[Federal Register Volume 78, Number 37 (Monday, February 25, 2013)]
[Rules and Regulations]
[Pages 12833-12872]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-04084]



[[Page 12833]]

Vol. 78

Monday,

No. 37

February 25, 2013

Part II





Department of Health and Human Services





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45 CFR Parts 147, 155, and 156





 Patient Protection and Affordable Care Act; Standards Related to 
Essential Health Benefits, Actuarial Value, and Accreditation; Final 
Rule

Federal Register / Vol. 78 , No. 37 / Monday, February 25, 2013 / 
Rules and Regulations

[[Page 12834]]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

45 CFR Parts 147, 155, and 156

[CMS-9980-F]
RIN 0938-AR03


Patient Protection and Affordable Care Act; Standards Related to 
Essential Health Benefits, Actuarial Value, and Accreditation

AGENCY: Department of Health and Human Services.

ACTION: Final rule.

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SUMMARY: This final rule sets forth standards for health insurance 
issuers consistent with title I of the Patient Protection and 
Affordable Care Act, as amended by the Health Care and Education 
Reconciliation Act of 2010, referred to collectively as the Affordable 
Care Act. Specifically, this final rule outlines Exchange and issuer 
standards related to coverage of essential health benefits and 
actuarial value. This rule also finalizes a timeline for qualified 
health plans to be accredited in Federally-facilitated Exchanges and 
amends regulations providing an application process for the recognition 
of additional accrediting entities for purposes of certification of 
qualified health plans.

DATES: Effective April 26, 2013.

FOR FURTHER INFORMATION CONTACT: 
Leigha Basini at (301) 492-4307, for general information.
Adam Block at (410) 786-1698, for matters related to essential health 
benefits, actuarial value, and minimum value.
Tara Oakman at (301) 492-4253, for matters related to accreditation.

SUPPLEMENTARY INFORMATION: 

Table of Contents

I. Background
    A. Legislative Overview
    B. Stakeholder Consultation and Input
II. Provisions of the Regulation and Analysis of and Responses to 
Public Comments
    A. Part 147--Health Insurance Reform Requirements for the Group 
and Individual Health Insurance Markets
    1. Subpart B--Requirements Relating to Health Care Access
    a. Coverage of EHB (Sec.  147.150)
    B. Part 155--Exchange Establishment Standards and Other Related 
Standards Under the Affordable Care Act State-Required Benefits
    C. Part 156--Health Insurance Issuer Standards Under the 
Affordable Care Act, Including Standards Related to Exchanges
    1. Subpart A--General Provisions
    2. Subpart B--EHB Package
    a. State Selection of Benchmark (Sec.  156.100)
    b. Determination of EHB for Multi-State Plans (Sec.  156.105)
    c. EHB-Benchmark Plan Standards (Sec.  156.110)
    d. Provision of EHB (Sec.  156.115)
    e. Prescription Drug Benefits (Sec.  156.122)
    f. Prohibition on Discrimination (Sec.  156.125)
    g. Cost-Sharing Requirements (Sec.  156.130)
    h. AV Calculation for Determining Level of Coverage (Sec.  
156.135)
    i. Levels of Coverage (Sec.  156.140)
    j. Determination of Minimum Value (Sec.  156.145)
    k. Application to Stand-Alone Dental Plans Inside the Exchange 
(Sec.  156.150)
    3. Subpart C--Accreditation
III. Collection of Information Requirements
IV. Regulatory Impact Analysis
V. Regulatory Flexibility Act
VI. Unfunded Mandates
VII. Federalism
VIII. Appendix A--List of EHB Benchmarks
IX. Appendix B--Largest FEDVIP Dental and Vision Plan Options, as of 
March 31, 2012

Acronym List:

    Because of the many organizations and terms to which we refer by 
acronym in this final rule, we are listing these acronyms and their 
corresponding terms in alphabetical order below:

AV Actuarial Value
CHIP Children's Health Insurance Program
CMS Centers for Medicare & Medicaid Services
DOL U.S. Department of Labor
EHB Essential Health Benefits
ERISA Employee Retirement Income Security Act (29 U.S.C. section 
1001, et seq.)
FDA U.S. Food and Drug Administration
FEDVIP Federal Employees Dental and Vision Insurance Program
FEHBP Federal Employees Health Benefits Program
FSA Flexible Spending Arrangement
HEDIS Healthcare Effectiveness Data and Information Set
HHS U.S. Department of Health and Human Services
HIOS Health Insurance Oversight System
HMO Health Maintenance Organization
HRA Health Reimbursement Arrangement
HSA Health Savings Account
IOM Institute of Medicine
ICR Information Collection Requirements
IRS Internal Revenue Service
MV Minimum Value
NAIC National Association of Insurance Commissioners
OMB Office of Management and Budget
OPM U.S. Office of Personnel Management
PHSAct Public Health Service Act
PRA Paperwork Reduction Act
QHP Qualified Health Plan
SHOP Small Business Health Options Program
SSA Social Security Administration
The Act Social Security Act
The Code Internal Revenue Code of 1986
USP United States Pharmacopeia

    Executive Summary: Beginning in 2014, all non-grandfathered health 
insurance coverage in the individual and small group markets, Medicaid 
benchmark and benchmark-equivalent plans, and Basic Health Programs (if 
applicable) will cover essential health benefits (EHB), which include 
items and services in 10 statutory benefit categories, such as 
hospitalization, prescription drugs, and maternity and newborn care, 
and are equal in scope to a typical employer health plan. In addition 
to offering EHB, non-grandfathered health insurance plans will meet 
specific actuarial values (AVs): 60 percent for a bronze plan, 70 
percent for a silver plan, 80 percent for a gold plan, and 90 percent 
for a platinum plan. These AVs, called ``metal levels,'' will assist 
consumers in comparing and selecting health plans by allowing a 
potential enrollee to compare the relative payment generosity of 
available plans. Taken together, EHB and AV will significantly increase 
consumers' ability to compare and make an informed choice about health 
plans.
    The Department of Health and Human Services (HHS) has provided 
information on EHB and AV standards in several phases. On December 16, 
2011, HHS released a bulletin \1\ (the EHB Bulletin) following a report 
from the U.S. Department of Labor (DOL) \2\ describing the scope of 
benefits typically covered under employer-sponsored coverage and an 
HHS-commissioned study from the Institute of Medicine (IOM) \3\ 
recommending the criteria and methods for determining and updating the 
EHB. The EHB Bulletin outlined an intended regulatory approach for 
defining EHB, including a benchmark-based framework. Shortly 
thereafter, on January 25, 2012, HHS released an illustrative list of 
the largest three small group market products by state, which was 
updated on July 2, 2012.\4\ HHS further clarified the approach 
described in the EHB Bulletin through a series of Frequently Asked 
Questions (FAQs),\5\ released on

[[Page 12835]]

February 17, 2012. On July 20, 2012, HHS published a final rule \6\ 
authorizing the collection of data to be used under the intended 
process for states to select from among several benchmark options to 
define EHB.
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    \1\ ``Essential Health Benefits Bulletin.'' December 16, 2011. 
Available at: http://cciio.cms.gov/resources/files/Files2/12162011/essential_health_benefits_bulletin.pdf.
    \2\ ``Selected Medical Benefits: A report from the Department of 
Labor to the Department of Health and Human Services.'' April 15, 
2011. Available at: http://www.bls.gov/ncs/ebs/sp/selmedbensreport.pdf.
    \3\ Institute of Medicine, ``Essential Health Benefits: 
Balancing Coverage and Cost.'' October 6, 2011. Available at: http://www.iom.edu/Reports/2011/Essential-Health-Benefits-Balancing-Coverage-and-Cost.aspx.
    \4\ ``Essential Health Benefits: List of the Largest Three Small 
Group Products by State.'' July 3, 2012. Available at: http://cciio.cms.gov/resources/files/largest-smgroup-products-7-2-2012.pdf.PDF.
    \5\ ``Frequently Asked Questions on Essential Health Benefits 
Bulletin.'' February 17, 2012. Available at: http://cciio.cms.gov/resources/files/Files2/02172012/ehb-faq-508.pdf.
    \6\ Patient Protection and Affordable Care Act; Data Collection 
to Support Standards Related to Essential Health Benefits; 
Recognition of Entities for the Accreditation of Qualified Health 
Plans, Final Rule, 77 FR 42658-42672 (July 20, 2012) (to be codified 
at 45 CFR part 156).
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    HHS also published a bulletin \7\ outlining an intended regulatory 
approach to calculations of AV and implementation of cost-sharing 
reductions on February 24, 2012 (the AV/CSR Bulletin). Specifically, 
HHS outlined an intended regulatory approach for the calculation of AV, 
de minimis variation standards, and silver plan variations for 
individuals eligible for cost-sharing reductions among other topics. As 
described in section IB of this preamble, ``Stakeholder Consultation 
and Input,'' HHS reviewed and considered comments on both the EHB and 
AV/CSR bulletins in developing the notice of proposed rulemaking and 
this final rule.
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    \7\ ``Actuarial Value and Cost-Sharing Reductions Bulletin.'' 
February 24, 2012. Available at: http://cciio.cms.gov/resources/files/Files2/02242012/Av-csr-bulletin.pdf.
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    In addition, this rule finalizes an amendment to 45 CFR 156.275, as 
published on July 20, 2012 (77 FR 42658), which established the first 
phase of an intended two-phase approach to recognizing accrediting 
entities. As directed under law, recognized entities will implement the 
standards established under the Affordable Care Act for qualified 
health plans (QHPs) to be accredited on the basis of local performance 
on a timeline established by the Exchange. The amendment to phase one 
included here does not alter recognition of the National Committee for 
Quality Assurance (NCQA) and URAC as published in the Federal Register 
notice on November 23, 2012 (77 FR 70163). The amendment provides an 
opportunity for additional accrediting entities meeting the conditions 
in listed Sec.  156.275 to be recognized by the Secretary, until phase 
two is in effect. This opportunity includes an application and review 
process. This final rule also sets forth a timeline for the 
accreditation standard for the purposes of QHP certification in 
Federally-facilitated Exchanges.

I. Background

A. Legislative Overview

    Section 1302 of the Affordable Care Act provides for the 
establishment of an EHB package that includes coverage of EHB (as 
defined by the Secretary of the Department of Health and Human Services 
(the Secretary)), cost-sharing limits, and AV requirements. The law 
directs that EHB be equal in scope to the benefits covered by a typical 
employer plan and cover at least the following 10 general EHB 
categories: Ambulatory patient services; emergency services; 
hospitalization; maternity and newborn care; mental health and 
substance use disorder services, including behavioral health treatment; 
prescription drugs; rehabilitative and habilitative services and 
devices; laboratory services; preventive and wellness services and 
chronic disease management; and pediatric services, including oral \8\ 
and vision care. Sections 1302(b)(4)(A) through (D) of the Affordable 
Care Act establish that the Secretary must define EHB in a manner that 
(1) reflects appropriate balance among the 10 statutory EHB categories; 
(2) is not designed in such a way as to discriminate based on age, 
disability, or expected length of life; (3) takes into account the 
health care needs of diverse segments of the population; and (4) does 
not allow denials of EHB based on age, life expectancy, or disability. 
Sections 1302(b)(4)(E) and (F) of the Affordable Care Act further 
direct the Secretary to consider the provision of emergency services 
and dental benefits when determining whether a particular health plan 
covers EHB. Finally, sections 1302(b)(4)(G) and (H) of the Affordable 
Care Act specify that the Secretary periodically review the EHB, report 
the findings of such review to the Congress and to the public, and 
update the EHB as needed to address any gaps in access to care or 
advances in the relevant evidence base. Section 1311(d)(3)(B) of the 
Affordable Care Act establishes that states may require a QHP to cover 
additional benefits beyond those in the EHB, provided that the state 
defrays the costs of such required benefits.
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    \8\ We note that the Affordable Care Act uses the terms 
``dental'' and ``oral'' interchangeably when referring to the 
pediatric dental care category of EHB (see, e.g., section 
1302(B)(1)(J), referring to pediatric oral care, and section 
1311(d)(2)(B)(ii), referring to stand-alone dental benefits). 
Similarly, we intend for purposes of the EHB rule that these terms 
be used without distinction.
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    As first described in Public Health Service (PHS) Act section 
2711,\9\ to determine which benefits are EHB for purposes of complying 
with PHS Act section 2711 and its implementing regulations, the 
Departments of Labor, Treasury, and HHS will consider a self-insured 
group health plan, a large group market health plan, or a grandfathered 
group health plan to have used a permissible definition of EHB under 
section 1302(b) of the Affordable Care Act if the definition is one 
that is authorized by the Secretary of HHS (including any available 
benchmark option, supplemented as needed to ensure coverage of all ten 
statutory categories). Furthermore, the Departments intend to work with 
those plans that make a good faith effort to apply an authorized 
definition of EHB to ensure there are no annual or lifetime dollar 
limits on EHB.
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    \9\ See 75 FR 37188, 37191 (June 28, 2010). The regulations 
define ``essential health benefits'' by cross-reference to section 
1302(b) of the Affordable Care Act and applicable regulations, which 
had not been issued at the time of publication of the regulations 
implementing PHS Act section 2711.
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    Section 1301(a)(1)(B) of the Affordable Care Act directs all 
issuers of QHPs to cover the EHB package described in section 1302(a) 
of the Affordable Care Act, including coverage of the services 
described in section 1302(b), adhering to the cost-sharing limits 
described in section 1302(c), and subject to 1302(e), meeting the AV 
levels established in section 1302(d). Section 2707(a) of the PHS Act 
extends the coverage of the EHB package to issuers of non-grandfathered 
individual and small group policies beginning with plan years starting 
on or after January 1, 2014, irrespective of whether such issuers offer 
coverage through an Exchange. In addition, section 2707(b) of the PHS 
Act directs non-grandfathered group health plans to ensure that cost-
sharing under the plan does not exceed the limitations described in 
sections 1302(c)(1) and (2) of the Affordable Care Act.
    Section 1302(d)(2) of the Affordable Care Act describes the levels 
of coverage that section 1302(a)(3) includes in the EHB package: 60 
percent for a bronze plan, 70 percent for a silver plan, 80 percent for 
a gold plan, and 90 percent for a platinum plan. Section 1302(d)(3) 
directs the Secretary to develop guidelines that allow for de minimis 
variation in AV calculations.
    Section 1311(c)(1)(D)(i) of the Affordable Care Act directs a 
health plan to ``be accredited with respect to local performance on 
clinical quality measures * * * by any entity recognized by the 
Secretary for the accreditation of health insurance issuers or plans 
(so long as any such entity has transparent and rigorous methodological 
and scoring criteria).'' Section 1311(c)(1)(D)(ii) requires that QHPs

[[Page 12836]]

``receive such accreditation within a period established by an Exchange 
* * * ''. In a final rule published on July 20, 2012 (77 FR 42658), 
because NCQA and URAC already met the statutory requirements, they were 
recognized as accrediting entities on an interim basis, subject to the 
submission of documentation required in 45 CFR 156.275(c)(4). This 
recognition is now effective as indicated in the Federal Register 
notice (77 FR 70163) published on November 23, 2012, titled 
``Recognition of Entities for the Accreditation of Qualified Health 
Plans.''
    In this final rule, HHS establishes a process by which accrediting 
entities that are not already recognized can submit an application to 
be recognized and a proposed notice and final notice process for 
recognizing any new accrediting entities. This final rule also sets 
forth a timeline for the accreditation requirement in a Federally-
facilitated Exchange.

B. Stakeholder Consultation and Input

    HHS consulted with interested stakeholders on several policies 
related to EHB, AV, and Exchange functions. HHS held a number of 
listening sessions with consumers, providers, employers, health plans, 
and state representatives to gather public input, and released several 
documents for public review and comment. In addition, HHS consulted 
with stakeholders through regular meetings with the National 
Association of Insurance Commissioners (NAIC), regular contact with 
states through the process of awarding and monitoring grants for the 
establishment of Exchanges, Medicaid consultations, and meetings with 
tribal leaders and representatives, health insurance issuers, trade 
groups, consumer advocates, employers, and other interested parties.
    HHS received approximately 11,000 comments in response to the EHB 
Bulletin. Commenters represented a wide variety of stakeholders, 
including health insurance issuers, consumers, health providers, 
states, employers, employees, and Members of Congress. In the proposed 
rule, we noted that these comments were considered as the policies were 
developed and were also discussed throughout the preamble of the 
proposed rule. HHS has consulted with and will continue to consult with 
federally recognized tribes on the provisions of this rule that impact 
tribes.

II. Provisions of the Regulation and Analysis of and Responses to 
Public Comments

    The proposed rule, titled ``Patient Protection and Affordable Care 
Act; Standards Related to Essential Health Benefits, Actuarial Value, 
and Accreditation'' (77 FR 70644), was published in the Federal 
Register on November 26, 2012. In that rule, we proposed to codify 
regulations in 45 CFR parts 147, 155, and 156. For Part 147, we 
proposed standards for health insurance issuers in the small group and 
individual markets related to health insurance reforms. For Part 155, 
we proposed standards for states seeking to require benefits in 
addition to those in EHB and outlined the proposed standards for 
Exchanges related to the QHP accreditation timeline. Additionally, for 
Part 156, we proposed standards relating to EHB and AV, as well as 
relating to accreditation of QHP issuers. These standards apply only in 
the individual and small group markets, and not to Medicaid benchmark 
or benchmark-equivalent plans. In a proposed rule, released on January 
14, 2013, titled ``Medicaid, Children's Health Insurance Programs, and 
Exchanges: Essential Health Benefits in Alternative Benefits 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,'' \10\ CMS proposed EHB 
applicability to Medicaid.
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    \10\ Medicaid, Children's Health Insurance Programs, and 
Exchanges: Essential Health Benefits in Alternative Benefits 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 4594 (proposed January 22, 
2013) (to be codified at 42 CFR parts 430, 431, 433, 435, 440, 447, 
and 457 and 45 CFR part 155).
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    We received approximately 5,798 public comments including roughly 
600 total unique letters on the essential health benefit proposals, 
including comments from states, health plans, industry experts, health 
care providers, Members of Congress, consumer groups, and members of 
the public. Many non-unique comments concerned coverage of lactation 
services, medical foods, acupuncture services, maternity coverage for 
dependents, and cost sharing for mental health services. Many 
commenters expressed concern about the comprehensiveness of the 
proposed benchmark standard, the balance between affordability and 
state flexibility, and the length of the public comment period. In this 
final rule, we provide a summary of each proposed provision, a summary 
of the public comments received and our responses to them, and the 
policies we are finalizing.
    The comments and our responses to general comments are set forth 
below.
    Comment: Several commenters were concerned that the 30-day comment 
period was not an adequate amount of time to provide sufficient 
feedback on the proposed regulation. Specifically, many commenters 
requested a 60-day comment period, but provided no substantive comment.
    Response: CMS provided a 30-day comment period, which is consistent 
with the Administrative Procedure Act and the policy established by the 
Assistant Secretary for Administration (ASA) and the Office of 
Management and Budget (OMB). We note that CMS previously allowed for an 
extended comment period on the EHB Bulletin, which outlined the 
intended policy in the proposed rule. CMS believes that interested 
stakeholders had adequate opportunity to provide comment on the 
policies established in this final rule.

