that the preamble text, which 
states that the rule would direct issuers to provide all new enrollees 
with an enrollment information package as described in Sec.  
156.265(e), is inconsistent with the proposed regulation text in Sec.  
156.285(c)(3), which states that the enrollment information package is 
described in Sec.  156.265(f).
    Response: We have modified the final rule to correctly reference 
Sec.  156.265(e).
    Comment: One commenter requested clarification of the definition of 
a QHP for the SHOP.
    Response: We note that all of the standards in part 156, including 
definitions, pertaining to QHPs also apply to the QHPs offered through 
the

[[Page 18431]]

SHOP in the small group market unless the regulation text explicitly 
indicates that a specific standard pertains only to QHPs offered to 
qualified individuals, or are otherwise exempted.

Summary of Regulatory Changes

    We are finalizing the provisions proposed in Sec.  156.285 of the 
proposed rule, with the following modifications in conformance with 
changes to part 155 subpart H: in new paragraph (b)(3) we clarified 
that a SHOP must offer an enrollment period to a newly qualified 
employee who becomes qualified outside of the initial or annual open 
enrollment period. In new paragraph (b)(4) we established that a SHOP 
must conform to the effective dates of coverage described in Sec.  
156.260 and Sec.  155.720. In new paragraph (e) we clarified that QHP 
issuers participating in the SHOP may not impose minimum participation 
rules with respect to a QHP unless the SHOP authorizes the minimum 
participation rule in accordance with 155.705(b)(10). Finally, we made 
a limited number of technical changes to clarify the language in this 
section.
p. Non-renewal and Decertification of QHPs (Sec.  156.290)
    In Sec.  156.290, we proposed standards for QHP issuers that 
voluntarily do not renew participation of a QHP in the Exchange, 
including notification, benefit coverage standards, and reporting 
standards. Specifically, we proposed to direct QHP issuers that do not 
renew QHP participation to provide written notice to each enrollee. We 
solicited comment on the potential content of the non-renewal notice 
and any other information that we should consider including. We also 
proposed that if an Exchange decertifies a QHP, the QHP issuer must 
terminate coverage for 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 requested comment 
on the extent to which enrollees should continue to receive coverage 
from a decertified plan.
    Comment: One commenter recommended that HHS or Exchanges attach 
penalties to the decision not to seek recertification described in 
proposed Sec.  156.290(a), such as barring the QHP from participating 
in the Exchange for one year following the non-renewal. Conversely, a 
few commenters requested that HHS prohibit Exchanges from imposing 
penalties or sanctions on plans that voluntarily non-renew.
    Response: HHS lacks authority under the Affordable Care Act to 
impose any penalties for non-renewal of a QHP in an Exchange. Exchanges 
may take varied approaches to voluntary non-renewal; for example, some 
Exchanges may establish criteria for re-entry, while other Exchanges 
may utilize the standard certification process.
    Comment: One commenter recommended that the final rule direct QHPs 
that choose not pursue recertification to complete data reporting 6 to 
12 months after exiting the market.
    Response: Obtaining data from non-renewing QHPs will be important 
for Exchanges. We note that Sec.  156.290(a)(3) expressly obligates a 
non-renewing QHP to complete its reporting through the end of the plan 
or benefit year.
    Comment: A few commenters suggested that HHS establish more 
advanced notice for non-renewal than the proposed deadline of September 
15th.
    Response: We believe that a deadline of September 15th is 
sufficiently far in advance of the annual open enrollment period to 
provide adequate notice for Exchanges and enrollees. Accordingly, we 
are finalizing that deadline as proposed.
    Comment: Several commenters suggested that HHS direct QHPs to 
notify participating providers of a decision not to renew. These 
commenters further suggested that the QHP pay all incurred claims until 
participating providers have been notified.
    Response: Section 156.290 of the final rule establishes that QHPs 
that choose not to pursue recertification must cover benefits for 
enrollees for the duration of the plan or benefit year. Similarly, QHPs 
must pay all claims incurred while certified and participating in the 
Exchange, subject to the terms and conditions of the QHP's contracts 
with providers. While participating providers have a significant 
interest in a QHP's decision not to seek recertification with the 
Exchange, we believe that establishing a standard for QHP issuers to 
notify participating providers would impose a significant burden on 
QHPs. Therefore, we are not adding such a standard in the final rule.

Summary of Regulatory Changes

    We are finalizing Sec.  156.290 as proposed.
q. Prescription Drug Distribution and Cost Reporting (Sec.  156.295)
    In accordance with section 6005 of the Affordable Care Act, we 
proposed in Sec.  156.295 that QHP issuers provide the following 
information related to prescription drug distribution--(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 amount that the PBM pays retail pharmacies, and mail order 
pharmacies, and the total number of prescriptions that were dispensed. 
We sought comment on how a QHP issuer whose contracted PBM operates its 
own mail order pharmacy can meaningfully report on element (3). We also 
requested comment on potential definitions for ``rebates,'' 
``discounts'' and ``price concessions''; and noted that we were 
considering using the term ``direct and indirect remuneration,'' to 
encompass these various arrangements. We also requested comment on our 
proposed definition of PBM and whether we should define PBMs as any 
entities that perform specific functions on behalf of a health 
insurance issuer. We sought comment on how to minimize the burden of 
these reporting standards.
    Finally, we also proposed to codify the statutory penalties for 
noncompliance, including $10,000 per day that information is not 
provided; contract termination if the information is not reported 
within 90 days of the deadline; and $100,000 per piece of false 
information provided.
    Comment: In response to proposed Sec.  156.295(a)(1)--(3) and the 
discussion in the preamble to the proposed rule, many commenters 
requested clarification of key terms used in this section, such as 
``PBM,'' ``generic drug,'' ``bona fide service fees,'' and ``rebates, 
discounts, or price concessions.'' One commenter requested that 
stakeholders have future opportunities to review and comment on the 
technical specifications of this section. Some commenters supported the 
proposed definition of ``PBM,'' while others recommended a broader 
definition that would encompass all entities that provide

[[Page 18432]]

management services but do not negotiate directly with manufacturers. A 
few commenters requested clarification of this definition with respect 
to medical benefit and physician-administered drugs. With respect to 
the definition of ``generic drug,'' commenters offered numerous 
alternate definitions that HHS could adopt, including the definition 
provided in the Social Security Act, single source versus multiple 
source drugs, or therapeutically and bioequivalent. Several commenters 
responded to HHS' request for comment on the definition of ``rebates, 
discounts, or price concessions.'' Some urged HHS to codify the statute 
as written, or proposed specific definitions for these terms. Other 
commenters recommended use of the term ``direct and indirect 
remuneration'' and recommended that CMS maintain consistent definitions 
across the Exchange and the Medicare program.
    Response: Section 6005 of the Affordable Care Act includes similar 
standards for both the Medicare program and the Exchange. We believe 
that many of the entities and issuers that will report these data may 
participate in both programs. Therefore, we will align definitions with 
the Medicare program to the extent possible. We note that we are 
maintaining the proposed definition of ``PBM'', which we believe 
encompasses a sufficiently broad spectrum of entities and activities. 
We are similarly maintaining the proposed interpretations of ``generic 
drug'' and ``rebates, discounts, or price concessions.'' Finally, we 
are revising the description of ``bona fide service fees'' to better 
align with the definition included by the Medicare program in a 
proposed rule released on October 11, 2011, and to provide for greater 
flexibility with respect to this definition, given that bona fide 
services are subject to change as new ones are developed or other bona 
fide services are discontinued. Accordingly, we are not finalizing the 
specific examples of bona fide service fees included in the proposed 
rule.
    As we noted in the preamble to the proposed rule, we intend to 
clarify these standards through forthcoming guidance. We anticipate 
continuing to work with stakeholders to refine these standards.
    Comment: One commenter requested that HHS clarify the standard in 
proposed Sec.  156.295(a)(1) that QHP issuers report generic dispending 
rates ``broken down by pharmacy type.''
    Response: We clarify that paragraph (a)(1) directs QHP issuers to 
report generic dispensing rates separately for each of four types of 
pharmacies: mail order pharmacies, independent pharmacies, supermarket 
pharmacies, and mass merchandiser pharmacies.
    Comment: In response to HHS' request for 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 issuer 
pays the PBM and what the PBM pays the pharmacy, several commenters 
suggested that mail order pharmacies owned by PBMs do not present 
unique challenges with respect to this reporting activity.
    Response: As noted in the preamble to the proposed rule, we expect 
to issue further guidance on this section, and will continue to engage 
stakeholders to refine these reporting activities.
    Comment: In response to HHS' request for comment on how to minimize 
the burden associated with proposed Sec.  156.295(a)(1)--(3), several 
commenters recommended that HHS limit the collection of information to 
those data elements listed in the Affordable Care Act. Commenters also 
suggested that HHS harmonize reporting standards across programs to the 
extent possible, such as by using the PDE reporting format currently 
used in the Medicare Part D program. Multiple commenters recommended 
that HHS monitor compliance with this section through audits only, 
either of QHP issuers or of PBMs.
    Response: We clarify that HHS will only collect those data elements 
specified in the Affordable Care Act. We further intend to be 
consistent across programs to minimize burden and promote consistency, 
and are aligning the definitions of key terms used in this section with 
the Medicare Part D program. We expect to provide additional detail on 
the exact format and content of this reporting in future guidance.
    Comment: In response to the reporting standards identified in 
proposed Sec.  156.295(a), a few commenters requested more detailed 
information on why HHS needs to receive the data and how the data will 
be used. Conversely, some commenter favored greater transparency of 
prescription drug cost information and recommended that the information 
be reported to the Exchange.
    Response: Section 6005 of the Affordable Care Act directs HHS to 
collect the data elements listed in the statute. We note that the 
Affordable Care Act limits the disclosure of these data, which we 
codify in paragraph (b). At this time we are still refining the process 
for reporting and uses for these data, and expect to provide additional 
guidance on this section in the future.
    Comment: A few commenters raised concerns about QHP issuers' 
ability to comply with the reporting standards in proposed Sec.  
156.295(a)(1) through (3), noting that current contracts between 
issuers and PBMs do not typically cover these data elements.
    Response: We believe that issuers and PBMs will have sufficient 
time to renegotiate or modify these contracts before reporting becomes 
necessary.
    Comment: One commenter recommended that HHS establish some 
flexibility in the application of penalties to accommodate delays in 
the realization of price concessions and exceptional circumstances such 
as IT failure or human error.
    Response: HHS intends to issue further guidance on these reporting 
standards, including how the statutory penalties may be applied.

