[Federal Register Volume 78, Number 22 (Friday, February 1, 2013)]
[Proposed Rules]
[Pages 7348-7371]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-02139]



[[Page 7348]]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

45 CFR Parts 155 and 156

[CMS-9958-P]
RIN 0938-AR68


Patient Protection and Affordable Care Act; Exchange Functions: 
Eligibility for Exemptions; Miscellaneous Minimum Essential Coverage 
Provisions

AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.

ACTION: Proposed rule.

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SUMMARY: This proposed rule would implement certain functions of the 
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. These specific statutory 
functions include determining eligibility for and granting certificates 
of exemption from the shared responsibility payment for not maintaining 
minimum essential coverage as described in section 5000A of the 
Internal Revenue Code. Additionally, this proposed rule implements the 
responsibility of the Secretary of Health and Human Services, in 
coordination with the Secretary of the Treasury, to designate other 
health benefits coverage as minimum essential coverage by providing 
that certain coverage be designated as minimum essential coverage. It 
also outlines substantive and procedural requirements that other types 
of individual coverage must fulfill in order to be certified as minimum 
essential coverage under the Internal Revenue Code.

DATES: To be assured consideration, comments must be received at one of 
the addresses provided below, no later than 5 p.m. on March 18, 2013.

ADDRESSES: In commenting, please refer to file code CMS-9958-P. Because 
of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    You may submit comments in one of four ways (please choose only one 
of the ways listed):
    1. Electronically. You may submit electronic comments on this 
regulation to http://www.regulations.gov. Follow the ``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-9958-P, P.O. Box 8010, 
Baltimore, MD 21244-8010.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By express or overnight mail. You may send written comments to 
the following address only: Centers for Medicare & Medicaid Services, 
Department of Health and Human Services, Attention: CMS-9958-P, Mail 
Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
    4. By hand or courier. Alternatively, you may deliver (by hand or 
courier) your written comments only to the following addresses prior to 
the close of the comment period:
    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, 
call telephone number (410) 786-7195 in advance to schedule your 
arrival with one of our staff members.
    Comments erroneously mailed to the addresses indicated as 
appropriate for hand or courier delivery may be delayed and received 
after the comment period.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: Lauren Block, (301) 492-4425, for 
provisions related to exemptions from the shared responsibility 
payment.
    Amanda Ledford, (410) 786-1565, for provisions related to minimum 
essential coverage.

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://www.regulations.gov. Follow the search instructions on that Web site to 
view public comments.
    Comments received timely will also be 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.

Executive Summary

    To ensure effective and efficient implementation of the insurance 
market reforms, the Affordable Care Act requires a nonexempt individual 
to maintain minimum essential coverage or make a shared responsibility 
payment. The Affordable Care Act specifies the categories of 
individuals who are eligible to receive exemptions from the shared 
responsibility payment under section 5000A of the Code, which provides 
nonexempt individuals with a choice: Maintain minimum essential 
coverage for themselves and any nonexempt family members or include an 
additional payment with their federal income tax return. Many 
individuals are exempt from the shared responsibility payment, 
including some whose religious beliefs conflict with acceptance of the 
benefits of private or public insurance and those who do not have an 
affordable health insurance coverage option available. Section 
1311(d)(4)(H) of the Affordable Care Act (42 U.S.C. 18031(d)(4)(H)) 
directs the new health insurance marketplaces, called Affordable 
Insurance Exchanges (Exchanges), to issue certifications of exemption 
from the shared responsibility payment under section 5000A of the Code 
to eligible individuals. Section 1411 of the Affordable Care Act (42 
U.S.C. 18081) generally provides procedures for determining an 
individual's eligibility for various benefits relating to health 
coverage, including exemptions from the application of section 5000A of 
the Code.
    This proposed rule sets forth standards and processes under which 
the Exchange will conduct eligibility determinations for and grant 
certificates of exemption from the shared responsibility payment. 
Furthermore, it supports and complements rulemaking conducted by the 
Secretary of the

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Treasury with respect to section 5000A of the Internal Revenue Code 
(the Code), as added by section 1501(b) of the Affordable Care Act, 
published elsewhere in this issue of the Federal Register. The intent 
of this rule is to implement the relevant provisions while continuing 
to afford states substantial discretion in the design and operation of 
an Exchange, with greater standardizations provided where directed by 
the statute or where there are compelling practical, efficiency, or 
consumer protection reasons.
    Under section 5000A(f)(1)(E), the Secretary of Health and Human 
Services, in coordination with the Secretary of the Treasury, may 
designate other health benefits coverage as minimum essential coverage. 
This proposed rule provides standards for determining whether certain 
other types of health insurance coverage constitute minimum essential 
coverage and procedures for sponsors to follow for a plan to be 
identified as minimum essential coverage under section 5000A. This rule 
proposes to designate certain types of existing health coverage as 
minimum essential coverage. Other types of coverage, not statutorily 
specified and not designated as minimum essential coverage in this 
regulation, may be recognized as minimum essential coverage if certain 
substantive and procedural requirements are met as proposed in this 
rule. These additional categories of minimum essential coverage, both 
those designated per se and those that may apply for recognition are 
neither group health insurance coverage nor individual health 
insurance. Consumers with types of coverage that are recognized as 
minimum essential coverage in accordance with this rule would be 
determined to have minimum essential coverage for purposes of the 
minimum essential coverage requirement if the coverage is certified to 
be substantially compliant with the requirements of Title I of the 
Affordable Care Act that apply to non-grandfathered plans in the 
individual market.

Table of Contents

Executive Summary
I. Background
    A. Legislative Overview
    B. Stakeholder Consultation and Input
    C. Structure of the Proposed Rule
    D. Alignment With Related Rules and Published Information
II. Provisions of the Proposed Regulation
    A. Part 155--Exchange Establishment Standards and Other Related 
Standards Under the Affordable Care Act
    1. Subpart A--General Provisions
    a. Definitions (Sec.  155.20)
    2. Subpart C--General Functions of an Exchange
    a. Functions of an Exchange (Sec.  155.200)
    3. Subpart G--Exchange Functions in the Individual Market: 
Eligibility Determinations for Exemptions
    a. Definitions and General Requirements (Sec.  155.600)
    b. Eligibility Standards for Exemptions (Sec.  155.605)
    c. Eligibility Process for Exemptions (Sec.  155.610)
    d. Verification Process Related to Eligibility for Exemptions 
(Sec.  155.615)
    e. Eligibility Redeterminations for Exemptions During a Calendar 
Year (Sec.  155.620)
    f. Options for Conducting Eligibility Determinations for 
Exemptions (Sec.  155.625)
    g. Reporting (Sec.  155.630)
    h. Right to Appeal (Sec.  155.635)
    B. Part 156--Health Insurance Issuer Standards Under the 
Affordable Care Act, Including Standards Related to Exchanges
    a. Definition of Minimum Essential Coverage (Sec.  156.600)
    b. Other Types of Coverage That Qualify as Minimum Essential 
Coverage (Sec.  156.602)
    c. Requirements for Recognition as Minimum Essential Coverage 
for Coverage Not Otherwise Designated Minimum Essential Coverage in 
the Statute or This Regulation (Sec.  156.604)
    d. HHS Audit Authority (Sec.  156.606)
    e. Eligibility for Minimum Essential Coverage
III. Collection of Information Requirements
IV. Response to Comments
V. Summary of Regulatory Impact Statement
VI. Regulatory Flexibility Act
VII. Unfunded Mandates
VIII. Federalism
IX. Congressional Review Act
X. Regulation Text

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
CHIP Children's Health Insurance Program
CMS Centers for Medicare & Medicaid Services
FPL Federal Poverty Level
HHS Department of Health and Human Services
IRS Internal Revenue Service
NAIC National Association of Insurance Commissioners
QHP Qualified Health Plan
SSA Social Security Administration
SSN Social Security Number
The Code Internal Revenue Code of 1986, as amended

I. Background

A. Legislative Overview

    Section 1501(b) of the Affordable Care Act added section 5000A of 
the Internal Revenue Code (the Code) to a new chapter 48 of subtitle D 
(Miscellaneous Excise Taxes) of the Code effective for months beginning 
after December 31, 2013. Section 5000A of the Code, which was 
subsequently amended by the TRICARE Affirmation Act of 2010, Public Law 
111-159 (124 Stat. 1123) and Public Law 111-173 (124 Stat. 1215), 
requires that nonexempt individuals either maintain minimum essential 
coverage or make a shared responsibility payment, includes standards 
for the calculation of the shared responsibility payment, describes 
categories of individuals who may qualify for an exemption from the 
shared responsibility payment, and provides the definition of ``minimum 
essential coverage.''
    Section 1311(d)(4)(H) of the Affordable Care Act specifies that the 
Exchange will, subject to section 1411 of the Affordable Care Act, 
grant certifications of exemption from the shared responsibility 
payment specified in section 5000A of the Code. Section 
1311(d)(4)(I)(i) of the Affordable Care Act specifies that the Exchange 
will transfer to the Secretary of the Treasury a list of the 
individuals to whom the Exchange provided such a certification. Section 
1411(a)(4) of the Affordable Care Act provides that the Secretary of 
Health and Human Services (the Secretary) will establish a program for 
determining whether a certification of exemption from the shared 
responsibility requirement and penalty will be issued by an Exchange 
under section 1311(d)(4)(H) of the Affordable Care Act. We propose to 
interpret this provision as authorizing the Secretary to determine 
``whether,'' with respect to the nine exemptions provided for under 
section 5000A of the Code, Exchanges would perform the role of issuing 
certifications of exemption under section 1311(d)(4)(H) of the 
Affordable Care Act, whether eligibility for the exemption would be 
determined solely through tax filing, or whether both processes would 
be available. Under this interpretation, the responsibility under 
section 1311(d)(4)(H) of the Affordable Care Act to issue 
certifications of exemption would be ``subject to'' these 
determinations by the Secretary under section 1411(a)(4) of the 
Affordable Care Act, and Exchanges would thus only be required to issue 
certifications of exemption with respect to exemptions not exclusively 
assigned to IRS.
    Section 1321 of the Affordable Care Act discusses state flexibility 
in the operation and enforcement of Exchanges and related requirements. 
Section 1321(a) of the Affordable Care Act provides broad authority for 
the

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Secretary to establish standards and regulations to implement the 
statutory requirements related to Exchanges and other components of 
title I of the Affordable Care Act as amended by the Health Care and 
Education Reconciliation Act of 2010. Section 1311(k) of the Affordable 
Care Act specifies that Exchanges may not establish rules that conflict 
with or prevent the application of regulations promulgated by the 
Secretary under Subtitle D of Title I of the Affordable Care Act.
    In accordance with our interpretation of these sections of the 
Affordable Care Act, and the authority provided by, inter alia, section 
1321(a) of the Affordable Care Act, we propose that under the program 
established under section 1411(a)(4) of the Affordable Care Act, the 
Exchange would determine eligibility for and grant certificates of 
exemption as described below. We also note that consistent with prior 
guidance, a state-based Exchange can be approved to operate by HHS if 
it uses a federally-managed service to make eligibility determinations 
for exemptions.
    On March 27, 2012 the Department of Health and Human Services (HHS) 
published the final rule entitled ``Patient Protection and Affordable 
Care Act; Establishment of Exchanges and Qualified Health Plans; 
Exchange Standards for Employers'' (77 FR 18309). The provisions of the 
final rule, herein referred to as the Exchange final rule, encompass 
the key functions of Exchanges related to eligibility, enrollment, and 
plan participation and management. In the Exchange final rule, 45 CFR 
155.200(b) provided that a minimum function of an Exchange is to grant 
certificates of exemption consistent with sections 1311(d)(4)(H) and 
1411 of the Affordable Care Act. This proposed rule cross-references 
several provisions in the Exchange final rule, notably the limited 
situations where eligibility and verification processes used in 
determining eligibility for enrollment in a qualified health plan (QHP) 
through the Exchange and for insurance affordability programs can also 
be used by Exchanges for the purpose of determining whether an 
individual is eligible for an exemption from the shared responsibility 
payment.
    Section 5000A(f) of the Code designates certain types of coverage 
as minimum essential coverage. The term ``minimum essential coverage'' 
includes all of the following: Government sponsored programs (the 
Medicare program under part A of title XVII of the Social Security Act 
(the Act); the Medicaid program under title XIX of the Social Security 
Act; the CHIP program under title XXI of the Act; medical coverage 
under chapter 55 of title 10, United States Code, including the TRICARE 
program; a health care program under chapter 17 or 18 of title 38, 
United States Code, as determined by the Secretary of Veterans Affairs, 
in coordination with the Secretaries of Health and Human Services and 
Treasury; a health plan under section 2504(e) of title 22, United 
States Code (relating to Peace Corps volunteers); or the 
Nonappropriated Fund Health Benefits Program of the Department of 
Defense, established under section 349 of the National Defense 
Authorization Act for Fiscal Year 1995); coverage under an eligible 
employer-sponsored plan; coverage under a health plan offered in the 
individual market within a State; and coverage under a grandfathered 
health plan. In addition, section 5000A(f)(1)(E) of the Code directs 
the Secretary of Health and Human Services, in coordination with the 
Secretary of Treasury, to designate other health benefits coverage, 
such as a state health benefits risk pool, as minimum essential 
coverage for purposes of their enrollees satisfying the minimum 
coverage requirement. This proposed regulation would designate certain 
additional types of coverage qualify as minimum essential coverage and 
also proposes a process by which other types of coverage could be 
recognized as minimum essential coverage.

B. Stakeholder Consultation and Input

    On August 3, 2010, HHS published a request for comment (the RFC) 
inviting the public to provide input regarding the rules that will 
govern the Exchanges. In particular, HHS asked states, tribal 
representatives, consumer advocates, employers, insurers, and other 
interested stakeholders to comment on the standards Exchanges should 
meet. The comment period closed on October 4, 2010.
    The public response to the RFC yielded comment submissions from 
consumer advocacy organizations, medical and health care professional 
trade associations and societies, medical and health care professional 
entities, health insurers, insurance trade associations, members of the 
general public, and employer organizations. The majority of the 
comments were related to the general functions and standards for 
Exchanges, qualified health plans (QHPs), eligibility and enrollment, 
and coordination with Medicaid. While this proposed rule does not 
directly respond to comments from the RFC, the comments received are 
described, where applicable, in discussing specific regulatory 
proposals. We intend to respond to relevant comments from the RFC, 
along with comments received on this proposed rule, as part of the 
final rule.
    In addition to the RFC, HHS has consulted with stakeholders through 
regular meetings with the National Association of Insurance 
Commissioners (NAIC), regular contact with states through the Exchange 
grant process, and meetings with tribal representatives, health 
insurance issuers, trade groups, consumer advocates, employers, and 
other interested parties. For example, we received feedback from health 
care sharing ministries about the process for how individual members 
can obtain certificates of exemption based on their membership in a 
health care sharing ministry, and an expression of interest in a 
process for allowing health care sharing ministries to obtain 
recognition that they meet the standards under section 5000A(d)(2)(B) 
of the Code. We also received information from various stakeholder 
groups regarding types of ``other coverage'' as described in section 
5000A(f)(1)(E) of the Code. Similar consultation will continue 
throughout the development of further Exchange guidance on exemptions 
and ``other coverage.''

C. Structure of the Proposed Rule

    The provisions of this proposed rule include the addition of 
subpart G to 45 CFR part 155, which includes standards for Exchanges 
related to conducting eligibility determinations for and granting 
certificates of exemption from the shared responsibility payment. We 
also propose to amend Sec.  155.200(a) to add a reference to indicate 
that, consistent with existing language in Sec.  155.200(b), granting 
certificates of exemption is a minimum function of the Exchange. 
Furthermore, we add subpart G to 45 CFR part 156 which includes 
standards related to minimum essential coverage.

D. Alignment With Related Rules and Published Information

    As noted above, this proposed rule is published in coordination 
with the Department of Treasury's proposed rule, ``Shared 
Responsibility Payment for Not Maintaining Minimum Essential Coverage'' 
(Treasury proposed rule). This regulation includes numerous cross-
references to the Treasury proposed rule, published elsewhere in this 
issue of the Federal Register.