A. Part 147--Health Insurance Reform Requirements for the Group and 
Individual Health Insurance Markets

1. Subpart B--Requirements Relating to Health Care Access
a. Coverage of EHB (Sec.  147.150)
    Section 2707(a) of the PHS Act, as added by the Affordable Care 
Act, directs health insurance issuers that offer non-grandfathered 
health insurance coverage in the individual or small group market to 
ensure that such coverage includes the EHB package, which is defined 
under section 1302(a) of the Affordable Care Act to include the 
coverage of EHB, application of cost-sharing limitations, and AV 
requirements (plans must be a bronze, silver, gold, or platinum plan, 
or a catastrophic plan).
    Section 1255 of the Affordable Care Act provides that this EHB 
package standard applies starting the first plan year for the small 
group market or policy year for the individual market beginning on or 
after January 1, 2014. In 45 CFR 147.150(a), we implement the 
requirement in section 2707(a) of the PHS Act that a health insurance 
issuer that offers health insurance coverage in the individual or small 
group market--inside or outside of the Exchange-- ensures that such 
coverage offers the EHB package.
    Section 2707(b) of the PHS Act provides that a group health plan 
shall ensure that any cost-sharing

[[Page 12837]]

requirements under the plan does not exceed the limitations provided 
for under section 1302(c)(1), annual limitation on cost-sharing, and 
(c)(2), annual limitation on deductibles, of the Affordable Care Act. 
Section 715(a)(1) of the Employee Retirement Income Security Act 
(ERISA) and section 9815(a)(1) of the Internal Revenue Code (the Code) 
incorporate section 2707(b) of the PHS Act into ERISA and the Code. In 
the preamble to the proposed rule, HHS, DOL, and the Department of the 
Treasury state that they read section 2707(b) to apply the deductible 
limit described in section 1302(c)(2) of the Affordable Care Act only 
to plans and issuers in the small group market and not to self-insured 
group health plans, large group health plans, or health insurance 
issuers offering health insurance coverage in the large group market. 
However, no rules to implement that interpretation were proposed at 
that time and we noted that section 147.150(b) would be reserved. The 
three Departments intend to engage in future rulemaking to implement 
section 2707(b) but, in light of comments received on the 
interpretation of section 2707(b), are explaining in more detail here 
our intended approach to this provision and the application of the 
section 1302(c)(1) and (2) cost-sharing limits to group health plans. 
Section 2707(b) provides that ``[a] group health plan shall ensure that 
any annual cost sharing imposed under the plan does not exceed the 
limitations provided for under paragraphs (1) and (2) of section 
1302(c).'' We recognize the potential ambiguity in this reference to 
the limitations provided under section 1302(c)(1) and (2) of the 
Affordable Care Act. As noted below in response to comments, we read 
section 2707(b) as requiring all group health plans to comply with the 
annual limitation on out-of-pocket maximums described in section 
1302(c)(1),\11\ annual limitation on cost-sharing. At the same time, 
consistent with the approach described in the preamble to the proposed 
rule, we continue to believe that only plans and issuers in the small 
group market are subject to the deductible limits described in section 
1302(c)(2).
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    \11\ Note that PHS Act section 2707 is not applicable to 
grandfathered health plans. See 26 CFR 54.9815-1251T, 29 CFR 
2590.715-1251, 45 CFR 147.140.
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    We believe there are two alternative reads of the statute that give 
strong textual support for this interpretation of the relationship 
between of section 2707(b) and section 1302(c)(2) and lead to 
effectively the same result. The first interpretation would implement 
section 2707(b)'s direction that group health plans comply with section 
1302(c)(1) and (2) by substituting the term ``group health plan'' from 
section 2707(b) where the term ``health plan'' appears in section 
1302(c)(1) and (2). The annual limitation on cost-sharing in section 
1302(c)(1) applies to all ``health plan[s],'' and so under this 
interpretation that limitation would apply to all ``group health 
plan[s].'' In contrast, the annual limitation on deductibles in section 
1302(c)(2) applies only to ``health plan[s] offered in the small group 
market,'' and so under this interpretation that limitation would apply 
only to insured small group market health plans.
    Under the second interpretation we see as consistent with the 
statutory text, section 2707(b) could be read to require all group 
health plans to comply with both the annual limitation on cost-sharing 
in section 1302(c)(1) and the annual limitation on deductibles in 
section 1302(c)(2). Section 1302(c)(2)(C), however, provides that the 
cap on deductibles shall be applied in such a manner so as not to 
affect the actuarial value of the plan. If the limitation on 
deductibles were interpreted to apply to large and self-insured group 
health plans, the Departments would engage in rulemaking to implement 
this provision broadly, so as to provide relief to large and self-
insured group health plans in cases where complying with the limit on 
deductibles would affect the actuarial value of those plans. We 
anticipate that we would develop the applicable parameters in separate 
rulemaking that would take into consideration the differences in 
applying the concept of actuarial value to large and self-insured group 
health plans that do not have to meet the level of coverage 
requirements that are part of the EHB package.
    In addition, section 2707(c) of the PHS Act provides that an issuer 
offering any level of coverage specified under section 1302(d) of the 
Affordable Care Act offer coverage in that level as a plan in which the 
only enrollees are individuals who have not yet attained the age of 21. 
We codify this standard in 45 CFR 147.150(c).
    Comments received regarding Sec.  147.150(a) and (c) are addressed 
in other sections of this preamble that are more relevant to the 
substance of the comments. We also received comments addressing the 
suggested interpretation of section 2707(b) and how the limitations on 
cost-sharing should apply to all group health plans.
    Comment: Some commenters requested that self-insured plans be 
exempt from the cost sharing limits described in Sec.  156.130(a). 
Several of these comments indicated operational concerns with applying 
a single annual limitation on cost sharing to EHB that are administered 
by separate contractors; in particular, commenters noted the practice 
of using a pharmacy benefit manager to administer prescription benefits 
separately from other medical benefits. Other commenters agreed with 
the legal read that cost sharing limits described in Sec.  156.130(a) 
apply to all group health plans.
    Response: We note that DOL also received correspondence on this 
issue seeking clarification of how the three Departments would 
interpret section 2707(b) of the PHS Act and the corresponding 
provisions in ERISA and the Code. As discussed in more detail above, 
the three Departments interpret these provisions to mean that large 
group market and self-insured group health plans must comply with the 
annual limitation on out-of-pocket maximums described in section 
1302(c)(1).
    Nevertheless, the Departments are concerned about the operational 
and timing issues raised by commenters, and find that some transitional 
relief is appropriate. Accordingly, the three Departments are issuing 
concurrent sub-regulatory guidance identifying an enforcement safe 
harbor for large and self-insured group health plans to address those 
operational concerns.
Summary of Regulatory Changes
    For the reasons described in the proposed rule and considering the 
comments received, we are finalizing the provisions proposed in Sec.  
147.150 of the proposed rule with two technical edits to paragraph (c) 
to conform to the underlying statutory authority, including adding to 
paragraph (c) the following language ``as a plan in which the only 
enrollees are,'' to clarify that the child-only coverage offered by an 
issuer under this section must be a plan with only child enrollees.

B. Part 155--Exchange Establishment Standards and Other Related 
Standards Under the Affordable Care Act State-Required Benefits

    Section 1311(d)(3)(B) of the Affordable Care Act explicitly permits 
a state, at its option, to require QHPs to offer benefits in addition 
to EHB, but requires the state to make payments, either to the 
individual enrollee or to the issuer on behalf of the enrollee, to 
defray the cost of these additional benefits. We proposed that state-
required benefits enacted on or before December 31, 2011 (even if not 
effective

[[Page 12838]]

until a later date) may be considered EHB, which would obviate the 
requirement for the state to defray costs for these state-required 
benefits. We also proposed that these state-required benefits that are 
not included in the benchmark would apply to QHP markets in the same 
way they apply in the current market. This policy regarding state-
required benefits is intended to apply for at least plan years 2014 and 
2015. This two year transitional period accommodates current market 
offerings and limits market disruption in the first years of the 
Exchanges.
    Under the Affordable Care Act, state payment for state-required 
benefits only applies to QHPs. Since the Exchange is responsible for 
certifying QHPs, we proposed that the Exchange identify which 
additional state-required benefits, if any, are in excess of the EHB.
    We additionally proposed that the calculations of the cost of 
additional benefits be made by a member of the American Academy of 
Actuaries, in accordance with generally accepted actuarial principles 
and methodologies. We also proposed the calculation be done 
prospectively to allow for the offset of an enrollee's share of premium 
and for purposes of calculating the premium tax credit and reduced cost 
sharing.\12\
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    \12\ Section 36B(b)(3)(D) of the Code specifies that the portion 
of the premium allocable to required additional benefits shall not 
be taken into account in determining a premium tax credit. Likewise, 
section 1402(c) of the Affordable Care Act specifies that cost-
sharing reductions do not apply to required additional benefits.
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    The comments and our responses to Sec.  155.170 are set forth 
below.
    Comment: Some commenters were concerned that including all state-
required benefits enacted before December 31, 2011 in EHB would 
increase costs for covered individuals. However, most who commented on 
inclusion of state-required benefits favored this policy.
    Response: Research by the HHS Office of the Assistant Secretary for 
Planning and Evaluation found that the majority of required benefits 
have a negligible impact on premiums.\13\
---------------------------------------------------------------------------

    \13\ ``Essential Health Benefits: Comparing Benefits in Small 
Group Products and State and Federal Employee Plans.'' ASPE Research 
Brief, December 2011. Available at: http://aspe.hhs.gov/health/reports/2011/marketcomparison/rb.pdf.
---------------------------------------------------------------------------

    Comment: Some commenters suggested that states should make monthly 
payments to only the issuer on behalf of the enrollee, and that 
payments to the enrollee directly should not be permitted.
    Response: Section 1311(d)(3)(B) of the Affordable Care Act directs 
the state to make payments either to the individual enrollee or to the 
issuer, and regulatory language reflects that statutory requirement. We 
are retaining our proposed approach as final and will permit states to 
either make payments to individuals or issuers, as applicable.
    Comment: Some commenters suggested that we should require the state 
to defray any cost associated with other types of state requirements, 
such as rules regarding reimbursement to certain providers, anti-
discrimination laws, and rules specific to benefit delivery method.
    Response: As we explained in the preamble of the proposed rule, we 
interpret ``state-required benefits'' to include the care, treatment 
and services that an issuer must provide to its enrollees. Other state 
laws that do not relate to specific benefits, including those relating 
to providers and benefit delivery method, are not addressed in Sec.  
155.170.
    Comment: In the proposed rule we requested comment on whether the 
state should make payments based on the statewide average cost of 
additional state-required benefits that are outside the scope of EHB or 
make payments based on each QHP issuer's actual cost. Several 
commenters noted that each QHP issuer's cost may vary due to 
differences in market share and enrollee pool, and those commenters 
favored payments based on actual cost. Other commenters recommended 
that payments should be based on the average benefit cost for the 
relevant geographic area.
    Response: We believe that states may wish to take different 
approaches, basing payments on either statewide average or each 
issuer's actual cost. Therefore, we are not establishing a standard in 
this final rule but permit both options for calculating state payments, 
at the election of the state.
Summary of Regulatory Changes
    For the reasons described in the proposed rule and considering the 
comments received, we are finalizing the provisions proposed in Sec.  
155.170 of the proposed rule without modification.
Accreditation Timeline (Sec.  155.1045)
    In Sec.  155.1045, we proposed to redesignate the existing 
paragraph as paragraph (a) and to add a new paragraph (b) to set forth 
the timeline for accreditation as a QHP certification requirement in 
the Federally-facilitated Exchanges (including State Partnership 
Exchanges). This provision is consistent with Sec.  156.275(a), in 
which we required that all QHP issuers must be accredited with respect 
to local performance of their QHPs on the timeline established by the 
Exchange.
    The comments and our responses to Sec.  155.1045 are set forth 
below.
    Comment: Several commenters supported the proposal to phase-in 
accreditation standards for QHP issuers participating in a Federally-
facilitated Exchange. Other commenters did not support this approach 
and requested that QHP issuer accreditation, as defined in 45 CFR 
156.275, be required for QHP issuers beginning in 2013.
    Response: HHS is finalizing the accreditation timeline for QHP 
issuers in the Federally-facilitated Exchanges as proposed. We proposed 
a phased approach in order to accommodate issuers without existing 
accreditation and new issuers. We believe that accepting existing 
accreditation from an issuer's commercial, Medicaid, or Exchange 
products and phasing in accreditation requirements for issuers without 
existing accreditation will expand QHP choices available to consumers 
while ensuring that all QHP issuers commit to delivering high quality 
care. Creating a phased approach for these requirements also provides 
issuers and recognized accrediting entities with sufficient time to 
schedule and conduct accreditation reviews, which can take as long as 
18 months.
    Comment: Several commenters requested clarification of the 
requirements specified in proposed Sec.  155.1045(b)(2) and (3) and the 
meaning of being accredited in accordance with Sec.  156.275.
    Response: As stated above, HHS proposed a phased approach to 
accreditation for the Federally-facilitated Exchanges. In paragraph 
(b)(2), we proposed that a QHP issuer must be accredited on their 
policies and procedures that are applicable to their Exchange products, 
or a QHP issuer must have commercial or Medicaid health plan 
accreditation granted by a recognized accrediting entity for the same 
state in which the issuer is offering Exchange coverage and the 
administrative policies and procedures underlying that accreditation 
must be the same or similar to the administrative policies and 
procedures used in connection with the QHP. In paragraph (b)(3), we 
direct issuers of QHPs to be accredited in accordance with all of the 
standards specified in Sec.  156.275, including performance measurement 
reporting required at (a)(1)(i) and (ii) of Sec.  156.275 and the 
reporting of clinical performance measures and patient experience 
ratings on a standardized Consumer Assessment of Health Providers and 
Systems[supreg] (CAHPS) survey. We are adopting this phased

[[Page 12839]]

approach to accreditation to align with the earliest possible time that 
issuers are able to report performance data on their QHP population as 
part of the accreditation process. We acknowledged in earlier guidance 
\14\ that performance data on an issuer's QHP population will not be 
available until a full-year of data are available (for example, in 2015 
based on the 2014 coverage year).
---------------------------------------------------------------------------

    \14\ General Guidance on Federally-facilitated Exchanges, May 
16, 2012. Available at http://cciio.cms.gov/resources/files/ffe-guidance-05-16-2012.pdf.
---------------------------------------------------------------------------

    Comment: One commenter questioned if accreditation at the Exchange 
product type level would be methodologically sound in 2016 and 
requested a delay of several years in the requirement at Sec.  
155.1045(b)(3) which requires QHP issuers to be accredited in 
accordance with 45 CFR 156.275 as early as 2016 certification for the 
2017 coverage year.
    Response: We are requiring performance measurement reporting at the 
Exchange product type level as part of accreditation required in 2016 
to align with the earliest possible time that issuers are able to 
report performance data on their QHP population. As finalized in 45 CFR 
156.275(c)(2)(iii),\15\ there is an exception to the Exchange product 
type level accreditation requirement if the recognized accrediting 
entity demonstrates that the Exchange product type accreditation is not 
methodologically sound for a particular issuer.
---------------------------------------------------------------------------

    \15\ Patient Protection and Affordable Care Act; Data Collection 
To Support Standards Related to Essential Health Benefits; 
Recognition of Entities for the Accreditation of Qualified Health 
Plans,'' 77 FR 42658 (July 20, 2012).
---------------------------------------------------------------------------

    Comment: One commenter suggested that State-based Exchanges should 
be encouraged to follow the accreditation timeline set forth for a 
Federally-facilitated Exchange.
    Response: As specified in 45 CFR 155.1045(a), Exchanges must 
establish a uniform period within which a QHP issuer must become 
accredited. State-based Exchanges are able to align with the proposed 
Federally-facilitated Exchange timeline if they choose. This provision 
was finalized in the Exchange Establishment Final Rule.\16\
---------------------------------------------------------------------------

    \16\ ``Establishment of Establishment of Exchanges and Qualified 
Health Plans; Exchange Standards for Employers; Final Rule and 
Interim Final Rule'' (77 FR 18310 (March 27, 2012)). Available at 
http://www.gpo.gov/fdsys/pkg/FR-2012-03-27/pdf/2012-6125.pdf.
---------------------------------------------------------------------------

    Comment: Some commenters urged HHS to take additional steps to 
monitor and oversee QHP quality, aside from accreditation.
    Response: Issuers participating in Exchanges need to meet the range 
of standards for certification which are included in 45 CFR part 156. 
As part of plan management functions, Exchanges will be responsible for 
managing certain types of consumer complaints about QHP issuers, 
examining potential QHP issuer non-compliance with applicable laws, and 
ensuring ongoing compliance with the QHP certification standards. We 
believe these requirements, including processes for issuer 
recertification and decertification will ensure adequate oversight of 
issuers participating in a Federally-facilitated Exchange. 
Additionally, we anticipate future rulemaking on QHP issuer quality 
reporting requirements, including a QHP-specific quality rating as 
required by section 1311(c)(3) of the Affordable Care Act.
    Comment: Several commenters asked for clarification regarding how 
HHS will determine if an issuer has existing commercial, Medicaid, or 
Exchange accreditation. Several commenters noted that Medicaid managed 
care plans may not be licensed as ``issuers.'' Other commenters 
questioned if HHS would accept accreditation from a company's Preferred 
Provider Organization product if it is accredited on a different legal 
entity than the company's Health Maintenance Organization (HMO) 
product.
    Response: The Exchange Establishment Final Rule, at 45 CFR 155.20, 
defines ``health insurance issuer or issuer'' by cross-referencing the 
definition of health insurance issuer as defined in 45 CFR 144.103: A 
health insurance issuer means ``an insurance company, insurance 
service, or insurance organization (including an HMO) that is required 
to be licensed to engage in the business of insurance in a state and 
that is subject to state law that regulates insurance (within the 
meaning of section 514(b)(2) of ERISA).'' This term does not include a 
group health plan. We consider issuers, as defined above, to have 
existing accreditation if they are accredited with respect to the 
product type at issue under the same legal entity as the one that is 
offering such a product in the Exchange. We plan to issue future 
guidance as to the process by which issuers may demonstrate how they 
meet the accreditation standard.
    Comment: One commenter asked that HHS clarify that a federally-
facilitated Exchange will accept any existing health plan accreditation 
on issuers' commercial or Medicaid lines of business, in the same state 
as the Exchange in which the issuer is seeking to offer coverage, at 
the overall QHP issuer level.
    Response: As we stated in a previously issued rule,\17\ 
accreditation at the Exchange product type level balances capturing the 
QHP experience and enabling the reporting of valid and reliable 
performance measures. An issuer may offer multiple QHPs under the same 
product type, in the same Exchange; if the product type for that 
Exchange is accredited, each of the corresponding QHPs would be 
considered to be accredited.
---------------------------------------------------------------------------

    \17\ Patient Protection and Affordable Care Act; Data Collection 
to Support Standards Related to Essential Health Benefits; 
Recognition of Entities for the Accreditation of Qualified Health 
Plans, Final Rule, 77 FR 42658, -42665-42666 (July 20, 2012) (to be 
codified at 45 CFR 156.275(c)(2)(iii)).
---------------------------------------------------------------------------

    Comment: Some commenters questioned whether an issuer would meet 
the standard in Sec.  155.1045(b) if the recognized accrediting entity 
that had awarded the accreditation modified its accreditation 
standards. One commenter specifically asked whether a QHP issuer would 
meet the similarity standard described in Sec.  155.1045(b)(2) if the 
recognized accrediting entity loses its recognition.
    Response: We view these comments as pertaining to the meaning of 
being accredited as required in Sec.  156.275. We would consider 
issuers whose recognized accrediting entity modified its requirements 
or lost its recognition as being accredited, provided that the 
accrediting entity was recognized by HHS and accredited as meeting the 
standards identified in Sec.  156.275 when the accreditation was 
awarded. These issuers would meet the requirements in Sec.  156.275 
and, therefore, the timeliness and similarity standards described in 
Sec.  155.1045(b). Further, we do not anticipate that phase one 
recognized accrediting entities are likely to lose their recognition 
because Sec.  156.275(c)(4)(ii) requires that recognized accrediting 
entities provide to HHS any proposed changes or updates to the 
accreditation standards and requirements, processes, and measure 
specifications for performance measures with 60 days' notice prior to 
public notification.\18\ Therefore, HHS would have ample time to 
analyze the entity's changes and assess if the changes should result in 
the loss of recognition.
---------------------------------------------------------------------------

    \18\ 45 CFR 156.275(c)(2) was finalized in the final rule, 
Patient Protection and Affordable Care Act; Data Collection To 
Support Standards Related to Essential Health Benefits; Recognition 
of Entities for the Accreditation of Qualified Health Plans, 77 FR 
42658 (July 20, 2012).
---------------------------------------------------------------------------

    Comment: Several commenters requested that HHS exempt certain types 
of plans or issuers from the accreditation requirements, such as CO-OPs 
and Medicaid managed care plans,

[[Page 12840]]

or provide a different accreditation timeline for these issuers.
    Response: Under 45 CFR 155.1045(a) Exchanges are responsible for 
establishing a timeline for which all QHP issuers must be accredited. 
The timeline for accreditation must be applied consistently across QHP 
issuers. The phased process was developed in part to accommodate new 
issuers, including CO-OP, and Medicaid plans without existing 
accreditation.
    Comment: A commenter asked for clarification on the applicability 
of the accreditation requirements to stand-alone dental plans.
    Response: The preamble to the Exchange Establishment Final Rule 
specifies that to the extent that accreditation standards specific to 
stand-alone dental plans do not exist, then such plans would not be 
required to meet the accreditation requirement or the accreditation 
timeline required by 45 CFR 155.1045.
    Comment: Several commenters made recommendations as to when in the 
QHP certification year a QHP issuer must be accredited in order to be 
considered to have met the standards proposed in 45 CFR 155.1045(b)(1), 
(2), and (3). One commenter recommended requiring issuers to crosswalk 
their existing accredited policies or procedures to their QHP products.
    Response: HHS will be issuing forthcoming guidance on how the 
accreditation requirements will be operationalized as part of the QHP 
certification process in the Federally-facilitated Exchanges.
    Comment: Several commenters submitted comments in regard to the 
U.S. Office of Personnel Management's (OPM) Establishment of the Multi-
State Plan Program for the Affordable Insurance Exchanges Notice of 
Proposed Rulemaking, 77 FR 72582 \19\ (December 5, 2012) on 
accreditation of multi-state plans (MSPs).
---------------------------------------------------------------------------

    \19\ ``Establishment of the Multi-State Plan Program for the 
Affordable Insurance Exchanges'' (77 FR 72582 (December 5, 2012)). 
Available at: http://www.gpo.gov/fdsys/pkg/FR-2012-12-05/pdf/2012-29118.pdf.
---------------------------------------------------------------------------

    Response: HHS has determined that these comments are outside the 
scope of this rule. As noted in Sec.  155.1045(a), the timeline for 
accreditation for multi-state plans will be set by OPM.
Summary of Regulatory Changes
    For the reasons described in the proposed rule and considering the 
comments received, we are finalizing Sec.  155.1045 of the proposed 
rule without modification.