Summary of Regulatory Changes

    We are finalizing the provisions proposed in Sec.  156.295 of the 
proposed rule, with the following modification: in paragraph (a)(2)(i) 
we revised the description of ``bona fide service fees'' to better 
align with the definition included by the Medicare program in a 
proposed rule released on October 11, 2011, published at 76 FR 63018, 
and to provide for greater flexibility with respect to this definition, 
given that bona fide services are subject to change as new ones are 
developed or other bona fide services are discontinued.
1. Subpart F--Consumer Operated and Oriented Plan Program
Definitions (Sec.  156.505)
    Section 156.505 sets forth definitions for terms that are used 
throughout subpart F for the CO-OP program. In the final rule, 
``Establishment of Consumer Operated and Oriented Plan (CO-OP) Program 
(76 FR 77392), we revised the definitions of several terms to remove 
references to the ``Establishment of Exchanges and QHPs'' rule (76 FR 
41866), because it had not yet been finalized. We also added 
definitions for several terms as they were proposed in the rule, 
``Establishment of Exchanges and QHPs'' (76 FR 41866), because those 
terms were referred to within the revised definitions.
    In the CO-OP Program Final Rule, we stated that once the 
``Establishment of Exchanges and QHPs'' rule (76 FR 77392) was 
finalized, we would revise the definitions in section 156.505 to 
incorporate the definitions adopted in the new part 155. Consistent 
with this intent, we have revised the definitions

[[Page 18433]]

for the terms ``CO OP QHP,'' ``Exchange,'' ``individual market,'' 
``issuer,'' ``small group market,'' ``SHOP,'' and ``State'' from the 
CO-OP Program Final Rule to reference the definitions in the new part 
155. As explained later in this preamble, the changes in this section 
are being issued on an interim basis. These revisions ensure that the 
definitions used in subpart F of section 156 are consistent with the 
definitions in the new part 155. We also removed the definitions of 
``group health plans,'' ``health insurance coverage,'' ``small 
employer,'' ``qualified employer,'' and ``QHP'' because these terms are 
no longer referenced in the aforementioned definitions.
    We made a technical change to section 156.510(b)(2)(ii). When 
referring to an applicant that ``has as a sponsor a nonprofit, not-for-
profit, public benefit, or similarly organized entity that is also a 
sponsor for a pre-existing issuer,'' we inadvertently used the defined 
term ``sponsor.'' Our intent was to refer to an entity that sponsors a 
pre-existing issuer and not an entity that serves as a CO-OP's sponsor. 
Therefore, we revised this provision to refer to an applicant that 
``has as a sponsor a nonprofit, not-for-profit, public benefit, or 
similarly organized entity that also sponsors a pre-existing issuer.''

C. Part 157--Employer Interactions with Exchange and SHOP Participation

    In part 157, we proposed standards that address qualified employer 
participation in SHOP. Also, we briefly outlined employer interactions 
with Exchanges related to the verification of employees' eligibility 
for qualifying coverage in an eligible employer-sponsored plan.
1. Subpart A--General Provisions
    Subpart A outlines the basis and scope for part 157 and defines 
terms used throughout part 157.
a. Basis and scope (Sec.  157.10)
    In Sec.  157.10, we proposed the general statutory authority for 
the proposed regulations and outlined the scope of part 157, which is 
to establish the standards for employers in connection with Exchanges. 
We did not receive specific comments on this section and are finalizing 
the provisions as proposed.
b. Definitions (Sec.  157.20)
    In Sec.  157.20, we proposed definitions for terms used in part 157 
that need clarification. The definitions presented in Sec.  157.20 are 
taken directly from the statute or based on definitions we proposed in 
part 155 or part 156. For instance, we stated that the terms 
``qualified employer,'' ``qualified employee'' and ``small employer'' 
have the meaning given to the terms in Sec.  155.20.
    We did not receive specific comments on this section and are 
finalizing the provisions as proposed. Furthermore, we are finalizing 
the definitions proposed in Sec.  157.20 of the proposed rule without 
modification.
2. Subpart C--Standards for Qualified Employers
    Subpart C of this part outlines the general provisions for employer 
participation in SHOPs. As we noted in the preamble to the proposed 
rule, this subpart substantially mirrors and complements subpart H of 
part 155.
a. Eligibility of Qualified Employers to Participate in the SHOP (Sec.  
157.200)
    In Sec.  157.200, we proposed the standards for an employer that 
seeks to offer health coverage to its employees through a SHOP. We 
proposed that only qualified employers may participate in a SHOP. In 
the preamble to the proposed rule, we noted that some small employers 
may have employees in multiple States or SHOP service areas, 
referencing proposed Sec.  155.710, which would allow multi-State 
employers flexibility in offering coverage to their employees. We did 
not receive specific comments on this section and are finalizing the 
provisions as proposed.
b. Employer Participation Process in the SHOP (Sec.  157.205)
    In Sec.  157.205, we proposed the process for employer 
participation in the SHOP. Specifically, we proposed that a qualified 
employer make available QHPs to employees in accordance with the 
process developed by the SHOP pursuant to Sec.  155.705, and that a 
qualified employer participating in a SHOP disseminate information to 
its employees about the methods for selecting and enrolling in a QHP. 
We also proposed that a qualified employer submit premium payments 
according to the process proposed in Sec.  155.705. Additionally, we 
proposed that a qualified employer must provide an employee hired 
outside of the initial enrollment or annual open enrollment period with 
specific information.
    We further proposed that a qualified employer provide the SHOP with 
information about individuals or employees whose eligibility to 
purchase coverage through the employer has changed. We also proposed 
that a qualified employer adhere to the annual employer election period 
to change program participation for the next plan year. In Sec.  
155.725, we proposed that a qualified employer may begin participating 
in the SHOP at any time.
    Finally, we proposed that if a qualified employer remains eligible 
for coverage and does not take action during the annual employer 
election period, the employer would continue to offer the same plan, 
coverage level or plans selected the previous year for the next plan 
year unless the QHP or QHPs are no longer available. We invited 
comments regarding the feasibility of the processes established in this 
section and the implications for small employers and their employees.
    Comment: Some commenters requested that the final rule direct the 
SHOP to create a specific timeline for employers to notify their 
employees regarding their coverage options. Some commenters strongly 
supported the suggestion that the SHOP create a toolkit to help 
qualified employers explain the enrollment process and the choices 
available to employees.
    Response: SHOPs may support employers through electronic means and 
through informational packages in communicating with their employees 
about available coverage options, and note that nothing in this section 
would preclude a SHOP from developing such resources. We do not codify 
an employer notification standard because we think it unnecessary.
    Comment: One commenter stated that HHS should clarify that 
qualified employers offering coverage through the SHOP should be able 
to choose which QHPs they will offer their employees rather than 
allowing SHOPs to potentially decide employer offerings.
    Response: Section 1311 of the Affordable Care Act directs a SHOP 
to, at a minimum, offer coverage to qualified employees as follows: 
qualified employers select a cost sharing level, within which qualified 
employees may select any available QHP. We recognize the need to 
balance the extent of employer and employee choice against the 
potential for risk selection resulting from those choices. As discussed 
more fully in the comment and response section of Sec.  155.705(b)(2) 
and (3), we have neither specified nor restricted the range of 
additional employer options a SHOP may offer. Therefore, we are 
finalizing the provisions of this section as proposed with minor edits 
for better clarity and precision.

Summary of Regulatory Changes

    We are finalizing the definitions proposed in Sec.  157.205 of the 
proposed rule with the following modification: in paragraph (e)(1) we 
clarify that a SHOP

[[Page 18434]]

must offer an enrollment period to a newly qualified employee beginning 
on the first day of such employee becoming qualified.