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II. Provisions of the Proposed Regulation

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

1. Subpart A--General Provisions
a. Definitions (Sec.  155.20)
    We propose to make a technical correction to the definition of 
``applicant'' to note that it does not apply to an applicant seeking an 
exemption pursuant to proposed subpart G. We propose a separate 
definition for ``applicant'' that is specific to exemptions in Sec.  
155.600.
    We propose to make a technical correction to the definition of 
``application filer'' to note that it does not apply to an application 
filer seeking an exemption pursuant to proposed subpart G. We propose a 
separate definition for ``application filer'' that is specific to 
exemptions in Sec.  155.600.
2. Subpart C--General Functions of an Exchange
a. Functions of an Exchange (Sec.  155.200)
    The Exchange final rule specifies that the Exchange will perform 
the minimum functions described in subparts D, E, H, and K of part 155. 
In accordance with section 1311(d)(4)(H) of the Affordable Care Act and 
existing 45 CFR 155.200(b), in paragraph (a), we propose to add that 
the Exchange would also perform the functions described in subpart G of 
this part related to eligibility determinations for exemptions.
3. Subpart G--Exchange Functions in the Individual Market: Eligibility 
Determinations for Exemptions
a. Definitions and General Requirements (Sec.  155.600)
    In paragraph (a) of Sec.  155.600, we propose definitions for terms 
that apply throughout subpart G. First, we propose to define 
``applicant'' as an individual who is seeking an exemption from the 
shared responsibility payment for him or herself through an application 
submitted to the Exchange. We provide this definition to distinguish 
the use of applicant in this subpart from the definition in Sec.  
155.20 of this chapter, which is specific to an individual who is 
submitting an application for an eligibility determination for 
enrollment in a QHP.
    We propose to define ``application filer'' as an applicant, an 
individual who expects to be liable for the shared responsibility 
payment, in accordance with 26 CFR 1.5000A-1(c) of the Treasury 
proposed rule, published elsewhere in this issue of the Federal 
Register, for an applicant, an authorized representative, or if the 
applicant is a minor or incapacitated, someone acting responsibly for 
an applicant. This is consistent with the definition that is used for 
the eligibility process for enrollment in a QHP and for insurance 
affordability programs, with one exception. In this proposed rule, we 
use the liability structure established in 26 CFR 1.5000A-1(c) of the 
Treasury proposed rule, published elsewhere in this issue of the 
Federal Register to assist in defining the range of potential 
application filers, while the definition of application filer in Sec.  
155.20 uses the tax household or Medicaid household, as they are the 
relevant units for eligibility for enrollment in a QHP and for 
insurance affordability programs. We note that we expect to modify the 
proposed language in Sec.  155.227 (78 FR 4711) to incorporate the 
minor changes necessary to clarify that authorized representatives can 
assist individuals seeking exemptions. Similarly, we intend to modify 
the proposed language in Sec.  155.225 (78 FR 4710) to clarify that 
certified application counselors can assist individuals seeking 
exemptions. We seek comment on how authorized representatives and 
certified application counselors can best support individuals seeking 
certificates of exemption from the Exchange.
    We propose to define ``exemption'' as an exemption from the shared 
responsibility payment. While sections 5000A(d)(2) through (4) of the 
Code describe individuals who are not ``applicable individuals'' for 
purposes of the requirement to maintain minimum essential coverage in 
section 5000A of the Code, and sections 5000A(e)(1) through (5) of the 
Code describe individuals who are exempt from liability for the shared 
responsibility payment imposed under section 5000A(b) of the Code, the 
consequence for individuals described in either category is the same: 
Individuals in both categories are not subject to the shared 
responsibility payment for not maintaining minimum essential coverage.
    We propose to define ``health care sharing ministry'' in the same 
manner as provided in 26 CFR 1.5000A-3(b) of the Treasury proposed 
rule, published elsewhere in this issue of the Federal Register.
    We propose to define ``required contribution'' in the same manner 
as provided in 26 CFR 1.5000A-3(e) of the Treasury proposed rule, 
published elsewhere in this issue of the Federal Register.
    We propose to define ``Indian tribe'' in the same manner as in 26 
CFR 1.5000A-3(g) of the Treasury proposed rule, published elsewhere in 
this issue of the Federal Register, which in turn references the 
definition in section 45A(c)(6) of the Code. We note that section 
45A(c)(6) of the Code describes certain federally-recognized Indian 
tribes (including any qualified Alaska Native village or regional or 
village corporation).
    We welcome comment on these definitions.
    Consistent with 45 CFR 155.300(c), in paragraph (b), we propose 
that for purposes of this subpart, any attestation that an applicant is 
to provide under this subpart may also be provided by an application 
filer on behalf of the applicant.
    In paragraph (c) of Sec.  155.600, we propose that for the purposes 
of this subpart, the Exchange must consider information through 
electronic data sources, other information as provided by the 
applicant, or other information as available in the records of the 
Exchange to be reasonably compatible with an applicant's attestation if 
the difference or discrepancy does not impact the eligibility for the 
relevant exemption that the applicant requested. This is the same 
standard that is used in 45 CFR 155.300(d) for eligibility for 
enrollment in a QHP and for insurance affordability programs. This 
proposal minimizes the administrative burden on applicants by limiting 
additional requests for information to only those situations in which 
there is good cause for such requests. We note that as provided in 
subpart D, this threshold does not preclude flexibility for Exchanges 
in further defining reasonable compatibility, particularly with regard 
to specific categories of exemptions, as long as the Exchange adheres 
to this general standard as well.
    We also propose to add paragraphs (d) and (e) in order to specify 
that the accessibility and notice requirements in Sec.  155.205(c) and 
Sec.  155.230, respectively, apply to exemptions as well, given that 
the definition of applicant in this subpart is otherwise specific to 
exemptions. We note that 45 CFR 155.230(d), as proposed (78 FR 4594), 
specifies that notices will be provided either through standard mail, 
or, if an individual elects, electronically, provided that standards 
for use of electronic notices are met as set forth in 42 CFR 435.918, 
as proposed in the same issue of the Federal Register. Further 
discussion of this approach is at 78 FR 4601-4602 and 4635.

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b. Eligibility standards for Exemptions (Sec.  155.605)
    Section 5000A of the Code provides nine categories of exemptions. 
Of these nine categories, section 5000A expressly provides that 
certifications of exemptions in two categories (religious conscience 
and hardship) be provided by the Exchange under section 1311(d)(4)(H) 
of the Affordable Care Act. Under the program established under section 
1411(a)(4) of the Affordable Care Act for determining whether 
certifications of exemptions are to be issued by Exchanges under 
section 1311(d)(4)(H) of the Affordable Care Act, we are proposing that 
Exchanges would issue certificates of exemption in these two 
categories. With respect to the other seven exemptions, for reasons set 
forth below, we propose that under the program provided for in section 
1411(a)(4) of the Affordable Care Act, Exchanges would issue 
certifications of exemption with respect to three additional categories 
of exemption (with exemptions also available through the tax filing 
process). In the four remaining exemption categories, however, we 
propose that under the program established under section 1411(a)(4) of 
the Affordable Care Act, certifications would not be issued by 
Exchanges under section 1311(d)(4)(H) of the Affordable Care Act, and 
the determination of whether an individual is eligible for an exemption 
under section 5000A of the Code in these categories would be made 
exclusively by IRS through the tax filing process.
    In this section, we propose standards related to the five 
categories of exemptions that we are proposing that the program under 
section 1411(a)(4) of the Affordable Care Act assign to Exchanges, and 
discuss our reasons for assigning the remaining four categories of 
exemptions exclusively to the IRS at the end of this section.
    In paragraph (a) of Sec.  155.605, we propose that except as 
specified in paragraph (g), the Exchange would determine an applicant 
eligible for and grant a certificate of exemption for a month if the 
Exchange determines that he or she meets the requirements for one of 
the categories of exemptions described in this section for at least one 
day in the month, consistent with 26 CFR 1.5000A-3 of the Treasury 
proposed rule, published elsewhere in this issue of the Federal 
Register. We note that an individual will not need to submit a separate 
application for each month in which he or she is applying for an 
exemption. We also note that the proposed standards for hardship 
exemptions specify that depending on the circumstances for each 
specific hardship exemption category, the certificate may be provided 
for an entire calendar year or instead for a specific month or period 
of months, including periods of time that stretch across more than one 
calendar year (for example, in the case of a hardship that occurs for 
the first time in December); this is discussed further in the preamble 
associated with paragraph (g) of this section.
    We note that an individual may be eligible for multiple exemptions 
simultaneously; while there is no practical reason to have multiple 
exemptions in effect at any given time, we believe that an applicant 
should be able to apply for multiple exemptions in case some are 
denied, and also receive any exemptions for which he or she is 
eligible. We considered specifying that the Exchange could only accept 
an application for one category of exemption at a time from an 
applicant, but did not propose this approach because we believe that it 
increases the length of time required to conclude the overall 
eligibility process in cases where the initial application is denied. 
Further, we considered specifying that once the Exchange granted a 
certificate of exemption based on one category, it would not provide 
additional exemptions for the same time period. However, we believe 
that the statute does not provide the flexibility for the Exchange to 
deny an exemption to an applicant who is otherwise eligible, and think 
that the number of applicants who will continue to pursue exemptions 
after receiving one for a coverage month is too small to increase 
administrative burden in any significant way. We solicit comments 
regarding this approach.
    In paragraph (b), we propose that except as specified, an applicant 
is required to submit a new application for each year for which an 
applicant would like to be considered for an exemption through the 
Exchange, and that an exemption will only be provided for a calendar 
year that the applicant submitted an application. This proposal is 
based on the recognition that for many categories of exemptions, an 
applicant's exemption status may change from year to year. There are 
exceptions for exemptions provided based on membership in an Indian 
tribe and for religious conscience, in recognition that an individual's 
qualification for these exemptions is expected to remain the same from 
year to year. There are also exceptions for hardship, since some 
categories of hardship will be provided for one or more months and may 
be provided for periods of time that stretch across more than one 
calendar year (for example, in the case of a hardship that occurs for 
the first time in December), and some categories of hardship can only 
be provided after the close of a calendar year. We welcome comments on 
this approach and how the Exchange can expedite and streamline the 
process.
    We considered whether to specify that the Exchange send a notice to 
each individual who had an exemption certificate from the Exchange for 
a calendar year, in order to remind him or her regarding the 
opportunity to apply to for an exemption for the following calendar 
year, and whether this could also be an individual option. We solicit 
comments regarding the use of such a reminder and on a renewal process 
more generally.
    In paragraphs (c) through (g) of this section, we propose standards 
for eligibility for an exemption through the Exchange. First, in 
paragraph (c), we propose to codify the statutory eligibility standards 
for the exemption based on religious conscience. In paragraph (c)(1), 
we propose that the Exchange will determine an applicant eligible for 
an exemption for a month if he or she is a member of a recognized 
religious sect or division described in section 1402(g)(1) of the Code, 
and an adherent of established tenets or teachings of such sect or 
division for such month, in accordance with 26 CFR 1.5000A-3(a) of the 
Treasury proposed rule, published elsewhere in this issue of the 
Federal Register. We note that the statute prescribes the religious 
sects and divisions that are covered by this exemption, and that as 
such, HHS does not have discretion to expand it to cover other groups.
    In paragraph (c)(2), we propose eligibility standards regarding the 
duration of the exemption for religious conscience. In paragraph 
(c)(2)(i), we propose that the Exchange grant the exemption for 
religious conscience to an applicant that meets the standards of 
paragraph (c)(1) of this section for a month on a continuing basis, 
until such time that the applicant either reaches the age of 18, or 
reports that he or she no longer meets the standards provided in (c)(1) 
of this section. This proposal is based on our understanding that 
membership in the religious sects or divisions described in section 
1402(g)(1) of the Code will not typically change from year to year, 
along with the provision in Sec.  155.620(b), which provides that an 
applicant who receives a certificate of exemption from the Exchange 
must report changes with respect to the eligibility standards for 
exemptions established in this section. Further, the provision in Sec.  
155.620(a)

[[Page 7353]]

also provides that if an individual reports to the Exchange that they 
no longer meet the standards established in paragraph (c)(1) of this 
section, such as if the individual chooses to terminate his or her 
membership in a religious sect or division, the Exchange will 
redetermine his or her eligibility, which will result in the Exchange 
discontinuing the individual's exemption. We solicit comment on this 
approach.
    We propose to add paragraph (c)(2)(ii) to specify how the Exchange 
should handle a situation in which an individual who has a certificate 
of exemption based on religious conscience that was granted prior to 
the individual reaching the age of 18 turns 18. We believe that a 
special process is necessary in this situation so that any future 
exemption is based on the individual's own attestation and not an 
attestation provided by a parent or legal guardian. Accordingly, we 
propose that the Exchange send such an individual a notice when he or 
she reaches the age of 18 that informs the individual that he or she 
needs to submit a new exemption application if he or she would like to 
maintain the certificate of exemption. If the applicant submits a new 
application that reflects uninterrupted membership, and it is approved, 
the Exchange will provide a new certificate of exemption that is 
retroactive and leaves no gap.
    We propose to add paragraph (c)(3) to specify that the Exchange 
will grant an exemption in this category prospectively or 
retrospectively, including after the close of the calendar year, which 
provides flexibility for applicants and ensures that this exemption 
will be available as needed during the tax filing process, as it can 
only be provided by the Exchange.
    In paragraph (d), we propose that the Exchange will determine an 
applicant eligible for an exemption for a month if the applicant is a 
member of a health care sharing ministry for such month in accordance 
with 26 CFR 1.5000A-3(b) of the Treasury proposed rule, published 
elsewhere in this issue of the Federal Register. This exemption is 
discussed further in the preamble associated with 26 CFR 1.5000A-3(b) 
of the Treasury proposed rule, published elsewhere in this issue of the 
Federal Register. We note that unlike the exemption for religious 
conscience, our understanding is that membership in a health care 
sharing ministry can fluctuate over time, particularly as we understand 
that membership is contingent on a financial contribution. 
Consequently, we propose that an applicant must re-apply for this 
exemption each calendar year. Further, for the same reason, we note 
that the language of this proposal specifies that the Exchange will 
only determine an individual eligible for an exemption in this category 
if he or she is a member of a health care sharing ministry at the time 
the application for an exemption is submitted; that is, the Exchange 
would not provide this exemption based on likely or probable future 
membership, including likely or probable membership beyond the calendar 
year. Lastly, consistent with these proposals, we propose to add 
paragraph (d)(2) to specify that the Exchange may only provide an 
exemption in this category retrospectively. We note that an individual 
may also receive this exemption retrospectively through the tax filing 
process. Furthermore, as proposed below in Sec.  155.610(h), after 
December 31 of a given calendar year, the Exchange will not accept an 
application for an exemption in this category for months for such 
calendar year. We solicit comments on this approach.
    In paragraph (e), we propose the eligibility standards for the 
exemption based on incarceration. We specify that the Exchange must 
determine an individual eligible for an exemption for a month that he 
or she meets the definition specified in 26 CFR 1.5000A-3(d) of the 
Treasury proposed rule, published elsewhere in this issue of the 
Federal Register, which covers anyone who is confined after the 
disposition of charges in a jail, prison, or similar penal institution 
or correctional facility, which we believe can be implemented 
identically to the standard used for eligibility for enrollment in a 
QHP. We note that this proposed language does not provide for this 
exemption to be granted in cases where future incarceration is in 
doubt; rather, we propose that the Exchange will only provide this 
exemption for months in which an individual was incarcerated. We also 
considered specifying that this exemption could be provided based on an 
expectation of continued incarceration, but ultimately decided not to 
provide an exemption in this case since individuals are frequently 
released from incarceration ahead of the initially-expected release 
date, at which point they would need to obtain minimum essential 
coverage unless they apply for and are determined eligible for a 
separate exemption. Further, unlike some other categories of 
exemptions, it seems unlikely that an applicant who is seeking an 
exemption based on incarceration is doing so to obtain guidance 
regarding a purchasing decision, which is the primary purpose of 
providing prospective exemptions. We solicit comments on this approach.
    We propose to add paragraph (e)(2) to specify that the Exchange may 
only provide an exemption in this category retrospectively. We note 
that an individual may also receive this exemption retrospectively 
through the tax filing process. Furthermore, as proposed below in Sec.  
155.610(h), after December 31 of a given calendar year, the Exchange 
will not accept an application for an exemption in this category for 
months for such calendar year.
    In paragraph (f), we propose eligibility standards for the 
exemption based on membership in an Indian tribe. In paragraph (f)(1), 
we propose to codify that the Exchange must determine an applicant 
eligible for an exemption for a month if he or she is a member of an 
Indian tribe for such month, in accordance with 26 CFR 1.5000A-3(g) of 
the Treasury proposed rule, published elsewhere in this issue of the 
Federal Register. We note that the definition of Indian used in the 
statute for this exemption is the same as is used for the cost-sharing 
and special enrollment provisions in subparts D and E, respectively.
    In paragraph (f)(2), we propose eligibility standards regarding the 
duration of the exemption for membership in an Indian tribe, such that 
the Exchange must grant the exemption for membership in an Indian tribe 
to an applicant who meets the standards of paragraph (f)(1) of this 
section for a month on a continuing basis, until such time that the 
individual reports that he or she no longer meets the standards 
provided in (f)(1) of this section. This proposal is based on our 
understanding that an individual's membership in an Indian tribe, as 
defined in section 45A(c)(6) of the Code, will not typically change 
from year to year. As such, we seek to reduce the administrative burden 
on the Exchange and individuals who are members of Indian tribes. We 
note that the provision in Sec.  155.620(a) also provides that if an 
individual reports to the Exchange that they no longer meet the 
standards established in paragraph (f)(1) of this section, such as if 
the individual chooses to terminate his or her membership in an Indian 
tribe, as defined in section 45A(c)(6) of the Code, the Exchange will 
redetermine his or her eligibility, which will result in the Exchange 
discontinuing the individual's exemption. We solicit comment on this 
approach.
    We propose to add paragraph (f)(3) to specify that the Exchange 
will grant an exemption in this category during the