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

1. Subpart A--General Provisions
    In Sec.  156.20, we proposed to add the following definitions as 
follows:
Actuarial Value and Percentage of the Total Allowed Costs of Benefits
    We proposed to define ``actuarial value (AV)'' as the percentage 
paid by a health plan of the total allowed costs of benefits. We 
proposed to define the ``percentage of the total allowed costs of 
benefits'' as the anticipated covered medical spending for EHB coverage 
(as defined in Sec.  156.110 (a)) paid by a health plan for a standard 
population, computed in accordance with the health plan's cost sharing, 
divided by the total anticipated allowed charges for EHB coverage 
provided to the standard population, and expressed as a percentage.
    Because section 1302(d)(2) of the Affordable Care Act refers to AV 
relative to coverage of the EHB for a standard population, we proposed 
these definitions together in order to provide that AV is the 
percentage that represents the total allowed costs of benefits paid by 
the health plan, based on the provision of EHB as defined for that plan 
according to Sec.  156.115.
Benchmark Plans
    Under the benchmark selection and standards proposed in Sec. Sec.  
156.100 and 156.110, we believe it is important to differentiate 
between the plan selected by a state (or through the default process in 
Sec.  156.100(c)), which we proposed to call the ``base-benchmark 
plan,'' and the benchmark standard that EHB plans will need to meet, 
which we proposed to call the ``EHB-benchmark plan.''
    We proposed that ``base-benchmark plan'' means that the plan that 
is selected by a state from the options described in Sec.  156.100(a), 
or a default benchmark plan, as described in Sec.  156.100(c), prior to 
any adjustments made to meet the benchmark standards described in Sec.  
156.110.
    We proposed that ``EHB-benchmark plan'' means that the standardized 
set of EHB that must be met by a QHP or other issuer as required by 
Sec.  147.150.
    We proposed that ``Essential health benefits package or EHB 
package'' means the scope of covered benefits and associated limits of 
a health plan offered by an issuer, as set forth in section 1302(a) of 
the Affordable Care Act. The EHB package provides at least the ten 
statutory categories of benefits, as described in 45 CFR 156.110(a); 
provides benefits in the manner described in Sec.  156.115; limits 
cost-sharing for such coverage as described in Sec.  156.130; and 
subject to offering catastrophic plans as described in section 1302(e) 
of the Affordable Care Act, provides distinct levels of coverage as 
described in 45 CFR 156.140.
    The comments and our responses to the proposed changes to Sec.  
156.20 are set forth below.
    Comment: Several commenters urged HHS to provide uniform, 
standardized definitions for certain terms used throughout the 
regulation relating to cost sharing.
    Response: Terms used throughout the regulation are standard terms 
of art that are understood in the industry, therefore we will not 
provide additional definitions.
Summary of Regulatory Changes
    For the reasons described in the proposed rule and considering the 
comments received, we are finalizing the provisions proposed in Sec.  
156.20 of the proposed rule, without substantive modifications. We note 
that we have made technical corrections to clarify that ``EHB package'' 
and ``essential health benefits package'' are the same.
2. Subpart B--EHB Package
a. State Selection of Benchmark (Sec.  156.100)
    In Sec.  156.100, we proposed to set forth the criteria for the 
selection process if a state chooses to select a benchmark plan. The 
EHB-benchmark plan would apply to non-grandfathered health insurance 
coverage offered in the individual or small group markets. The EHB-
benchmark plan would serve as a reference plan, reflecting both the 
scope of services and limits offered by a typical employer plan in that 
state. This approach and benchmark selection would apply for at least 
the 2014 and 2015 benefit years.
    Consistent with the approach outlined in the EHB Bulletin, in Sec.  
156.100(a) we proposed that the state may select its base-benchmark 
plan from among the following four types of health plans: (1) The 
largest plan by enrollment in any of the three largest small group 
insurance products in the state's small group market as defined in 
Sec.  155.20; (2) any of the largest three state employee health 
benefit plans by enrollment; (3) any of the largest three national 
Federal Employees Health Benefits Program (FEHBP) plan options by 
enrollment that are open to Federal employees; or (4) the largest 
insured commercial non-Medicaid HMO operating in the state. Data from 
the first quarter two years

[[Page 12841]]

prior to the coverage year would be used to determine plan enrollment. 
HHS also made available benefit data for the single largest Federal 
Employees Dental and Vision Insurance Program (FEDVIP) dental and 
vision plans respectively, based on enrollment.
    Section 156.100(a)(1) would reflect a typical plan in the state's 
small group market and provides state flexibility as recommended by the 
IOM in its report.\20\ The remaining proposed benchmark plan options, 
in Sec.  156.100(a)(2) through (a)(4), would reflect the benchmark 
approach used in Medicaid, as defined in 42 CFR 440.330, and in the 
Children's Health Insurance Plan (CHIP), as defined in 42 CFR 457.410 
and 457.420.
---------------------------------------------------------------------------

    \20\ Institute of Medicine, ``Essential Health Benefits: 
Balancing Coverage and Cost'' (2011). Available at: http://www.iom.edu/Reports/2011/Essential-Health-Benefits-Balancing-Coverage-and-Cost.aspx.
---------------------------------------------------------------------------

    Because the PHS Act defines ``state'' to include the U.S. 
territories (Puerto Rico, Guam, the U.S. Virgin Islands, American 
Samoa, and the Northern Mariana Islands), the PHS Act requirements 
related to EHB, as established by section 1302 of the Affordable Care 
Act, apply to the territories.
    At Sec.  156.100(b), we proposed the standard for approval of a 
state-selected EHB-benchmark plan.
    We proposed that the state's benchmark plan selection in 2012 would 
be applicable for at least the 2014 and 2015 benefit years and stated 
that we intend to revisit this policy for subsequent years. This two 
year transitional period accommodates current market offerings and 
limits market disruption in the first years of the Exchanges.
    In Sec.  156.100(c), we proposed that if a state did not make a 
benchmark plan selection, the default base-benchmark plan would be the 
largest plan by enrollment in the largest product by enrollment in the 
state's small group market. Each state's benchmark is specified in 
Appendix A with a detailed set of benefits available at 
www.cciio.cms.gov.
    The comments and our responses to Sec.  156.100 are set forth 
below.
    Comment: Some commenters preferred a different benchmark plan than 
the selection proposed in Appendix A of the proposed rule. Commenters 
suggested that the proposed benchmark was inconsistent with the typical 
employer plan in the state, and/or the scope of benefits was not 
sufficiently comprehensive. Several commenters recommended that HHS 
have a single, uniform federal EHB package because they are concerned 
that the proposed benchmark options have a large degree of variation in 
covered benefits which may lead to inconsistent EHB packages from state 
to state. We also received several comments indicating that the ``top 
three small group products in each state'' approach to the benchmark 
selection was not the best option for the default benchmark plan, and 
that FEHBP would have been a better alternative. Several commenters 
believed that offering plan benefit packages created for adults or 
families may not be considered sufficient to meet the requirement to 
provide child-only coverage and that we should provide child-specific 
benchmark plans such as states' CHIP plans as a more appropriate child-
only plan option.
    Response: The benchmark approach for defining EHB sought to balance 
the statutory ten benefit categories and affordability while providing 
states--the primary regulators of health insurance markets--with 
flexibility. The benchmark plan options for each state reflect the 
scope of benefits and services typically offered in the employer market 
in that state. This approach meets the statutory requirement that EHB 
reflect a typical employer plan as well as the recommendation provided 
by the IOM on the approach to defining EHB. Prior to the release of the 
proposed rule and during the comment period prior to the release of the 
final rule, HHS held multiple discussions with states regarding 
specific details of their EHB-benchmark recommendations and these 
selections are reflected in the finalized selections available in 
Appendix A. Furthermore, we believe that our general EHB requirements, 
along with regulatory prohibitions on benefit discrimination, ensure 
that plans include an appropriate range of benefits for adults and 
children. We will monitor these and other benefit packages to ensure 
regulatory compliance and assess the need for future program changes.
    Comment: We received numerous comments that the largest plan in the 
largest product in the state was not among the options provided by HHS. 
HHS did not propose the largest plan in the largest product due to 
technical concerns with the methodology used in determining enrollment 
data for the list of largest plans in the largest products.
    Response: The three largest products in each state's small group 
market were identified using enrollment data collected by 
HealthCare.gov. The largest plan for each of the three largest products 
in the small group market in each state was identified using enrollment 
data from the plans in each state. We recognize that there are several 
different methodologies for counting enrollment that we could have 
chosen, and we selected the one that is most uniform across states and 
best represents for all states the largest plan in the largest product 
in the small group market. Prior to the release of the largest three 
products list, HHS confirmed the methodology with each state.
    Comment: We received comments recommending which one of the four 
types of health plan benchmark options would be the most appropriate 
default base-benchmark plan for territories. A few commenters 
recommended that the territories follow the same standard as states for 
the default base-benchmark plan; however, there was also concern that 
the territories' markets are too small and unique, compared to those in 
the states, to use the largest small group market plan. Some commenters 
recommended using one consistent set of benefits, such as FEHBP, to 
ensure a comprehensive EHB package. Other commenters discussed that the 
small group market in Puerto Rico is more similar to the small group 
markets in the 50 states than to those in the other territories given 
the much larger size of its population and suggested that Puerto Rico 
should have the largest small group plan in the market as the default 
benchmark.
    Response: In light of comments received, HHS has selected the 
largest FEHBP plan as the default base-benchmark plan for all U.S. 
territories, except for Puerto Rico. Benchmarks for Puerto Rico and the 
other territories are listed in Appendix A along with the state 
benchmark plans.
    Comment: Several commenters expressed concern over providing 
enforcement authority to states and recommended a more prescriptive 
approach to monitoring and enforcement of this regulation. Some 
requested that the federal government exercise strong oversight of 
state efforts in monitoring and enforcing this area. Commenters also 
urged HHS to use 2014 and 2015 as transitional years, during which we 
would collect data on the plans then use those data to help update EHB 
annually, starting in 2016. Recommended criteria for review included 
but were not limited to plan comprehensiveness, affordability, and 
continuity of coverage. Moreover, commenters recommended that, starting 
in 2016, HHS adopt a comprehensive, Federal EHB standard.
    Response: Enforcement of the requirement to cover EHB is governed 
by section 2723 of the PHS Act, which looks first to states for 
enforcement, then to the Secretary where a state has failed to 
substantially enforce.

[[Page 12842]]

Therefore, we expect states to enforce the requirement that plans must 
offer EHB. We are currently reviewing all options for updating EHB in 
2016 and anticipate releasing additional guidance in the future on 
enforcement of EHB requirements and updating EHB.
Summary of Regulatory Changes
    For the reasons described in the proposed rule and considering the 
comments received, we are finalizing the provisions proposed in Sec.  
156.100 of the proposed rule, with the following modification: while 
continuing to be recognized as states, as defined under the PHS Act, 
the U.S. territories including Guam, American Samoa, the U.S. Virgin 
Islands and the Northern Mariana Islands, with exception of Puerto 
Rico, will use the largest FEHBP plan as the default base-benchmark 
plan. Like the other 50 states and the District of Columbia, Puerto 
Rico will use the largest plan by enrollment in the largest product by 
enrollment in its small group market as its default base-benchmark 
plan. This is reflected in Appendix A.
b. Determination of EHB for Multi-State Plans (Sec.  156.105)
    In Sec.  156.105, we proposed how the EHB determination would be 
made for Multi-State Plans offered under contract with OPM pursuant to 
section 1334 of the Affordable Care Act. We proposed that Multi-State 
Plans must meet benchmark standards set by OPM.\21\
---------------------------------------------------------------------------

    \21\ OPM has proposed standards for the Multi-State Plan Program 
in ``Establishment of the Multi-State Plan Program for the 
Affordable Insurance Exchanges'' 77 FR 72582 (December 5, 2012). 
Available at: http://www.gpo.gov/fdsys/pkg/FR-2012-12-05/pdf/2012-29118.pdf.
---------------------------------------------------------------------------

    The comments and our responses to Sec.  156.105 are set forth 
below.
    Comment: We received several comments requesting more information 
on the EHB requirement with respect to Multi-State Plans.
    Response: OPM will be releasing regulations and guidance on the 
application of EHB to Multi-State Plans. Therefore, we are not 
addressing these comments in this rule.
Summary of Regulatory Changes
    For the reasons described in the proposed rule and considering the 
comments received, we are finalizing the provisions proposed in Sec.  
156.105 of the proposed rule without modifications.
c. EHB-Benchmark Plan Standards (Sec.  156.110)
    To clarify the relationship between the 10 statutory EHB categories 
and the EHB-benchmark plan, in paragraph (a) we proposed that the EHB-
benchmark plan provide coverage of at least the following categories of 
benefits described in section 1302(b)(1) of the Affordable Care Act: 
(1) Ambulatory patient services; (2) emergency services; (3) 
hospitalization; (4) maternity and newborn care; (5) mental health and 
substance use disorder services, including behavioral health treatment; 
(6) prescription drugs; (7) rehabilitative and habilitative services 
and devices; (8) laboratory services; (9) preventive and wellness 
services and chronic disease management; and (10) pediatric services, 
including oral and vision care.
    We proposed to interpret ``pediatric services'' to mean services 
for individuals under the age of 19 years. We noted that states have 
the flexibility to extend pediatric coverage beyond the 19-year age 
baseline.
    For those base-benchmark plan options that would not cover one or 
more of the 10 statutorily required EHB categories, in paragraph (b), 
we proposed standards for supplementing. In paragraph (b)(1), we 
proposed requiring that if a base-benchmark plan option does not cover 
any items and services within an EHB category, the base-benchmark plan 
would be supplemented by adding that particular category in its 
entirety from another base-benchmark plan option. The resulting plan, 
which would then cover all 10 statutory EHB categories, must also meet 
standards for non-discrimination and balance defined in paragraphs (d) 
and (e) of this section. After meeting all of these standards, it would 
be considered the EHB-benchmark plan.
    Proposed paragraphs (b)(2) and (3) discuss two categories of 
benefits that may not currently be included in some major medical 
benefit plans but that were included in the EHB as defined in proposed 
Sec.  156.110(a) and section 1302(b)(1) of the Affordable Care Act. Our 
review of research on employer-sponsored plan benefits, including small 
employer products, found that pediatric oral and vision services were 
not covered under the benefit packages of a number of potential 
benchmarks, but, rather, were often covered under stand-alone policies. 
We proposed targeted policy options for each of these benefit 
categories.
    In proposed paragraph (b)(2), we proposed to provide states with 
two options for supplementing base-benchmark plans that do not include 
benefits for pediatric oral care coverage. The first option, described 
in paragraph (b)(2)(i), was to supplement with pediatric coverage 
included in the FEDVIP dental plan with the largest enrollment. The 
second option, described in paragraph (b)(2)(ii), was to supplement 
with the benefits available under that state's separate CHIP program, 
if one exists, to the eligibility group with the highest enrollment.
    Similarly, in proposed paragraph (b)(3), we proposed to provide two 
options for states to supplement a base-benchmark plan that does not 
include pediatric vision services. The first option, described in 
(b)(3)(i), is to supplement with the pediatric vision coverage included 
in the FEDVIP vision plan with the largest national enrollment offered 
to federal employees under 5 U.S.C. 8982. The second option, described 
in (b)(3)(ii), is to supplement pediatric vision coverage with the 
state's separate CHIP plan, if applicable.
    In proposed paragraph (c), we proposed the process by which HHS 
will supplement a default base-benchmark plan, where necessary. 
Specifically, HHS would supplement the category of benefits in the 
default base-benchmark plan with the first of the following options 
that offers benefits in that particular EHB category: (1) The largest 
plan by enrollment in the second largest product by enrollment in the 
state's small group market as defined in Sec.  155.20; (2) the largest 
plan by enrollment in the third largest product by enrollment in the 
state's small group market as defined in Sec.  155.20; (3) the largest 
national FEHBP plan by enrollment across states that is described in 
and offered to Federal employees under 5 U.S.C. 8903; (4) the plan 
described in paragraph (b)(2)(i) to cover pediatric oral care benefits; 
(5) the plan described in (b)(3)(i) to cover pediatric vision care 
benefits; and (6) habilitative services as described in Sec.  
156.110(f) or Sec.  156.115(a)(4).
    In proposed paragraph (d), we state that the EHB-benchmark plan 
must not include discriminatory benefit designs. As set forth in 
proposed Sec.  156.125, issuers would be prohibited from using benefit 
designs that discriminate on the basis of an individual's age, expected 
length of life, present or predicted disability, degree of medical 
dependency, quality of life or other health condition. Issuers would 
also have to comply with non-discrimination standards applicable to 
QHPs under the Exchange rules. These standards would apply both to 
benefit designs that limit enrollment, and those that prohibit access 
to care for enrollees.
    In proposed paragraph (e), we proposed to implement section 
1302(b)(4)(A) of the Affordable Care Act by proposing to require that 
the EHB-benchmark plan ensure an appropriate