IV. Waiver of Proposed Rulemaking

    We ordinarily publish a notice of proposed rulemaking in the 
Federal Register and invite public comment on the proposed rule. The 
notice of proposed rulemaking includes a reference to the legal 
authority under which the rule is proposed, and the terms and substance 
of the proposed rule or a description of the subjects and issues 
involved. This procedure can be waived, however, if an agency finds 
good cause that a notice-and-comment procedure is impracticable, 
unnecessary, or contrary to the public interest and incorporates a 
statement of the finding and its reasons in the rule issued.
    Based on the comments that we received on the Exchange 
establishment and eligibility proposed rules, we believe that there are 
new options and specific standards that should be implemented in 
connection with eligibility determinations. Specifically, we finalize 
here the ability of an Exchange to fulfill minimum functions without 
making eligibility determinations for Medicaid or CHIP, advance 
payments of premium tax credits, or cost-sharing reductions, provided 
that certain conditions and performance standards are met. As this 
option for a bifurcation of the responsibility to determine eligibility 
was not included in the proposed rule, the proposal also did not 
address the regulatory framework and standards necessary under this 
option to achieve a system of streamlined and coordinated eligibility 
and enrollment, the major goal underpinning our proposals in the 
Exchange eligibility proposed rule (76 FR 51204). In this rule, in part 
155 subpart D in the sections identified below, we outline the options 
and approach to maintain the seamless consumer experience while 
allowing States to design the eligibility process to best match their 
current systems and capacity and State policy goals.
    A compliant system for eligibility determination is critical to the 
establishment and implementation of Exchanges. In this final rule, we 
provide additional flexibility for how and by which eligibility for 
various insurance affordability programs will be made than was proposed 
in the Exchange proposed rules released in the summer of 2011. We also 
outline certain timeliness standards and agreements to permit a non-
integrated approach to eligibility determination that still affords 
applicants a seamless path to enrollment in coverage but would not 
increase administrative burden and costs.
    In addition, we finalize on an interim basis certain eligibility 
standards for cost-sharing reductions for multi-state households, 
Exchange timeliness standards for eligibility determinations, Exchange 
timeliness standards for administration of cost-sharing reduction and 
advance payments of premium tax credit, and a limited exception to the 
general verification rules for individuals in special circumstances. 
Although the proposed rule did not clearly and consistently address 
these timeliness provisions, commenters indicated the importance of 
such standards and we recognize the importance of providing finality 
for these standards at this time. We finalize an interim provision, at 
Sec.  155.315(g), to provide a process by which the Exchange must 
complete verifications of information for applicants without 
documentation; this interim provision is also included in the Medicaid 
final rule. This provision was not proposed but several commenters 
raised the need for such a limited exception to the verification 
procedures otherwise required in subpart D. Further, HHS and CMS 
received comments in response to the Exchange Eligibility proposed rule 
and the Medicaid proposed rule related to better alignment of the 
Exchange and Medicaid and CHIP programs. Interim final provisions to 
set parameters for cooperation and coordination of these programs are 
included here at Sec.  155.345(a) and (g).
    The process for approval of State-based Exchanges must begin prior 
to January 1, 2013, a date by which HHS must approve (or conditionally-
approve) States-based Exchanges for the 2014 coverage year. States that 
elect to establish an Exchange must make and implement critical 
decisions in order to seek approval of a State-based Exchange, 
including those about how eligibility determinations will be made. As 
they make these decisions, it is essential that States know the 
standards and necessary agreements associated with the new bifurcation 
alternatives for making eligibility determinations, the additional 
parameters for cooperation and alignment with Medicaid and CHIP 
programs, and the new rules governing Exchange eligibility 
determinations. Like the new bifurcation options described above, the 
new standards associated with Exchange determinations are also integral 
to developing and establishing an Exchange--and the systems to support 
it--in order to meet the January 1, 2013 deadline for HHS approval. For 
example, the timeliness and verification standards for Exchange 
eligibility determinations need to be part of the eligibility 
determination system that is developed. Similarly, the timeliness 
standards associated with administration of cost sharing reductions and 
premium tax credits are necessary to include in the initial 
establishment of Exchange systems. Accordingly, we believe we need to 
finalize these provisions as soon as possible to provide States the 
information they need for Exchange establishment.
    As a result, based on the comments to the 2011 Exchange proposed 
rules regarding these policies, we believe it would be contrary to the 
public interest to delay issuing new eligibility determination and 
timeliness standards rules. Further, providing public notice and 
additional comment periods for these policies would not provide States 
with sufficient lead time to take advantage of and incorporate these 
additional policies, prepare their State Exchange Blueprints, and 
complete the State Exchange readiness assessments process as set out in 
the proposed and this final rule. In light of the timing constraints, 
we are soliciting additional comment and issuing as interim final the 
following provisions:
     Sec.  155.300(b)--Related to Medicaid and CHIP 
regulations;
     Sec.  155.302--Related to options for conducting 
eligibility determinations;
     Sec.  155.305(g)--Related to eligibility standards for 
cost-sharing reductions;
     Sec.  155.310(e)--Related to timeliness standards for 
Exchange eligibility determinations;
     Sec.  155.315(g)--Related to verification for applicants 
with special circumstances;
     Sec.  155.340(d)--Related to timeliness standards for the 
transmission of information for the administration of advance payments 
of the premium tax credit and cost-sharing reductions; and
     Sec.  155.345(a) and Sec.  155.345(g)--Related to 
agreements between agencies administering insurance affordability 
programs.
    We also received comments on the Exchanges establishment proposed 
rule regarding the need for performance and training standards that 
should be developed by HHS or required by HHS for agent and brokers who 
are assisting individuals with applications for insurance affordability 
programs. The proposed rule discussed and solicited comment about how 
to incorporate agents and brokers in the process of enrolling qualified 
individuals and qualified employers through the

[[Page 18435]]

Exchange; provisions to achieve that policy goal are finalized in this 
rule in light of the comments received to the proposed rule.\16\ We did 
not propose or solicit comment on specific standards related to the 
provision of application assistance by agents and brokers. To provide 
useful assistance, agents and brokers should be fully aware of the 
complex eligibility and verification standards that will be used to 
determine eligibility for advance payment of premium tax credits and 
cost-sharing reductions. Also, in connection with this assistance, 
agents and brokers may gain access to a potential enrollee's income 
information, including access to sensitive tax data. Because the 
proposed rule did not apply training or performance standards to agents 
and brokers in connection with providing assistance to applicants, we 
did not address the regulatory framework supporting standards to ensure 
that agents and brokers are cognizant of the eligibility determination 
standards and process, maintain the confidentiality of such data, and 
operate in a manner that support their access to such data. In Sec.  
155.220, we describe these standards in more detail and outline their 
importance and connection to privacy and security standards described 
elsewhere in this rule.
---------------------------------------------------------------------------

    \16\ We direct attention to Sec.  155.220(a)(2) and the preamble 
for that section for a more detailed discussion.
---------------------------------------------------------------------------

    Agent and brokers, where permitted to operate in a State, may serve 
an important role in assisting individuals in applying for coverage in 
the Exchange and with assisting individuals in gaining access to health 
insurance affordability programs. Because open enrollment for Exchanges 
will begin on October 1, 2013, and Exchanges require lead time to 
develop and implement privacy and security standards, agreements, 
training programs for agent and brokers, as well as systems to support 
agents and brokers working with Exchanges. As a result, we find that 
providing public notice and additional comment periods for these 
policies would not provide States with sufficient lead time to take 
advantage of and incorporate these additional policies prior to 
Exchange approval under the processes as set out in the proposed and 
this final rule. In light of the timing constraints, we are also 
soliciting additional comment and issuing as interim final the 
following provision:
     Sec.  155.220(a)(3)--Related to the ability of a State to 
permit agents and brokers to assist qualified individuals in applying 
for advance payments of the premium tax credit and cost-sharing 
reductions for QHPs.
    For the reasons stated above, we find good cause to waive the 
notice of proposed rulemaking and to issue these specific portions of 
this final rule on an interim basis. We are providing a 45-day public 
comment period in connection with these provisions.
    Finally, this final rule makes a small number of technical changes 
to the provisions relating to CO-OPs, 45 CFR part 156 subpart F. We 
find there is good cause to waive notice and comment rulemaking for 
these changes because soliciting comment on them is unnecessary. These 
changes do not alter the substance of the CO-OP regulations and are 
therefore being finalized in this rule. As discussed the preamble 
above, they are being made principally to minimize duplicative 
definitions within parts 155 and 156.

IV. Provisions of the Final Regulations

    For the most part, this final rule incorporates the provisions of 
the proposed rule. Those provisions of this final rule that differ from 
the proposed rule are as follows:

Changes to Sec.  155.20

     Changes full definitions to statutory and regulatory 
definitions, where applicable, including the definitions of 
``applicant,'' ``eligible employer-sponsored plan,'' ``health plan,'' 
``plain language,'' ``individual market,'' and ``small group market.''
     Added definitions for ``application filer,'' ``educated 
health care consumer,'' and ``Exchange Blueprint.''