[[Page 7354]]

year prospectively or retrospectively. We note that an individual may 
also receive this exemption retrospectively through the tax filing 
process. This permits flexibility depending on when an application is 
submitted.
    In paragraph (g), we propose eligibility standards for the 
exemption based on hardship, which is defined in section 5000A(e)(5) of 
the Code as applying to, ``any applicable individual who for any month 
is determined by the Secretary under section 1311(d)(4)(H) of the 
Affordable Care Act to have suffered a hardship with respect to the 
capability to obtain coverage under a qualified health plan.'' In 
developing some of these standards, we considered the standards 
established by the Commonwealth of Massachusetts. We note that we 
propose specific time standards for each category of hardship, and we 
solicit comments regarding whether these are appropriate, or if we 
should adopt a more uniform approach across the category.
    First, in paragraph (g)(1) of Sec.  155.605, we propose that the 
Exchange provide an exemption for hardship for a month or months in 
which an applicant experienced financial or domestic circumstances, 
including unexpected natural or human-caused events, such that he or 
she has a significant, unexpected increase in essential expenses; the 
expense of purchasing health insurance would have caused him or her to 
experience serious deprivation of food, shelter, clothing or other 
necessities; or he or she has experienced other factors similar to 
those described in paragraphs (g)(1)(i) and (ii) of this section that 
prevented him or her from obtaining minimum essential coverage. We 
propose broad language to include a range of personal scenarios that 
could negatively impact an applicant such that he or she would be 
eligible for this exemption, and we expect to clarify these criteria in 
future guidance. This proposal provides necessary flexibility for the 
Exchange to tailor an exemption for hardship to particular 
circumstances that impact an individual, but cannot adequately be 
predicted in advance. We expect that these circumstances will include, 
but not be limited to, situations in which an applicant is homeless, 
receives a shut-off notice from a utility company, faces a natural 
disaster, or experiences other unexpected natural or human-caused event 
causing significant damage to the applicant or his or her home. We 
request comment on these criteria, including on whether additional 
standards should be established in regulation or guidance. We note that 
we strive to set clearly defined standards as much as possible without 
preventing an applicant in need from being determined eligible for an 
exemption for hardship. We also solicit comments regarding whether the 
proposed time standard can be effectively implemented, or whether we 
should instead specify that a hardship under this paragraph that occurs 
at any point during a year should result in a hardship exemption for 
that entire year, as well as potentially for the entire next year, 
depending on when the hardship occurred.
    Second, in paragraph (g)(2), we propose that the Exchange provide 
an exemption for hardship for a calendar year if an applicant, or 
another individual for whom the applicant attests will be included in 
the applicant's family (as defined in 26 CFR 1.5000A-1(d)(6)), is 
unable to afford coverage for such calendar year in accordance with 26 
CFR 1.5000A-3(e) of the Treasury proposed rule, published elsewhere in 
this issue of the Federal Register, calculated using projected annual 
household income. We propose identical standards to those defined for 
the lack of affordable coverage exemption in 26 CFR 1.5000A-3(e), 
except that the Exchange would use projected household income to 
determine whether coverage is affordable under this exemption, instead 
of actual household income from the tax return for the year for which 
the exemption is requested. We note that the preamble associated with 
26 CFR 1.5000A-3(e) of the Treasury proposed rule, published elsewhere 
in this issue of the Federal Register recognizes that the information 
necessary to determine the portion of the required contribution made 
through a salary reduction arrangement and excluded from gross income 
may not be available to the applicant or the IRS. Accordingly, Treasury 
has solicited comments about practicable ways to administer this 
requirement. We also solicit comments regarding whether the approach in 
paragraph (g)(5) of this section should also be applied to this 
hardship category.
    We propose these standards as a component of hardship, rather than 
as a separate category of exemption, in order to ensure that an 
applicant can prospectively receive this exemption during a calendar 
year, and in doing so, obtain the information needed to make a 
purchasing decision and also qualify to purchase a catastrophic plan. 
We also clarify that we propose that this exemption is not available 
for a calendar year for an application that is submitted after the last 
date on which an applicant could enroll in a QHP through the Exchange 
for the calendar year for which the exemption is requested. This is 
because this exemption is designed to ensure that an applicant can 
obtain the information needed to make a purchasing decision, including 
for a catastrophic plan, which is not applicable after the last date on 
which enrollment would be possible. After this point, an individual 
will be able to seek an exemption on his or her tax return for the 
year.
    We specify in paragraph (g)(3) of Sec.  155.605 that the Exchange 
provide an exemption for hardship for a calendar year if an individual 
taxpayer who was not required to file an income tax return for such 
calendar year because his or her gross income was below the filing 
threshold, but who nevertheless filed to receive a tax benefit, claimed 
a dependent who was required to file a tax return, and the combined 
household income exceeded the applicable return filing threshold 
outlined in 26 CFR 1.5000A-3(f)(2) of the Treasury proposed rule, 
published elsewhere in this issue of the Federal Register.
    We propose to add paragraph (g)(4) to specify that the Exchange 
provide an exemption for hardship for a calendar year for an individual 
who has been determined ineligible for Medicaid for one or more months 
during the benefit year solely as a result of a State not implementing 
section 2001(a) of the Affordable Care Act. We provide an exemption for 
hardship in this circumstance to address situations in which a state's 
decision regarding the Medicaid expansion included in the Affordable 
Care Act results in an individual being ineligible for Medicaid. We 
believe that this determination is an appropriate use of the hardship 
exemption given that the Affordable Care Act anticipates that Medicaid 
will be available to such individuals. With this situation noted, we 
believe that many such individuals could also receive exemptions based 
on the standards specified in paragraph (g)(2) of this section (the 
inability to afford coverage), or section 5000A(e)(2) of the Code 
(income below filing threshold), and so propose this paragraph to 
ensure that any such individuals remaining are not liable for a shared 
responsibility payment regardless of a state's decision with respect to 
the Medicaid expansion under the Affordable Care Act. We seek comment 
on whether this exemption should be limited to such individuals who are 
also not eligible for advance payments of the premium tax credit (that 
is, with projected annual household income below the poverty 
threshold).

[[Page 7355]]

    We propose to add paragraph (g)(5) of Sec.  155.605 to specify that 
the Exchange provide an exemption for hardship for a calendar year if 
an applicant and one or more employed members of his or her family, as 
defined in 26 CFR 1.5000A-1(d)(6) of the Treasury proposed rule, 
published elsewhere in this issue of the Federal Register, are each 
determined eligible for self-only coverage in separate eligible 
employer-sponsored plans that are affordable, pursuant to 26 CFR 
1.5000A-3(e) for one or more months during the calendar year, but for 
whom the aggregate cost of employer-sponsored coverage for all the 
employed members of the family exceeds 8 percent of the household 
income for that month or those months, in accordance with 26 CFR 
1.5000A-3(e). This proposal aligns with 26 CFR 1.5000A-3(e)(3)(i) and 
(ii), which specify that for an employed individual, the affordability 
of coverage under an eligible employer-sponsored plan offered through 
such individual's employer is determined based on the cost of self-only 
coverage, regardless of whether the employed individual is eligible for 
family coverage under another eligible employer-sponsored plan because 
of the individual's relationship to another employed individual in the 
family. Thus, this hardship category is designed to provide relief for 
employed members of a family who have affordable self-only coverage 
options available and as a result do not qualify for the lack of 
affordable coverage exemption under 26 CFR 1.5000A-3(e) even though the 
family's aggregate cost of covering all of the employed members may 
exceed 8 percent of household income. We note that this category only 
covers those individuals who are actually offered self-only coverage in 
an eligible employer-sponsored plan, as the lack of affordable coverage 
exemption in paragraph 26 CFR 1.5000A-3(e) already provides an 
exemption based on affordability computed using the cost of family 
coverage for children and others who are not offered self-only coverage 
in an eligible employer-sponsored plan.
    Lastly, as noted above, section 5000A of the Code provides for four 
additional categories of exemptions that we propose, under our 
authority in section 1411(d)(4) of the Affordable Care Act to determine 
whether certificates of exemptions are issued by Exchanges under 
section 1311(d)(4)(H) of the Affordable Care Act, to make available 
solely through the tax filing process and not to be subject to 
certification by Exchanges. Specifically, we propose that the Exchange 
would not issue certifications of exemption with respect to household 
income below the filing threshold (other than the limited hardship 
exemption proposed in Sec.  155.605(g)(3) and described above); not 
being lawfully present; short coverage gaps; and inability to afford 
coverage (other than the limited hardship exemption proposed in Sec.  
155.605(g)(2) and described above).
    The exemptions for inability to afford coverage under section 
5000A(e)(1) of the Code and income below the filing threshold under 
section 5000A(e)(2) of the Code necessitate an assessment of actual 
household income, which will be unavailable until after the close of 
the tax year and which would be provided to the individual through the 
tax filing process, making a process of seeking a duplicative 
certification from an Exchange an unnecessary administrative burden. 
Under the authority in section 5000A(e)(1)(A) and (e)(2) of the Code to 
determine the year for which income will be evaluated for purposes of 
these exemptions, the Secretary (in consultation with the Secretary of 
Treasury) has determined that the relevant year is the taxable year 
that includes a month for which an individual seeks one of these 
exemptions. Verification of an individual's household income once the 
year is over is a matter of tax administration and tax compliance. 
Accordingly, we are proposing under our authority in section 1411(d)(4) 
that certifications by Exchanges not be issued with respect to these 
two exemptions (other than the hardship exemption proposed in Sec.  
155.605(g)(2) and Sec.  155.605(g)(3)).
    With respect to the exemption based on an individual not being 
lawfully present under section 5000A(d)(3) of the Code, we do not 
believe it is appropriate to provide for a process under which an 
individual would be required to present himself or herself to an 
Exchange as not lawfully present. Consequently, we are proposing that 
this exemption also be implemented exclusively through the tax filing 
process.
    Lastly, with respect to the exemption for short coverage gaps under 
section 5000A(e)(4) of the Code, as short coverage gaps can only be 
confirmed after the year has concluded, and as IRS will have 
authoritative information about whether an individual has coverage 
based on information reported by health insurance issuers under section 
6055 of the Code, we propose that this exemption also be implemented 
exclusively through the tax filing process, as proposed at 26 CFR 
1.5000A-5 of the Treasury proposed rule, published elsewhere in this 
issue of the Federal Register, in order to reduce administrative burden 
on individuals and the Exchange. We solicit comment on this approach 
and if there are alternative approaches that HHS should consider.
c. Eligibility Process for Exemptions (Sec.  155.610)
    In Sec.  155.610, we propose the process by which the Exchange will 
determine an applicant's eligibility for exemptions.
    In paragraph (a), we propose to specify that the Exchange will use 
an application established by HHS in order to collect the information 
necessary to determine eligibility and grant a certificate of exemption 
for an applicant, unless the Exchange receives approval to use an 
alternative application in accordance with paragraph (b). We also 
clarify that in cases in which relevant information has already been 
collected through the eligibility process for enrollment in a QHP and 
for insurance affordability programs, the Exchange will use this 
information for the purpose of eligibility for an exemption to the 
maximum extent possible. This proposal promotes an efficient process 
that minimizes the burden on the applicant, and is parallel to the 
approach used for eligibility for enrollment in a QHP and for insurance 
affordability programs, as specified in 45 CFR 155.405. We intend to 
provide the HHS-developed application in the near future, and expect it 
will share data elements with the application defined in 45 CFR 155.405 
for information that is common to the two applications.
    In paragraph (b) of Sec.  155.610, we propose that the Exchange may 
seek approval from HHS for an alternative application. We further 
specify that such alternative application must only request the minimum 
information necessary for the purposes identified in paragraph (a) of 
this section. Our intent is to simplify the application process by 
reducing the collection of unnecessary information. As such, we seek to 
preserve flexibility for Exchanges to utilize an alternative 
application if it efficiently assists individuals in applying for 
exemptions while also minimizing potential administrative burdens.
    We also note that there are exemptions that share common data and 
verifications with the eligibility process for enrollment in a QHP and 
for insurance affordability programs. There are also situations in 
which an individual may submit the application described in 45 CFR 
155.405, and ultimately need an exemption, including when he or she is 
determined ineligible for enrollment in a QHP based

[[Page 7356]]

on being incarcerated (other than incarceration pending the disposition 
of charges); when available coverage is unaffordable in accordance with 
proposed Sec.  155.605(g)(2); and when he or she is ineligible for 
Medicaid based solely on a state's decision with respect to the 
Medicaid expansion under the Affordable Care Act. As such, in paragraph 
(c) of Sec.  155.610, we propose that if an individual submits the 
application in 45 CFR 155.405 and then requests an exemption, the 
Exchange must use the information collected on the application for 
coverage and not duplicate any verification processes that share the 
standards specified in this subpart. We solicit comments on how best to 
coordinate these processes to ensure maximum administrative simplicity 
for all involved parties.
    In paragraph (d) of Sec.  155.610, we propose the Exchange must 
accept the application for an exemption from an application filer, and 
provide tools for the submission of an application. Section 
1413(b)(1)(A)(ii) of the Affordable Care Act, 45 CFR 155.405(a) 
specifies that the single, streamlined application for enrollment in a 
QHP through the Exchange and insurance affordability programs via an 
Internet Web site, by telephone, by mail, and in person. However, the 
Affordable Care Act does not contain similarly specific language for 
the application for an exemption; consequently, we have opted to not 
specify particular channels here. With that said, we believe that this 
language would allow the Exchange to deploy any or all of the methods 
described in 45 CFR 155.405. We solicit comments regarding whether we 
should specify some or all of the channels specified in 45 CFR 155.405.
    In paragraph (e) of Sec.  155.610, we propose that the Exchange 
will specify that an applicant who has a social security number (SSN) 
will provide such number to the Exchange. This provision is 
particularly important in the exemption process because the Secretary 
of the Treasury uses the SSN to coordinate information in the tax 
filing process. Further, the SSN provides the Exchange with additional 
abilities to ensure program integrity. However, we clarify in 
paragraphs (e)(2) and (e)(3) that the Exchange may not require an 
individual who is not seeking an exemption for him or herself to 
provide a SSN, except that the Exchange will require an application 
filer to provide the SSN for a non-applicant tax filer only if the 
applicant attests that the tax filer has a SSN and filed a tax return 
for the year for which tax data would be utilized to verify household 
income and family size for a hardship exemption as discussed in Sec.  
155.605(g) that involves such verification. This proposal follows the 
approach used for eligibility for insurance affordability programs, as 
specified in 45 CFR 155.305(e)(6), and ensures that information 
collected by the Exchange is only that information which is necessary 
to support the eligibility process. We solicit comments on the 
applicability of this provision in the context of the exemption 
eligibility process.
    In paragraph (f) of Sec.  155.610, we propose that the Exchange 
will grant a certificate of exemption to any applicant determined 
eligible in accordance with the standards for exemptions provided in 
Sec.  155.605. As specified in section 1311(d)(4)(H) of the Affordable 
Care Act, the responsibility of the Exchange is to ``grant a 
certification'', which is what will be provided to the IRS to support 
the tax filing process. Depending on the exemption for which an 
applicant receives a certificate, the certificate may cover a month, 
multiple months, a calendar year, or multiple calendar years, and may 
represent multiple exemption categories, to the extent that an 
individual receives multiple exemptions for a single tax year.
    In paragraph (g)(1) of Sec.  155.610, we propose that the Exchange 
will determine eligibility for exemptions promptly and without undue 
delay. This proposal uses the same timing threshold used throughout 
subpart D, including in 45 CFR 155.310(e)(1), with respect to 
eligibility determinations for enrollment in a QHP and for insurance 
affordability programs. We note in paragraph (g)(2) in Sec.  155.610 
that the assessment of timeliness of eligibility determinations by the 
Exchange is based on the period from the date of the application until 
the date on which the Exchange notifies the applicant of its decision. 
We expect that the Exchange will monitor the timeliness of eligibility 
determinations and strive to improve performance over time. We solicit 
comments regarding specific performance standards for the eligibility 
process described in this subpart, and whether we should define an 
outer bound in which an eligibility determination will be made (e.g., 
45 days).
    In paragraph (h), we propose to clarify that except for the 
exemption for religious conscience under Sec.  155.605(c) and for 
hardship described in Sec.  155.605(g), after December 31 of a given 
calendar year, the Exchange will not accept an application for an 
exemption for months for such calendar year. As described above, the 
other seven categories of exemptions will be available through the tax 
filing process, which we believe is a more appropriate and efficient 
avenue through which to receive exemptions after the coverage year is 
over. With the exception of the two exemptions that can only be granted 
by the Exchange, we consider the availability of exemptions from the 
Exchange necessary only until an individual can file an income tax 
return claiming an exemption for a given coverage year. We solicit 
comments regarding this approach, and whether there should be 
additional categories of exemptions for which the Exchange will grant 
exemptions after the close of a calendar year.
    In paragraph (i) of Sec.  155.610, we propose that the Exchange 
will provide timely written notice to an applicant of any eligibility 
determination for an exemption made in accordance with this subpart. We 
note that as proposed in Sec.  155.600(e), written notice can be 
provided through electronic means, consistent with Sec.  155.230(d). We 
further note that, for purposes of tax administration, if the Exchange 
determines an applicant eligible for a certificate of exemption, the 
notification provided will include an exemption certificate number, 
which we will further define in systems guidance. An individual will 
use this certificate number as part of the tax filing process.
    In paragraph (j) of Sec.  155.610, we propose that an individual 
who has been certified by an Exchange as qualifying for an exemption 
will retain the records that demonstrate not only receipt of the 
certificate of exemption but also qualification for the underlying 
exemption. For tax purposes, the Code provides that every taxpayer must 
keep records sufficient to establish all information required to be 
shown on any return the taxpayer must file. These records include any 
records and information substantiating any claim for exemption on the 
taxpayer's federal income tax return. We note that to the extent that 
the Exchange provides a certificate of exemption for which the 
underlying verification is based in part on the special circumstances 
exception proposed in Sec.  155.615(h), an individual will retain 
records that demonstrate receipt of the certificate of exemption, as 
well as the circumstances that warranted the use of the special 
circumstances exception.
d. Verification Process Related to Eligibility for Exemptions (Sec.  
155.615)
    Section 1411(b)(5) of the Affordable Care Act provides that an 
applicant who is seeking an exemption will provide information as a 
part of the eligibility process, and section 1411(c)(1) of the