[[Page 12843]]

balance among the categories of EHB so that benefits would not be 
unduly weighted toward any category.
    In conducting research on employer-sponsored plan benefits and 
state-required benefits, HHS found that many health insurance plans do 
not identify habilitative services as a distinct group of services.\22\ 
Accordingly, our proposed regulation proposed to include a transitional 
policy for coverage of habilitative services that would provide states 
with the opportunity to define these benefits if they were not included 
in the base-benchmark plan. Specifically, in paragraph (f), we proposed 
that, if the base-benchmark plan did not include coverage of 
habilitative services, the state would be permitted to determine the 
services included in the habilitative services category. If states did 
not define the habilitative services category, plans would be required 
to provide these benefits as defined in Sec.  156.115(a)(4). HHS 
intends to carefully monitor coverage of habilitative services across 
the individual and small group markets, and to use this data to inform 
future changes to this transitional policy.
---------------------------------------------------------------------------

    \22\ ASPE Research Brief, ``Essential Health Benefits: Comparing 
Benefits in Small Group Products and State and Federal Employee 
Plans.'' December 16, 2011. Available at: http://aspe.hhs.gov/health/reports/2011/MarketComparison/rb.shtml.
---------------------------------------------------------------------------

    The comments and our responses to Sec.  156.110 are set forth 
below.
    Comment: Numerous commenters urged that the 10 EHB categories and 
individual services or benefits within those categories be defined in 
more detail. Medicaid was suggested as an appropriate model for 
defining the habilitation benefit, as well as pediatric dental and 
vision benefits.
    Response: The statute directed the Secretary to define EHB to 
include at least the 10 identified categories, while ensuring that the 
scope of EHB is equal to the scope of benefits provided under a typical 
employer plan. However, typical employer plans differ by state. The 
Secretary balanced these directives, and minimized market disruption, 
by directing plans to offer the 10 statutory EHB categories while 
allowing the state to select the specific details of their EHB coverage 
by reference to one of a range of popularly selected plans offered in 
the state or as part of the FEHBP. Accordingly, the states continue to 
maintain their traditional role in defining the scope of insurance 
benefits and may exercise that authority by selecting a plan that 
reflects the benefit priorities of that state. With regard to 
habilitative and pediatric dental and vision benefits, we appreciate 
the commenters' recommendation to use Medicaid plans as appropriate 
models. In order to maintain the states' role in defining required 
benefits in their markets, we will finalize the regulations to provide 
for state flexibility in determining how to define habilitation 
services and to offer other options for supplementing based-benchmark 
plans that do not include coverage for pediatric dental and vision 
services. We will continue to monitor this area to assess the need for 
future regulatory action.
    Comment: We received a number of comments recommending that the age 
limit for the ``pediatric services'' category be raised from 19, as 
proposed, to 21, to better align with existing Medicaid and CHIP 
standards for pediatric benefits and help ensure continuity of coverage 
for those children who will transition between Exchange and public 
coverage. Commenters further asserted that the higher age limit would 
improve care for children with chronic or complex conditions such as 
cystic fibrosis by allowing continued treatment beyond the age of 19 by 
such children's pediatric provider, who has more expertise in these 
areas than adult-focused practitioners.
    Response: The age of 19 as the upper limit for the definition of 
pediatric services is consistent with the upper age limit in the 
Affordable Care Act's prohibition on preexisting conditions for 
children as well as the age limit for eligibility to enroll in CHIP. In 
addition, federal Medicaid law requires that states cover children up 
to age 19 with family incomes up to 100 percent of the federal poverty 
limit as a mandatory eligibility category. States are permitted to 
increase this maximum age in defining pediatric services.
    Comment: A number of commenters expressed concern with individual 
state selections for supplementing coverage categories lacking in a 
chosen benchmark plan, suggested that the regulation allow additional 
supplementation options, or suggested that states should be required to 
supplement inadequate coverage of individual service types within a 
benefit category.
    Response: As stated previously, the Secretary structured the EHB 
regulations to maintain state flexibility in defining benefits within 
the categorical parameters set out by Congress. Benchmark options 
derive from the most popular products in each state's small group 
market, among others. Allowing states to supplement from this range of 
options allows each state to develop an EHB-benchmark plan that 
reflects its state benefit priorities.
    Comment: Several commenters suggested that we require balance not 
only across the benefit category but also within each category or 
across the continuum of care.
    Response: The balance provision in Sec.  156.110(e) is consistent 
with the section 1302(b)(4)(A) of the Affordable Care Act, which it 
implements. Requiring balance within each category or across the 
continuum of care could result in plans that are not similar in scope 
to a typical employer health plan as required by statute.
Summary of Regulatory Changes
    For the reasons described in the proposed rule and considering the 
comments received, we are finalizing the provisions proposed in Sec.  
156.110 of the proposed rule with two technical edits. We have added 
the words ``pediatric oral'' to Sec.  156.110(b)(2) to clarify that 
supplementation of the pediatric dental services category in the base-
benchmark plan would be with the pediatric oral benefits from a 
benchmark option. We have likewise added the words ``pediatric vision'' 
to Sec.  156.110(b)(3) in place of the word ``such'' to clarify that 
supplementation of the pediatric vision services category in the base-
benchmark plan would be with the pediatric vision benefits from 
allowable source plan and have added the words ``by enrollment'' to 
clarify that the largest product in a state's small group market is 
determined by enrollment.
d. Provision of EHB (Sec.  156.115)
    In paragraph (a)(1), we proposed that plans may have limitations on 
coverage that differ from the limitations in the EHB-benchmark plan, 
but covered benefits and limitations on coverage must remain 
substantially equal to the benefits in the EHB-benchmark plan.
    In paragraph (a)(2), we proposed that in order to satisfy the 
requirement to offer EHB, mental health and substance use disorder 
services, including behavioral health treatment services required under 
Sec.  156.110(a)(5), must be provided in a manner that complies with 
the Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA).
    In paragraph (a)(3), we further proposed that a plan does not 
provide EHB unless it meets the standards in 45 CFR 147.130.
    In paragraph (a)(4), we proposed that if the EHB-benchmark plan 
does not include coverage for habilitative services and the state does 
not determine habilitative benefits, a health

[[Page 12844]]

insurance issuer must either: (1) Provide parity by covering 
habilitative services benefits that are similar in scope, amount, and 
duration to benefits covered for rehabilitative services; or (2) decide 
which habilitative services to cover and report on that coverage to 
HHS.
    We proposed the concept of benefit substitution consistent with 
what HHS outlined in the EHB Bulletin. As outlined in paragraph 
(b)(1)(i), we proposed that issuers may substitute benefits, or sets of 
benefits, that are actuarially equivalent to the benefits being 
replaced. We further proposed in paragraph (b)(1)(ii) that substitution 
could only occur within benefit categories, not between different 
benefit categories. In paragraph (b)(1)(iii), we clarify that our 
proposed benefit substitution policy does not apply to prescription 
drug benefits. In paragraph (b)(2), we outlined what must be submitted 
to demonstrate that any substituted benefit, or group thereof, is 
actuarially equivalent to the original benefit or benefits contained in 
the EHB-benchmark for that state. Lastly, in paragraph (b)(3), we 
proposed that actuarial equivalence of benefits be determined based on 
the value of the service without regard to cost-sharing, as cost 
sharing will be considered in the actuarial value calculation described 
in Sec.  156.135. We noted that the resulting plan benefits would be 
subject to requirements of non-discrimination described in Sec.  
156.125. In addition, we note that under this approach, states would 
have the option to enforce a stricter standard on benefit substitution 
or prohibit it completely.
    In paragraph (c), we proposed to clarify that a plan does not fail 
to provide EHB solely because it does not offer the services described 
in Sec.  156.280(d). Here we would apply the statutory provision in 
section 1303(b)(1)(B)(i) of the Affordable Care Act that allows a QHP 
to meet the standards for EHB even if it does not offer the services 
described in 45 CFR Sec.  156.280(d), to health insurance issuers that 
offer non-grandfathered coverage in the individual or small group 
market. This provision applies to all services in section 1303(b)(1)(A) 
of the Affordable Care Act, including pharmacological services.
    In paragraph (d), we proposed that an issuer of a plan offering EHB 
may not include routine non-pediatric dental services, routine non-
pediatric eye exam services, cosmetic orthodontia and long-term/
custodial nursing home care benefits as EHB.
    The comments and our responses to Sec.  156.115 are set forth 
below.
    Comment: Some commenters asked us to eliminate or provide 
additional guidance regarding the substantially equal standard.
    Response: Based on the rationale we outlined in the proposed rule, 
we are maintaining the substantially equal standard as written to allow 
for flexibility of plan design.
    Comment: Several commenters requested confirmation that EHB must 
comply with federal mental health and substance use disorder parity 
requirements in both the individual and the small group markets. 
Commenters also asked if states would have to defray the cost of adding 
benefits in order to comply with parity.
    Response: Section 2707 of the PHS Act requires health insurance 
issuers in the individual and small group health insurance markets to 
cover the EHB package required under section 1302 of the Affordable 
Care Act. The Affordable Care Act grants the Secretary broad authority 
to define EHB. We proposed in Sec.  156.115(a)(2) that plans are 
required to comply with the parity standards set forth in Sec.  146.136 
of this chapter, implementing the requirements under MHPAEA in order to 
satisfy the requirement to provide EHB. Section 1311(j) of the 
Affordable Care Act specifies that section 2726 of the PHS Act shall 
apply to qualified health plans in the same manner and to the same 
extent as such section applies to health insurance issuers and group 
health plans. For these reasons, we confirm that plans must comply with 
the parity standards applicable to mental health and substance use 
disorder benefits set forth in 45 CFR 146.136 in both the individual 
and the small group markets in order to satisfy the requirement to 
cover EHB. Additionally, because compliance with EHB would require 
compliance with the parity standards, states would not have to defray 
any costs associated with bringing plans into compliance because any 
benefits added to ensure parity would be considered part of the EHB 
package.
    Comment: Commenters requested a federal definition of habilitative 
services. Many recommended that HHS adopt the NAIC definition of 
habilitation or use the Medicaid statute's definition of habilitation 
as a reference point, to highlight the importance of maintenance of 
function. Commenters also asked that HHS eliminate giving issuers the 
choice of determining their habilitative benefits.
    Response: As explained in the EHB Bulletin, habilitative benefits 
are not well defined in the current commercial market. If habilitative 
services are not covered by the EHB-benchmark plan, then states have 
the first opportunity to determine which habilitative benefits must be 
covered by their benchmark plan. States may choose to use the NAIC or 
Medicaid definition. If states have not chosen to define habilitative 
benefits, the issuers' choice remains. This is a transitional policy, 
and HHS intends to monitor available data regarding coverage of 
habilitative services.
    Comment: Many commenters urged HHS to eliminate the option to 
substitute benefits, noting concerns that substitution may result in 
discrimination. Commenters also requested that HHS codify the implied 
option for states to limit or completely prohibit substitution.
    Response: We have retained the discretion we proposed to provide 
for substitution within categories to provide greater choice to 
consumers, and promote plan innovation through coverage and design 
options. We also retained the requirement that any substitution must be 
actuarially equivalent. As the party responsible for enforcement of 
EHB, it is up to each state to set criteria for substitution in its 
state, consistent with paragraph (b) of this Section.
    Comment: In the preamble to the proposed rule, we clarified that a 
plan may not exclude enrollees from coverage in any category except 
pediatric services. Many commenters recommended that CMS codify this 
proposal in regulation text.
    Response: In response to the comments received, we have modified 
Sec.  156.115(a)(2) to prohibit an EHB plan from excluding an enrollee 
from coverage in an EHB category except pediatric services.
    Comment: Several commenters urged HHS to remove the provision at 
Sec.  156.115(c) so that section 1303(b)(1)(A) of the Affordable Care 
Act would not extend to plans that are not QHPs. Other commenters noted 
that services under section 1303 of the Affordable Care Act are covered 
by their state benchmark plan and requested confirmation that other EHB 
plans will not have to offer such services.
    Response: We are finalizing the regulation to include the provision 
to ensure parity between the Exchange and non-Exchange markets. We note 
that nothing in the proposed provision impedes an issuer's ability to 
offer 1303 services. It also does not limit a state's authority to 
prohibit or require these services under state law.
    Comment: While some commenters objected to the exclusion of routine 
non-pediatric dental services, routine non-pediatric eye exam services, 
and long term/custodial nursing home care

[[Page 12845]]

benefits, from EHB, the majority of commenters agreed with the 
exclusion of these services because they are not typically included in 
medical plans offered by a typical employer.
    Response: The Affordable Care Act requires EHB to be based on 
benefits typically offered by a typical employer plan. In contrast with 
the benefits covered by a typical employer health plan, these 
particular benefits often qualify as excepted benefits.\23\ However, 
plan offerings are not restricted to EHB, so plans may offer additional 
benefits.
---------------------------------------------------------------------------

    \23\ For more information on excepted benefits, see 26 CFR 
54.9831-1, 29 CFR 2590.732, 45 CFR 146.145, and 45 CFR 148.220.
---------------------------------------------------------------------------

    Comment: We received comments requesting that HHS change the 
reference to ``cosmetic orthodontia'' and define the excluded service 
as ``non-medically necessary orthodontia'' to reflect the standard that 
issuers typically use and to be consistent with the EHB Bulletin.
    Response: Based on comments, we have changed the language in Sec.  
156.115(d) to refer to non-medically necessary orthodontia and deleted 
the reference to cosmetic orthodontia.
Summary of Regulatory Changes
    We are finalizing the provisions proposed in Sec.  156.115 of the 
proposed rule, with the following modifications: In paragraph (a) we 
added subparagraph (2) to clarify that an EHB plan cannot exclude an 
enrollee from any EHB category except pediatric services. In paragraph 
(b), we have added regulation text explicitly reflecting our adoption 
in this final rule of our proposal that states be permitted to limit or 
prohibit benefit substitutions that would otherwise be permissible 
under our regulations, and we recodified subparagraph (3) as (2)(iv). 
We changed the language in Sec.  156.115(d) to use the term ``non-
medically necessary'' instead of ``cosmetic'' orthodontia.
e. Prescription Drug Benefits (Sec.  156.122)
    This subsection appeared as Sec.  156.120 in the proposed rule, 
however, for technical reasons this subsection will be renumbered as 
Sec.  156.122 in the final rule.
    In paragraph (a)(1), we proposed that in order to comply with the 
requirement to cover EHB, a plan would cover at least the greater of: 
(1) One drug in every USP category and class; or (2) the same number of 
drugs in each category and class as the EHB-benchmark plan. In 
paragraph (a)(2) we proposed that a QHP would have to report its drug 
list to the Exchange, an EHB plan operating outside of the Exchange 
must report its drug list to the state, and a multi-state plan must 
report its drug list to OPM. In paragraph (b) we proposed to clarify 
that a health plan does not fail to provide EHB prescription drug 
benefits solely because it does not offer drugs that are Sec.  
156.280(d) services.
    We proposed using the most recent version of the United States 
Pharmacopeia's (USP) Model Guidelines as a common organizational tool 
for plans to report drug coverage. We stated that we would work with 
issuers, states and the NAIC to facilitate use of the USP 
classification system and we would provide a tool for states and 
issuers to count clinically distinct drugs and categorize them into the 
USP system.\24\
---------------------------------------------------------------------------

    \24\ The requirement to use USP classification applies only to 
submission of formulary for review/certification. Plans may continue 
to use any classification system they choose in marketing and other 
plan materials.
---------------------------------------------------------------------------

    We also proposed that drugs would be counted toward these 
requirements if they are chemically distinct.\25\ For example, offering 
two dosage forms or strengths of the same drug would not be offering 
drugs that are chemically distinct. Similarly, a brand name drug and 
its generic equivalent are not chemically distinct.
---------------------------------------------------------------------------

    \25\ The concept of chemically distinct is also described in the 
Medicare Part D Manual, Chapter 6, Section 30.2.1. More information 
is available at: https://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovContra/downloads//Chapter6.pdf.
---------------------------------------------------------------------------

    In paragraph (c), we proposed that a plan offering EHB have 
procedures in place to ensure that enrollees have access to clinically 
appropriate drugs that are prescribed by a provider but are not 
included on the plan's drug list, which is generally consistent with 
private plan practice today.
    The comments and our responses to Sec.  156.122 are set forth 
below.
    Comment: Several commenters noted that the proposed rule requires 
plans to meet a target number of drugs within a specific class without 
regard to which drugs are covered. Those commenters expressed concern 
regarding absence of a system to review the adequacy and quality of 
each plan drug list.
    Response: Section 156.125, regarding discrimination, applies to all 
EHB including prescription drug benefits. Under the prohibition on 
discrimination regulation we are finalizing at Sec.  156.125 of this 
part, an issuer's benefit design, or the implementation of its benefit 
design, may not discriminate based on an individual's age, expected 
length of life, present or predicted disability, degree of medical 
dependency, quality of life, or other health conditions. Issuers may 
continue to use reasonable medical management techniques that are 
evidence-based in accordance with Sec.  156.125. The states and the 
Exchanges will be responsible for monitoring drug lists for such 
compliance as part of their enforcement and certification 
responsibilities.
    Comment: Some commenters noted that the proposed rule does not 
discuss how plans must address new drugs that come onto the market 
during the course of a plan year.
    Response: While plans must offer at least the greater of one drug 
for each USP category and class or the number of drugs in the EHB-
benchmark plan, plans are permitted to go beyond the number of drugs 
offered by the benchmark without exceeding EHB.
    Comment: Some commenters recommended that HHS should not require 
coverage of at least one drug in each USP category and class, because 
such coverage is not similar to a typical employer plan and that 
certain categories and classes have limited drug options. Some 
commenters raised concerns about cost and that covering a drug in each 
USP category and class is arbitrary. Instead, they suggested HHS delete 
the requirement to match a specific number of drugs per benchmark plan 
category and class, and allow plans to determine the specific drugs 
covered.
    Response: In response, we internally analyzed and carefully 
reviewed prescription drug coverage in the EHB-benchmark plans listed 
in Appendix A, and found that the majority of the benchmark plans 
already meet the EHB standard or would only have to cover one or two 
additional drugs to meet the standard. Therefore, we believe that, 
given current coverage under benchmark plans, the policy of requiring 
at least one drug per category and class reflects drug coverage in a 
typical employer plan and will have a negligible effect on premiums. We 
also note that this section does not require that drugs be covered on a 
particular tier. Additionally, we are finalizing Sec.  156.122(a)(1) as 
proposed as a transition policy for the first two plan or policy years 
beginning in 2014 and will study and take into consideration the 
effects this policy, if any, have on changing typical drug coverage in 
the market.
    Comment: Many commenters expressed concern over the use of USP as 
the class and category classification system.
    Response: For consistency and to minimize administrative burden and 
barriers to market entry for health plans, specifically for issuers 
offering products in multiple states, we believe it is important to use 
only one classification system. While there was concern among