Changes to Sec.  155.105

     Adds that HHS would consult with other relevant Federal 
agencies in approval of State Exchanges.
     Establishes timeframe for review of significant changes to 
one where any change would receive written approved or denial within 60 
days, or the approval would be automatic after 60 days (which may be 
extended by 30 days by HHS).

Changes to Sec.  155.110

     Establishes that other State agencies are eligible 
contracting entities (such as departments of insurance).
     Establishes that Exchange boards must have at least one 
consumer representative on a governing board.

Changes to Sec.  155.160

     Streamlines language regarding user fees, and removed 
policy that States announce user fees annually.

Changes to Sec.  155.200

     Removes appeals of eligibility determinations as a minimum 
Exchange function.
     Adds a clarification that in carrying out its statutorily-
required responsibilities, the Exchange is not construed to be acting 
on behalf of a QHP to convey that Exchanges are not automatically 
considered HIPAA business associates.

Changes to Sec.  155.205

     Adds more detail regarding meaningful access standards.
     Clarifies standards for persons with disabilities, 
including the provision of auxiliary aids at no cost to the individual.
     Outlines standards for limited English proficient 
individuals, including oral and written translations and the use of 
taglines on the Exchange Web site.

Changes to Sec.  155.210

     Directs Exchanges to develop and publicly disseminate 
conflict of interest standards and training standards for entities to 
be awarded Navigator grants.
     Applies privacy and security standards to Navigators.
     Establishes that at least one Navigator entity must be a 
community and consumer-focused non-profit group.
     Clarifies entities that are not eligible to serve as 
Navigators.
     Prohibits Navigators from receiving compensation by 
issuers for enrollment into plans outside of the Exchange.

Changes to Sec.  155.220

     Establishes standards related to the ability of a State to 
permit agents and brokers to assist qualified individuals enrolling in 
QHPs through an Exchange; as described elsewhere in this rule, this 
provision is being published as interim.
     Establishes participation standards for agents and brokers 
to facilitate QHP selection through a non-Exchange Web site.

Changes to Sec.  155.230

     Aligns notices with expanded meaningful access standards 
in Sec.  155.205.
     Maintains standard that the Exchange must re-evaluate the 
appropriateness and usability of applications, forms, and notices, but 
removes the policy that this must occur ``on an annual basis and in 
consultation with HHS in instances when significant changes are made.''
     Adds that a notice must include a reason for intended 
action.

[[Page 18436]]

Changes to Sec.  155.240

     Removes duplicative standard for the Exchange to accept 
aggregated payments from qualified employers; Sec.  155.705(b)(4) 
retains the premium aggregation function for the SHOP.

Changes to Sec.  155.260

     Removed definition of ``personally identifiable 
information.''
     Includes more specific standards for privacy and security 
of personally identifiable information.
     Includes privacy and security principles based on the Fair 
Information Practice Principles (FIPPs) framework adopted by ONCHIT and 
a list of critical security outcomes.
     Clarifies that the privacy and security standards of this 
section apply only to information created or collected for the purposes 
of carrying out Exchange minimum functions.
     Expands the scope of information to which the standards 
apply to information created, collected, used, or disclosed by an 
Exchange or other individual or entity that has an agreement with the 
Exchange.
     Adds the standard that the Exchange workforce complies 
with the privacy and security policies and procedures developed and 
implemented by the Exchange.
     Establishes that Exchanges must develop and utilize secure 
electronic interfaces when sharing personally identifiable information 
electronically.
     Adds standards for data matching and sharing arrangements 
that facilitate the sharing of personally identifiable information 
between the Exchange and agencies administering Medicaid, CHIP, or the 
BHP.

Changes to Sec.  155.300

     Adds that references to Medicaid and CHIP regulations in 
this subpart refer to those regulations as implemented in accordance 
with rules and procedures which are the same as those applied by the 
State Medicaid or State CHIP agency or approved by such agency in the 
agreement described in Sec.  155.435(a), and as described elsewhere in 
this rule, this provision is being published as interim final.

Adds Sec.  155.302

     Adds section outlining options for (1) the Exchange to 
conduct assessments of eligibility for Medicaid and CHIP rather than an 
eligibility determination for Medicaid and CHIP, and; (2) the Exchange 
to implement a determination of eligibility for advance payments of the 
premium tax credit and cost-sharing reductions for the Exchange, and as 
described elsewhere in this rule, this provision is being published as 
interim.
     Includes standards for such assessments and eligibility 
determinations, and as described elsewhere in this rule, this provision 
is being published as interim.

Changes to Sec.  155.305

     Adds language throughout to clarify that individuals must 
be ``living'' in the service area of the Exchange in addition to the 
prior standards for residency, in order to align with changes to 
Medicaid residency standards.
     Adds that an applicant age 21 and over also meets the 
residency standard if he or she has entered the service area of the 
Exchange with a job commitment or seeking employment (whether or not 
currently employed), in order to align with changes to Medicaid 
residency standards.
     Adds language clarifying how to address cost-sharing 
reductions in situations in which multiple tax households are covered 
by a single policy, and as described elsewhere in this rule, this 
provision is being published as interim.
     Clarifies that cost-sharing reductions use the same 
household income and FPL definitions as advance payments of the premium 
tax credit.

Changes to Sec.  155.310

     Adds language directing Exchanges to obtain attestations 
from a tax filer regarding advance payments of the premium tax credit, 
with flexibility to identify specific attestations in future guidance.
     Adds language clarifying that applicants must provide 
social security numbers.
     Adds a standard that the Exchange must determine 
eligibility promptly and without undue delay, and as described 
elsewhere in this rule, this provision is being published as interim.
     Adds content, consistent with the statute, to the notice 
to an employer regarding an employee's eligibility for the advanced 
payment of tax credits.
     Adds the standard to provide employer with an indication 
the employee has been determined eligible for advance payments of the 
premium tax credit, that the employer may be liable for the payment 
assessed under section 4980H of the Code if they have more than 50 
full-time employees, and that the employer has the right to appeal the 
determination.

Changes to Sec.  155.315

     Provides flexibility for the Exchange to accept 
attestation of residency or examine electronic data sources, regardless 
of the choices made by the State Medicaid or CHIP agencies.
     Adds provision specifying that the Exchange will validate 
all social security numbers with SSA.
     Allows applicants and application filers to submit 
documentation to resolve inconsistencies via channels available for 
submission of application.
     Includes a new provision which specifies that the Exchange 
will accept an applicant's attestation if documentation with which to 
resolve an inconsistency does not exist or is not reasonably available, 
with the exception of inconsistencies related to citizenship and 
immigration status, and as described elsewhere in this rule, this 
provision is being published as interim.

Changes to Sec.  155.320

     Sets forth that if an applicant's attestation to projected 
annual household income is no more than ten percent below his or her 
prior tax data, the Exchange must rely on the attestation without 
further verification as part of the alternate verification process, and 
specifies that if his or her attestation is greater than ten percent 
below his or her prior tax data, the Exchange will conduct further 
verification.
     Allows the use of the alternate income verification 
process when a tax filer's filing status has changed, as directed by 
statute.
     Allows the use of the alternate income verification 
process when a tax filer's family composition has changed or is 
reasonably expected to change.
     Clarifies that if there is no tax data, the Exchange must 
discontinue advance payments of the premium tax credit and cost-sharing 
reductions at the end of the 90 day inconsistency period.
     Clarifies that the Exchange verify whether an applicant 
reasonably expects to be enrolled in employer-sponsored insurance the 
year for which he or she is seeking coverage, in addition to whether 
the applicant is currently enrolled.

Changes to Sec.  155.330

     Allows the Exchange to establish a reasonable threshold 
for changes in income that an enrollee must report.
     Allows the Exchange to expand data matching during the 
benefit year within certain standards and without HHS approval.
     Adds procedures for notifying and redetermining an 
enrollee's eligibility upon obtaining data via data matches; outlines 
different procedures for data related to income, family size, or family 
composition and data not related to

[[Page 18437]]

income, family size, or family composition.
     Allows the Exchange to align eligibility effective dates 
for redeterminations with coverage effective dates in subpart E.

Changes to Sec.  155.335

     Adds timing standard for annual redetermination notice and 
provides that the annual redetermination notice be combined with the 
annual notice of open enrollment into a single, coordinated notice in 
the first two years.
     Provides flexibility to States on timing of notice 
starting with redeterminations of coverage effective on or after 
January 1, 2017, and sets forth standards for such flexibility.
     Clarifies effective dates of annual redetermination.
     Adds that the Exchange is authorized to obtain tax data 
for a period of up to five years, unless the individual declines this 
authorization or chooses to authorize for a period of less than five 
years.
     Adds limitation to redetermination if an individual 
requests eligibility determination for insurance affordability programs 
but does not have an authorization for the Exchange to obtain tax data 
as part of annual redetermination process; Exchange must notify 
enrollee and not proceed with redetermination until authorization has 
been obtained or enrollee declines financial assistance.

Changes to Sec.  155.340

     Replaces ``Social Security number'' with ``taxpayer 
identification number,'' in accordance with statute.
     Adds the standard that the Exchange must transmit promptly 
and without undue delay information to enable advance payments of the 
premium tax credits and cost-sharing reductions, and as described 
elsewhere in this rule, this provision is being published as interim.