[[Page 7357]]

Affordable Care Act specifies that the Exchange will verify this 
information. Section 1411(d) of the Affordable Care Act provides 
flexibility to the Secretary to define verification processes for those 
data elements for which a process is not otherwise defined in section 
1411 of the Affordable Care Act. In this section, we propose language 
regarding the verification process related to eligibility for 
exemptions. Similar to the verification process outlined in Sec.  
155.315 governing the verification process related to eligibility for 
enrollment in a qualified health plan through the Exchange, the 
Exchange will undertake a series of steps designed to assemble the 
information needed to determine an applicant's eligibility for the 
exemption for which he or she applied. These processes are designed not 
only to minimize the burden on applicants, but also to serve a valuable 
program integrity function in order to assure that applicants are only 
deemed eligible for exemptions if they meet the standards specified in 
Sec.  155.605.
    First, in paragraph (a) of Sec.  155.615, we propose that unless 
HHS grants a request for modification under paragraph (i) of this 
section, the Exchange will verify or obtain information as provided in 
this section in order to determine that the applicant is eligible for 
an exemption.
    In paragraph (b), we propose the verification process concerning 
the exemption for religious conscience. We specify that for any 
applicant requesting this exemption, the Exchange will verify that he 
or she meets the standards as outlined in Sec.  155.605(c). First, in 
paragraph (b)(1) of Sec.  155.615, we propose that except as specified 
in paragraph (b)(2) of this section, the Exchange will accept a form 
that reflects that an applicant has been approved under section 
1402(g)(1) of the Code by the Internal Revenue Service (IRS). This is 
to accommodate those situations in which an applicant has already 
received approval from IRS for an exemption from Social Security and 
Medicare taxes, which use an identical standard to that used for the 
purposes of the religious conscience exemption. Second, in paragraph 
(b)(2), we propose that except as specified in paragraphs (b)(3) and 
(4) of this section, the Exchange will accept an applicant's 
attestation that he or she is a member of a recognized religious sect 
or division described in section 1402(g)(1) of the Code, and an 
adherent of established tenets or teachings of such sect or division. 
Next, the Exchange will verify that the religious sect or division to 
which the applicant attests membership is recognized by the Social 
Security Administration (SSA) as a religious sect or division under 
section 1402(g)(1) of the Code. We expect that this verification will 
involve comparing the religious sect or division to which an applicant 
attests membership to a list maintained by SSA that is available for 
this purpose.
    Third, in paragraph (b)(3) of Sec.  155.615, we propose that if the 
information provided by an applicant regarding his or her membership in 
a recognized religious sect or division is not reasonably compatible 
with other information provided by the individual or the records of the 
Exchange, the Exchange will follow the procedures specified in 
paragraph (g) of this section concerning situations in which the 
Exchange is unable to verify information. These procedures are used 
throughout this section and described in the preamble associated with 
paragraph (g) of this section.
    Fourth, in paragraph (b)(4), we propose that if an applicant 
attests to membership in a religious sect or division that is not 
recognized by SSA as a religious sect or division under section 
1402(g)(1) of the Code, the Exchange will determine an applicant 
ineligible for this exemption. Because SSA has an established process 
for religious sects and divisions to follow in order to become 
recognized, sects or divisions that are not currently recognized but 
are interested in pursuing such status will follow the existing SSA 
process. With that said, we note that our understanding is that there 
are few, if any, religious sects or divisions that could be approved 
under section 1402(g)(1) of the Code that have yet to be approved, as 
this provision of the Code requires that a sect or division to have 
been in existence at all times since December 31, 1950.
    In paragraph (c) of Sec.  155.615, we propose the verification 
process concerning the exemption for membership in a health care 
sharing ministry. We specify that for any applicant requesting this 
exemption, the Exchange will verify whether he or she meets the 
standards in Sec.  155.605(d). First, in paragraph (c)(1) of Sec.  
155.615, we propose that except as specified in paragraphs (c)(2) and 
(3) of this section, the Exchange will first accept an attestation from 
an applicant that he or she is a member of a health care sharing 
ministry. Next, the Exchange will verify that the health care sharing 
ministry to which the applicant attests membership is known to the 
Exchange as a health care sharing ministry. We expect that this 
verification will involve comparing the health care sharing ministry to 
which an applicant attests membership with a list of health care 
sharing ministries that will be developed by HHS based on outreach to 
heath care sharing ministries, which HHS will then make available to 
Exchanges.
    In paragraph (c)(2), we propose that if the information provided by 
an applicant regarding his or her membership in a health care sharing 
ministry is not reasonably compatible with other information provided 
by the individual or the records of the Exchange, the Exchange will 
follow the procedures specified in paragraph (g) of this section 
concerning situations in which the Exchange is unable to verify 
information. These procedures are used throughout this section and 
described in the preamble associated with paragraph (g) of this 
section.
    In paragraph (c)(3), we propose that if an applicant attests to 
membership in a health care sharing ministry that is unknown to the 
Exchange as a health care sharing ministry according to the standards 
in Sec.  155.605(d), the Exchange will then notify HHS and not 
determine an applicant eligible or ineligible for this exemption until 
HHS informs the Exchange regarding the attested health care sharing 
ministry's status with respect to the standards specified in 26 CFR 
1.5000A-3(b) of the Treasury proposed rule, published elsewhere in this 
issue of the Federal Register. This process allows an applicant who is 
a member of a health care sharing ministry that meets the standards 
specified in Sec.  155.605(d), but is previously unknown to the 
Exchange, to have the opportunity to receive this exemption. We have 
conducted preliminary outreach regarding health care sharing ministries 
that meet the requirements specified in the statute, and note that this 
provision of the Code normally requires a health care sharing ministry 
to have been in existence at all times since December 31, 1999, 
although a new organization can meet the criteria based on the history 
of its predecessor, and some existing health care sharing ministries 
may not currently meet all the statutory requirements, but can later 
perfect their status by, for example, obtaining 501(c)(3) status.
    In paragraph (d), we propose the verification process concerning 
the exemption for incarceration. We specify that for any applicant 
requesting this exemption, the Exchange will verify, through the 
process described in 45 CFR 155.315(e), that he or she was 
incarcerated, which means that there is no additional burden associated 
with developing a process to support this verification for purposes of 
the incarceration exemption.

[[Page 7358]]

    As with other verifications, we also specify in paragraph (d)(2) of 
Sec.  155.615 that if the Exchange is unable to verify an applicant's 
incarceration status through the verification process outlined, the 
Exchange will follow the procedures in paragraph (g) of this section 
concerning situations in which the Exchange is unable to verify 
information.
    In paragraph (e), we propose the verification process concerning 
the exemption for members of Indian tribes. We specify in paragraph 
(e)(1) that for any applicant requesting this exemption, the Exchange 
will verify his or her membership in an Indian tribe through the 
process outlined in 45 CFR 155.350(c), which means that there is no 
additional burden associated with developing a process to support this 
verification for purposes of this exemption. In paragraph (e)(2) of 
Sec.  155.615, we also propose that the Exchange follow the procedures 
specified in paragraph (g) of this section if it is unable to verify an 
applicant's tribal membership.
    In paragraph (f), we propose the verification process concerning 
exemptions for hardship. In paragraph (f)(2), we propose that for an 
applicant applying for a hardship exemption prospectively based on an 
inability to afford coverage, as described in Sec.  155.605(g)(2), the 
Exchange use procedures established under subpart D of this part to 
verify the availability of affordable coverage through the Exchange 
based on projected income, and the procedures described in Sec.  
155.320(e) to verify eligibility for qualifying coverage in an eligible 
employer-sponsored plan. As noted in the preamble to Sec.  
155.605(g)(2), we propose that this exemption is not available for a 
calendar year for an application that is submitted after the last date 
on which an applicant could enroll in a QHP through the Exchange for 
the calendar year for which the exemption is requested. We anticipate 
providing additional guidance regarding procedures for the Exchange to 
verify whether an applicant has experienced other categories of 
hardship; we expect that these will likely include some amount of paper 
documentation, but solicit comments regarding appropriate verification 
procedures that will ensure a high degree of program integrity while 
minimizing administrative burden.
    Paragraph (g) provides procedures for the Exchange to follow in the 
event the Exchange is unable to verify information necessary to make an 
eligibility determination for an exemption, including situations in 
which an applicant's attestation is not reasonably compatible with 
information in electronic data sources or other information in the 
records of the Exchange, or when electronic data is required but 
unavailable. These procedures mirror those provided in Sec.  
155.315(f), with modifications to preclude eligibility pending the 
outcome of the verification process, made in accordance with the 
Secretary's authority under section 1411 of the Affordable Care Act. 
These modifications are based on the fact that individuals need to 
account for exemptions when they file income tax returns after the 
coverage year is over, which means that delaying the granting of a 
certificate until information can be verified does not create 
significant issues for an applicant. We also note that given that the 
process in this paragraph may be applied to more than one piece of 
information and applicants can apply for more than one exemption at a 
time, it is possible for the process in paragraph (g) to run 
simultaneously for multiple pieces of information that are relevant to 
eligibility for a single exemption, or across multiple exemptions.
    First, under paragraph (g)(1) of Sec.  155.615, the Exchange will 
make a reasonable effort to identify and address the causes of the 
issue, including through typographical or other clerical errors, by 
contacting the application filer to confirm the accuracy of the 
information submitted by the application filer. We anticipate that when 
an applicant applies via an internet Web site or the telephone, this 
process will occur during the application session. Second, in paragraph 
(g)(2)(i), we propose that if the Exchange is unable to resolve the 
issue, the Exchange will notify the applicant of the issue. After 
providing this notice, in paragraph (g)(2)(ii), the Exchange will 
provide 30 days from the date on which the notice is sent for the 
applicant to present satisfactory documentary evidence via the channels 
available for the submission of an application, except by telephone, or 
otherwise resolve the issues. We note that, following the same approach 
in the Exchange final rule, all listed timelines refer to calendar 
days. In paragraph (g)(3), we propose that the Exchange may extend the 
period for an applicant to resolve the issue if the applicant can 
provide evidence that a good faith effort has been made to obtain the 
necessary documentation. And in paragraph (g)(4), we propose that the 
Exchange will not grant a certificate of exemption during this period 
based on the information that is the subject of the request under this 
paragraph. This is distinct from the approach taken for the eligibility 
process for enrollment in a QHP and for advance payments of the premium 
tax credit and cost-sharing reductions, since, while there is a strong 
benefit associated with providing access to health insurance pending 
the outcome of a verification process, there is no apparent health 
benefit to an applicant in receiving an exemption pending the outcome 
of such a process.
    In paragraph (g)(5), we propose that, if after the conclusion of 
the period described in paragraph (g)(2)(ii) of this section, the 
Exchange is unable to verify the applicant's attestation, the Exchange 
will determine the applicant's eligibility based on the information 
available from the data sources specified in this subpart, as 
applicable, unless such applicant qualifies for the exception provided 
under paragraph (h), and notify the applicant in accordance with the 
procedures described under Sec.  155.610(i), including the inability to 
verify the applicant's attestation.
    In paragraph (h) of Sec.  155.615, we propose a provision under 
which the Exchange would 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 in which 
documentation cannot be obtained. This standard is consistent with the 
standard in subpart D at 45 CFR 155.315(g); examples of individuals for 
whom this provision may apply include homeless individuals, and victims 
of domestic violence or natural disasters.
    Section 1411(c)(4)(B) of the Affordable Care Act provides that the 
Secretary may modify the methods used under the Secretary's program 
under section 1411 for the verification of information. In paragraph 
(i) of Sec.  155.615, we propose to codify this flexibility, as we did 
in 45 CFR 155.315(h). Specifically, we propose that HHS may approve an 
Exchange Blueprint or a significant change to an Exchange Blueprint to 
modify the methods for the collection and verification of information 
as described in this subpart, as well as the specific information to be 
collected, based on a finding by HHS that the requested modification 
would reduce the administrative costs and burdens on individuals while 
maintaining accuracy and minimizing delay, and that any applicable 
requirements under 45 CFR 155.260, 45 CFR 155.270, paragraph (j) of 
this section, and section 6103 of the Code with respect to the 
confidentiality, disclosure, maintenance, or use of information will be 
met. We also note

[[Page 7359]]

that all information exchanges specified in this section will comply 
with 45 CFR 155.260 and 155.270.
    In paragraph (j) of Sec.  155.615, we propose that the Exchange 
will not require an applicant to provide information beyond what is 
necessary to support the process of the Exchange for eligibility 
determinations for exemptions, including the process for resolving 
inconsistencies described in Sec.  155.615(g).
e. Eligibility Redeterminations for Exemptions During a Calendar Year 
(Sec.  155.620)
    Section 1411(f)(1) of the Affordable Care Act provides that the 
Secretary shall establish procedures for periodic redeterminations of 
eligibility. In Sec.  155.620, we propose to codify this by providing 
that the Exchange will redetermine an individual's eligibility for an 
exemption if the Exchange receives and verifies new information as 
reported by an individual. Similar to the standards in 45 CFR 155.330, 
in paragraph (b) of Sec.  155.620, we propose that the Exchange will 
require an individual with a certificate of exemption to report any 
changes related to the eligibility standards described in Sec.  
155.605.
    In 45 CFR 155.330(b)(3), which relates to the redetermination 
process for eligibility for enrollment in a QHP and for insurance 
affordability programs, we provide that the Exchange may establish a 
reasonable threshold for changes in income, such that an individual who 
experiences a change in income that is below the threshold is not 
required to report such change. We also note, however, that the 
Exchange will always allow an individual to report a change of any 
size. The intent of this provision was to limit the burden associated 
with reporting very small changes in income, with the understanding 
that the reconciliation process for advance payments of the premium tax 
credit would ultimately resolve these differences. We considered 
proposing similar flexibility for the purpose of eligibility for 
exemptions, but chose not to due to the absence of a reconciliation 
process. We solicit comment as to whether we should establish such 
flexibility in this section.
    Also, in paragraph (b)(2) of Sec.  155.620, we propose that the 
Exchange would allow an individual to report changes by the channels 
acceptable for the submission of an exemption application.
    In paragraph (c), we propose that the Exchange use the verification 
processes used at the point of initial application, as described in 
Sec.  155.615, in order to verify any changes reported by an individual 
prior to using the self-reported information in an eligibility 
determination for an exemption. In paragraph (c)(2), we propose that 
the Exchange notify an individual in accordance with Sec.  155.610(i) 
after re-determining his or her eligibility based on a reported change. 
Lastly, in paragraph (c)(3), similar to standards established in 45 CFR 
155.330(c), we propose that the Exchange will provide periodic 
electronic notifications regarding the requirements for reporting 
changes and an individual's opportunity to report any changes, to an 
individual who has a certificate of exemption and who has elected to 
receive electronic notifications, unless he or she has declined to 
receive such notifications.
    We also note that unlike 45 CFR 155.330, we do not propose that the 
Exchange conduct periodic data matching regarding an individual's 
eligibility for an exemption. The data matches that are established in 
45 CFR 155.330(d), which were established based on a combination of 
relevance to eligibility for insurance affordability programs and the 
availability of electronic data sources, relate to data that is not 
significant in determining eligibility for exemptions: Death, and 
whether an individual has been determined eligible for Medicare, 
Medicaid, CHIP, or the Basic Health Program (BHP), where applicable. 
Further, with the exception of income, we are unaware of electronic 
data sources with which it would be useful to conduct data matching for 
purposes of eligibility for exemptions, particularly given the fact 
that generally, exemptions that are provided by the Exchange will be 
provided for prior months based on actual information. And while income 
data are available, we do not believe that the administrative 
complexity associated with implementing these matches, which are not 
required under 45 CFR 155.330, produces sufficient benefit. We solicit 
comments as to whether we should establish similar data matching 
provisions, and if so, whether we should specify that the Exchange 
should handle changes identified through the matching process in a 
similar manner as to that specified in 45 CFR 155.330, or take a 
different approach.
    Lastly, also unlike the eligibility process for enrollment in a QHP 
and for insurance affordability programs, we do not propose an annual 
Exchange redetermination process for exemptions. We believe that an 
individual's exemption status may change significantly from year to 
year, and have proposed in Sec.  155.605 that certain exemptions for 
which information is unlikely to change (i.e., the exemptions for 
members of an Indian tribe, and for members of recognized religious 
sects) remain in effect unless an individual reports that his or her 
status has changed. For all other exemptions, we propose that an 
individual who has a certificate of exemption will submit an 
application for any subsequent calendar year for which he or she 
requests the same exemption. We do anticipate, however, that the 
Exchange can expedite and streamline this process significantly through 
the use of online accounts and other administrative tools, and welcome 
comment regarding how this can occur, including whether it should be 
reflected explicitly in regulation.
f. Options for Conducting Eligibility Determinations for Exemptions 
(Sec.  155.625)
    As previously noted, section 1411 of the Affordable Care Act 
provides that the Secretary will establish a program for eligibility 
determinations for exemptions. As described above, in general, we 
propose that the Exchange conduct the eligibility process for 
exemptions. However, as noted in the State Exchange Implementation 
Questions and Answers released by HHS on November 29, 2011 \1\ and the 
Frequently Asked Questions on Exchanges, Market Reforms, and Medicaid 
released by HHS on December 10, 2012,\2\ based on significant comments 
and feedback from states, a state-based Exchange can be approved if it 
uses a federally-managed service to make eligibility determinations for 
exemptions. As such, in Sec.  155.625, we propose this option, and we 
solicit comment regarding the specific configuration of a service that 
would be useful for states and also feasible within the time remaining 
for implementation.
---------------------------------------------------------------------------