[[Page 12846]]

commenters on the use of USP as the system, there was no universal 
system identified as a potential alternative. We chose the current 
version USP Model Guidelines (version 5) because it is publicly 
available and many pharmacy benefit managers are familiar with it. We 
believe the USP model best fits the needs for the years 2014 and 2015 
during the transitional EHB policy and we have developed a crosswalk 
tool to count the number of drugs available in each USP category and 
class. We intend to work with issuers, states and the NAIC to 
facilitate state use of the USP Model Guidelines Version 5.0 as a 
classification system and as a comparison tool.
    Comment: Several commenters requested additional detail regarding 
the requirement that that a plan ``must have procedures in place that 
allow an enrollee to request clinically appropriate drugs not covered 
by the health plan.''
    Response: Additional guidance regarding our expectations for the 
required exceptions process is forthcoming in sub-regulatory guidance. 
We note the importance of this option for those whose medical needs 
require a very narrow range of pharmaceuticals, and emphasize that our 
research has shown that a large number of plans already offer this 
option in the market today. It is expected that plans that currently 
have such a process in place will not be expected to modify their 
existing process.
    Comment: Many commenters suggested that HHS should clarify in Sec.  
156.120(c) (as explained above, now renumbered as Sec.  156.122(c)) of 
the final regulation that plans must have procedures in place that 
ensure enrollees have access to clinically appropriate drugs, not just 
allow the enrollee to request such a drug. While the preamble of the 
proposed rule includes a statement of this standard, the proposed rule 
does not.
    Response: We have added language from the proposed rule preamble to 
Sec.  156.122(c) directing plans to have procedures to allow an 
enrollees to gain access to clinically appropriate drugs.
    Comment: Commenters urged HHS to provide guidance as to which drugs 
are covered by Sec.  156.280(d) so that the final rule is clear as to 
which drugs are actually exempted.
    Response: We have revised the language to specify that we are 
referring to drugs approved by the U.S. Food and Drug Administration 
(FDA) as a Sec.  156.280(d) service.
Summary of Regulatory Changes
    We are finalizing the provisions in Sec.  156.120 of the proposed 
rule (renumbered as Sec.  156.122 in the final rule), with the 
following modifications: We have added language to Sec.  156.122(c) 
based on the proposed rule's preamble text directing plans to have 
procedures to allow an enrollees to gain access to clinically 
appropriate drugs. We have revised the language in subparagraph (b) to 
specify that we are referring to drugs approved by the U.S. Food and 
Drug Administration (FDA) as a Sec.  156.280(d) service.
f. Prohibition on Discrimination (Sec.  156.125)
    Section 1302(b)(4) of the Affordable Care Act directs the Secretary 
to address certain standards in defining EHB, including elements 
related to balance, discrimination, the needs of diverse sections of 
the population, and denial of benefits. The proposed regulations would 
provide an approach to addressing discrimination that would allow 
states to monitor and identify discriminatory benefit designs, or the 
implementation thereof.
    To address potentially discriminatory practices, we proposed in 
paragraph (a) that an issuer does not provide EHB if its benefit 
design, or the implementation of its benefit design, discriminates 
based on an individual's age, expected length of life, or present or 
predicted disability, degree of medical dependency, quality of life, or 
other health conditions. In paragraph (b), we proposed that Sec. Sec.  
156.200 and156.225 also apply to all issuers required to provide 
coverage of EHB, prohibiting discrimination based on factors including 
but not limited to race, gender, disability, and age as well as 
marketing practices or benefit designs that will have the effect of 
discouraging the enrollment of individuals with significant health 
needs.
    These provisions would provide a framework and legal standard from 
which to develop analytic tools to test for discriminatory plan 
benefits. Such analyses could include evaluations to identify 
significant deviation from typical plan offerings including such as 
limitations for benefits with specific characteristics.
    The comments and our responses to Sec.  156.125 are set forth 
below.
    Comment: Several commenters indicated their belief that section 
1302(b)(4) of the Affordable Care Act does not prohibit discrimination 
in benefit implementation in the standards for providing EHBs.
    Response: Section 1302(b)(4) of the Affordable Care Act specifies 
that EHB not include ``coverage decisions, determine reimbursement 
rates, establish incentive programs, or design benefits in ways that 
discriminate against individuals because of their age, disability, or 
expected length of life.'' We believe that this range of prohibited 
discrimination implicitly encompasses not just the categories of 
benefits included in the benefit design but also the implementation of 
that design.
    Comment: A number of commenters recommended that we expand this 
section to prohibit discrimination based on sex, gender identity, 
sexual orientation, having a particular medical condition, and other 
factors.
    Response: The regulation as written prohibits benefit 
discrimination on the grounds articulated by Congress in section 
1302(b)(4) of the Affordable Care Act, as well as those in 45 CFR 
156.200(e), which include race, color, national origin, disability, 
age, sex, gender identity and sexual orientation.
    Comment: Many commenters requested that we add more detail to the 
regulation regarding standards of nondiscrimination, the framework for 
monitoring and enforcement, as well as clarification of the roles of 
the states and the federal government. Several commenters expressed 
concern that enrollees with certain health conditions might by 
discriminated against by an issuer's failure to include appropriate 
specialists in their network.
    Response: Enforcement of the PHS Act provisions codified in this 
rule is governed by section 2723 of the PHS Act, which first looks to 
states and then to the Secretary where a state has does not 
substantially enforce. The approach to nondiscrimination will reserve 
flexibility for both HHS and the states to respond to new developments 
in benefit structure and implementation and to be responsive to varying 
circumstances across the states. We agree with the commenters that 
network adequacy is an important part of plan coverage. Compliance with 
network adequacy requirements is outside of the scope of this 
regulation.
    Comment: Several commenters expressed concern over state benchmarks 
that they believed contained discriminatory benefit designs and worried 
that issuers in those states would be required to copy those designs.
    Response: To the extent that a state benchmark plan includes a 
discriminatory benefit design, non-discrimination regulations at Sec.  
156.110(d) and Sec.  156.125 require issuers to meet the benchmark 
requirements in a nondiscriminatory matter.

[[Page 12847]]

    Comment: Many commenters expressed concern that Sec.  156.125 would 
prevent issuers from employing traditional medical management 
techniques, with some requesting that we revise regulatory text to 
indicate that evidence-based techniques would not be considered 
discriminatory. Others expressed ongoing concern that medical 
management techniques were often used as nuanced mechanisms for 
discrimination.
    Response: As we stated in the preamble to the proposed rule, and 
consistent with section 1563(d) of the Affordable Care Act, these EHB 
regulations do not prohibit issuers from applying reasonable medical 
management techniques. An issuer could use prior authorization, but 
could not implement prior authorization in a manner that discriminates 
on the basis of membership in a particular group based on factors such 
as age, disability, or expected length of life that are not based on 
nationally recognized, clinically appropriate standards of medical 
practice evidence or not medically indicated and evidence-based. For 
example, a reasonable medical management technique would be to require 
preauthorization for coverage of the zoster (shingles) vaccine in 
persons under 60 years of age, consistent with the recommendation of 
the Advisory Committee on Immunization Practices. We are adding a new 
paragraph (c) in Sec.  156.125, to clarify that nothing in this section 
shall be construed to prevent an issuer from using reasonable medical 
management techniques.
Summary of Regulatory Changes
    For the reasons described in the proposed rule and considering the 
comments received, we are finalizing the provisions proposed in Sec.  
156.125 of the proposed rule with two modifications. Based on comments 
addressed below in response to proposed section Sec.  156.130, we have 
deleted the reference to Sec.  156.225 from paragraph (b) of this 
section, and, as described in response to the comment above, we have 
added a new paragraph (c), clarifying that nothing in this section 
shall be construed to prevent an issuer from appropriately utilizing 
reasonable medical management techniques.
g. Cost-Sharing Requirements (Sec.  156.130)
    The Affordable Care Act provides several standards on cost sharing 
for certain health plans. Standards in Sec.  156.130 are applicable to 
QHPs pursuant to section 1301(a)(1)(B), as implemented by 45 CFR 
156.200(b)(3) and 45 CFR 156.20, which require QHPs to offer the 
essential health benefits package described at section 1302(a) of the 
Affordable Care Act. Similarly, these standards would be applicable to 
non-grandfathered health insurance coverage offered by health insurance 
issuers in the individual and small group markets pursuant to section 
2707(a) of the PHS Act as implemented by Sec.  147.150(a) of these 
regulations.
    In Sec.  156.130(a), we proposed to codify the Affordable Care 
Act's limitation on cost sharing for 2014 and in subsequent years. 
Section 156.130(a)(1) would tie the annual limitation on cost sharing 
for plan years beginning in 2014, to the enrollee out-of-pocket limit 
for high-deductible health plans (HDHP), as calculated pursuant to 
section 223(c)(2)(A)(ii) of Internal Revenue Code of 1986 (the Code) 
based on section 1302(c)(1)(A) of the Affordable Care Act. Proposed 
paragraph (a)(1)(i) would address the limitation for self-only coverage 
and proposed paragraph (a)(1)(ii) would address the limitation for 
coverage other than self-only coverage; the practical effect for 
coverage other than self-only coverage would be that the annual 
limitation would be double the limitation applicable to self-only 
coverage. For illustrative purposes only, for the year 2013 these 
amounts will be $6,250 for self-only and $12,500 for non-self only 
coverage.\26\ Amounts for 2014 are expected to be released by the IRS 
in the spring of 2013. In proposed Sec.  156.130(a)(2)(i), the annual 
limitation on cost sharing would increase by the premium adjustment 
percentage, which would be set by HHS as described in Sec.  156.130(e), 
in years after 2014 for self-only coverage. In proposed Sec.  
156.130(a)(2)(ii), the annual limitation on cost sharing in years after 
2014 for non-self only coverage is double the annual limitation on cost 
sharing for self-only coverage for that year.
---------------------------------------------------------------------------

    \26\ http://www.irs.gov/pub/irs-drop/rp-12-26.pdf.
---------------------------------------------------------------------------

    Sections 1302(c)(2)(A)(i) and 1302(c)(2)(A)(ii) of the Affordable 
Care Act define and proposed Sec.  156.130(b) codified the annual 
limitation on deductibles for health plans offered in the small group 
market as part of the EHB package. This limitation on deductibles is 
imposed on QHPs by section 1301(a)(1)(B) of the Affordable Care Act and 
45 CFR 156.200(b)(3). The limitation is also imposed on non-
grandfathered health plans in the individual and small group markets by 
section 2707(a) of the PHS Act, which we proposed to implement in 
proposed 45 CFR 147.150(a). In proposed Sec.  156.130(b)(1)(i), we 
proposed that the annual limitation on deductibles for the year 2014 be 
$2,000 for self-only coverage and in proposed Sec.  156.160(b)(1)(ii), 
$4,000 for non self-only coverage. In proposed Sec.  156.130(b)(2), we 
proposed that in years beyond 2014, the annual deductible limits for 
self-only plans would increase by the premium adjustment percentage 
described in paragraph (e) under the authority of section 1302(c)(2)(B) 
of the Affordable Care Act.
    Section 1302(c)(2)(C) of the Affordable Care Act directs that the 
limit on deductibles described in section 1302(c)(2)(A) for a health 
plan offered in the small group market be applied so as to not affect 
the actuarial value of any health plan. We proposed to interpret and 
implement this provision through our proposal at Sec.  156.130(b)(3) by 
authorizing a health insurance issuer to make adjustments to its 
deductible to maintain the specified actuarial value for the applicable 
level of coverage required under proposed Sec.  156.140. In proposed 
Sec.  156.130(b)(3), we proposed that a plan may exceed the annual 
deductible limit if it cannot reasonably reach a given level of 
coverage (metal tier) without doing so.
    Section 1302(c)(2)(A) of the Affordable Care Act permits but does 
not require, contributions to flexible spending arrangements (FSAs) to 
be taken into account when determining the deductible maximum. We 
proposed to standardize the maximum deductible for all health plans in 
the small group market at $2,000 for self-only coverage and $4,000 for 
non-self-only coverage, as described in proposed Sec.  156.130(b)(1) 
and potentially adjusted in proposed Sec.  156.130(b)(3), and not 
increase the deductible levels by the amount available under the FSA.
    In proposed Sec.  156.130(c), we proposed a special rule for 
network plans. Under our proposal, cost sharing requirements for 
benefits from a provider outside of a plan's network would not count 
towards the annual limitation on cost sharing, or the annual limitation 
on deductibles. We considered an out-of-network provider to be a 
provider with whom the issuer does not have a contractual arrangement 
with respect to the applicable plan.
    In proposed Sec.  156.130(d), we proposed to codify sections 
1302(c)(1)(B) and 1302(c)(2)(B) of the Affordable Care Act by requiring 
that the annual limitation on cost sharing and the annual limitation on 
deductibles for a plan year beginning after calendar year 2014 only 
increase by multiples of $50 and must be

[[Page 12848]]

rounded to the next lowest multiple of $50.
    In proposed Sec.  156.130(e), we proposed to codify section 
1302(c)(4) of the Affordable Care Act, which specifies that the premium 
adjustment percentage is calculated as the percentage (if any) by which 
the average per capita premium for health insurance coverage for the 
preceding calendar year exceeds such average per capita premium for 
health insurance for 2013.
    In proposed Sec.  156.130(f), we proposed to codify section 
1302(c)(2)(D) of the Affordable Care Act, which states that the annual 
deductibles do not apply to preventive care described in Sec.  147.130.
    Proposed Sec.  156.130(g) proposed to prohibit discriminatory cost 
sharing.
    Proposed Sec.  156.130(h) proposed to implement the requirements in 
section 1302(b)(4)(E) of the Affordable Care Act that, as part of 
coverage of EHB, a QHP must (1) provide coverage for emergency 
department services provided out-of-network without imposing any 
requirement under the plan for prior authorization of services or any 
limitation on coverage for the provision of services that is more 
restrictive than the requirements or limitations that apply to 
emergency department services received from network providers, and (2) 
apply the same cost sharing in the form of a copayment or coinsurance 
for emergency department services for an out-of-network provider--as 
would apply to an in-network provider.
    The comments and our responses to Sec.  156.130 are set forth 
below.
    Comment: HHS received several comments suggesting a standard 
definition of the reasonableness exemption in proposed Sec.  
156.130(b)(3) for plans in the small group market that can only meet 
the deductible requirements as well as certain actuarial value 
requirements such as for a bronze plan for a very narrow range of plan 
designs.
    Response: We intend to provide sub-regulatory guidance outlining 
options related to plan designs where exceeding the deductible limits 
described in Sec.  156.130(b) is permissible. We reiterate that Sec.  
156.130(b) as finalized here applies only for purposes of defining a 
cost-sharing limitation application to issuers and QHPs that must offer 
the EHB package.
    Comment: Several commenters expressed concerns about the protection 
of a health plan's ability to control costs through the use of 
reasonable medical management, as well as cost and administrative 
burdens placed on QHP issuers.
    Response: We do not believe that the requirements pertaining to 
cost-sharing would preclude issuers from engaging in reasonable medical 
management. However, in response to comments about the protection of a 
health plan's ability to control costs through the use of utilization 
management and administrative burden, we are not finalizing the policy 
as paragraph (g) of Sec.  156.130 and we are relabeling the remainder 
of Sec.  156.130 accordingly.
    Comment: HHS received several comments requesting deductible 
increases for plans in the small group market based on employer FSA 
contributions. Other commenters preferred our approach, which prohibits 
these increases, because of the operational complications of 
determining the FSA contribution in time for plan selection.
    Response: The Affordable Care Act provides the option but not the 
requirement to increase deductibles in the small group market based on 
FSA contributions. The operational implications of determining which 
employers are contributing to employee FSAs and matching only those 
employees to plan options with corresponding increases in deductibles 
when FSA contributions and plan selection generally occurs 
simultaneously is operationally infeasible. We are now finalizing our 
policy due to the operational complications of determining the FSA 
contribution in time for plan selection, although we will revisit this 
policy in later years. We believe this will have no impact on 
enrollment in small group plans for those eligible.
    Comment: HHS received several comments discussing the merits of 
applying the cost-sharing limits to in-network services only rather 
than applying the annual cost sharing limits defined in Sec.  
156.130(a) to all costs including both in-network and out-of-network 
fees.
    Response: Our research has shown that generally, health spending 
occurs in-network.\27\ The IOM in its recommendation \28\ focused on 
the long term balance between affordability and comprehensiveness of 
coverage, therefore, we have decided to apply cost-sharing limits to 
in-network visits only to promote health plan affordability. We note 
that nothing in this proposal explicitly prohibits an issuer from 
voluntarily establishing a maximum out-of-pocket limit applicable to 
out-of-network services, or a state from requiring that issuers do so.
---------------------------------------------------------------------------

    \27\ 26 U.S.C. 223(c)(2)(D)
    \28\ Institute of Medicine, ``Essential Health Benefits: 
Balancing Coverage and Cost'' (2011). Available at: http://www.iom.edu/Reports/2011/Essential-Health-Benefits-Balancing-Coverage-and-Cost.aspx.
---------------------------------------------------------------------------

Summary of Regulatory Changes
    For the reasons described in the proposed rule and considering the 
comments received, we are finalizing the provisions proposed in Sec.  
156.130 of the proposed rule with one modification. We are not 
finalizing the text proposed as paragraph (g) and are relabeling the 
provision proposed paragraph (h) as paragraph (g) in this final rule.
h. AV Calculation for Determining Level of Coverage (Sec.  156.135)
    The Affordable Care Act directs issuers offering non-grandfathered 
health insurance coverage in the individual and small group markets, 
including QHPs, to ensure that plans meet a level of coverage specified 
in section 1302(a)(3) of the Affordable Care Act and defined in Sec.  
156.140(b). Each level of coverage corresponds to an AV calculated 
based on the cost-sharing features of the plan. Pursuant to these 
statutory provisions, in paragraph (a), we proposed that an issuer 
would use the AV Calculator developed by HHS to determine the health 
plan's level of coverage as proposed in Sec.  156.140(b), subject to 
the exception in paragraph (b). As part of this proposal, we solicited 
comment on both the AV Calculator and a methodology document that 
includes the logic behind the calculator and a description of the 
development of the standard population, represented in the calculator 
as tables of aggregated data called continuance tables.
    Consistent with section 1302(d)(2)(A) of the Affordable Care Act 
that AV be calculated based on the provision of the EHB to a standard 
population, we proposed that the AV Calculator use one or more sets of 
national claims data reflecting plans of various levels of generosity 
as the underlying standard population. In paragraph (b), we proposed 
options for an issuer whose plan designs do not permit the calculator 
to provide an accurate summary of plan generosity. Although HHS 
anticipates that the vast majority of plans will be able to use the 
calculator in 2014 and beyond, no uniform calculator can accommodate 
the entire potential universe of plan designs. Therefore, we proposed 
to provide exceptions for plan designs not compatible with the 
calculator. Specifically, we proposed in paragraph (b)(1) that plans 
not using the AV calculator would need to submit documentation in the 
form of actuarial certification that they have complied with one of the 
methods described