Changes to Sec.  155.345

     Adds standards for agreements between the Exchange and 
other insurance affordability programs, and as described elsewhere in 
this rule, this provision is being published as interim.
     Clarifies responsibilities of the Exchange when applicants 
are found potentially eligible for Medicaid based on factors other than 
MAGI which includes notifying the applicant; clarifies standards for 
providing advance payments of the premium tax credit and cost-sharing 
reductions to such individuals.
     Adds standards for the Exchange when accepting 
applications from other insurance affordability programs and sending 
applications to agencies administering other insurance affordability 
programs, and as described elsewhere in this rule, this provision is 
being published as interim.
     Adds a special rule providing that if the Exchange finds a 
tax filer's household income is less than 100 percent of the FPL and 
one or more applicant in the tax filer's household is found ineligible 
for Medicaid or CHIP, the Exchange follow the procedures in Sec.  
155.320(c)(3).

Changes to Sec.  155.350

     Clarifies that an individual must be eligible for advance 
payments of the premium tax credit in order to be eligible for cost-
sharing reductions, in accordance with statute.
     Clarifies that cost-sharing reductions use the same 
household income and FPL definitions as advance payments of the premium 
tax credit.

Changes to Sec.  155.400

     Adds policy in Sec.  155.400(b)(2) for Exchanges to submit 
eligibility and enrollment information to HHS and QHP issuers promptly 
and without undue delay.
     Removes policy from Sec.  155.400(c) that the Exchange 
must submit enrollment information to HHS on a monthly basis.
     Adds policy in Sec.  155.400(d) that the Exchange must 
reconcile enrollment information with HHS and QHP issuers on a monthly 
basis.

Changes to Sec.  155.410

     Extends the initial open enrollment period from February 
28, 2014 to March 31, 2014.
     Modifies the standards in this section such that an 
enrollment transaction must be received by the 15th of the month to 
secure an effective date of the first of the following month.
     Gives the Exchange flexibility to negotiate earlier 
effective dates and/or later plan selection cutoff dates, but notes 
that the Exchange must secure agreement from all participating QHP 
issuers. Further, an earlier effective date can only be offered to an 
individual who is not determined eligible for or forgoes advance 
payments of the premium tax credit/cost-sharing reductions for the 
first partial month of coverage.
     Gives the Exchange the option to automatically enroll 
individuals contingent upon demonstrating good cause to HHS.

Changes to Sec.  155.420

     Aligns coverage effective dates for special enrollment 
periods with the new dates for the initial open enrollment periods as 
described in Sec.  155.410, except in the case of marriage or loss of 
minimum essential coverage.
     Removes the limits on special enrollment periods formerly 
in Sec.  155.420(f).

Changes to Sec.  155.430

     Defines reasonable notice, for the purposes of 
effectuating a termination, as 14 days.
     Clarifies the effective dates of terminations for 
enrollees under various scenarios, including individuals newly eligible 
for Medicaid, or CHIP; and individuals receiving advance payments of 
the premium tax credit.

Changes to Sec.  155.700

     Adds a definition for minimum participation rules.

Changes to Sec.  155.705

     Permits the SHOP to impose minimum participation rules at 
the SHOP level.
     Adds a standard that the SHOP develop and offer a premium 
calculator.

Changes to Sec.  155.715

     Clarifies that SHOPs may not use section 1411(b)(2) or 
1411(c) verification processes for the SHOP eligibility determination 
process.
     Clarifies that for eligibility determination purposes, the 
SHOP may collect only the minimum information necessary to make such a 
determination.

Changes to Sec.  155.720

     Adds a standard that the SHOP must report to the IRS 
employer participation and employee enrollment information in a form 
and manner specified by HHS.

Changes to Sec.  155.725

     Adds a standard that the SHOP offer the same special 
enrollment periods as the individual Exchange, with the exception of 
changes in citizenship status or eligibility for insurance 
affordability programs.
     Clarifies that the annual election/open enrollment periods 
for employers/employees must be at least 30 days.
     Clarifies that the SHOP provide newly qualified employees 
with a specified enrollment period.

Changes to Sec.  155.730

     Adds safeguards to protect information collected on 
application.

Changes to Sec.  155.1010

     Clarifies that multi-State plans and CO-OPs are recognized 
as QHPs.

[[Page 18438]]

     Allows Exchanges to certify QHPs during the plan/benefit 
year if necessary.

Changes to Sec.  155.1020

     Clarifies that multi-State plans are exempt from the 
Exchange process for receiving and considering rate increase 
justifications, and from the Exchange process for receiving annual rate 
and benefit information.
     Establishes that the Exchange must post rate increase 
justifications on its Web site.

Changes to Sec.  155.1040

     Clarifies that multi-State plans must submit transparency 
data in a time and manner determined by the U.S. Office of Personnel 
Management.

Changes to Sec.  155.1045

     Clarifies that the U.S. Office of Personnel Management 
will establish the accreditation timeline for multi-State plans.

Changes to Sec.  155.1050

     Clarifies that the U.S. Office of Personnel Management 
will ensure compliance with network adequacy standards by multi-State 
plans.
     Clarifies that a QHP issuer in an Exchange may not be 
prohibited from contracting with any essential community provider 
designated under Sec.  156.235(c).

Changes to Sec.  155.1065

     Clarifies that stand-alone dental plans must meet most QHP 
certification standards, including Sec.  155.1020(c) and that stand-
alone dental plans must offer the pediatric dental essential health 
benefit without annual and lifetime limits as applied to the essential 
health benefits in section 1302(b) of the Affordable Care Act.
     Adds a standard for the Exchange to ensure sufficient 
access to pediatric dental coverage.

Changes to Sec.  155.1075

     Exempts multi-State plans and CO-OPs from the Exchange 
recertification process.

Changes to Sec.  155.1080

     Exempts multi-State plans and CO-OPs from the Exchange 
decertification process.

Changes to Sec.  156.50

     Clarifies that participating issuers must remit user fees, 
as defined by an Exchange, and other assessments, if applicable, to a 
State-based or Federally-facilitated Exchange.

Changes to Sec.  156.225

     Codifies the statutory prohibition against QHP benefit 
designs that have the effect of discouraging enrollment by higher-need 
individuals.

Changes to Sec.  156.230

     Expands the proposed standard such that a QHP must 
maintain a network that is sufficient in number and types of providers, 
including providers that specialize in mental health and substance 
abuse, to assure that all services will be accessible without 
unreasonable delay.

Changes to Sec.  156.235

     Sets minimum standards that a QHP must have a sufficient 
number and geographic distribution of essential community providers to 
ensure reasonable and timely access to a broad range such providers for 
low-income, medically underserved individuals in the QHP's service 
area.
     Clarifies the definition of essential community provider 
to include providers that met the criteria to be an essential community 
provider on the publication date of this regulation unless the provider 
lost its status as an essential community provider as a result of 
violating Federal law.
     Establishes an alternate standard for integrated delivery 
systems and staff model plans.
     Clarifies payment policy with respect to FQHCs and all 
other essential community providers.

Changes to Sec.  156.255

     Removes provision related to covering specific rating 
categories or groups.

Changes to Sec.  156.265

     Clarifies the role of the QHP issuer in the enrollment 
process for enrollment through the Exchange.

Changes to Sec.  156.270

     Adds a standard that the QHP issuer must notify the 
affected individual 30 days in advance of a termination.
     Clarifies that for individuals receiving advance payments 
of the premium tax credit who are terminated for non-payment, the QHP 
issuer must pay all claims for the first month of the grace period. The 
issuer may pend claims during the second and third months, but must 
notify providers. Finally, the issuer must return to Treasury any 
advance payment of the premium tax credit for the second and third 
months at the conclusion of the grace period and effectuate termination 
of coverage at the end of the first month of the grace period.

Changes to Sec.  156.280

     Codifies the pre-regulatory model guidelines on issuer 
segregation plans.

Changes to Sec.  156.285

     Clarifies that QHP issuers must provide newly qualified 
employees with a specified enrollment period.
     Clarifies that QHP issuers participating in the SHOP may 
not set minimum participation rules for offering health coverage in 
connection with a QHP.

Changes to Sec.  156.295

     Modifies definition of ``bona fide service fees.''

Changes to Sec.  157.205

     Removes requirement for SHOP to continue coverage if 
employer fails to take action during election period.