    \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.
    \2\ Frequently Asked Questions on Exchanges, Market Reforms, and 
Medicaid, published December 10, 2012: http://cciio.cms.gov/resources/files/exchanges-faqs-12-10-2012.pdf.
---------------------------------------------------------------------------

    First, in Sec.  155.625(a), we propose that the Exchange may 
satisfy the requirements of this subpart by either executing all 
eligibility functions, directly or through contracting arrangements 
described in 45 CFR 155.110(a), or through the use of a federally-
managed service, which is described in paragraph (b) of Sec.  155.625.
    Second, in Sec.  155.625(b), we specify that the Exchange may 
implement an eligibility determination for an

[[Page 7360]]

exemption made by HHS, provided that the Exchange accepts the 
application, as specified in Sec.  155.610(d), and issues the 
eligibility notice, as specified in Sec.  155.610(i), and that 
verifications and other activities required in connection with 
eligibility determinations for exemptions are performed by the Exchange 
in accordance with the standards identified in this subpart or by HHS 
in accordance with the agreement described in paragraph (b)(4) of Sec.  
155.625. We also propose that under this option, the Exchange will 
transmit all applicant information and other information obtained by 
the Exchange to HHS, and adhere to HHS's determination. Lastly, in 
paragraph (b)(4), we propose that the Exchange and HHS enter into an 
agreement specifying their respective responsibilities in connection 
with eligibility determinations for exemptions.
    We considered establishing a process under which HHS would accept 
the application for an exemption certificate and provide the notice 
under Sec.  155.610(i), but did not propose this for two reasons. 
First, we believe that it is more straightforward, and also not 
administratively burdensome, for the Exchange to provide and accept the 
application, since the exemption application process shares similar 
features with the coverage application process, and the Exchange will 
be identified to applicants through outreach campaigns and other means 
as a primary contact point for many activities regarding the Affordable 
Care Act in a particular state. Further, it facilitates the provision 
of exemptions that originate through applications for eligibility for 
enrollment in a QHP and for insurance affordability programs, which 
will be accepted by the Exchange. Second, we propose that the Exchange 
issue the notice, and the certificate, as section 1311(d)(4)(H) of the 
Affordable Care Act specifies that the Exchange must, ``* * * grant a 
certification attesting that * * * an individual is exempt * * *'' 
Consequently, we see issuing the notice and any certificate as a 
necessary activity of the Exchange. We also believe that this does not 
present a significant administrative burden to the Exchange, since the 
contents of the notice can be standardized and provided by HHS. We 
solicit comments regarding maintaining these responsibilities at the 
Exchange, whether there are other responsibilities that should be 
specifically attributed to the Exchange or to HHS, and how this service 
can be implemented most efficiently, including with a focus on the 
first year of operations.
    In Sec.  155.625(c), we outline the standards to which the Exchange 
will adhere when eligibility determinations are made in accordance with 
paragraph (b). Such standards include that the arrangement does not 
increase administrative costs and burdens on individuals, or increase 
delay, and that applicable requirements under 45 CFR 155.260, 155.270, 
and 155.315(i), and section 6103 of the Code are met with respect to 
the confidentiality, disclosure, maintenance or use of information. 
These are the same standards that are used in 45 CFR 155.302(d) 
regarding advance payments of the premium tax credit and cost-sharing 
reductions.
g. Reporting (Sec.  155.630)
    In Sec.  155.630, we propose to codify the provisions specified in 
section 1311(d)(4)(I)(i) of the Affordable Care Act regarding reporting 
by the Exchange to IRS regarding eligibility determinations for 
exemptions. If the Exchange grants an individual a certificate of 
exemption in accordance with Sec.  155.610(i), we propose that the 
Exchange will transmit to IRS the individual's name and SSN, exemption 
certificate number, and any additional information specified in 
additional guidance published by IRS in accordance with 26 CFR 
601.601(d)(2). We solicit comment as to how this interaction can work 
as smoothly as possible.
h. Right to Appeal (Sec.  155.635)
    In Sec.  155.635, we propose that the Exchange will include notice 
of the right to appeal and instructions for how to appeal in any 
notification issued in accordance with Sec.  155.610(i) and Sec.  
155.625(b)(1). We propose that an individual may appeal any eligibility 
determination or redetermination made by the Exchange in relation to an 
exemption. Additional detail about the appeal process is described in 
subpart F of the proposed rule titled, ``Medicaid, Children's Health 
Insurance Programs, and Exchanges: Essential Health Benefits in 
Alternative Benefit Plans, Eligibility Notices, Fair Hearing and Appeal 
Processes for Medicaid and Exchange Eligibility Appeals and Other 
Provisions Related to Eligibility and Enrollment for Exchanges, 
Medicaid and CHIP, and Medicaid Premiums and Cost Sharing'' (78 FR 
4719).

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

    Some individuals are currently enrolled in health coverage that is 
not statutorily designated as minimum essential coverage. Under section 
5000A(f)(1)(E), the Secretary of Health and Human Services, in 
coordination with the Secretary of the Treasury, may designate other 
health benefits coverage as minimum essential coverage. This proposed 
rule would allow these individuals to keep their current coverage 
without incurring the shared responsibility payment for not maintaining 
minimum essential coverage, and would ensure that such coverage 
includes consumer protections.
    This proposed rule proposes to designate certain types of existing 
coverage, not specified under section 5000A, as minimum essential 
coverage. Additionally, other types of coverage that are neither 
statutorily nor regulatory designated as minimum essential coverage in 
this regulation, may be recognized as minimum essential coverage if 
certain substantive and procedural requirements are met as proposed in 
this rule. These types of coverage, both those designated per se and 
those recognized by application are neither group health insurance 
coverage nor individual health insurance. Consumers with coverage 
recognized as minimum essential coverage in accordance with this 
regulation would be determined to have minimum essential coverage for 
purposes of the requirement to maintain minimum essential coverage.
    Under section 36B of the Code, individuals eligible to enroll in 
minimum essential coverage other than coverage in the individual market 
are generally not eligible for the premium tax credit. Recognizing that 
some of the categories of coverage designated by the Secretary may be 
widely available, the Treasury Department will consider providing 
appropriate rules in guidance under Code section 36B to address when 
individuals are treated as eligible to enroll in various types of 
coverage designated by the Secretary.
a. Definition of Minimum Essential Coverage (Sec.  156.600)
    This proposed rule cross references the Treasury regulation under 
section 5000A of the Code for the definition of minimum essential 
coverage.

[[Page 7361]]

b. Other Types of Coverage That Qualify as Minimum Essential Coverage 
(Sec.  156.602)
    Prior to the Affordable Care Act, many people did not have access 
to employer-sponsored health coverage and could not qualify for, or 
otherwise seek alternatives to, individual health insurance coverage. 
Some individuals turned to other types of health coverage, such as 
self-funded student health coverage or state high risk pools.
    We propose to specifically recognize certain types of coverage that 
have not been designated in the statute, as minimum essential coverage. 
HHS is familiar with the scope of coverage under these plans and they 
are comparable to other coverage that is designated as minimum 
essential coverage under the statute. The following types of coverage 
would be designated per se as minimum essential coverage for purposes 
of the minimum essential coverage requirement:
    1. Self-funded student health insurance plans. Some institutions of 
higher education (as defined in the Higher Education Act of 1965) offer 
student health coverage to students with their own funds, assuming the 
risk for payment of claims. These plans are neither group health 
insurance nor individual insurance in most states.
    2. Foreign health coverage. Many foreign nationals reside in this 
country and many of these individuals are covered by health coverage 
from their country of citizenship.
    3. Refugee medical assistance supported by the Administration for 
Children and Families (45 CFR 400.90 through 400.107) This is a 
federally-funded program that provides up to eight months of coverage 
to certain non-citizens who are considered refugees under the 
Immigration and Naturalization Act.
    4. Medicare advantage plans. The Medicare program under part C of 
title XVIII of the Social Security Act, which provides Medicare parts A 
and B benefits through a private insurer. While these plans provide the 
same coverage as that described in part A of Title XVIII of the Social 
Security Act, section 5000A(f)(1)(a)(i) specifically designated only 
Medicare coverage under Part A of Title XVIII as minimum essential 
coverage.
    5. AmeriCorps coverage (45 CFR 2522.250(b)). Coverage offered to 
AmeriCorps volunteers, which is the domestic counterpart to the Peace 
Corps.
    The types of coverage enumerated above have been in existence for a 
significant period of time. Although they vary in scope, they each 
provide a meaningful level of coverage that meets certain fundamental 
health needs for the people who are enrolled and protect against 
catastrophic losses. Three of the five are public programs, and even 
though student health plans are not individual or group market 
coverage, they are subject to certain consumer protections. 
Accordingly, individuals who wish to remain in these plans should not 
be subject to the shared responsibility payment under section 5000A of 
the Code. We welcome comments on these and whether there are other 
existing categories of coverage that should be recognized as minimum 
essential coverage. We also solicit comments regarding whether self-
funded student health coverage should be limited to institutions of 
higher education, as defined by the Higher Education Act of 1965, or if 
coverage offered by other institutions, such as primary or secondary 
educational institution, or unaccredited educational institutions, 
should be included. Lastly, we included coverage for AmeriCorps 
volunteers in the list of types of coverage designated as minimum 
essential coverage. Coverage for Peace Corps volunteers is statutorily 
designated as minimum essential coverage, and since AmeriCorps is a 
similar organization, coverage offered to volunteers under AmeriCorp 
should be provided the same status as minimum essential coverage. We 
welcome comments on the inclusion of AmeriCorps coverage in the 
designated list.
    State high risk pools are specifically noted in section 
5000A(f)(1)(E) of the Code as coverage that could be designated by the 
Secretary as minimum essential coverage. This rule proposes that state 
high risk pools be designated as minimum essential coverage for a 
period of time to be determined by the Secretary. State high risk pools 
across the country vary in their coverage and benefits and some high 
risk pools may not substantially comply with the requirements of the 
Affordable Care Act, as specified in this proposed rule. Accordingly, 
while we are proposing that state high risk pools will initially be 
designated minimum essential coverage, we reserve the right to review 
and monitor the extent and quality of coverage, and in the future to 
reassess whether they should be designated minimum essential coverage 
or should be required to go through the process outlined in Sec.  
156.604 this proposed rule. We solicit comments on whether state high 
risk pools should automatically be designated as minimum essential 
coverage or whether they should be required to follow the process 
outlined in Sec.  156.604 of this proposed rule.
c. Requirements for Recognition as Minimum Essential Coverage for Types 
of Coverage not Otherwise Designated Minimum Essential Coverage in the 
Statute or This Regulation (Sec.  156.604)
    In addition to the types of coverage recognized above, there may be 
other types of individual coverage that provide important coverage to 
enrollees comparable to the statutorily designated types of minimum 
essential coverage. Accordingly, the proposed rule outlines a process 
in which other types of coverage could seek to be recognized as minimum 
essential coverage. Such recognition would apply only to the particular 
plan sponsored by the submitting organization seeking recognition.
    Employment-based coverage would not be recognized as minimum 
essential coverage through this proposed process. This is because 
employment-based group coverage is generally subject to the provisions 
of either ERISA, the Code and/or the PHS Act, and there is a separate 
statutory category of minimum essential coverage under the Department 
of Treasury's authority that addresses eligible employer-sponsored 
plans.
    Coverage recognized as minimum essential coverage through this 
process would need to offer substantially the same consumer protections 
as those enumerated in the Title I of Affordable Care Act relating to 
non-grandfathered, individual coverage to ensure consumers are 
receiving the protections of the Affordable Care Act. Furthermore, 
setting standards for other coverage qualifying as minimum essential 
coverage creates a disincentive for the creation of coverage that is 
designed to circumvent the important consumer protections of the 
Affordable Care Act. We solicit comments on the proposed 
``substantially comply'' standard as it applies to other types of 
individual coverage. We also solicit comments on the process for 
recognizing other coverage as minimum essential coverage.
    We propose that sponsors of minimum essential coverage also meet 
other criteria specified by the Secretary. We anticipate that there may 
be organizational standards that could disqualify a type of coverage 
from being recognized as minimum essential coverage, such as if 
individuals are prohibited from membership in the organization based on 
a health factor. We seek comment on the types of criteria the Secretary 
should consider in

[[Page 7362]]

this process as well as whether they should be added to the final rule.
    We propose that sponsors of a plan that seeks to have such coverage 
recognized as minimum essential coverage adhere to certain procedures. 
Sponsors would submit to HHS electronically the following information: 
(1) Name of the organization sponsoring the plan; (2) name and title of 
the individual who is authorized to make, and makes, this certification 
on behalf of the organization; (3) address of the individual named 
above; (4) phone number of the individual named above; (5) number of 
enrollees; (6) eligibility criteria; (7) cost sharing requirements, 
including deductible and out-of-pocket maximum; (8) essential health 
benefits covered (as defined in Sec.  1302(b) of the Affordable Care 
Act and its implementing regulations); and (9) a certification that the 
plan substantially complies with the provisions of Title I of the 
Affordable Care Act as applicable to non-grandfathered individual 
health insurance coverage. Once HHS receives a submission from a 
sponsor, it will review the information. If HHS determines that the 
coverage meets the necessary criteria to be recognized by the Secretary 
as minimum essential coverage, HHS would then inform the sponsor of the 
minimum essential coverage status of its coverage. This coverage would 
then be placed in a public list the types of coverage that have 
submitted information and have been determined by the Secretary to meet 
the eligibility requirements to be recognized as minimum essential 
coverage. The proposed rule also provides the Secretary the authority 
to revoke the minimum essential coverage status of a type of coverage 
that had previously been recognized minimum essential coverage if it 
has been determined that the coverage no longer meets the requirements 
to be minimum essential coverage. We solicit comments on whether there 
should be an appeal process for sponsors of coverage that had the 
minimum essential coverage status revoked by the Secretary. Such an 
appeal process could be internal within HHS, where the initial decision 
to revoke would be reviewed by an HHS staff person other than the one 
who made the initial decision. Comments are also welcome on whether 
this appeal process should be available to sponsors whose initial 
request for recognition of minimal essential coverage status for their 
coverage was denied by HHS.
d. HHS Audit Authority (Sec.  156.606)
    Under this proposed rule, HHS would have the ability to audit plans 
to ensure the accuracy of the certification either randomly or when 
triggered by certain information. For example, errors in the 
submission, complaints from enrollees, communications with state 
insurance regulators, media reports, etc., may result in an audit of a 
sponsoring organization.
    We believe this process strikes the appropriate balance between 
efficiency and ensuring compliance. Comments are solicited on the 
proposed procedures and if and when audits should be conducted. 
Comments are also welcome on whether sponsors of the types of coverage 
that have been designated as minimum essential coverage in the proposed 
rule should also submit the above information required to CMS.
    Once recognized as minimum essential coverage, a plan would have to 
provide notice to its enrollees, specifying that the plan has been 
recognized as minimum essential coverage for the purposes of the 
individual coverage requirement. This notice could be included in 
existing enrollment materials and in other plan documents. The sponsor 
of any plan recognized as minimum essential coverage would also be 
required to provide the annual information reporting to the IRS 
specified in section 6055 of the Code and furnish statements to 
individuals enrolled in such coverage to assist them in establishing 
that they are not subject to the shared responsibility payment of 
section 5000A of the Code. We request comments on whether all plans and 
programs designated as minimum essential coverage under this regulation 
must provide notice to enrollees, or only plans recognized through the 
process in Sec.  156.604 of this regulation.