[[Page 12849]]

below. We intend for this submission to be made to the appropriate 
entity (the state, HHS, the Exchange, or OPM) reviewing the health plan 
for compliance with AV and level of coverage standards.
    In paragraph (b)(2), we proposed two options to accommodate plans 
with benefit designs that cannot be accommodated by the AV Calculator. 
In paragraph (b)(2)(i), we proposed that a health plan issuer be 
permitted to decide how to adjust the plan benefit design (for 
calculation purposes only) to fit the parameters of the calculator and 
then, pursuant to paragraph (b)(2)(ii), have a member of the American 
Academy of Actuaries certify that the methodology was fit to the 
parameters of the AV Calculator in accordance with generally accepted 
actuarial principles and methodologies. In paragraph (b)(3), we 
proposed a second option, that the plan may use the calculator for the 
plan design provisions that correspond to the parameters of the 
calculator and then have a member of the American Academy of Actuaries 
calculate appropriate adjustments to the AV as determined by the AV 
Calculator for plan design features that deviate substantially, in 
accordance with generally accepted actuarial principles and 
methodologies. We proposed in paragraph (b)(4) that, to align with the 
AV Calculator and the rules proposed here for how AV is determined, 
plans using one of these methods would exclude out-of-network costs 
when using additional calculation methods.
    In paragraph (c), we proposed a standard for the treatment of small 
group market HDHPs offered with a health savings account (HSA) or a 
health plan in the small group market integrated with a health 
reimbursement arrangement (HRA), so that HDHP and HSAs/HRAs are 
integrated. Recognizing that simply calculating the AV of the HDHP 
based on the insurance plan alone could understate the value of 
coverage if the value of the employer contribution to such accounts are 
not included, and that employer-provided HSAs and HRAs are generally 
the equivalent of first dollar coverage for any cost-sharing 
requirements encountered by the enrollee, in paragraph (c)(1), we 
proposed that the annual employer contributions to HSAs and amounts 
newly made available under HRAs for the current year count within the 
plan design.
    Section 1302(d)(2)(B) of the Affordable Care Act directs the 
Secretary to issue regulations under which employer contributions to an 
HSA (within the meaning of section 223 of the Code) may be taken into 
account in determining the level of coverage for a plan of the employer 
and HHS proposed allowing for similar treatment of HRAs.
    In paragraphs (c)(2)(i) and (ii), we proposed that the AV 
Calculator would include any current year HSA contributions or amounts 
newly made available under integrated HRAs for the current year as an 
input into the calculator that can be used to determine the AV of an 
employer-sponsored health benefit plan.
    In paragraph (d) we proposed that in years 2015 and after, a state-
specific data set may be used as the standard population (that is, in 
place of the HHS-issued continuance tables) for AV calculations if 
approved by HHS. Issuers in such a state would still use the AV 
Calculator logic, but the underlying data used for generating the AV 
would be specific to the state. In paragraphs (d)(1) through (5), we 
proposed and solicited comment on criteria, based on a July 2011 
American Academy of Actuaries issue brief, for acceptable state claims 
data and their use.
    In paragraph (e), we proposed that the default standard population 
provided by HHS, which is described in paragraph (f) and represented in 
the continuance tables incorporated into the regulatory proposal by 
reference, would be used unless the state submits its own standard 
population consistent with paragraphs (d) and (e). In paragraph (e), we 
proposed that the state data set be submitted in a format that can 
support the AV Calculator described in paragraph (a).
    In paragraph (f), we proposed that HHS will develop the standard 
population to be used to calculate AV in accordance with section 
1302(d)(2)(A) of the Affordable Care Act, which requires that AV be 
calculated using a standard population.
    The comments and our responses to Sec.  156.135 are set forth 
below.
    Comment: Some commenters suggested a different version of the AV 
Calculator including a microsimulation model based calculator, a 
calculator with greater inputs, or no calculator at all with plans 
utilizing their own data to calculate an AV. Other commenters supported 
HHS's decision to develop an AV Calculator based on continuance tables.
    Response: We elected to use a continuance table model as a 
methodology for determining actuarial value because in general this 
type of model is common, popular, and well understood by the actuarial 
community. We have no evidence that a microsimulation model would be 
more precise or would be more successful at parsing plan designs that 
receive high actuarial values with this continuance table model, but 
would receive low actuarial values in a microsimulation model. The 
level of detail of the calculator inputs was thoroughly researched and 
tested and we concluded that adding detail did not have a material 
impact on actuarial value.
    Comment: HHS received numerous comments in support of the 
development of an AV Calculator based on a single national standard 
population. Other commenters suggested the use of standardized plan 
data instead of a single data set to develop the standard population.
    Response: HHS is finalizing its proposed approach to develop an AV 
Calculator based on a single national standardized dataset. We 
considered allowing issuers to use standardized plan data to determine 
AV levels, but in response to comments received to both the AV Bulletin 
and the proposed regulation, ultimately developed the AV Calculator 
using a single standardized dataset to best facilitate consumer 
comparisons so that plans with the same cost-sharing structure would 
have the same AVs. As described in Sec.  156.135(d), we are also 
allowing for the use of state-specific standard population data 
beginning in 2015.
    Comment: HHS received several comments urging HHS to allow states 
to submit their own claims data for use in the AV Calculator starting 
in 2014 or to account for regional variations in the AV Calculator. 
Other commenters recommended that HHS wait to allow the use of state 
data until 2017 or until an update to the AV Calculator is made.
    Response: Starting in 2015, states will have the opportunity to 
submit state-specific claims data for the AV Calculator. In 2014, 
states and other stakeholders can assess the AV Calculator and 
determine whether geographic variation or state-specific claims data 
would be useful modifications starting in 2015.
    Comment: Some commenters suggested that the AV Calculator should 
consider both in and out-of-network utilization. Other commenters 
supported the inclusion of only in-network utilization for the AV 
Calculator.
    Response: HHS developed the AV Calculator and with regard to 
exceptions to use of the AV Calculator in Sec.  156.135(b)(4), is 
finalizing the proposal to consider only in-network utilization based 
on empirical data indicating that only a small percentage of total 
costs come from out-of-network

[[Page 12850]]

utilization.\29\ This approach was supported by the American Academy of 
Actuaries in its comments on the AV Bulletin.
---------------------------------------------------------------------------

    \29\ AHIP, Center for Policy and Research, ``An Updated Survey 
of Health Insurance Claims Receipt and Processing Times, 2011'', 
2013. http://www.ahip.org/SurveyHealthCare-January2013.
---------------------------------------------------------------------------

    Comment: Many commenters noted a variety of potential technical 
issues in the proposed AV Calculator. Other commenters asked HHS to 
provide additional detail on the development of the standard population 
and logic and assumptions used to convert the claims data into an AV 
Calculator, including that HHS provide additional detail on the 
specific services included in each benefit input in the calculator to 
facilitate calculation using one of the exceptions, as well as the 
services included in the unclassified category.
    Response: As part of the proposed regulation, HHS released both the 
AV Calculator tool and a methodology document detailing the development 
of the standard population and AV Calculator. In developing the final 
version of the AV Calculator tool, HHS considered all of the technical 
comments received and made revisions as appropriate. In addition, the 
revised and final version of the methodology document considers all 
comments received and provides additional explanation wherever 
possible. In developing the publicly available methodology document, we 
described step by step the data and logic that the calculator uses to 
determine plan AVs and held ourselves to the common practice level of 
detail present in describing risk adjustment models for CMS as well as 
academic publications. The final AV Calculator and methodology document 
are incorporated by reference into this final rule and available at 
http://cciio.cms.gov/resources/regulations/index.html#pm.
    Comment: Several commenters asked for additional guidance and 
clarification on when one of the exceptions in Sec.  156.135(b) may be 
used to calculate AV.
    Response: We intend to interpret this standard as dependent on 
whether the AV Calculator takes into account or accommodates all 
material aspects of a plan's cost-sharing structure. For example, we 
expect that the calculator will not be able to accommodate plan designs 
with multiple coinsurance rates as different levels of out-of-pocket 
spending are met or a multi-tier network with substantial amounts of 
utilization expected in tiers other than the lowest-priced tier. We 
have also made minor edits to the regulation to clarify that, for a 
plan that cannot be accommodated by the calculator, an issuer has the 
option of using either exception method and that both methods require 
submission of an actuarial certification.
    Comment: The majority of commenters noted that the AV Calculator 
does not address health plans with family cost-sharing features such as 
deductibles that accrue across members of the same family. Some 
commenters recommended adjustments or additional guidance for the final 
AV Calculator to account for these plans.
    Response: The AV Calculator standard population was developed using 
claims data that did not include family cost-sharing information. 
Therefore, health plans with cost-sharing features that accrue across 
family members for non-self-only coverage may be treated as unique plan 
designs, if the family plan design has a material effect on the plan's 
AV. To address commenters' concerns regarding AV calculation for plans 
with family cost-sharing features, as a safe harbor, the AV of a plan 
with a deductible and/or out-of-pocket maximum that accumulates at the 
family level will be considered the same AV as calculated using the AV 
Calculator for the corresponding individual plan, so long as the 
deductible and/or out-of-pocket maximum do not exceed that allowed by a 
family multiplier set by CMS in future guidance. We note that the out-
of-pocket maximum would still be constrained by the maximum permitted 
by Sec.  156.130(a)(1)(ii).
    Comment: Several commenters encouraged HHS to add functionality or 
additional benefit inputs to the AV Calculator--for example, that the 
calculator account for more or different benefits as separate cost-
sharing inputs and that the calculator take into account service 
limits.
    Response: The AV Calculator was developed to accommodate the vast 
majority of plan designs and to include as separate cost-sharing inputs 
those benefits that have a significant impact on a plan's AV. The AV 
Calculator balances the need to accommodate a wide range of plan 
designs, with the need to provide a tool that is accessible to the user 
and contains a manageable number of inputs.
    Comment: Several commenters requested that the full amount of HSA 
and integrated HRA employer contributions be accounted for in the AV 
Calculator. Some of these commenters also requested that HHS allow 
employee contributions to count towards a plan's AV.
    Response: We clarify here that the AV Calculator implements Sec.  
156.135 by treating HSA and amounts newly made available under an 
integrated HRA that may be used only for cost sharing the same way it 
treats any other plan benefits. For example, a $1,000 HSA employer 
contribution is treated in the AV Calculator as if a plan with $1,000 
deductible is reduced to $0. The $1,000 HSA contribution does not get 
counted as $1,000 in the numerator of the AV Calculator because the 
equation is based on total population expected spending by the total 
population, rather than by particular individuals. Instead the $1,000 
contribution is counted as the average dollar value it would cost to 
reduce a $1,000 deductible to $0. We note that while the AV Calculator 
cannot accommodate situations in which the HSA or amounts first made 
available under integrated HRAs that may be used only for cost sharing, 
exceeds the deductible, the value of the account can still be 
accommodated by using the alternative methods for AV calculation 
allowed under Sec.  156.135(b).
    Comment: Some commenters expressed concerns that a health plan 
issuer would not have access to information on employer contributions 
to HSAs and HRAs. Other commenters asked HHS to clarify how the 
provision on HSAs and HRAs would be operationalized.
    Response: As finalized in Sec.  156.135(c), employer contributions 
to an HSA or newly made available through integrated HRAs that may be 
used only for cost sharing, are taken into account when calculating the 
AV of a health plan only when the plan is offered with an HSA 
integrated HRAs that may only be used for cost sharing at the time of 
purchase. Because it is the issuer that uses the AV Calculator to 
determine a plan's AV, the HSA employer contribution, or the amount 
newly made available by the employer under an integrated HRA that may 
only be used for cost sharing, may be considered part of the AV 
calculation when the contribution is available and known to the issuer 
at the time the plan is purchased.
    Comment: HHS received numerous comments regarding when and how to 
update the AV Calculator in future years. In some cases commenters 
expressed concern that annual updates to the AV Calculator or 
underlying data would require issuers to make annual updates to plan 
benefit designs in order to comply with AV standards.
    Response: In response to these comments, we are now clarifying that 
HHS does not anticipate making annual changes to the AV Calculator 
logic or

[[Page 12851]]

underlying standard population. We will consider all comments received 
and give sufficient notice with regard to updating as we develop a 
strategy for updating the AV Calculator.
Summary of Regulatory Changes
    For the reasons described in the proposed rule and considering the 
comments received, we are finalizing the provisions proposed in Sec.  
156.135 of the proposed rule, with two modifications. First we make 
minor modifications to paragraph (b) to clarify that the issuer must 
submit an actuarial certification from an actuary as to the methodology 
used to determine AV when the plan design is not compatible with the AV 
Calculator. In paragraph (c) we clarify that, in order to count towards 
the AV calculation, employer contributions to HSAs and amounts made 
newly available under integrated HRAs that may only be used for cost 
sharing must be known to the issuer when the plan is purchased. Whether 
other types of integrated HRAs might count towards AV is being given 
further consideration. In this case, guidance on the treatment of HRAs 
will be issued and this regulation will be amended as necessary.
i. Levels of Coverage (Sec.  156.140)
    This section describes standards for meeting the Affordable Care 
Act provisions directing that issuers offering QHPs or non-
grandfathered health plans in the individual and small group markets 
offer plans that meet distinct levels of coverage.
    In paragraph (a), we proposed the general requirement that the AV 
of a plan must be calculated according to Sec.  156.135, within de 
minimis variation, in order to determine a plan's level of coverage. In 
paragraph (b), we proposed to codify section 1302(d)(1) of the 
Affordable Care Act, which requires that a bronze plan has an AV of 60 
percent; a silver plan, 70 percent; a gold plan, 80 percent; and a 
platinum plan, 90 percent.
    In paragraph (c), we proposed a de minimis variation of +/- 2 
percentage points for all non-grandfathered plans. For example, a 
silver plan could have an AV between 68 and 72 percent.
    The comments and our responses to Sec.  156.140 are set forth 
below.
    Comment: Several commenters encouraged HHS to adopt a wider range 
of de minimis variation to allow for greater variation in plan design 
and so that more plans are able to maintain their current benefit 
designs in 2014 or to allow states to define their own de minimis 
variation. Other commenters requested a narrower range than +/- 2 
percentage points.
    Response: The proposed de minimis variation of +/- 2 percentage 
points gives issuers the flexibility to set cost-sharing rates that are 
simple and competitive while ensuring consumers can easily compare 
plans of similar generosity. This approach strikes a balance between 
ensuring comparability of plans within each metal level and allowing 
plans the flexibility to use convenient cost-sharing metrics. The de 
minimis range also mitigates the need for annual plan redesign, 
allowing plans to retain the same plan design year to year and remain 
at the same metal level.
Summary of Regulatory Changes
    For the reasons described in the proposed rule and considering the 
comments received, we are finalizing the provisions proposed in Sec.  
156.140 of the proposed rule without modification.
j. Determination of Minimum Value (Sec.  156.145)
    Section 1302(d)(2)(C) of the Affordable Care Act sets forth the 
rules for calculating the percentage of the total allowed costs of 
benefits provided under a group health plan or health insurance 
coverage under the PHS Act and the Code by providing that the rule 
adopted by the Secretary under section 1302(d)(2) include the rules for 
calculating the percentage of the total allowed costs of benefits 
provided under a group health plan or health insurance coverage. 
Section 36B(c)(2)(C)(ii) of the Code provides that an employer-
sponsored plan provides minimum value (MV) if this percentage is no 
less than 60 percent. For the purpose of determining that a given plan 
provides MV, we proposed in paragraph (a) that the percentage of the 
total allowed cost of benefits will be determined using one of the main 
methodologies as described in Treasury Notice 2012-31, released on May 
14, 2012 (``MV Notice'').\30\ In paragraph (c), we proposed that MV for 
employer-sponsored self-insured group health plans and insured large 
group health plans will be determined using a standard population that 
is based on self-insured group health plans. We also proposed in the 
preamble that employer contributions to an HSA and amounts newly made 
available under an HRA will be taken into account in determining MV in 
accordance with the principles applied in taking such amounts into 
account in determining AV.
---------------------------------------------------------------------------

    \30\ Internal Revenue Service, ``Minimum value of an employer-
sponsored health plan'' (2012). Available at: http://www.irs.gov/pub/irs-drop/n-12-31.pdf.
---------------------------------------------------------------------------

    In applying this approach to determining MV, in paragraph (a)(1), 
we proposed that employer-sponsored self-insured and insured group 
plans will be able to use the MV Calculator, which would be made 
available by HHS and the Internal Revenue Service. We described in 
preamble to the proposed rule how the MV Calculator is similar in 
design to the AV Calculator discussed above in connection with Sec.  
156.135. Furthermore, section 1302(d)(2)(C) of the Affordable Care Act 
provides that the percentage of the total allowed costs of benefits 
provided under a group health plan or health insurance coverage for the 
purposes of determining whether the plan or insurance provide minimum 
value will be determined using the rules contained in regulation for 
determining actuarial value.
    As an alternative to using the MV Calculator, we proposed in 
paragraph (a)(2) that an employer-sponsored plan would be able to use 
an array of design-based safe-harbors published by HHS and the Internal 
Revenue Service in the form of checklists to determine whether the plan 
provides MV.
    Third, if an employer-sponsored plan contains non-standard features 
that are not suitable for the use of the calculator and do not fit the 
safe harbor checklists, we proposed in paragraph (a)(3) to permit MV to 
be determined through certification by an actuary without the use of 
the MV Calculator. The actuary would make this determination based on 
the plan's benefits and coverage data and the standard population, 
utilization, and pricing tables available for purposes of the valuation 
of employer-sponsored plans. As proposed, this final option would be 
available only when one of the other methodologies is not applicable to 
the employer-sponsored plan. We proposed that the determination of MV 
must be made by a member of the American Academy of Actuaries, based on 
an analysis performed in accordance with generally accepted actuarial 
principles and methodologies. We intend to issue applicable guidance 
concerning the actuarial analysis.
    In the event that a plan uses the MV Calculator and offers an EHB 
outside of the parameters of the MV Calculator, we proposed in 
paragraph (b)(1) that an actuary who is a member of the American 
Academy of Actuaries will be permitted to determine the value of that 
benefit and add it to the result derived from the MV Calculator in 
accordance with the generally accepted actuarial principles and 
methodologies. For clarity, alignment, and administrative ease, we 
proposed in paragraph (b)(2),

[[Page 12852]]

for purposes of determining that a group health plan provides MV, that 
such plans will be permitted to take into account all benefits provided 
by the plan that are included in any one of the EHB-benchmarks.
    The comments and our responses to Sec.  156.145 are set forth 
below.
    Comment: We received several comments asking why the AV Calculator 
cannot be used to determine minimum value.
    Response: The AV Calculator was designed to reflect a standard 
population as directed by section 1302(d)(2)(A) of the Affordable Care 
Act. Because it represents the individual and small group markets, the 
AV Calculator was designed to include data that is reflective of these 
anticipated populations. Similarly, the MV Calculator is intended to 
test whether an employer-sponsored group health plan--which is not in 
the individual or small group insurance markets--provides minimum value 
and therefore determine if an employee is eligible for a premium tax 
credit. Thus, we have developed an MV Calculator with similar 
functionality to the AV Calculator but based on claims data that better 
reflects typical employer-sponsored plans. In our sampling, the vast 
majority of plan designs that are in excess of 60 percent AV are also 
in excess of 60 percent MV. We are finalizing the rule with added 
language establishing any plan in the small group market that meets any 
of the levels of coverage, as described in Sec.  156.140 of this 
subpart, satisfies minimum value.
    Comment: We received numerous comments asking when the MV 
Calculator and safe-harbor checklists will be available for public use.
    Response: The MV Calculator with accompanying continuance tables 
and the MV methodology are now available at http://cciio.cms.gov/resources/regulations/index.html#pm and we look forward to comments on 
both.
    Comment: Several commenters questioned why certain benefits outside 
EHB would be included in the calculation of MV under paragraph (b).
    Response: While employer-sponsored group health plans are not 
required to offer EHB unless they are health plans offered in the small 
group market subject to PHS Act section 2707(a), employer-sponsored 
group health plans that seek to offer minimum value must offer 60 
percent of the total allowed cost of benefits. Under section 1302(d)(2) 
of the Affordable Care Act, this measurement, like AV, is based on the 
provision of EHB to a standard population. To calculate minimum value, 
employer-sponsored plans may account for any benefits covered by the 
employer that are also covered in any one of the EHB-benchmark plan 
options in any state.
    Comment: Commenters recommended using the same de minimis variation 
of the AV Calculator, +/- 2 percentage points, when using the MV 
Calculator.
    Response: We acknowledge the flexibility in plan design when 
allowing for a de minimis variation of +/- 2 percentage points in the 
AV Calculator and the similar functionality of the MV Calculator to the 
AV Calculator; however, whereas the statute allows for a de minimis 
range with actuarial value there is no similar provision in section 36B 
of the Code with regard to MV.
Summary of Regulatory Changes
    In general, we are finalizing the provisions of Sec.  156.145 as 
proposed. To address concerns whether insurance offered in the small 
group market at a bronze level of coverage provides MV, we have added 
regulation text at Sec.  156.145(a)(4), to clarify that if a plan in 
the small group market meets any of the levels of coverage described in 
Sec.  156.140(b), it meets MV. We have also added Sec.  156.145(d) to 
reflect the proposed preamble language that employer contributions to 
an HSA and amounts newly made available under integrated HRAs, 
specifically HRAs that may be used only for cost sharing, will be taken 
into account in determining MV. To provide greater clarity, we have 
modified Sec.  156.145(a) to read that an employer-sponsored plan 
provides MV if the percentage of the total allowed costs of benefits 
provided under the plan is no less than 60 percent. An employer-
sponsored plan may use one of the methodologies outlined in Sec.  
156.145 to determine whether the percentage of the total allowed costs 
of benefits provided under the plan is not less than 60 percent. 
Whether other types of integrated HRAs might count towards MV is being 
given further consideration. In this case, guidance on the treatment of 
HRAs will be issued and this regulation will be amended as necessary.
k. Application to Stand-alone Dental Plans inside the Exchange (Sec.  
156.150)
    In paragraph (a), we proposed that stand-alone dental plans would 
have a separate annual limitation on cost sharing from QHPs covering 
the remaining EHBs. While the annual limitation on cost-sharing for a 
QHP embedding pediatric dental coverage would have to be consistent 
with Sec.  156.130, the annual limitation on cost sharing for a stand-
alone dental plan would be considered in accordance with this section. 
We proposed that the plan must demonstrate the annual limitation on 
cost sharing for the stand-alone dental plan is reasonable for coverage 
of the pediatric dental EHB. The annual limitation on cost sharing 
would be applicable to in-network services only, consistent with Sec.  
156.130(c).
    In paragraph (b), we proposed actuarial value standards for stand-
alone dental plans. The calculator developed by HHS under proposed 
Sec.  156.135 would be inappropriate for stand-alone dental plans 
because the standard population that underlies the HHS-developed 
calculator could not be reasonably adapted to reflect a pediatric-only 
population that utilizes dental services. Accordingly, in paragraph 
(b)(1), we proposed that stand-alone dental plans may not use the HHS-
developed AV calculator. Instead, given the unique and narrow focus of 
the stand-alone dental plan market, we proposed in paragraph (b)(2) 
that any stand-alone dental plan certified to meet an 75 percent AV, 
with a de minimis range of +/- 2 percentage points, be considered a 
``low'' plan and anything with an AV of 85 percent, with a de minimis 
range of +/- 2 percentage points, be considered a ``high'' plan. In 
order to meet this standard we proposed in paragraph (b)(3) that the 
issuer of a stand-alone plan demonstrate that the plan meets the 
``high'' or ``low'' level of coverage as certified by a member of the 
American Academy of Actuaries using generally accepted actuarial 
principles.
    The comments and our responses to Sec.  156.150 are set forth 
below.
    Comment: Several commenters supported our proposal to allow stand-
alone dental plan to have a separate out-of-pocket maximum, subject to 
a standard of ``reasonableness'' and either requested additional 
guidance on the ``reasonable'' standard or provided suggestions for how 
best to further define what a ``reasonable'' out-of-pocket maximum 
would be for a stand-alone dental plan. Other commenters urged HHS to 
include stand-alone dental plans in the overall out-of-pocket maximum 
and to find some method to develop a method to track and coordinate the 
out-of-pocket maximum between issuers.
    Response: We agree with comments noting that coordination between 
medical and dental issuers would be administratively complex and 
accordingly could result in higher premiums for consumers. We therefore 
allow for a separate out-of-pocket maximum for stand-alone dental 
issuers. We clarify that it will be up to the Exchange to decide what 
constitutes a reasonable out-of-pocket maximum for