V. Collection of Information Requirements

Paperwork Reduction Act

    As noted above, this final rule incorporates provisions originally 
published as two proposed rules, the July 15, 2011 rule titled 
Establishment of Exchanges and Qualified Health Plans, and the August 
17, 2011 rule titled Exchange Functions in the Individual Market: 
Eligibility Determinations and Exchange Standards for Employers. These 
proposed rules are referred to collectively as the Exchange 
establishment and eligibility proposed rules. In the Exchange 
establishment proposed rule published on July 15, 2011, we sought 
comment on certain information collection requirements associated with 
that proposed rule. We received one comment that stated a concern 
regarding the adequacy of the burden estimates stated in the Collection 
of Information Requirements section. We considered the commenter's 
concern and plan to issue more detail regarding the collection of 
information requirements in this rule.
    In the Exchange establishment proposed rule, we explained that we 
would seek comments on the standards associated with Sec.  155.105, 
which are finalized in this rule as the standards for the Exchange 
Blueprint. On November 10, 2011, we issued a 60-day Federal Register 
Notice seeking comments on a template for the Exchange Blueprint. For 
more information, please see page 70418 of Vol. 76, No. 218 of the 
Federal Register.
    In the Exchange eligibility proposed rule published on August 17, 
2011, we did not seek comment on the associated

[[Page 18439]]

information collection requirements. In accordance with the Paperwork 
Reduction Act (PRA), we will issue a Federal Register Notice in the 
coming weeks to seek public comments on these provisions.
    In addition, this final rule includes certain regulatory provisions 
that differ from those included in the Exchange establishment proposed 
rule. Some of those provisions involve changes from the information 
collection requirements described in the Exchange establishment 
proposed rule. These changes include the following:
     Exchange up-to-date Internet Web site (Sec.  155.205);
     Standard for Exchanges to maintain records of enrollment 
(Sec.  155.400);
     Standard for Exchanges to submit eligibility and 
enrollment information to QHP issuers and HHS promptly and without 
undue delay and reconcile enrollment information with QHP issuers and 
HHS on at least a monthly basis (Sec.  155.400);
     Notice of eligibility to applicant (Sec.  155.405);
     Notice of annual open enrollment period to applicant 
(Sec.  155.410);
     Standard for Exchanges to maintain records of coverage 
terminations (Sec.  155.430);
     Notice to employers (Sec.  155.715);
     Notice to individual of inability to substantiate employee 
status (Sec.  155.715);
     Notice of employer eligibility (Sec.  155.715);
     Notice of employee eligibility (Sec.  155.715);
     Notice of employer withdrawal from SHOP (Sec.  155.715);
     Notice of effective date to employees (Sec.  155.720);
     Notice of employee termination of coverage to employer 
(Sec.  155.720);
     Standard for the SHOP to maintain records of enrollment 
(Sec.  155.720);
     Standard for the SHOP to reconcile enrollment information 
(Sec.  155.720);
     Notice of annual employer election period (Sec.  155.725);
     Notice to employee of open enrollment period (Sec.  
155.725);
     Standard for Exchanges to collect QHP issuer reports on 
covered benefits, rates, and cost sharing requirements (Sec.  
155.1020);
     Notice to the QHP issuer, enrollees, HHS, and the State 
insurance department of the decertification of a QHP (Sec.  155.1080);
     Issuer reporting of benefit and rate information (Sec.  
156.210);
     Issuer reporting of rate increase justifications (Sec.  
156.210);
     Issuer reporting of transparency in coverage information 
(Sec.  156.220);
     Standard for QHP issuers to make available enrollee cost 
sharing information (Sec.  156.220);
     Notice to applicants and enrollees that includes the 
provider directory (Sec.  156.230);
     Notice of effective date of coverage to individuals (Sec.  
156.260);
     Standard for QHP issuers to collect enrollment information 
and submit the enrollment information to the Exchange (Sec.  156.265);
     Standard for QHP issuers to provide an enrollment package 
to enrollee (Sec.  156.265);
     Summary of cost and coverage document(Sec.  156.265);
     Standard for QHP issuers to reconcile enrollment 
information with the Exchange (Sec.  156.265);
     Notice to the enrollee of the termination of coverage 
(Sec.  156.270);
     Notice to the enrollee of payment delinquency (Sec.  
156.270);
     Standard for QHP issuers to maintain records of coverage 
terminations (Sec.  156.270);
     Standard for QHP issuers to provide enrollment information 
package to SHOP enrollees (Sec.  156.285);
     Summary of cost and coverage document for employees and 
employers (Sec.  156.285);
     Standard for QHP issuers to reconcile enrollment 
information with the SHOP (Sec.  156.285);
     Notice to SHOP enrollee of the termination of coverage 
(Sec.  156.285);
     Notice of QHP issuer non-renewal of certification to 
Exchange (Sec.  156.290);
     Notice of QHP issuer non-renewal of certification to 
enrollees (Sec.  156.290); and
     Standard for QHP issuers to submit prescription drug 
distribution and cost reporting (Sec.  156.295);
    This final rule also includes some information collection 
requirements for which we did not seek comment in the Exchange 
establishment proposed rule. In accordance with the Paperwork Reduction 
Act (PRA), we will issue a Federal Register Notice in the coming weeks 
to seek public comments on these provisions.
    Finally, this final rule describes some information collections for 
which CMS plans to seek approval at a later date. For these information 
collections, CMS will issue future Federal Register notices to seek 
comments on those information collections, as required by the PRA. This 
includes, among other collections:
     Navigator standards (Sec.  155.210);
     Single streamlined application to determine eligibility 
and collect information for enrollment (Sec.  155.405);
     SHOP single employer application (Sec.  155.715);
     SHOP single employee application (Sec.  155.715);
     Alternative employer application (Sec.  155.730);
     Collection of rates, covered benefits, and cost sharing 
information (Sec.  155.200);
     Collection of transparency of coverage information (Sec.  
155.1040);
     Evaluation of service area (Sec.  155.1055);
     Standards for the certification of stand-alone dental 
plans (Sec.  155.1065);
     Submission of rates, covered benefits, and cost sharing 
information (Sec.  156.210); and
     Submission of transparency of coverage information (Sec.  
156.220).

VI. Summary of Regulatory Impact Analysis

    The summary analysis of benefits and costs included in this rule is 
drawn from the detailed Regulatory Impact Analysis. That impact 
analysis evaluates the impacts of this rule and a second rule, 
``Patient Protection and Affordable Care Act; Standards Related to 
Reinsurance, Risk Corridors and Risk Adjustment.'' The second final 
rule will be published separately. The following summary focuses on the 
benefits and costs of this final rule.

A. Introduction

    HHS has examined the impacts of this final rule under Executive 
Orders 12866 and 13563, the Regulatory Flexibility Act (5 U.S.C. 601-
612), the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4), and the 
Executive Order 13132 on Federalism. 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 
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 issuers, agents and brokers, and 
employers, HHS concludes

[[Page 18440]]

that a significant number of firms affected by this final 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 promulgating ``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 final rule to result in one-year expenditures that 
would meet or exceed this amount.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a final rule that imposes 
substantial direct costs on State and local governments, preempts State 
law, or otherwise has Federalism implications. Specifically, an agency 
must act in strict accordance with the governing law, consult with 
State officials, and address their concerns.

B. Need for This Regulation

    This final rule implements standards related to the Establishment 
of Exchanges and Qualified Health Plans and standards for Qualified 
Employers 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 Regulation

    This summary focuses on the benefits and costs of the requirements 
in this Exchange final rule that combines the policies in the Exchange 
establishment proposed rule and the Exchange eligibility proposed rule.
Benefits in Response to the Regulation
    The Exchanges and their associated policies, according to CBO's 
letter to Evan Bayh from November 30, 2009, reduce premiums for the 
same benefits compared to prior law. CBO 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.\17\
---------------------------------------------------------------------------

    \17\ Congressional Budget Office, ``Letter to the Honorable Evan 
Bayh: An Analysis of Health Insurance Premiums Under the Patient 
Protection and Affordable Care Act '' (Washington, 2009).
---------------------------------------------------------------------------

    CBO also estimates that premiums for small businesses purchasing 
through the Exchanges would be up to 2 percent lower than they would be 
without the Affordable Care Act, for comparable reasons. CBO estimated 
that the administrative costs to health plans (described in greater 
detail below) would be more than offset by savings resulting from lower 
overhead due to new policies to limit benefit variation, and end 
underwriting. Premium savings to individuals and small businesses allow 
for alternative uses of income and resources, such as increasing 
retirement savings for families or investing in new jobs for small 
businesses.
    Simplified eligibility processes will increase take-up of health 
insurance leading to improved health. In a recent study, compared to 
the uninsured group, the insured received more hospital care, more 
outpatient care, had lower medical debt, better self-reported health, 
and other health related benefits. The evaluation concluded that for 
low-income uninsured adults, coverage has the following benefits: (1) 
Significantly higher utilization of preventive care (mammograms, 
cholesterol monitoring, blood tests for high blood sugar related to 
diabetes, etc.); (2) a significant increase in the probability of 
having a regular office or clinic for primary care; and, (3) 
significantly better self-reported health. In addition, the use of 
electronic records among State and Federal agencies with information to 
verify eligibility will minimize the transaction costs associated with 
purchasing health insurance improving market efficiency and minimizing 
time cost for enrollees on enrollment.
Costs in Response to the Regulation
    Meeting the requirements of this rule will have costs affecting 
Exchanges and 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 areas. 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.
    To support the new eligibility structure, States are expected to 
build new or modify existing information technology systems. How each 
State constructs and assembles the components necessary to support its 
Exchange and Medicaid infrastructure will vary and depend on the level 
of maturity of current systems, current governance and business models, 
size, and other factors. Administrative costs to support the vision for 
a streamlined and coordinated eligibility and enrollment process will 
also vary for each State depending on the specific approaches taken 
regarding the integration between programs and its decision to build a 
new system or use existing systems; while the Affordable Care Act 
requires a high level of integration, States have the option to go 
beyond the requirements of the Act.
    We also believe that overall administrative costs may increase in 
the short term as States build information technology systems; however, 
in the long-term States will see savings through the use of more 
efficient systems. As noted in the preamble, we believe the approach we 
are taking to supporting the verification of applicant information with 
SSA, IRS, and DHS reduces administrative complexity and associated 
costs. Administrative costs to States incurred in the development of 
information technology infrastructure to support the Exchange are 
funded wholly through State Exchange Planning and Establishment Grants. 
Costs for information technology infrastructure that will also support 
Medicaid must be allocated to Medicaid, but are eligible for a time-
limited 90 percent Federal matching rate to assist in development.
Methods of Analysis
    This impact analysis references both estimates from the 
Congressional Budget Office (CBO), as well as Center for