III. Collection of Information Requirements

    Under the Paperwork Reduction Act of 1995, we are required to 
provide 60-day notice in the Federal Register and solicit public 
comment before a collection of information requirement is submitted to 
the Office of Management and Budget (OMB) for review and approval. In 
order to fairly evaluate whether an information collection should be 
approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act 
of 1995 requires that we solicit comment on the following issues:
     The need for the information collection and its usefulness 
in carrying out the proper functions of our agency.
     The accuracy of our estimate of the information collection 
burden.
     The quality, utility, and clarity of the information to be 
collected.
     Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.
    The proposed rule entitled ``Exchange Functions: Eligibility for 
Exemptions'' proposes standards with regard to the minimum function of 
an Exchange to perform eligibility determinations and issue 
certificates of exemption from the shared responsibility payment. The 
rule proposes standards related to eligibility for exemptions, 
including the verification and eligibility determination process, 
eligibility redeterminations, options for conducting eligibility 
determinations, and reporting related to exemptions. The rule also 
proposes to designate certain types of coverage as minimum essential 
coverage and outlines substantive and procedural requirements that 
other types of coverage must fulfill in order to be recognized as 
minimum essential coverage under section 5000A(f)(5) of the Code, as 
added by the Affordable Care Act.
    This section outlines the information collection requirements in 
the proposed regulation that will be addressed through this notice and 
comment process under the Paperwork Reduction Act (PRA). We are 
soliciting public comment on each of these issues for the following 
sections of the proposed rule that contain information collection 
requirements (ICRs). We used data from the Bureau of Labor Statistics 
to derive average costs for all estimates of salary in establishing the 
information collection requirements. Salary estimates include the cost 
of fringe benefits, calculated at 30.4 percent of salary, which is 
based on the June 2012 Employer Costs for Employee Compensation report 
by the U.S. Bureau of Labor Statistics. Additionally, we used estimates 
from the Congressional Budget Office to derive estimates of the number 
of exemption applications we anticipate Exchanges to receive, and the 
number of exemption eligibility determination notifications we 
anticipate Exchanges to generate.

1. Exemption Application (Sec.  155.610)

    Throughout this subpart, we propose that the Exchange collect 
attestations from applicants for a certificate of exemption. These 
attestations will be collected using the application described in Sec.  
155.610(a). In Sec.  155.610(a), we provide that the Exchange use an 
application created by HHS to collect the information necessary for 
determining eligibility for and granting certificates of exemption. The 
burden associated with this

[[Page 7363]]

requirement is the time and effort estimated for an applicant to 
complete an application. The exemption application may be available in 
both paper and electronic formats. An electronic application process 
would vary depending on each applicant's circumstances and which 
exemption an applicant is applying for, such that an applicant is only 
presented with questions relevant to the exemption for which he or she 
is applying. The goal is to solicit sufficient information so that in 
most cases no further inquiry will be needed. We estimate that on 
average, it will take .27 hours (16 minutes) for an application filer 
to complete an application, which is based on the estimates created for 
the single, streamlined application for enrollment in a QHP \3\, with a 
90% electronic/10% paper mix (noting that no specific application 
channel is specified in this proposed rule). While the Congressional 
Budget Office \4\ estimates that 24 million individuals would be exempt 
from the shared responsibility penalty in 2016, it is unclear how many 
individuals will seek these exemptions from an Exchange. Some of these 
individuals will apply for and receive an exemption through the tax 
filing process, while others will apply for and receive an exemption 
through the Exchange. Therefore, of the 24 million individuals, we 
conservatively anticipate that approximately half will apply for an 
exemption through the Exchange, and half will seek an exemption through 
the tax filing process and specifically seek comment on this 
assumption. Accordingly, we estimate that approximately 12 million 
applications for exemptions will be submitted to the Exchange for 
calendar year 2016, for a total of 3.2 million burden hours. We also 
note that some individuals will apply for an exemption but be 
determined ineligible for an exemption, but it is difficult for us to 
estimate this number, and that in an unknown number of cases, multiple 
individuals in a single household may submit a single application.
---------------------------------------------------------------------------

    \3\ The estimates may be found in the information collection 
request entitled, ``Data Collection to Support Eligibility 
Determinations for Insurance Affordability Programs and Enrollment 
through Affordable Insurance Exchanges, Medicaid and Children's 
Health Insurance Program Agencies.''
    \4\ Congressional Budget Office, ``Payments of Penalties for 
Being Uninsured Under the Affordable Care Act,'' September 2012 
http://cbo.gov/sites/default/files/cbofiles/attachments/09-19-12-Indiv_Mandate_Penalty.pdf.
---------------------------------------------------------------------------

    We do not estimate any cost to the Exchanges of evaluating the 
exemption applications. For the purposes of this estimate, we expect 
all applications to be submitted electronically and processed through 
the system, which would result in no additional labor costs to evaluate 
and review the exemption applications. We request comment on this 
assumption.
    We estimate that the cost to develop the exemption application will 
be significantly less than the estimated cost of developing the 
coverage application because the coverage application takes into 
account additional factors necessary in order to perform eligibility 
determinations for insurance affordability programs. We also note that 
as with the coverage application, HHS will be releasing a model 
application for use by Exchanges, which will significantly decrease the 
burden associated with the implementation of the application. On 
average, we estimate that the implementation of the exemption 
application will take approximately 1,059 hours of software development 
at a labor cost of $98.50 per hour, for a total cost of $104,312 per 
Exchange and a total cost of $5,319,887 for 51 Exchanges.

2. Notices (Sec. Sec.  155.610, 155.615, 155.620)

    Several provisions in subpart G outline specific notices that the 
Exchange will send to individuals during the exemption eligibility 
determination process, including the notice of eligibility 
determination described in Sec.  155.610(i). The purpose of these 
notices is to alert an applicant of his or her eligibility 
determination for an exemption and related actions taken by the 
Exchange. To the extent that an applicant is determined eligible for an 
exemption, the notice of eligibility determination described in Sec.  
155.610(i) will serve as the certificate of exemption. Accordingly, we 
do not provide a separate burden estimate for the certificates of 
exemption described throughout this subpart. When possible, we 
anticipate that the Exchange will consolidate notices when multiple 
members of a household are applying together and receive an eligibility 
determination at the same time. Consistent with 45 CFR 155.230(d), the 
notice may be in paper or electronic format, based on the election of 
an individual, will be in writing, and will be sent after an 
eligibility determination has been made by the Exchange; these are the 
same standards that are used for eligibility notices for enrollment in 
a QHP through the Exchange and for insurance affordability programs, as 
described in 45 CFR 155.310(g). It is difficult to estimate the number 
of applicants that will opt for electronic versus paper notices, 
although we anticipate that a large volume of applicants will request 
electronic notification. We estimated the associated mailing costs for 
the time and effort needed to mail notices in bulk to applicants who 
request paper notices.
    We expect that the exemption eligibility determination notice will 
be dynamic and include information tailored to all possible outcomes of 
an application throughout the eligibility determination process. A 
health policy analyst, senior manager, and an attorney would review the 
notice. HHS is currently developing model notices, which will decrease 
the burden on Exchanges associated with providing such notices. If a 
state opts to use the model notices provided by HHS, we estimate that 
the Exchange effort related to the development and implementation of 
the exemption eligibility determination notice will necessitate 44 
hours from a health policy analyst at an hourly cost of $49.35 to learn 
exemptions rules and draft notice text; 20 hours from an attorney at an 
hourly cost of $90.14, and four hours from a senior manager at an 
hourly cost of $79.08 to review the notice; and 32 hours from a 
computer programmer at an hourly cost of $52.50 to conduct the 
necessary development. In total, we estimate that this will take a 
total of 100 hours for each Exchange, at a cost of approximately $5,971 
per Exchange and a total cost of $304,497 for 51 Exchanges. For most 
notices outlined in subpart G of this proposed rule, we estimate that 
the notice development as outlined in the paragraph above, including 
the systems programming, would take each Exchange an estimated 100 
hours to complete in the first year.
    We expect that the burden on the Exchange to maintain this notice 
will be significantly lower than to develop it. We estimate that it 
will take each professional approximately a quarter of the time to 
maintain the notice as compared to developing the notice. Accordingly, 
we estimate the maintenance of the eligibility determination notice in 
subsequent years will necessitate 11 hours from a health policy analyst 
at an hourly cost of $49.35; 5 hours from an attorney at an hourly cost 
of $90.14; one hour from a senior manager at an hourly cost of $79.08 
and eight hours from a computer programmer at an hourly cost of $52.50. 
In total, we estimate that this will take a total of 25 hours for each 
Exchange, at a cost of approximately $1,492 per Exchange and a total 
cost of $76,092 for 51 Exchanges.
    Pursuant to section 5000A of the Code, the Secretary of Treasury 
must collect the necessary data from QHP issuers to determine the 
national

[[Page 7364]]

average bronze monthly premiums in order to assist in the computation 
of the shared responsibility payment. As such, HHS must request the 
monthly premium for all bronze level QHP's through all 51 Exchanges 
from QHP issuers. The burden associated on states and QHP issuers is 
already included in the information collection request entitled, 
``Initial Plan Data Collection to Support QHP Certification and other 
Financial Management and Exchange Operations,'' and as such, we do not 
include a separate burden estimate here. As this information is already 
being collected for another purpose, there will be no additional burden 
on QHP issuers or states.

3. Electronic Transmissions (Sec. Sec.  155.615, 155.630)

    Section 155.615 specifies that the Exchange will utilize applicable 
procedures established under subpart D of the Exchange final rule in 
order to obtain data through electronic data sources for purposes of 
determining eligibility for and granting certificates of exemption. 
This involves the electronic transmission of data through procedures 
established under subpart D in order to verify an applicant's 
incarceration status, to verify eligibility for qualifying coverage in 
an eligible employer-sponsored plan, and to determine eligibility for 
advance payments of the premium tax credit. Section 155.615 also 
includes additional electronic transmissions that are specific to the 
eligibility process for exemptions, including those related to health 
care sharing ministries and religious conscience. In section 155.630, 
we propose that the Exchange will provide relevant information to IRS 
regarding certificates of exemption for the purposes of tax 
administration, such as the name and other identifying information for 
the individual who received the exemption. As we expect that these 
transmissions of information will all be electronic, and through the 
same channels used for reporting to IRS established in Sec.  155.340, 
we do not anticipate for there to be any additional burden other than 
that which is required to design the overall eligibility and enrollment 
system. We do not provide a burden estimate for the electronic 
transmissions, as the cost is incorporated into the development of the 
IT system for the Exchange eligibility and enrollment system.

4. Verification and Change Reporting (Sec. Sec.  155.615, 155.620)

    The Exchange will use the same verification processes for new 
applications and for changes that are reported during the year. This 
includes the process for situations in which the Exchange is unable to 
verify the information necessary to determine an applicant's 
eligibility, which is described in section 155.615(g). It is not 
possible at this time to provide estimates for the number of applicants 
for whom additional information will be required to complete an 
eligibility determination, but we anticipate that this number will 
decrease as applicants become more familiar with the eligibility 
process for exemptions and as more data become available 
electronically. As such, for now, we estimate the burden associated 
with the processing of documentation for one submission from an 
applicant. We note that the burden associated with this provision is 
one hour for an individual to collect and submit documentation, and 12 
minutes for eligibility support staff at an hourly cost of $28.66 to 
review the documentation, for a total cost of $6 per document 
submission.

5. ICRs Regarding Agreements (Sec.  155.625)

    These provisions propose that an Exchange that decides to utilize 
the HHS service for making eligibility determinations for exemptions 
will enter into a written agreement with HHS. These agreements are 
necessary to ensure that the use of the service will minimize burden on 
individuals, ensure prompt determinations of eligibility without undue 
delay, and provide for secure, timely transfers of application 
information.
    The burden associated with these provisions is the time and effort 
necessary for the Exchange to establish an agreement with HHS. We 
estimate that the creation of the necessary agreement will necessitate 
35 hours from a health policy analyst at an hourly cost of $49.35, and 
35 hours from an operations analyst at an hourly cost of $54.45 to 
develop the agreement; and 30 hours from an attorney at an hourly cost 
of $90.14 and five hours from a senior manager at an hourly cost of 
$79.14 to review the agreement. Accordingly, the total burden on the 
Exchange associated with the creation of the necessary agreement will 
be approximately 105 hours and $6,733 per Exchange, for a total cost of 
$343,382 for 51 Exchanges.

6. ICRs Regarding Minimum Essential Coverage (Sec. Sec.  156.604(a)(3), 
156.604(c))

    Organizations that currently provide health coverage that are not 
statutorily specified and not designated as minimum essential coverage 
in this regulation may submit a request to CMS that their coverage be 
recognized as minimum essential coverage. As described in Sec.  
156.604(a)(3), sponsoring organizations would have to electronically 
submit to CMS information regarding their plans and certify that their 
plans meet substantially all of the requirements in the Title I of 
Affordable Care Act, as applicable to non-grandfathered, individual 
coverage. Because we do not know how many sponsoring organizations 
would submit a request, we have estimated the burden for one entity. We 
seek comments on how many organizations are likely to submit such 
requests. The burden associated with this certification includes the 
time needed to collect and input the necessary plan information, and 
maintain a copy for recordkeeping by clerical staff and for a manager 
and legal counsel to review it and for a senior executive to review and 
sign it. The certification would be submitted to CMS electronically at 
minimal cost. We estimate that it would take a combined total of 4.25 
hours (3 hours for clerical staff at an hourly cost of 30.64, 0.5 hour 
for a manager at an hourly cost of $55.22, 0.5 hours for legal counsel 
at an hourly cost of $83.10 and 0.25 hours for a senior executive at an 
hourly cost of $112.43) to prepare and submit the information and 
certification to CMS and to retain a copy for recordkeeping purposes. 
The total cost for one organization is estimated to be approximately 
$190.
    Section 156.604(c) specifies that sponsoring organizations whose 
health coverage are recognized as minimum essential coverage would have 
to provide a notice to enrollees informing them that the plan has been 
recognized minimum essential coverage for the purposes of the 
individual coverage requirement. The notice requirement may be 
satisfied by inserting the model statement provided in this proposed 
rule into existing plan documents. Plan documents are usually reviewed 
and updated annually before a new plan year begins. Sponsoring 
organizations may insert the model language in their plan documents at 
that time at minimal cost. Once the notice is included in the plan 
documents the first year, no additional cost will be incurred in future 
years. Therefore this notice is not subject to the Paperwork Reduction 
Act of 1995.
    The sponsor of any type of coverage recognized as minimum essential 
coverage would also be required to provide the annual information 
reporting to the IRS specified in section 6055 of the Code and furnish 
statements to individuals enrolled in such coverage to assist them in 
establishing that they

[[Page 7365]]

are not subject to the shared responsibility payment of section 5000A 
of the Code. The Department of Treasury plans to publish for public 
comment, in accordance with the Paperwork Reduction Act of 1995 (44 
U.S.C. Chapter 35), the required ICRs in the near future.

                          Table 1--Proposed Annual Information Collection Requirements
----------------------------------------------------------------------------------------------------------------
                                                                                    Burden  per
     Regulation section(s)       OMB control No.     Number of       Number of       response      Total annual
                                                    respondents      responses        (hours)     burden (hours)
----------------------------------------------------------------------------------------------------------------
Sec.   155.610................  0938--New.......              51              51           1,059          54,009
Sec.   155.610................  0938--New.......      12,000,000      12,000,000            0.27       3,200,000
Sec.  Sec.   155.610, 155.615,  0938--New.......              51              51             125           6,275
 155.620.
Sec.   155.615, 155.620.......  0938--New.......               1               1             0.2             0.2
Sec.   155.625................  0938--New.......              51              51             105           5,355
Sec.  Sec.   156.604(b).......  0938--New.......               1               1            4.25            4.25
                                                 ---------------------------------------------------------------
    Total.....................  ................  ..............  ..............  ..............       3,265,643
----------------------------------------------------------------------------------------------------------------

C. Submission of PRA-Related Comments

    We have submitted a copy of this proposed rule to OMB for its 
review of the rule's information collection and recordkeeping 
requirements. These requirements are not effective until they have been 
approved by OMB.
    To obtain copies of the supporting statement and any related forms 
for the proposed paperwork collections referenced above, access the CMS 
Web site at http://www.cms.hhs.gov/Paperwork@cms.hhs.gov, or call the 
Reports Clearance Office at 410-786-1326.
    We invite public comments on these potential information collection 
requirements. If you comment on these information collection and 
recordkeeping requirements, please do either of the following:
    1. Submit your comments electronically as specified in the 
ADDRESSES section of this proposed rule; or
    2. Submit your comments to the Office of Information and Regulatory 
Affairs, Office of Management and Budget, Attention: CMS Desk Officer, 
(CMS--9958-P) Fax: (202) 395-5806; or Email: OIRA_submission@omb.eop.gov.

IV. Response to Comments

    Because of the large number of public comments we normally receive 
on Federal Register documents, we are not able to acknowledge or 
respond to them individually. We will consider all comments we receive 
by the date and time specified in the DATES section of this preamble, 
and, when we proceed with a subsequent document, we will respond to the 
comments in the preamble to that document.