[[Page 12853]]

stand-alone dental plans and anticipate issuing further interpretive 
guidance for the federally-facilitated Exchanges in sub-regulatory 
guidance.
    Comment: Several commenters supported the proposed ``high'' and 
``low'' approach for the AV calculation of stand-alone dental plans, 
but urged HHS to decrease the ``low'' option from 75 percent to 70 
percent as a more affordable option for consumers and to increase 
variation between ``high'' and ``low'' plans. Other commenters 
expressed concerns about the impact of a ``high'' and ``low'' approach 
on consumers from an affordability standpoint. Lastly, some commenters 
requested that stand-alone dental plans be held to the same standard as 
health plans.
    Response: A ``high'' and ``low'' approach for the AV calculation of 
stand-alone dental plans simplifies the comparison between stand-alone 
dental plans with varying cost-sharing levels, while minimizing market 
disruption for dental plans. The AV levels for the ``high'' and ``low'' 
options are high compared to metal levels set in the statute to 
minimize market disruption. This permits stand-alone dental plans to 
maintain current benefit designs without adding deductibles or other 
cost-sharing features that are currently not part of those plans. We 
agree with commenters that 70 percent as a low level will allow for 
greater plan variation and are finalizing the regulation with a high/
low AV requirement of 70 percent and 85 percent respectively.
    Comment: The statute and regulations provide that if an Exchange 
offers a stand-alone dental plan offering a pediatric dental EHB 
benefit, medical plans are not required to offer a pediatric dental 
plan benefit on that Exchange. Several commenters encouraged HHS to 
extend the ability of a medical insurance plan to not offer the 
pediatric dental EHB into the non-Exchange market, in cases where a 
stand-alone dental plan that meet the standards to cover the pediatric 
dental EHB is offered.
    Response: The Affordable Care Act does not provide for the 
exclusion of a pediatric dental EHB outside of the Exchange as it does 
in section 1302(b)(4)(F) of the Affordable Care Act for QHPs. 
Therefore, individuals enrolling in health insurance coverage not 
offered on an Exchange must be offered the full ten EHB categories, 
including the pediatric dental benefit. However, in cases in which an 
individual has purchased stand-alone pediatric dental coverage offered 
by an Exchange-certified stand-alone dental plan off the Exchange, that 
individual would already be covered by the same pediatric dental 
benefit that is a part of EHB. When an issuer is reasonably assured 
that an individual has obtained such coverage through an Exchange-
certified stand-alone dental plan offered outside an Exchange, the 
issuer would not be found non-compliant with EHB requirements if the 
issuer offers that individual a policy that, when combined with the 
Exchange-certified stand-alone dental plan, ensures full coverage of 
EHB. We note that the stand-alone dental plan would have to be an 
Exchange-certified stand-alone dental plan to ensure that it covered 
the pediatric dental EHB, as required for Exchange certification under 
section 1311(d)(2)(B)(ii) of the Affordable Care Act. However, the 
Exchange-certified stand-alone dental plan would not need to be 
purchased through an Exchange. This alternate method of compliance is 
at the option of the medical plan issuer, and would only apply with 
respect to individuals for whom the medical plan issuer is reasonably 
assured have obtained pediatric dental coverage through an Exchange-
certified stand-alone dental plan. In addition, this option is only 
available for the pediatric dental EHB, and not for any other EHB, 
because of the unique treatment of stand-alone dental plans inside the 
Exchanges. With respect to other individuals seeking to enroll in the 
same plan, the issuer would be required to offer the same coverage 
generally (there would be no exception to guaranteed availability that 
would apply), but would have to make pediatric dental benefits 
available to such individuals.
    Comment: HHS received comments asking whether childless adults and 
families with children need to purchase a stand-alone dental plan if 
the QHP they enroll in through an Exchange has omitted the pediatric 
dental EHB as allowed under section 1302(b)(4)(F) of the Affordable 
Care Act.
    Response: Section 1302 of the Affordable Care Act outlines the 
requirements for health plans to cover the ten categories of the 
essential health benefits. The only exception permitted under 1302 of 
the Affordable Care Act is for QHPs to exclude coverage of the 
pediatric dental EHB if there is a stand-alone dental plan offered in 
the Exchange. Section 1311 of the Affordable Care Act requires all 
Exchange stand-alone dental plans to cover the pediatric dental EHB. In 
this way, sections 1302 and 1311 of the Affordable Care Act require 
that the full set of essential health benefits be offered to people 
purchasing coverage through the Exchange. However, nothing in this rule 
requires the purchase of the full set of EHB if the purchase is made 
through an Exchange. Thus, in an Exchange, someone (with a child or 
without) can purchase a QHP that does not cover the pediatric dental 
EHB without purchasing a stand-alone dental plan. As noted above, 
outside of an Exchange, an individual or family must be offered 
coverage of all ten categories of EHB, either through one policy, or 
through a combination of a medical policy and an Exchange-certified 
stand-alone dental plan, as described above.
    Comment: Several commenters asked how the policies in Sec.  156.150 
would affect a health insurance plan with an embedded pediatric dental 
EHB.
    Response: In response to these questions, we are now clarifying 
that the policies in Sec.  156.150 apply only to the pediatric dental 
EHB when offered by a stand-alone dental plan through an Exchange. When 
the pediatric dental benefit is embedded in a health insurance plan 
subject to standards set forth in Sec. Sec.  156.130 and 156.140, we do 
not distinguish it from other benefits with respect to AV and cost-
sharing requirements.
    Comment: Several commenters asked whether stand-alone dental plans 
in the Exchange can offer family coverage in addition to the pediatric 
dental EHB benefit.
    Response: Pursuant to section 1311(d)(2)(B)(ii) of the Affordable 
Care Act, a stand-alone dental plan must offer the pediatric dental EHB 
but may offer additional benefits, which could include non-pediatric 
coverage. We note that only the pediatric dental benefit, and not any 
non-pediatric coverage, would be subject to EHB standards, including 
complying with the requirement to offer benefits that are substantially 
equal to the benchmark and meeting AV and out-of-pocket limit 
requirements for stand-alone dental plans.
Summary of Regulatory Changes
    For the reasons described in the proposed rule and considering the 
comments received, we are finalizing the provisions proposed in Sec.  
156.150 of the proposed rule, with the following modifications: We 
clarify in paragraph (a) that the Exchange determines what constitutes 
a reasonable out-of-pocket maximum for a stand-alone dental plan. Also, 
in paragraph (b)(2)(i) we are changing the target AV for a ``low'' 
stand-alone dental plan from 75 percent to 70 percent. In addition, we 
clarify here that plans outside of the Exchange may offer EHB that 
exclude pediatric dental benefits if they are ``reasonably

[[Page 12854]]

assured'' that such coverage is sold only to individuals who purchase 
Exchange certified stand-alone dental plans.
3. Subpart C--Accreditation
Accreditation of QHP Issuers (Sec.  156.275)
Recognition of Accrediting Entity by HHS (Sec.  156.275(c)(1) and 
(c)(4))
    In Sec.  156.275, we proposed to amend Sec.  156.275(c)(1) to 
provide an application and review process for the current (``phase 
one'') recognition process of accrediting entities. This would allow 
additional accrediting entities the opportunity to apply and 
demonstrate how they meet the conditions for recognition articulated in 
1311(c)(1)(D) of the Affordable Care Act. We also proposed to amend 
Sec.  156.275(c)(4)(i) to delete the timeframe of submitting the 
documentation within 60 days of publication of this final rule and 
require accrediting entities to provide the documentation described in 
Sec.  156.275(c)(4)(i) with their application for review.
    The comments and our responses to Sec.  156.275 are set forth 
below.
    Comment: Commenters generally supported the HHS proposal to 
establish an application and review process for the recognition of 
additional accrediting entities as part of the phase one recognition 
process. Several commenters requested that, to be recognized, 
accrediting entities be held to the same standards as were used to 
recognize NCQA and URAC.31 32 Other commenters noted 
specific accrediting entities that should be recognized and asked that 
issuers seeking QHP certification be able to select the recognized 
accrediting entity from which to seek accreditation. Commenters also 
asked HHS to clarify that Exchanges must accept accreditation from any 
of the recognized accrediting entities.
---------------------------------------------------------------------------

    \31\ Patient Protection and Affordable Care Act; Data Collection 
to Support Standards Related to Essential Health Benefits; 
Recognition of Entities for the Accreditation of Qualified Health 
Plans, Final Rule, 77 FR 42658-42672 (July 20, 2012) (to be codified 
at 45 CFR part 156).
    \32\ Recognition of Entities for the Accreditation of Qualified 
Health Plans, 77 FR 70163 (November 23, 2012).
---------------------------------------------------------------------------

    Response: In our notice titled, ``Recognition of Entities for the 
Accreditation of Qualified Health Plans'', published on November 23, 
2012 (77 FR 70163), we announced NCQA and URAC as recognized 
accrediting entities by the Secretary of HHS to provide accreditation 
of QHPs meeting the requirements of 45 CFR 156.275 as they have 
effectively met the conditions listed in Sec.  156.275(c)(2), (c)(3), 
and (c)(4). Nothing in this final rule changes that recognition. HHS 
will finalize our regulation text as proposed with slight technical 
corrections to paragraph (c)(1)(iv) to correct the verb tenses. By 
finalizing Sec.  156.275(c)(1) and (4) largely as proposed, HHS will 
implement an application and review process by which additional 
accrediting entities can be recognized. This process also allows for 
accrediting entities that apply and are not recognized to reapply, 
provided that its standards are modified to meet the requirements. We 
concur with commenters that this process to provide other entities an 
opportunity to apply would provide expanded choices regarding QHP 
accreditation for Exchanges, states and issuers. As we stated in the 
proposed rule, this assessment will be the same as that underlying the 
recognition of NCQA and URAC. We also confirm that, for the purposes of 
QHP certification, issuers have the flexibility to seek accreditation 
from any of the HHS-recognized accrediting entities and that Exchanges 
must accept accreditation from any of the recognized accrediting 
entities for the purposes of QHP certification.
    Comment: Commenters asked for clarification about when the phase 
two recognition process would replace phase one.
    Response: As stated in the Recognition of Entities for the 
Accreditation of Qualified Health Plans Final Rule (July 20, 2012 77 FR 
42663), the phase one recognition process is effective until it is 
replaced by the phase two process. HHS has not yet set a timeline for 
the development and implementation of phase two.
    Comment: Several commenters requested that HHS modify the criteria 
established to evaluate accrediting entities, specified in 45 CFR 
156.275, including setting minimum standards for accrediting entities, 
adding specific clinical measures for accrediting entities to collect 
as part of accreditation, and adding specific topic areas to the 
accreditation standards, such as evaluating an issuer's implementation 
of mental health parity. Other commenters gave suggestions on items for 
inclusion in the phase two recognition process, including 
antidiscrimination, network adequacy and essential community provider 
standards; clinical measures applicable to specific populations, such 
as children, and specific measurement tools; implementing performance-
based accreditation; permitting QHP issuers to have their programs or 
services accredited; and a process for HHS to update standards over 
time.
    Response: HHS has established criteria for accreditation in 45 CFR 
156.275 that correspond to requirements included in section 
1311(c)(1)(D) of the Affordable Care Act. We consider these 
requirements as minimum standards for recognized accrediting entities 
to review as part of the accreditation of QHPs. These requirements were 
finalized in 45 CFR 156.275. We will consider the above comments as we 
develop the phase two recognition process which may establish 
additional criteria for recognized accrediting entities or for the 
accreditation to be provided for QHPs.
    Comment: Commenters supported the proposal for HHS to review 
applications from accrediting entities as they are received by HHS. 
Other commenters asked that HHS modify the proposed process by 
shortening the timeline to review applications from accrediting 
entities. Commenters also asked that the documentation required in 
Sec.  156.275(c)(4) be released to the public.
    Response: HHS has established a process to accept accrediting 
entity applications on a rolling basis in order to allow for any 
accrediting entity wishing to apply to do so as soon as it meets the 
requirements established in Sec.  156.275(c). The process also allows 
for accrediting entities who apply and are not recognized to reapply. 
HHS maintains that a thorough review of an applicant's documentation 
supporting the application specified in (c)(1)(i) and the publication 
of a notice in the Federal Register may take up to 60 days from the 
date of receipt. Further, HHS maintains that a minimum 30-day comment 
period is necessary to ensure that the public has adequate time to 
consider the accrediting entities being considered for recognition. HHS 
further maintains that no time period will be established for when the 
final notice is published in the Federal Register, as HHS must 
carefully review and consider comments submitted during the comment 
period before making a determination on whether or not an accrediting 
entity will be recognized. Lastly, as we proposed in (c)(1)(ii), HHS 
will publish a notice in the Federal Register that will include a 
summary of HHS's analysis of whether the accrediting entity meets the 
criteria described in (c)(2) and (3). Other documentation submitted 
during the application process may be proprietary and will not be made 
public.
    Comment: Several commenters offered suggestions for HHS to consider 
when implementing future quality reporting requirements for QHP issuers 
and Exchanges. These suggestions included: Specific quality measures 
for issuers to report; methods to minimize burden for reporting quality 
data; elements and attributes to consider in developing the QHP-
specific quality

[[Page 12855]]

rating; and consulting with external stakeholders as the quality 
requirements are developed. Other commenters made recommendations for 
educating consumers about quality information as well as the types of 
information that should be displayed to consumers. Finally, we received 
comments encouraging standardized quality reporting requirements across 
Exchanges and expressing support for State flexibility in establishing 
quality requirements.
    Response: While HHS appreciates the submission of these comments, 
they are outside the scope of this rule. We will solicit input on 
quality reporting requirements as part of future rulemaking.
Summary of Regulatory Changes
    For the reasons described in the proposed rule and considering the 
comments received, we are finalizing the provisions proposed in Sec.  
156.275(c)(1) and (4) of the proposed rule without substantive 
modification. We are revising the text at Sec.  156.275(c)(1)(iv) for 
technical corrections to reflect that the required notice has been 
published since the proposed rule.

III. Collection of Information

    Under the Paperwork Reduction Act of 1995, we are required to 
provide 30-day notice in the Federal Register and solicit public 
comment before an information collection request is submitted to the 
Office of Management and Budget (OMB) for review and approval. In order 
to fairly evaluate whether an information collection should be approved 
by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act of 1995 
requires that we solicit comment on the following issues:
     The need for the information collection and its usefulness 
in carrying out the proper functions of our agency.
     The accuracy of our estimate of the information collection 
burden.
     The quality, utility, and clarity of the information to be 
collected.
     Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.
    Below is a summary of the information collection requirements 
outlined in this regulation. Throughout this section, we assume that 
each data collection will occur on an annual basis unless otherwise 
noted. We used the Bureau of Labor Statistics (BLS) Web site to 
identify salary data, unless otherwise indicated. Fringe benefit 
estimates were taken from the BLS March 2011 Employer Costs for 
Employee Compensation report. These compensation estimates were 
selected to align with the burden estimates for the data collections 
described in the final rule that published on March 27, 2012 (77 FR 
18310). For purposes of presenting an estimate of paperwork burden, we 
reflect the operation of an Exchange in fifty states, the U.S. 
territories, and the District of Columbia. Similarly, we estimate the 
burden for issuers participating in all 50 states, the territories and 
the District of Columbia. Therefore, these estimates should be 
considered an upper bound of burden estimates. These estimates may be 
adjusted in future information collection requests. We solicited public 
comment on each of these issues for the following sections of this 
document that contain information collection requirements (ICRs).

A. ICRs Regarding Additional Required Benefits (Sec.  155.170(c))

    In Sec.  155.170(c), we direct QHP issuers to quantify and report 
to the Exchange the cost attributable to required benefits in addition 
to EHB. This is a third-party disclosure requirement. Issuers will use 
a uniform rate template in a revision to the Rate Increase Disclosure 
and Review Reporting Requirements information collection request to 
report this information. The burden associated with meeting this data 
collection is included in the Rate Review information collection 
request. A Federal Register notice (77 FR 40061),\33\ in which we 
sought comments on this PRA package, was published on July 6, 2012.
---------------------------------------------------------------------------

    \33\ ``Agency Information Collection Activities: Proposed 
Collection; Comment Request; Webinars''. (77 FR 40061) Available at 
http://www.gpo.gov/fdsys/pkg/FR-2012-07-06/pdf/2012-16508.pdf.
---------------------------------------------------------------------------

    As noted in the Rate Review information collection request, we 
estimate that a total of 2,010 issuers in the individual market and 
1,050 issuers in the small group market will offer products and that 
each issuer will have an average of 2.5 submissions per year. We 
anticipate that it will take an actuary a total of 11 hours to complete 
the uniform rate template, at $225 per hour for an actuary. The total 
annual cost is estimated to be $18,933,750. Of this total amount, only 
a fraction can be attributable to the portion of the uniform rate 
template that pertains to benefits in addition to EHB for QHP issuers. 
We estimate that of the total 11 hours it will take an actuary to 
complete the uniform rate template, it will take an actuary 1 hour to 
complete the portion pertaining to benefits in addition to EHB. 
Therefore, we estimate the cost attributable to the collection of 
information regarding benefits in addition to EHB to be $1,721,250.