[[Page 18441]]

Medicare & Medicaid Services (CMS) estimates from the FY 2013 
President's Budget. The CBO estimate remains the most comprehensive 
accounting of all the interacting provisions pertaining to the 
Affordable Care Act, and contains cost estimates of some provisions 
that have not been independently estimated by CMS. Based on our review, 
we expect that the requirements in these final rules will not 
significantly alter CBO's estimates of the budget impact of Exchanges 
or enrollment. The requirements are well within the parameters used in 
the modeling of the Affordable Care Act. Our review and analysis of the 
requirements indicate that the impacts are within the model's margin of 
error. In the regulatory impact analysis that accompanied the proposed 
Exchange establishment rule, we displayed CBO estimates of Exchange 
grant outlays. The estimates in this analysis reflect the most up-to-
date estimates from the FY 2013 President's Budget for State Planning 
and Establishment Grants.
    Table 1 includes the estimates of grants to States for Exchange 
start up from 2012 to 2016. It does not include costs related to 
reduced Federal revenues from refundable premium tax credits, which are 
administered by the Department of the Treasury subject to IRS 
rulemaking, the Medicaid effects, which are subject to separate 
rulemaking, or the policies whose offsets led CBO to estimate that the 
Affordable Care Act would reduce the Federal budget deficit by over 
$100 billion over the next 10 years. As this is a summary of the final 
impact analysis, for further information on the expected benefits and 
costs of this rule, please see the final regulatory impact analysis.

                Table 1--Estimated Outlays for the Affordable Insurance Exchanges FY 2012-FY2016
                                            [In billions of dollars]
----------------------------------------------------------------------------------------------------------------
                        Year                           2012      2013      2014      2015      2016    2012-2016
----------------------------------------------------------------------------------------------------------------
Grant Authority for Exchange Start up \a\..........      0.9       1.1       0.8       0.4       0.1        3.4
----------------------------------------------------------------------------------------------------------------
\a\ FY 2013 President's Budget, Analytical Perspectives, Table 32-1.

Regulatory Options Considered
    In addition to a baseline, HHS has identified three regulatory 
options for this final rule as required by Executive Order 12866 for 
Exchange establishment and eligibility.
    (1) Uniform Standard for Operations of an Exchange. Under this 
alternative HHS would require a single standard for State operations of 
Exchanges. The 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, 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.
    (3) Require a Paper-Driven Process for Conducting Eligibility 
Determinations. In this final rule, to verify applicant information 
used to support an eligibility determination, we generally require the 
Exchange first use electronic data, where available, prior to 
requesting paper documentation. Under this rule, individuals will be 
asked to provide only the minimum amount of information necessary to 
complete an eligibility determination, and will only be required to 
submit paper if electronic data cannot be used to complete the 
verification process. Under this alternative, the Exchange would 
require individuals to submit paper documentation to verify information 
necessary for an eligibility determination. This would not only 
increase the amount of burden placed on individuals to identify and 
collect this information, which may not be readily available to the 
applicant, but would also necessitate additional time and resources for 
Exchanges to accept and verify the paper documentation needed for an 
eligibility determination.
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 Regulatory Impact Analysis.
    The paper-driven process in option 3 would ultimately increase the 
amount of time it would take for an individual to receive health 
coverage, would reduce the number of States likely to operate an 
Exchange due to increased administrative costs, and would dissuade 
individuals from seeking coverage through the Exchange. We believe 
using technology to minimize burden on individuals and States will help 
increase access to coverage by streamlining the eligibility process, 
and will reduce administrative burden on Exchanges, while increasing 
accuracy by relying on trusted data for eligibility.

VIII. Accounting Statement

[[Page 18442]]



--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                   Estimates                                                   Units
                                    --------------------------------------------------------------------------------------------------------------------
              Category                                                                                                            Discount      Period
                                        Primary estimate          Low estimate          High estimate          Year dollar          rate       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/     $690.55...............  Not Estimated........  Not Estimated........  2011...............           7%    2012-2016
 year).
                                     $673.50...............  Not Estimated........  Not Estimated........  2011...............           3%    2012-2016
--------------------------------------------------------------------------------------------------------------------------------------------------------
Qualitative........................                          These costs include grant outlays to States to establish Exchanges.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                        Transfers
--------------------------------------------------------------------------------------------------------------------------------------------------------
Federal Annualized Monetized         0.....................  $....................  $....................  2011...............           7%    2012-2016
 ($millions/year).
                                     0.....................  $0.00................  $0.00................  2011...............           3%    2012-2016
From/To............................  From:                                                                 To:
Other Annualized Monetized           0.0...................  0.0..................  0.0..................
 ($millions/year).
                                     0.0...................  0.0..................  0.0..................
From/To............................  From:                                                                 To:
--------------------------------------------------------------------------------------------------------------------------------------------------------

VII. Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) (RFA) 
requires agencies to prepare an regulatory flexibility analysis to 
describe the impact of the final 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 final rule is necessary to implement 
standards related to the Establishment of Exchanges and Qualified 
Health Plans as authorized by the Affordable Care Act. For purpose of 
the Regulatory Flexibility Analysis, we expect the following types of 
entities to be affected by this final rule: (1) QHP issuers; (2) agents 
and brokers; (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 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).\18\
---------------------------------------------------------------------------

    \18\ `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

[[Page 18443]]

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.
    This rule finalizes 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 
these 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 provides 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 codifying section 1312(e) of the Affordable 
Care Act, which gives States the option to permit agents or brokers to 
assist individuals in enrolling in QHPs through the Exchange. If a 
State chooses to allow agents and brokers to assist individuals in 
enrolling in QHPs through the Exchange, we establish standards that 
would apply for such enrollment. Agents and brokers must meet these 
standards and any conditions 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 final rule establishes 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 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 established 
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.

VIII. 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 a 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 final rule would not impose costs 
above that $136 million UMRA threshold on State, local, or tribal 
governments.

IX. Federalism

    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a 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 establish an approved 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 final rule does not impose 
substantial direct requirement costs on State and local governments, 
this 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 (that is, 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 final 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 
establish 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 rule, 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

[[Page 18444]]

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 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.

45 CFR Part 157

    Employee benefit plans, Health insurance, Health maintenance 
organization (HMO), Health records, Hospitals, Indians, Individuals 
with disabilities, 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 amends 45 CFR subtitle A, subchapter B, as set forth 
below:

Subchapter B--Requirements Relating to Health Care Access

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

0
1. The authority citation for part 155 is revised to read as follows:

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

0
2. Revise the part 155 heading to read as set forth above.

0
3. Add subparts A through E to read as follows:
Subpart A--General Provisions
Sec.
155.10 Basis and scope.
155.20 Definitions.
Subpart B--General Standards Related to the Establishment of an 
Exchange
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 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 personally identifiable information.
155.270 Use of standards and protocols for electronic transactions.
Subpart D--Exchange Functions in the Individual Market: Eligibility 
Determinations for Exchange Participation and Insurance Affordability 
Programs
155.300 Definitions and general standards for eligibility 
determinations.
155.302 Options for conducting eligibility determinations.
155.305 Eligibility standards.
155.310 Eligibility process.
155.315 Verification process related to eligibility for enrollment 
in a QHP through the Exchange.
155.320 Verification process related to eligibility for insurance 
affordability programs.
155.330 Eligibility redetermination during the benefit year.
155.335 Annual eligibility redetermination.
155.340 Administration of advance payments of the premium tax credit 
and cost-sharing reductions.
155.345 Coordination with Medicaid, CHIP, the Basic Health Program, 
and the Pre-existing Condition Insurance Plan.
155.350 Special eligibility standards and process for Indians.
155.355 Right to appeal.
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.