V. Summary of Regulatory Impact Statement

A. Overall Impact

    We have examined the impact of this rule as required by Executive 
Order 12866 on Regulatory Planning and Review (September 30, 1993) and 
Executive Order 13563 on Improving Regulation and Regulatory Review 
(January 18, 2011). Executive Orders 12866 and 13563 direct agencies to 
assess all costs and benefits of available regulatory alternatives and, 
if regulation is necessary, to select regulatory approaches that 
maximize net benefits (including potential economic, environmental, 
public health and safety effects, distributive impacts, and equity). 
This rule has been designated a ``significant regulatory action'' under 
Executive Order 12866. Accordingly, this rule has been reviewed by the 
Office of Management and Budget.
    The exemption provisions of this proposed rule set forth how and 
what exemptions can be received through the Exchange. Given the 
statute, these rules would generate exemption request activity; the 
proposed rules could also potentially affect the amount of shared 
responsibility payments made in a given year and the number of 
individuals who would enroll in health insurance plans to avoid shared 
responsibility payments. The impact of the proposed minimum essential 
coverage provisions would be similar; individuals whose coverage would 
be designated minimum essential coverage, under the authority of the 
Secretary of Health and Human Services to designate other health 
benefit coverage as minimum essential coverage, would, in the absence 
of the rule, pay shared responsibility payments or switch health 
insurance coverage so as not to incur those penalties.
    As noted in our discussion, above, of information collection 
requirements, while CBO estimates that 24 million individuals would be 
exempt from the penalty in 2016, it is unclear how many individuals 
will seek these exemptions from an Exchange. These submissions would be 
associated with a variety of effects, including: costs to Exchanges to 
review the exemption requests; costs to applicants to request 
exemptions and retain documents; potential effects on enrollment in 
health coverage and its benefits; and a transfer from the federal 
government to individuals receiving exemptions in cases in which there 
is a foregone shared responsibility payment.
    We note that the cost to an applicant of submitting a request and 
retaining documents is bounded above by the expected shared 
responsibility payment; otherwise, he or she would not necessarily 
apply for the exemption. Though we currently lack data to precisely 
characterize the effects of these proposed provisions, we note that the 
potential number of individuals seeking exemptions through the Exchange 
could place the overall impact of the proposed rule over the $100 
million threshold for economic significance, even at a low economic 
cost per individual. The minimum essential coverage provisions included 
in this proposed rule could lead to transfers from the federal 
government to affected individuals (in this case, individuals whose 
coverage is designated to be minimum essential coverage) and have 
effects on health coverage enrollment (e.g., decreased switching 
between plans). Decreased switching between plans would entail time 
savings for affected individuals and uncertain effects on premium 
payments and use of medical services and products. We currently lack 
data to estimate the number of individuals whose coverage would be 
designated minimum essential coverage by this proposed rule. In light 
of our incomplete data and quantification of

[[Page 7366]]

impacts, we request data and comments on all likely economic effects of 
the provisions of this proposed rule.

VI. Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) (RFA) 
requires agencies to prepare an initial regulatory flexibility analysis 
to describe the impact of the proposed rule on small entities, unless 
the head of the agency can certify that the rule will not have a 
significant economic impact on a substantial number of small entities. 
The Act generally defines a ``small entity'' as (1) a proprietary firm 
meeting the size standards of the Small Business Administration (SBA); 
(2) a not-for-profit organization that is not dominant in its field; or 
(3) a small government jurisdiction with a population of less than 
50,000. States and individuals are not included in the definition of 
``small entity.'' HHS uses as its measure of significant economic 
impact on a substantial number of small entities a change in revenues 
of more than 3 to 5 percent. As the burden for this proposed regulation 
falls on either Exchanges or individuals, the proposed regulations will 
not have a significant economic impact on a substantial number of small 
entities, and therefore, a regulatory flexibility analysis is not 
required.

VII. Unfunded Mandates

    Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) 
requires that agencies assess anticipated costs and benefits before 
issuing any rule whose mandates require spending in any 1 year of $100 
million in 1995 dollars, updated annually for inflation, by state, 
local, or tribal governments, in the aggregate, or by the private 
sector. In 2012, that threshold is approximately $139 million. This 
final rule does not mandate expenditures by state governments, local 
governments, tribal governments, in the aggregate, or the private 
sector, of $136 million. The majority of state, local, and private 
sector costs related to implementation of the Affordable Care Act were 
described in the RIA accompanying the March 2012 Medicaid eligibility 
rule. Furthermore, the proposed rule does not set any mandate on states 
to set up an Exchange.

VIII. Federalism

    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule that imposes 
substantial direct effects on states, preempts state law, or otherwise 
has federalism implications. We wish to note again that the impact of 
changes related to implementation of the Affordable Care Act were 
described in the RIA associated with the Exchange final rule. As 
discussed in the Exchange final rule RIA, we have consulted with states 
to receive input on how the various Affordable Care Act provisions 
codified in this proposed rule would affect states.
    Because states have flexibility in designing their Exchange, state 
decisions will ultimately influence both administrative expenses and 
overall premiums. However, because states are not required to create an 
Exchange, these costs are not mandatory. For states electing to create 
an Exchange, the initial costs of the creation of the Exchange will be 
funded by Exchange Planning and Establishment Grants. After this time, 
Exchanges will be financially self-sustaining with revenue sources left 
to the discretion of the state. In the Department's view, while this 
proposed rule does not impose substantial direct costs on state and 
local governments, it 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 a 
state-based Exchange must adopt the federal standards contained in the 
Affordable Care Act and in this proposed rule, or have in effect a 
state law or regulation that implements these federal standards. 
However, the Department anticipates that the federalism implications 
(if any) are substantially mitigated because states have choices 
regarding the structure and governance of their Exchanges. 
Additionally, the Affordable Care Act does not require states to 
establish an Exchange; but if a state elects not to establish an 
Exchange or the state's Exchange is not approved, HHS, will establish 
and operate an Exchange in that state. Additionally, states will have 
the opportunity to participate in state Partnership Exchanges that 
would allow states to leverage work done by other states and the 
federal government, and will be able to leverage a federally-managed 
service for eligibility determination for exemptions.
    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 
officials on an individual basis.
    Pursuant to the requirements set forth in section 8(a) of Executive 
Order 13132, and by the signatures affixed to this regulation, the 
Department certifies that CMS has complied with the requirements of 
Executive Order 13132 for the attached proposed regulation in a 
meaningful and timely manner.

IX. Congressional Review Act

    This proposed rule is subject to the Congressional Review Act 
provisions of the Small Business Regulatory Enforcement Fairness Act of 
1996 (5 U.S.C. 801 et seq.), which specifies that before a rule can 
take effect, the federal agency promulgating the rule shall submit to 
each House of the Congress and to the Comptroller General a report 
containing a copy of the rule along with other specified information, 
and has been transmitted to Congress and the Comptroller General for 
review.
    In accordance with the provisions of Executive Order 12866, this 
regulation was reviewed by the Office of Management and Budget.

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.


[[Page 7367]]


    For the reasons set forth in the preamble, the Department of Health 
and Human Services proposes to amend 45 CFR subtitle A, subchapter B, 
as set forth below:

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

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

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

Subpart A--General Provisions

0
2. Amend Sec.  155.20 by revising the introductory text to paragraph 
(1) for the definition of ``Applicant'' and revising the definition of 
``Application filer'' to read as follows:


Sec.  155.20  Definitions.

* * * * *
    Applicant means:
    (1) An individual who is seeking eligibility for him or herself 
through an application submitted to the Exchange, excluding those 
individuals seeking eligibility for an exemption from the shared 
responsibility payment for not maintaining minimum essential coverage 
pursuant to subpart G, or transmitted to the Exchange by an agency 
administering an insurance affordability program for at least one of 
the following:
* * * * *
    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, excluding those individuals seeking 
eligibility for an exemption pursuant to subpart G.
* * * * *

Subpart C--General Functions of an Exchange

0
3. In Sec.  155.200, revise paragraph (a) to read as follows:


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, G, H, and K 
of this part.
* * * * *
0
4. Add subpart G to read as follows:
Subpart G--Exchange Functions in the Individual Market: Eligibility 
Determinations for Exemptions
Sec.
155.600 Definitions and general requirements.
155.605 Eligibility standards for exemptions.
155.610 Eligibility process for exemptions.
155.615 Verification process related to eligibility for exemptions.
155.620 Eligibility redeterminations for exemptions during a 
calendar year.
155.625 Options for conducting eligibility determinations for 
exemptions.
155.630 Reporting.
155.635 Right to appeal.

Subpart G--Exchange Functions in the Individual Market: Eligibility 
Determinations for Exemptions


Sec.  155.600  Definitions and general requirements.

    (a) Definitions. For purposes of this subpart, the following terms 
have the following meaning:
    Applicant means an individual who is seeking an exemption for him 
or herself through an application submitted to the Exchange.
    Application filer means an applicant, an individual who is liable 
for the shared responsibility payment in accordance with 26 CFR 
1.5000A-1(c) for an applicant, an authorized representative, or if the 
applicant is a minor or incapacitated, someone acting responsibly for 
an applicant.
    Exemption means an exemption from the shared responsibility 
payment.
    Health care sharing ministry has the same meaning as it does in 26 
CFR 1.5000A-3(b).
    Required contribution has the same meaning as it does in 26 CFR 
1.5000A-3(e).
    Shared responsibility payment has the same meaning as in 26 CFR 
1.5000A-1 et seq.
    Indian tribe has the same meaning as it does in section 45A(c)(6) 
of the Code.
    (b) Attestation. For the purposes of this subpart, any attestation 
that an applicant is to provide under this subpart may be made by the 
application filer on behalf of the applicant.
    (c) Reasonably compatible. For purposes of this subpart, the 
Exchange must consider information through electronic data sources, 
other information provided by the applicant, or other information in 
the records of the Exchange to be reasonably compatible with an 
applicant's attestation if the difference or discrepancy does not 
impact the eligibility of the applicant for the exemption or exemptions 
for which he or she applied.
    (d) Accessibility. Information, including notices, forms, and 
applications, must be provided to applicants in accordance with the 
standards specified in 45 CFR 155.205(c).
    (e) Notices. Any notice required to be sent by the Exchange to an 
individual in accordance with this subpart must be provided in 
accordance with the standards specified in 45 CFR 155.230.


Sec.  155.605  Eligibility standards for exemptions.

    (a) Eligibility for an exemption through the Exchange. Except as 
specified in paragraph (g) of this section, the Exchange must determine 
an applicant eligible for and issue a certificate of exemption for any 
month if the Exchange determines that he or she meets the requirements 
for one or more of the categories of exemptions described in this 
section for at least one day of the month.
    (b) Duration of single exemption. Except as specified in paragraphs 
(c)(2), (f)(2), and (g) of this section, the Exchange may provide a 
certificate of exemption only for the calendar year in which an 
applicant submitted an application for such exemption.
    (c) Religious conscience. (1) The Exchange must determine an 
applicant eligible for an exemption for any month if the applicant is a 
member of a recognized religious sect or division described in section 
1402(g)(1) of the Code, and an adherent of established tenets or 
teachings of such sect or division for such month, in accordance with 
section 5000A(d)(2)(A) of the Code.
    (2) Duration of exemption for religious conscience. (i) The 
Exchange must grant the certificate of exemption specified in this 
paragraph to an applicant who meets the standards provided in paragraph 
(c)(1) of this section for a month on a continuing basis, until the 
month after the month of the individual's 18th birthday, or until such 
time that an individual reports that he or she no longer meets the 
standards provided in paragraph (c)(1).
    (ii) If the Exchange granted a certificate of exemption in this 
category to an applicant prior to him or her reaching the age of 18, 
the Exchange must send such an applicant a notice upon reaching the age 
of 18 informing the applicant that he or she must submit a new 
exemption application if seeking to maintain the certificate of 
exemption.
    (3) The Exchange must provide an exemption in this category 
prospectively or retrospectively.
    (d) Membership in a health care sharing ministry. (1) The Exchange 
must determine an applicant eligible for an

[[Page 7368]]

exemption for a month if the applicant is a member of a health care 
sharing ministry for such month as defined in 26 CFR 1.5000A-3(b).
    (2) The Exchange may only provide an exemption in this category 
retrospectively.
    (e) Incarceration. (1) The Exchange must determine an applicant 
eligible for an exemption for a month if he or she meets the standards 
as defined in 26 CFR 1.5000A-3(d) for such month.
    (2) The Exchange may only provide an exemption in this category 
retrospectively.
    (f) Membership in an Indian tribe. (1) The Exchange must determine 
an applicant eligible for an exemption for any month if he or she is a 
member of an Indian tribe, as defined in section 45A(c)(6) of the Code, 
for such month, as defined in 26 CFR 1.5000A-3(g).
    (2) Duration of exemption for membership in an Indian tribe. The 
Exchange must grant the exemption specified in this paragraph to an 
applicant who meets the standards specified in Sec.  155.605(f)(1) for 
a month on a continuing basis, until such time that the applicant 
reports that he or she no longer meets the standards provided in Sec.  
155.605(f)(1).
    (3) The Exchange must provide an exemption in this category 
prospectively or retrospectively.
    (g) Hardship. The Exchange must determine an applicant eligible for 
an exemption--
    (1) For a month or months during which--
    (i) He or she experienced financial or domestic circumstances, 
including an unexpected natural or human-caused event, such that he or 
she has a significant, unexpected increase in essential expenses;
    (ii) The expense of purchasing minimum essential coverage would 
have caused him or her to experience serious deprivation of food, 
shelter, clothing or other necessities; or
    (iii) He or she has experienced other factors similar to those 
described in paragraphs (g)(1)(i) and (ii) of this section that 
prevented him or her from obtaining minimum essential coverage, as 
described in 26 CFR 1.5000A-2.
    (2) For a calendar year if he or she, or another individual the 
applicant attests will be included in the applicant's family, as 
defined in 26 CFR 1.5000A-1(d)(6), is unable to afford coverage for 
such calendar year in accordance with the standards specified in 26 CFR 
1.5000A-3(e), calculated using projected annual household income, and 
provided that the applicant applies for this exemption prior to the 
last date on which he or she could enroll in a QHP through the Exchange 
for the calendar year for which the exemption is requested;
    (3) For a calendar year if he or she was not required to file an 
income tax return for such calendar year because his or her gross 
income was below the filing threshold, but who nevertheless filed to 
receive a tax benefit, claimed a dependent with a filing requirement, 
and as a result, had household income exceeding the applicable return 
filing threshold described in 26 CFR 1.5000A-3(f)(2);
    (4) For a calendar year if he or she has been determined ineligible 
for Medicaid for one or more months during the benefit year solely as a 
result of a State not implementing section 2001(a) of the Affordable 
Care Act; or
    (5) For a calendar year if he or she, as well as one or more 
employed members of his or her family, as defined in 26 CFR 1.5000A-
1(d)(6), has been determined eligible for affordable self-only 
employer-sponsored coverage pursuant to 26 CFR 1.5000A-3(e) through 
their respective employers for one or more months during the calendar 
year, but the aggregate cost of employer-sponsored coverage for all the 
employed members of the family exceeds 8 percent of household income 
for that month or those months.


Sec.  155.610  Eligibility process for exemptions.

    (a) Application. Except as specified in paragraphs (b) and (c) of 
this section, the Exchange must use an application established by HHS 
to collect information necessary for determining eligibility for and 
granting certificates of exemption as described in Sec.  155.605 of 
this subpart.
    (b) Alternative application. If the Exchange seeks to use an 
alternative application, such application, as approved by HHS, must 
request the minimum information necessary for the purposes identified 
in paragraph (a) of this section.
    (c) Exemptions through the eligibility process for coverage. If an 
individual submits the application described in 45 CFR 155.405 of this 
chapter and then requests an exemption, the Exchange must use 
information collected for purposes of the eligibility determination for 
enrollment in a QHP and for insurance affordability programs in making 
the exemption eligibility determination and must not request duplicate 
information or conduct repeat verifications that adhere to the 
standards specified in this subpart.
    (d) Filing the exemption application. The Exchange must--
    (1) Accept the application from an application filer; and
    (2) Provide the tools to file an application.
    (e) Collection of Social Security Numbers. (1) The Exchange must 
require an applicant who has a Social Security number to provide such 
number to the Exchange.
    (2) The Exchange may not require an individual who is not seeking 
an exemption for himself or herself to provide a Social Security 
number, except as specified in paragraph (e)(3) of this section.
    (3) The Exchange must require an application filer to provide the 
Social Security number of a tax filer who is not an applicant only if 
an applicant attests that the tax filer has a Social Security number 
and filed a tax return for the year for which tax data would be 
utilized for verification of household income and family size for an 
exemption under Sec.  155.605(g)(2) that requires such verification.
    (f) Determination of eligibility; granting of certificates. The 
Exchange must determine an applicant's eligibility for an exemption in 
accordance with the standards specified in Sec.  155.605, and grant a 
certificate of exemption to any applicant determined eligible.
    (g) Timeliness standards. (1) The Exchange must determine 
eligibility for exemption promptly and without undue delay.
    (2) The Exchange must assess the timeliness of eligibility 
determinations made under this subpart based on the period from the 
date of application to the date the Exchange notifies the applicant of 
its decision.
    (h) Exemptions for previous tax years. Except for the exemptions 
described in 155.605(c) and (f) of this subpart, after December 31 of a 
given calendar year, the Exchange will not accept an application for an 
exemption for months for such calendar year, and must provide 
information to individuals regarding the process for claiming an 
exemption through the tax filing process.
    (i) Notification of eligibility determination for exemptions. The 
Exchange must provide timely written notice to an applicant of any 
eligibility determination made in accordance with this subpart. In the 
case of a determination that an applicant is eligible for an exemption, 
this notification must include the exemption certificate number for the 
purposes of tax administration.
    (j) Retention of records for tax compliance. (1) Consistent with 
the requirements of section 6001of the Code, an individual must retain 
the

[[Page 7369]]

records that demonstrate not only receipt of the certificate of 
exemption but also qualification for the underlying exemption.
    (2) In the case of any factor of eligibility that is verified 
through use of the special circumstances exception described in Sec.  
155.615(h) of this subpart, the records that demonstrate qualification 
for the underlying exemption are the information submitted to the 
Exchange regarding the circumstances that warranted the use of the 
exception, as well as records of the Exchange decision to allow such 
exception.