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:
    (1) 1301. Qualified health plan defined
    (2) 1302. Essential health benefits requirements
    (3) 1303. Special rules
    (4) 1304. Related definitions
    (5) 1311. Affordable choices of health benefit plans.
    (6) 1312. Consumer choice
    (7) 1313. Financial integrity.
    (8) 1321. State flexibility in operation and enforcement of 
Exchanges and related requirements.
    (9) 1322. Federal program to assist establishment and operation of 
nonprofit, member-run health insurance issuers.
    (10) 1331. State flexibility to establish Basic Health Programs for 
low-income individuals not eligible for Medicaid.
    (11) 1334. Multi-State plans.
    (12) 1402. Reduced cost-sharing for individuals enrolling in QHPs.
    (13) 1411. Procedures for determining eligibility for Exchange 
participation, advance premium tax credits and reduced cost sharing, 
and individual responsibility exemptions.
    (14) 1412. Advance determination and payment of premium tax credits 
and cost-sharing reductions.
    (15) 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,

[[Page 18445]]

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 enrolled in a QHP through an Exchange in 
accordance with 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 for him or herself 
through an application submitted to the Exchange or transmitted to the 
Exchange by an agency administering an insurance affordability program 
for at least one of the following:
    (i) Enrollment in a QHP through the Exchange; or
    (ii) Medicaid, CHIP, and the BHP, if applicable.
    (2) An employer or employee seeking eligibility for enrollment in a 
QHP through the SHOP, where applicable.
    Application filer means an applicant, an adult who is in the 
applicant's household, as defined in 42 CFR 435.603(f), or family, as 
defined in section 36B(d)(1) of the Code, an authorized representative, 
or if the applicant is a minor or incapacitated, someone acting 
responsibly for an applicant.
    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 enrolled in a QHP in the Exchange.
    Educated health care consumer has the meaning given the term in 
section 1304(e) of the Affordable Care Act.
    Eligible employer-sponsored plan has the meaning given the term in 
section 5000A(f)(2) of the Code.
    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 includes 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 are 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 standards 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 Blueprint means information submitted by a State, an 
Exchange, or a regional Exchange that sets forth how an Exchange 
established by a State or a regional Exchange meets the Exchange 
approval standards established in Sec.  155.105(b) and demonstrates 
operational readiness of an Exchange as described in Sec.  
155.105(c)(2).
    Exchange service area means the area in which the Exchange is 
certified to operate, in accordance with the standards specified in 
subpart B of this part.
    Grandfathered health plan has the meaning given the term in Sec.  
147.140.
    Group health plan 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 insurance coverage has the meaning given to the term in 
Sec.  144.103.
    Health plan has the meaning given to the term in section 1301(b)(1) 
of the Affordable Care Act.
    Individual market has the meaning given the term in section 
1304(a)(2) of the Affordable Care Act.
    Initial open 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.
    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 standards described in Sec.  155.210.
    Plan year means a consecutive 12 month period during which a health 
plan provides coverage for health benefits. A plan year may be a 
calendar year or otherwise.
    Plain language has the meaning given to the term in section 
1311(e)(3)(B) of the Affordable Care Act.
    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 in accordance with the process described in subpart K of 
part 155.
    Qualified health plan issuer or QHP issuer means a health insurance 
issuer that offers a QHP in accordance with a certification from an 
Exchange.

[[Page 18446]]

    Qualified individual means, with respect to an Exchange, an 
individual who has been determined eligible to enroll through the 
Exchange in a QHP in the individual market.
    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 has the meaning given to the term in section 
1304(a)(3) of the Affordable Care Act.
    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


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 to offer QHPs on 
January 1, 2014, and thereafter required in accordance with Sec.  
155.106. HHS may consult with other Federal Government agencies in 
determining whether to approve an Exchange.
    (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, D, E, H, and K of this part;
    (2) The Exchange is capable of carrying out the information 
reporting requirements in accordance with section 36B of the Code;
    (3) The entire geographic area of the State is in the service area 
of an Exchange, or multiple Exchanges consistent with Sec.  155.140(b).
    (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 Blueprint 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 
Blueprint through a readiness assessment conducted by HHS.
    (d) State Exchange approval. Each Exchange must receive written 
approval or conditional approval of its Exchange Blueprint 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 Blueprint. The State must 
notify HHS in writing before making a significant change to its 
Exchange Blueprint; no significant change to an Exchange Blueprint may 
be effective until it is approved by HHS in writing or 60 days after 
HHS receipt of a completed request. For good cause, HHS may extend the 
review period by an additional 30 days to a total of 90 days. HHS may 
deny a request for a significant change to an Exchange Blueprint within 
the review period.
    (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, D, 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 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 
Blueprint 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 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, or any other State agency that meets 
the qualifications of paragraph (a)(1) of this section.
    (b) Responsibility. To the extent that an Exchange establishes such 
agreements, 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:

[[Page 18447]]

    (i) Includes at least one voting member who is a consumer 
representative;
    (ii) 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, 156, or 
157 of this subchapter 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 mental health or substance abuse disorders;
    (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 Blueprint 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 service 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, 
according to the Congressional Budget Office estimates for projected 
coverage in 2016 that were published on March 30, 2011.
    (b) Process for determining non-compliance. Any State described in 
paragraph (a) of this section 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) States may generate funding, such as through user fees on 
participating issuers, for Exchange operations; and
    (2) No Federal grants under section 1311 of the Affordable Care Act 
will be awarded for State Exchange establishment after January 1, 2015.

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 D, E, H, and K of 
this part.
    (b) Certificates of exemption. The Exchange must issue certificates 
of exemption consistent with sections 1311(d)(4)(H) and 1411 of the 
Affordable Care Act.
    (c) 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.
    (d) Quality activities. The Exchange must evaluate quality 
improvement strategies and oversee implementation of enrollee 
satisfaction surveys,

[[Page 18448]]

assessment and ratings of health care quality and outcomes, information 
disclosures, and data reporting in accordance with sections 1311(c)(1), 
1311(c)(3), and 1311(c)(4) of the Affordable Care Act.
    (e) Clarification. In carrying out its responsibilities under this 
subpart, an Exchange is not operating on behalf of a QHP.


Sec.  155.205  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 and meets the requirements outlined in paragraphs (c)(1), 
(c)(2)(i), and (c)(3) of this section.
    (b) Internet Web site. The Exchange must maintain an up-to-date 
Internet Web site that meets the requirements outlined in paragraph (c) 
of this section and:
    (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 the enrollee satisfaction survey, as described 
in section 1311(c)(4) of the Affordable Care Act;
    (v) Quality ratings assigned in accordance with section 1311(c)(3) 
of the Affordable Care Act;
    (vi) Medical loss ratio information as reported to HHS in 
accordance with 45 CFR part 158;
    (vii) Transparency of coverage measures reported to the Exchange 
during certification in accordance with Sec.  155.1040; and
    (viii) The provider directory made available to the Exchange in 
accordance with Sec.  156.230.
    (2) 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 paragraphs (b)(2)(i) and (ii) of this section;
    (iv) Administrative costs of such Exchange; and
    (v) Monies lost to waste, fraud, and abuse.
    (3) 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.
    (4) Allows for an eligibility determination to be made in 
accordance with subpart D of this part.
    (5) Allows a qualified individual to select a QHP in accordance 
with subpart E of this part.
    (6) Makes 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.
    (c) Accessibility. Information must be provided to applicants and 
enrollees in plain language and in a manner that is accessible and 
timely to--
    (1) Individuals living with disabilities including accessible Web 
sites and the provision of auxiliary aids and services at no cost to 
the individual in accordance with the Americans with Disabilities Act 
and section 504 of the Rehabilitation Act.
    (2) Individuals who are limited English proficient through the 
provision of language services at no cost to the individual, including
    (i) Oral interpretation;
    (ii) Written translations; and
    (iii) Taglines in non-English languages indicating the availability 
of language services.
    (3) Inform individuals of the availability of the services 
described in paragraphs (c)(1) and (2) of this section and how to 
access such services.
    (d) Consumer assistance. The Exchange must have a consumer 
assistance function that meets the standards in paragraph (c) of this 
section, 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 that meet the standards in paragraph (c) of this 
section to educate consumers about the Exchange and insurance 
affordability programs 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 or individuals described in 
paragraph (c) of this section.
    (b) Standards. The Exchange must develop and publicly disseminate--
    (1) A set of standards, to be met by all entities and individuals 
to be awarded Navigator grants, designed to prevent, minimize and 
mitigate any conflicts of interest, financial or otherwise, that may 
exist for an entity or individuals to be awarded a Navigator grant and 
to ensure that all entities and individuals carrying out Navigator 
functions have appropriate integrity; and
    (2) A set of training standards, to be met by all entities and 
individuals carrying out Navigator functions under the terms of a 
Navigator grant, to ensure expertise in:
    (i) The needs of underserved and vulnerable populations;
    (ii) Eligibility and enrollment rules and procedures;
    (iii) The range of QHP options and insurance affordability 
programs; and,
    (iv) The privacy and security standards applicable under Sec.  
155.260.
    (c) Entities and individuals eligible to be a Navigator. (1) To 
receive a Navigator grant, an entity or individual must--
    (i) Be capable of carrying out at least those duties described in 
paragraph (e) 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;
    (iv) Not have a conflict of interest during the term as Navigator; 
and,
    (v) Comply with the privacy and security standards adopted by the 
Exchange as required in accordance with Sec.  155.260.
    (2) The Exchange must include an entity as described in paragraph 
(c)(2)(i) of this section and an entity from at least one of the other 
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 or individuals that meet 
the requirements of this section. Other entities may include but are 
not limited

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to Indian tribes, tribal organizations, urban Indian organizations, and 
State or local human service agencies.
    (d) Prohibition on Navigator conduct. The Exchange must ensure that 
a Navigator must not--