Sec.  155.615  Verification process related to eligibility for 
exemptions.

    (a) General rule. Unless a request for modification is granted 
under paragraph (i) of this section, the Exchange must verify or obtain 
information as provided in this section in order to determine that an 
applicant is eligible for an exemption.
    (b) Verification related to exemption for religious conscience. For 
any applicant who requests an exemption based on religious conscience, 
the Exchange must verify that he or she meets the standards specified 
in Sec.  155.605(c) of this subpart by--
    (1) Except as specified in paragraph (b)(2) of this section, 
accepting a form that reflects that he or she is approved by the 
Internal Revenue Service under section 1402(g)(1) of the Code;
    (2) Except as specified in paragraphs (b)(3) and (4) of this 
section, accepting his or her attestation, and verifying that the 
religious sect or division to which the applicant attests membership is 
recognized by the Social Security Administration as an approved 
religious sect or division under section 1402(g)(1) of the Code.
    (3) If information provided by an applicant regarding his or her 
membership in a religious sect or division is not reasonably compatible 
with other information provided by the individual or in the records of 
the Exchange, the Exchange must follow the procedures specified in 
paragraph (g) of this section.
    (4) If an applicant attests to membership in a religious sect or 
division that is not recognized by the Social Security Administration 
as an approved religious sect or division under section 1402(g)(1) of 
the Code, the Exchange must determine the applicant ineligible for this 
exemption.
    (c) Verification related to exemption for membership in a health 
care sharing ministry. For any applicant who requests an exemption 
based on membership in a health care sharing ministry, the Exchange 
must verify that the applicant meets the standards specified in Sec.  
155.605(d) of this subpart by--
    (1) Except as provided in paragraphs (c)(2) and (3) of this 
section, accepting his or her attestation; and verifying that the 
health care sharing ministry to which the applicant attests membership 
is known to the Exchange based on data provided by HHS as a health care 
sharing ministry.
    (2) If information provided by an applicant regarding his or her 
membership in a health care sharing ministry is not reasonably 
compatible with other information provided by the individual or in the 
records of the Exchange, the Exchange must follow the procedures 
specified in paragraph (g) of this section.
    (3) If an applicant attests to membership in a health care sharing 
ministry that is not known to the Exchange as a health care sharing 
ministry, the Exchange must notify HHS and not determine the applicant 
eligible or ineligible until such time as HHS notifies the Exchange 
regarding the attested health care sharing ministry's status with 
respect to the standards specified in 26 CFR 1.5000A-3(b).
    (d) Verification related to exemption for incarceration. (1) For 
any applicant who provides information attesting that he or she was 
incarcerated for a given month in accordance with the standards 
specified in Sec.  155.605(e) of this subpart, the Exchange must verify 
his or her attestation through the same process as described in 45 CFR 
155.315(e) of this part.
    (2) To the extent that the Exchange is unable to verify an 
applicant's attestation that he or she was incarcerated for a given 
month in accordance with the standards specified in Sec.  155.605(e) 
through the process described in 45 CFR 155.315(e) of this part, the 
Exchange must follow the procedures specified in paragraph (g) of this 
section.
    (e) Verification related to exemption for members of Indian tribes. 
(1) For any applicant who provides information attesting that he or she 
is a member of an Indian tribe, the Exchange must use the process 
outlined in 45 CFR 155.350(c) of this part to verify that the applicant 
is a member of an Indian tribe.
    (2) To the extent that the Exchange is unable to verify an 
applicant's status as a member of an Indian tribe through the process 
described in 45 CFR 155.350(c) of this part, the Exchange must follow 
the procedures specified in paragraph (g) of this section.
    (f) Verification related to exemption for hardship--(1) In general. 
For any applicant who requests an exemption based on hardship, the 
Exchange must verify whether he or she has experienced the hardship to 
which he or she is attesting.
    (2) Cannot afford coverage. For any applicant who requests an 
exemption based on the hardship described in Sec.  155.605(g)(2) of 
this subpart, the Exchange must verify the unavailability of affordable 
coverage through the procedures used to determine eligibility for 
advance payments of the premium tax credit, as specified in subpart D 
of this part, and the procedures used to verify eligibility for 
qualifying coverage in an eligible employer-sponsored plan, as 
specified in 45 CFR 155.320(e) of this part.
    (3) To the extent that the Exchange is unable to verify any of the 
information needed to determine an applicant's eligibility for an 
exemption based on hardship, the Exchange must follow the procedures 
specified in paragraph (g) of this section.
    (g) Inability to verify necessary information. Except as otherwise 
specified in this subpart, for an applicant for whom the Exchange 
cannot verify information required to determine eligibility for an 
exemption, including but not limited to when electronic data is 
required in accordance with this subpart but data for individuals 
relevant to the eligibility determination for an exemption are not 
included in such data sources or when electronic data is required but 
it is not reasonably expected that data sources will be available 
within 2 days of the initial request to the data source, the Exchange--
    (1) Must make a reasonable effort to identify and address the 
causes of such inconsistency, including typographical or other clerical 
errors, by contacting the application filer to confirm the accuracy of 
the information submitted by the application filer;
    (2) If unable to resolve the inconsistency through the process 
described in paragraph (g)(1) of this section, must--
    (i) Provide notice to the applicant regarding the inconsistency; 
and
    (ii) Provide the applicant with a period of 30 days from the date 
on which the notice described in paragraph (g)(2)(i) of this section is 
sent to the applicant to either present satisfactory documentary 
evidence via the channels available for the submission of an 
application, as described in 45 CFR 155.610(d) of this subpart, except 
for by telephone, or otherwise to resolve the inconsistency.
    (3) May extend the period described in paragraph (g)(2)(ii) of this 
section for

[[Page 7370]]

an applicant if the applicant demonstrates that a good faith effort has 
been made to obtain the required documentation during the period.
    (4) During the period described in paragraph (g)(1) and (g)(2)(ii) 
of this section, must not grant a certificate of exemption based on the 
information subject to this paragraph.
    (5) If, after the period described in paragraph (g)(2)(ii) of this 
section, the Exchange remains unable to verify the attestation, the 
Exchange must determine the applicant's eligibility for an exemption 
based on any information available from the data sources used in 
accordance with this subpart, if applicable, unless such applicant 
qualifies for the exception provided under paragraph (h) of this 
section, and notify the applicant of such determination in accordance 
with the notice requirements specified in Sec.  155.610(i) of this 
subpart, including notice that the Exchange is unable to verify the 
attestation; and
    (h) Exception for special circumstances. For an applicant who does 
not have documentation with which to resolve the inconsistency through 
the process described in paragraph (g)(2) of this section because such 
documentation does not exist or is not reasonably available and for 
whom the Exchange is unable to otherwise resolve the inconsistency, the 
Exchange must provide an exception, on a case-by-case basis, to accept 
an applicant's attestation as to the information which cannot otherwise 
be verified along with an explanation of circumstances as to why the 
applicant does not have documentation.
    (i) Flexibility in information collection and verification. HHS may 
approve an Exchange Blueprint in accordance with 45 CFR 155.105(d) of 
this part or a significant change to the Exchange Blueprint in 
accordance with 45 CFR 155.105(e) of this part modify the methods to be 
used for collection of information and verification as set forth in 
this subpart, as well as the specific information required to be 
collected, provided that HHS finds that such modification would reduce 
the administrative costs and burdens on individuals while maintaining 
accuracy and minimizing delay, and that applicable requirements under 
45 CFR 155.260, 155.270 of this part, and paragraph (j) of this 
section, and section 6103 of the Code with respect to the 
confidentiality, disclosure, maintenance, or use of such information 
will be met.
    (j) Applicant information. The Exchange must not require an 
applicant to provide information beyond the minimum necessary to 
support the eligibility process for exemptions as described in this 
subpart.


Sec.  155.620  Eligibility redeterminations for exemptions during a 
calendar year.

    (a) General requirement. The Exchange must redetermine the 
eligibility of an individual with an exemption if it receives and 
verifies new information reported by such an individual.
    (b) Requirement for individuals to report changes. (1) Except as 
specified in paragraph (b)(2) of this section, the Exchange must 
require an individual who has a certificate of exemption from the 
Exchange to report any change with respect to the eligibility standards 
for the exemption as specified in Sec.  155.605 of this subpart within 
30 days of such change.
    (2) The Exchange must allow an individual with a certificate of 
exemption to report changes via the channels available for the 
submission of an application, as described in Sec.  155.610(d) of this 
subpart.
    (c) Verification of reported changes. The Exchange must--
    (1) Verify any information reported by an individual with a 
certificate of exemption in accordance with the processes specified in 
Sec.  155.615 of this subpart prior to using such information in an 
eligibility redetermination.
    (2) Notify an individual in accordance with Sec.  155.610(i) of 
this subpart after redetermining his or her eligibility based on a 
reported change.
    (3) Provide periodic electronic notifications regarding the 
requirements for reporting changes and an individual's opportunity to 
report any changes, to an individual who has a certificate of exemption 
who has elected to receive electronic notifications, unless he or she 
has declined to receive such notifications.


Sec.  155.625  Options for conducting eligibility determinations for 
exemptions.

    (a) Options for conducting eligibility determinations. The Exchange 
may satisfy the requirements of this subpart--
    (1) Directly or through contracting arrangements in accordance with 
45 CFR 155.110(a) of this part; or
    (2) Through the approach described in paragraph (b) of this 
section, subject to the standards in paragraph (c) of this section.
    (b) Use of HHS service. Notwithstanding the requirements of this 
subpart, the Exchange may adopt an exemption eligibility determination 
made by HHS, provided that--
    (1) The Exchange accepts the application, as specified in Sec.  
155.610(c) of this subpart, and issues the eligibility notice, as 
specified in Sec.  155.610(i) of this subpart;
    (2) Verifications and other activities required in connection with 
eligibility determinations for exemptions are performed by the Exchange 
in accordance with the standards identified in this subpart or by HHS 
in accordance with the agreement described in paragraph (b)(5) of this 
section;
    (3) The Exchange transmits to HHS promptly and without undue delay 
and via secure electronic interface, all information provided as a part 
of the application or update that initiated the eligibility 
determination, and any information obtained or verified by the 
Exchange;
    (4) The Exchange adheres to the eligibility determination made by 
HHS; and
    (5) The Exchange and HHS enter into an agreement specifying their 
respective responsibilities in connection with eligibility 
determinations for exemptions.
    (c) Standards. To the extent that eligibility determinations for 
exemptions are made in accordance with paragraph (b) of this section, 
the Exchange must ensure that -
    (1) Such arrangement does not increase administrative costs and 
burdens on individuals, or increase delay; and
    (2) Applicable requirements under 45 CFR 155.260, 155.270, and 
155.315(i) of this part, and section 6103 of the Code with respect to 
the confidentiality, disclosure, maintenance or use of information are 
met.


Sec.  155.630  Reporting.

    Requirement to provide information related to tax administration. 
If the Exchange grants an individual a certificate of exemption in 
accordance with Sec.  155.610(i) of this subpart, the Exchange must 
transmit to the IRS at such time and in such manner as the IRS may 
specify -
    (a) The individual's name, Social Security number, and exemption 
certificate number;
    (b) Any other information required in guidance published by the 
Commissioner of the IRS in accordance with 26 CFR 601.601(d)(2).


Sec.  155.635  Right to appeal.

    Individual appeals. The Exchange must include the notice of the 
right to appeal and instructions regarding how to file an appeal in any 
notification issued in accordance with Sec.  155.610(i) and Sec.  
155.625(b)(1) of this subpart.

[[Page 7371]]

PART 156--PROCEDURAL AND SUBSTANTIVE REQUIREMENTS FOR MISCELLANEOUS 
COVERAGES WISHING TO BE DESIGNATED AS MINIMUM ESSENTIAL COVERAGE

0
5. The authority citation for subpart G is revised to read as follows:

    Authority: Title I of the Affordable Care Act, Sections 1301-
1304, 1311-1312, 1321, 1322, 1324, 1334, 1341-1343, and 1401-1402, 
1501, Pub. L. 111-148, 124 Stat. 119 (42 U.S.C. 18042).

0
6. Add subpart G to read as follows:
Subpart G--Minimum Essential Coverage
Sec.
156.600 The definition of minimum essential coverage.
156.602 Other coverage that qualifies as minimum essential coverage.
156.604 Requirements for recognition as minimum essential coverage 
for types of coverage not otherwise designated minimum essential 
coverage in the statute or this subpart.
156.606 HHS audit authority.

Subpart G--Minimum Essential Coverage


Sec.  156.600  The definition of minimum essential coverage.

    The term minimum essential coverage has the same meaning as 
provided in 26 CFR 1.5000A-2 for purposes of this subpart.


Sec.  156.602  Other coverage that qualifies as minimum essential 
coverage.

    The following types of coverage are designated by the Secretary as 
minimum essential coverage for purposes of section 5000A(f)(1)(E) of 
the Code:
    (a) Self-funded student health coverage. Coverage offered to 
students, by an institution of higher education (as defined in the 
Higher Education Act of 1965), where the institution assumes the risk 
for payment of claims.
    (b) Foreign health coverage. Coverage for non-citizens residing in 
the United States, provided by their home country.
    (c) Refugee medical assistance supported by the Administration for 
Children and Families (45 CFR Subpart G). A federally-funded program 
that provides up to 8 months of coverage to certain noncitizens who are 
considered refugees under the Immigration and Naturalization Act.
    (d) Medicare advantage plans. Medicare program under Part C of 
title XVIII of the Social Security Act, which provides Medicare Parts A 
and B benefits through a private insurer.
    (e) State high risk pool coverage. State high risk pools are 
designated as minimum essential coverage subject to further review by 
the Secretary.
    (f) Coverage for AmeriCorp volunteers. Health coverage provided to 
volunteers of AmeriCorp.
    (g) Other coverage. Other coverage that qualifies pursuant to Sec.  
156.604 of this subpart.


Sec.  156.604  Requirements for recognition as minimum essential 
coverage for types of coverage not otherwise designated minimum 
essential coverage in the statute or this subpart.

    The Secretary may recognize ``other coverage'' as minimum essential 
coverage provided HHS determines that the coverage meets the following 
substantive and procedural requirements:
    (a) Coverage requirements. A plan must meet substantially all the 
requirements pertaining to non-grandfathered, individual health 
insurance coverage, of title I of the Affordable Care Act.
    (b) Sponsoring organization requirements. In order for ``other 
coverage'' to be considered by the Secretary for recognition as minimum 
essential coverage, the sponsor, or in the case of a government-
sponsored program, the government agency responsible for administering 
the program, must meet criteria at the discretion the Secretary.
    (c) Procedural requirements. Procedural requirements for 
recognition as miscellaneous minimum essential coverage. To be 
considered for recognition as minimum essential coverage, a sponsor 
must submit the following information to HHS:
    (1) Identity of the plan sponsor and appropriate contact persons;
    (2) Basic information about the plan, including:
    (i) Name of the organization sponsoring the plan;
    (ii) Name and title of the individual who is authorized to make, 
and makes, this certification on behalf of the organization;
    (iii) Address of the individual named above;
    (iv) Phone number of the individual named above;
    (v) Number of enrollees;
    (vi) Eligibility criteria;
    (vii) Cost sharing requirements, including deductible and out-of-
pocket maximum limit;
    (viii) Essential health benefits covered; and
    (ix) A certification by the appropriate individual, named pursuant 
to paragraph (c)(2)(ii) of this section, that the health coverage 
sponsored by the organization substantially complies with the 
requirements of title I of the Affordable Care Act and sponsor 
standards required by this rule.
    (d) CMS will maintain a public list of types of coverage that the 
Secretary has recognized as minimum essential coverage.
    (e) If at any time the Secretary determines that a type of coverage 
previously recognized as minimum essential coverage no longer meets the 
coverage requirements of paragraph (a) of this section or the 
sponsoring organization requirements of paragraph (b) of this section, 
the Secretary may revoke the recognition of such coverage.
    (f) Notice. Once recognized as minimum essential coverage, a plan 
must provide notice to all enrollees of its minimum essential coverage 
status.


Sec.  156.606  HHS audit authority.

    The Secretary may audit a plan or program recognized as minimum 
essential coverage under Sec.  156.604 of this subpart at any time to 
ensure compliance with the requirements of Sec.  156.604(a) of this 
subpart.

    Dated: January 25, 2013.
Marilyn Tavenner,
Acting Administrator, Centers for Medicare & Medicaid Services.

    Approved: January 28, 2013.
Kathleen Sebelius,
Secretary, Department of Health and Human Services.
[FR Doc. 2013-02139 Filed 1-30-13; 11:15 am]
BILLING CODE 4120-01-P