B. ICRs Regarding State Selection of Base-Benchmark (Sec.  156.100) and 
EHB-Benchmark Plan Standards (Sec.  156.110)

    In Sec.  156.100, we proposed that a state may select a base-
benchmark plan to serve as a reference plan to define EHB in that 
state. We also proposed that if a state does not select a benchmark 
plan, its base-benchmark would be the largest plan by enrollment in the 
largest product in the state's small group market. In Sec.  156.110, we 
proposed that a state-selected or default benchmark plan must offer 
coverage in each EHB category, as required by the Affordable Care Act. 
We proposed that if a base-benchmark plan does not offer coverage in a 
category, it must be supplemented to include those missing benefit 
categories.
    We do not believe that this is a change to the information 
collection associated with state selection and submission of a 
benchmark plan and associated benefits and the data collection to 
establish default benchmark plans, including any required 
supplementing, which is already captured in the collection approved 
under OMB Control Number 0938-1174.

C. ICRs Regarding AV Calculation for Determining Level of Coverage 
(Sec.  156.135)

    In Sec.  156.135(b), we proposed to create an exception to using 
the AV calculator for issuers with health plans that are not designed 
in a way that is compatible with the AV calculator. To take advantage 
of this exception, issuers must submit an actuarial certification on 
their alternative method to the state, HHS, the Exchange, or OPM. This 
is a third-party disclosure requirement when the issuers submit to the 
state or the Exchange, and this is a reporting requirement when the 
issuers submit to HHS, OPM, or a Federally-facilitated Exchange. We 
account for this collection in the Initial Plan Data Collection to 
Support Qualified Health Plan Certification and Other Financial 
Management and Exchange Operations information collection request. A 
Federal Register notice (77 FR 40061) regarding this PRA package was 
published on July 6, 2012. As required by the PRA, we will publish 
another notice in the Federal Register when the aforementioned 
information collection request is submitted to OMB for review and 
approval.
    In the QHP Certification PRA package, we estimate that 1,200 
issuers will each offer 15 potential QHPs, for a total of

[[Page 12856]]

18,000 potential QHPs, and that the per-issuer burden will be 175 
hours. We estimate the cost per issuer in the first year of operations 
to be $13,475, which represents an aggregation of several staff, 
including actuarial staff. This information collection request includes 
data collections for QHP certification, risk adjustment, and 
reinsurance. We believe that only 5 percent of issuers will be unable 
to use the AV calculator, thus use the process proposed in Sec.  
156.135(b) and assume that it will take each issuer 8 of the total 175 
hours to provide the requested information. We further assume that the 
8 hours of work would be performed by an actuary, at $225 per hour. 
Therefore, we estimate the total cost attributable to Sec.  156.135(b) 
to be $1,800 per QHP and $1,620,000, per year.
    In Sec.  156.135(d), we proposed that beginning in 2015, a state 
may submit a state-specific standard population, to be used for AV 
calculations, so long as the criteria described in Sec.  156.135(d)(1) 
through (6) are met. A state that applies must submit to HHS summary 
evidence that the requirements described in the proposed rule are met 
and the dataset is in a format that will support the use of the AV 
calculator. We expect that for each state choosing this option, the 
data submission will require 15 hours from a database administrator at 
$47.70 an hour, 4 hours of actuarial work at $225 an hour, and 1 hour 
of management review at $75.15 an hour. Therefore, the total cost 
associated with the reporting requirement for each state choosing this 
option will be $1,691. We assume that states opting to develop a state-
specific standard population will provide new data every three to five 
years.

D. ICRs Regarding Stand-Alone Dental Plans Inside the Exchange (Sec.  
156.150(a))

    In Sec.  156.150(a), we proposed that stand-alone dental plans 
covering the pediatric dental EHB under Sec.  155.1065 must demonstrate 
to the Exchange that they have a reasonable annual limitation on cost 
sharing. This is a third-party disclosure requirement.
    We account for this collection in the QHP Certification information 
collection request discussed earlier in this section, where we estimate 
that 40 issuers will each offer a stand-alone dental plan, and that the 
burden for certification will be 6 hours per issuer, at a total hourly 
billing rate of $77, for a total cost of $462 per issuer. We estimate 
that of those 6 hours, 1 will be attributable to demonstrating that the 
annual limitation on cost sharing is reasonable, at a cost of $77 per 
plan. Therefore, across 40 plans, we estimate the total annual cost to 
be $3,080.

E. ICRs Regarding Accreditation (Sec.  156.275)

    As part of the proposed rule, titled ``Patient Protection and 
Affordable Care Act; Standards Related to Essential Health Benefits, 
Actuarial Value, and Accreditation'' (77 FR 70644), published in the 
Federal Register on November 26, 2012, we also issued a 60-day Federal 
Register notice seeking comments on these ICRs. The 60-day comment 
period closed on January 26, 2013. We will submit a revised information 
collection request to OMB, under OMB Control Number 0938-1176, to 
account for the adjustment in the number of respondents and the 
corresponding adjustment to the burden. At that time, as required by 
the PRA, we will publish another notice in the Federal Register when 
the aforementioned information collection request is submitted to OMB 
for review and approval.
    The comments and our responses are set forth below.
    Comment: One commenter noted that the data collection proposed 
under the information collection request entitled ``Recognized 
Accrediting Entities Data Collection'' \34\ requires the submission of 
significant amounts of sensitive, proprietary, or confidential data and 
may be overly burdensome to issuers.
---------------------------------------------------------------------------

    \34\ Available at: http://www.cms.gov/Regulations-and-Guidance/Legislation/PaperworkReductionActof1995/PRA-Listing-Items/CMS-10449.html.
---------------------------------------------------------------------------

    Response: HHS disagrees that the data submission requirements for 
recognized accrediting entities and accrediting entities seeking 
recognition from HHS for the purpose of Sec.  156.275(a) will be overly 
burdensome to issuers. We describe minimal data submission requirements 
for issuers. Issuer burden for the accreditation requirement is 
accounted for in the QHP Application information collection 
request.\35\ All other data requirements described in the information 
collection request regarding accreditation will be met by recognized 
accrediting entities and entities applying to be recognized by HHS.
---------------------------------------------------------------------------

    \35\ Patient Protection and Affordable Care Act; Data Collection 
to Support Standards Related to Essential Health Benefits; 
Recognition of Entities for the Accreditation of Qualified Health 
Plans, Final Rule, 77 FR 42658-42672 (July 20, 2012) (to be codified 
at 45 CFR part 156).
---------------------------------------------------------------------------

    Comment: One commenter offered specific feedback on the content 
areas that were proposed for data collection, including what 
accreditation survey data is collected, how accreditation data from 
different accrediting entities may vary, and requesting that only 
specific CAHPS survey questions be required for submission by QHP 
issuers.
    Response: The purpose of the ICRs regarding accreditation is to 
solicit feedback from stakeholders on the estimated burden associated 
with the proposed data collection on recognized accrediting entities. 
Comments in regard to specific content areas of the data collection are 
therefore outside of the scope. We finalized the accreditation 
documentation submission requirements in a final rule published on July 
20, 2012.\36\
---------------------------------------------------------------------------

    \36\ Patient Protection and Affordable Care Act; Data Collection 
to Support Standards Related to Essential Health Benefits; 
Recognition of Entities for the Accreditation of Qualified Health 
Plans (CMS-9965-F), 77 FR 42,658 (July 20, 2012).
---------------------------------------------------------------------------

IV. Regulatory Impact Analysis

    HHS has examined the impacts of this proposed regulation under 
Executive Order 12866 on Regulatory Planning and Review (September 30, 
1993) and Executive Order 13563 on Improving Regulation and Regulatory 
Review (February 2, 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). Executive 
Order 13563 is supplemental to and reaffirms the principles, 
structures, and definitions governing regulatory review as established 
in Executive Order 12866--emphasizing the importance of quantifying 
both costs and benefits, of reducing costs, of harmonizing rules, and 
of promoting flexibility.
    A regulatory impact analysis (RIA) must be prepared for rules with 
economically significant effects ($100 million or more in any 1 year), 
and a ``significant'' regulatory action is subject to review by the 
Office of Management and Budget (OMB). Section 3(f) of Executive Order 
12866 defines a ``significant regulatory action.'' In accordance with 
the provisions of Executive Order 12866, this regulation was reviewed 
by the Office of Management and Budget as an economically significant 
regulatory action.
    The Congressional Review Act, 5 U.S.C. 801 et seq., as added by the 
Small Business Regulatory Enforcement Fairness Act of 1996, generally 
provides that before a rule may take effect, the agency promulgating 
the rule must submit a rule report, which includes a copy of the rule, 
to each House of the Congress and to the Comptroller General of the 
United States. HHS will submit a

[[Page 12857]]

report containing this rule and other required information to the U.S. 
Senate, the U.S. House of Representatives, and the Comptroller General 
of the United States prior to publication of the rule in the Federal 
Register. A major rule cannot take effect until 60 days after it is 
published in the Federal Register. This action is a ``major rule'' as 
defined by 5 U.S.C. 804(2). This rule will be effective April 26, 2013, 
sixty days after date of publication in the Federal Register.

A. Summary

    This final rule will implement the requirements related to EHB and 
AV levels of coverage, and establish the timeline according to which 
QHP issuers participating in Federally-facilitated Exchanges must be 
accredited. We note that the Exchange regulation (45 CFR 156.200) 
established that QHPs will cover essential health benefits, as defined 
by the Secretary, and that QHPs be accredited on the basis of local 
performance. The cost to health plans of obtaining QHP certification 
and participating in Exchanges is already accounted for in the 
regulatory impact analysis that accompanies that regulation.\37\ 
Therefore, this analysis describes the incremental costs, benefits, and 
transfers associated with provisions in this proposed rule, for example 
that health plans cover the essential health benefits as specifically 
defined herein, and that health plans use the HHS-developed AV 
calculator.
---------------------------------------------------------------------------

    \37\ ``Patient Protection and Affordable Care Act; Establishment 
of Exchanges and Qualified Health Plans, Exchange Standards for 
Employers (CMS-9989-FWP) and Standards Related to Reinsurance, Risk 
Corridors and Risk Adjustment (CMS-9975-F): Regulatory Impact 
Analysis.'' Centers for Medicare & Medicaid Services. Available at: 
http://cciio.cms.gov/resources/files/Files2/03162012/hie3r-ria-032012.pdf.
---------------------------------------------------------------------------

    This final rule also contains details relating to the establishment 
of a timeline by which QHPs seeking certification by Federally-
facilitated Exchanges must be accredited. We do not believe that this 
results in incremental benefits, costs, or transfers.
    HHS has finalized this regulation to implement the protections 
intended by the Congress in an economically efficient manner. In 
accordance with OMB Circular A-4, HHS has quantified the benefits, 
costs and transfers where possible, and has also provided a qualitative 
discussion of some of the benefits, costs and transfers that may stem 
from this proposed regulation.

B. Overview of Key Provisions in the Proposed Rule

    The Affordable Care Act directs the Secretary to define EHB such 
that EHB includes at least and reflects an appropriate balance among 10 
benefit categories, and is equal in scope to benefits offered by a 
typical employer plan. Non-grandfathered plans in the individual and 
small group markets both inside and outside of the Exchanges, including 
multi-state plans, Medicaid benchmark and benchmark-equivalent, and 
Basic Health Programs, if applicable, must cover EHB beginning in 2014. 
This final rule establishes how the Secretary will define EHB based on 
a state-specific benchmark plan and lays out standards for the EHB-
benchmark plan and for issuers that cover EHB.
    In addition, the Affordable Care Act directs issuers offering non-
grandfathered health plans in the individual and small group markets to 
ensure that any offered plan meets specific AVs. The final rule 
outlines a process for computing plan AV using an HHS-developed AV 
calculator, as well as standards and flexibility for issuers in meeting 
the metal tiers.

C. Need for Regulatory Action

    This rule finalizes standards related to EHB and AV consistent with 
the Affordable Care Act. HHS believes that the provisions that are 
included in this final rule are necessary to fulfill the Secretary's 
obligations under sections 1302 and 1311 of the Affordable Care Act. 
Establishing specific approaches for defining EHB and calculating AV 
will bring needed clarity for states, issuers, and other stakeholders. 
Absent the provisions outlined in this proposed rule, states, issuers, 
and consumers would face significant uncertainty about how coverage of 
EHB should be defined and evaluated. Similarly, failing to specify a 
method for calculating AV could result in significant inconsistency 
across states and issuers, and significant confusion for consumers. 
Finally, establishing a clear timeline for potential QHPs to become 
accredited is essential to successful issuer participation in 
Federally-facilitated Exchanges.

D. Summary of Impacts and Accounting Table

    In accordance with OMB Circular A-4, Table IV.1 below depicts an 
accounting statement summarizing HHS's assessment of the benefits, 
costs, and transfers associated with this regulatory action.
    HHS anticipates that the provisions of this final rule will assure 
consumers that they will have health insurance coverage for EHB, and 
significantly increase consumers' ability to compare health plans, make 
an informed selection by promoting consistency across covered benefits 
and levels of coverage, and more efficiently purchase coverage. This 
final rule ensures that consumers can shop on the basis of issues that 
are important to them such as price, network physicians, and benefits 
offered, and be confident that the plan they choose does not include 
unexpected coverage gaps, like hidden benefit exclusions. It also 
allows for flexibility for plans to promote innovation in benefit 
design.
    Insurance contracts are extremely complicated documents; therefore, 
many consumers may not understand the content of the contracts they 
purchase.\38\ This complexity has two undesirable results. First, 
consumers may unknowingly purchase a product that does not meet their 
basic needs--the product may not cover benefits to restore or maintain 
good health, or may result in more financial exposure than the consumer 
anticipated. Second, complexity may deter consumers from market 
transactions, whereas a small number of meaningful choices may increase 
consumers' willingness to purchase coverage.\39\
---------------------------------------------------------------------------

    \38\ Consumers Union. (2012). ``What's Behind the Door: 
Consumers' Difficulties Selecting Health Plans.'' Available at: 
http://www.consumersunion.org/pub/pdf/Consumer%20Difficulties%20Selecting%20Health%20Plans%20Jan%202012.pdf
.
    \39\ Iyengar, Sheena S.; Lepper, Mark R. Journal of Personality 
and Social Psychology, Vol 79(6), Dec 2000, 995-1006.
---------------------------------------------------------------------------

    The specific approach to defining EHB in this final rule realizes 
the benefits of simplicity and transparency by allowing each state to 
choose a benchmark from a set of plans that are typical of the benefits 
offered by employers in that state. The final rule allows that EHB in 
each state reflect the choices made by employers and employees in that 
state today, and minimizes disruption in existing coverage in the small 
group market. In addition, the provisions addressing specific benefit 
categories, such as habilitative services and pediatric dental and 
vision services, will improve access to care for consumers who require 
these benefits.
    The approach to defining AV in this final rule uses standard 
assumptions about utilization and prices, and, for most products, 
directs issuers to use an AV calculator created by the Department to 
compute AV. This approach will ensure that two plans with the same 
cost-sharing parameters

[[Page 12858]]

(that is, deductibles, copayments, and coinsurance features) will have 
the same AVs. This approach is intended to lower consumer information 
costs and drive competition in the market by enabling consumers to 
easily compare the relative generosity of plans, knowing that the AV of 
each plan has been calculated in the same manner.
    In accordance with Executive Order 12866, HHS believes that the 
benefits of this regulatory action justify the costs.

                                          Table IV.1--Accounting Table
----------------------------------------------------------------------------------------------------------------
                                                                                     Units
             Category                       Estimates        ---------------------------------------------------
                                                               Year dollar    Discount rate    Period  covered
----------------------------------------------------------------------------------------------------------------
                                                    Benefits
----------------------------------------------------------------------------------------------------------------
Annualized Monetized ($millions/    Not Estimated             2011           7%              2013-2016
 year).
                                    Not Estimated             2011           3%              2013-2016
----------------------------------------------------------------------------------------------------------------
Qualitative.......................  (1) Improved coverage in benefit categories less typically available.
                                     Expanded access to coverage of benefits, particularly in the individual
                                     market, including maternity and prescription drug coverage.
                                    (2) Alignment with current consumer and employer choices. Flexibility for
                                     states; limited market disruption; allowance for health plan innovation
                                     (e.g., substitution within benefit categories; de minimis variation for
                                     AV).
                                    (3) Efficiency due to greater transparency. Increased transparency and
                                     consumer ability to compare coverage.
----------------------------------------------------------------------------------------------------------------
                                                      Costs
----------------------------------------------------------------------------------------------------------------
Annualized Monetized ($millions/    $3.4*                     2011           7%              2013-2016
 year).
                                    $3.1*                     2011           3%              2013-2016
----------------------------------------------------------------------------------------------------------------
Qualitative.......................  (1) Administrative costs. Insurers will incur administrative costs
                                     associated with altering benefit packages to ensure compliance with the
                                     definition of EHB established in this proposed rule. Issuers may also incur
                                     minor administrative costs related to computing AV.
----------------------------------------------------------------------------------------------------------------
                                    (2) Costs due to higher service utilization. As consumers gain additional
                                     coverage for benefits that previously did not meet the standards outlined
                                     in this proposed rule (for example, pediatric dental or vision coverage),
                                     utilization, and thus costs, may increase. A portion of this increased
                                     utilization and costs may be economically inefficient.
----------------------------------------------------------------------------------------------------------------
                                                    Transfers
----------------------------------------------------------------------------------------------------------------
Federal Annualized Monetized        Not Estimated             2011           7%              2013-2016
 ($millions/year).
                                    Not Estimated             2011           3%              2013-2016
----------------------------------------------------------------------------------------------------------------
*Note: Administrative costs include costs associated with Information Collection Requirements as described in
  section III of this final rule. These costs are annualized over the analysis period of 2013-2016.

E. Methods and Limitations of Analysis

    There are many provisions of the Affordable Care Act that are 
integral to the goal of expanding access to affordable insurance 
coverage, including the provisions of this proposed rule relating to 
EHB and AV. Because it is often difficult to isolate the effects 
associated with each particular provision of the Affordable Care Act, 
we discuss the evidence relating to the provisions of this proposed 
rule, as well as related provisions of the Affordable Care Act, in this 
regulatory impact analysis. We present quantitative evidence where it 
is possible and supplement with qualitative discussion.

F. Estimated Number of Affected Entities

    As discussed elsewhere in the preamble, standards relating to EHB 
and AV will apply to all health insurance issuers offering non-
grandfathered coverage in the individual and small group markets--both 
inside and outside of the Exchanges. The following sections summarize 
HHS's estimates of the number of entities that will be affected by this 
proposed regulation.
a. Issuers
    For purposes of the regulatory impact analysis, we have estimated 
the total number of health insurance issuers that will be affected by 
this proposed

[[Page 12859]]

regulation at the company level because this is the level at which 
issuers currently submit their annual financial reports to the National 
Association of Insurance Commissioners (NAIC). Table IV.2 shows the 
estimated distribution of issuers offering comprehensive major medical 
coverage in the individual and small group markets based on data 
submitted on the National Association of Insurance Commissioners' 2011 
Supplemental Health Care Exhibit (SHCE).\40\ Additionally, because many 
issuers are licensed in more than one state, we have also included data 
by ``licensed entity'' (company/state combination) for each market.
---------------------------------------------------------------------------

    \40\ The most complete source of data on the number of entities 
offering fully insured, private comprehensive major medical coverage 
in the individual and group markets is the National Association of 
Insurance Commissioners (NAIC) Annual Financial Statements and 
Policy Experience Exhibits database. These data contain information 
that issuers submit to the NAIC through State insurance regulators 
on four different financial exhibits (the Health, Life, Property & 
Casualty, and Fraternal ``Blanks''). The 2011 SHCE captures data on 
individual, small group and large group comprehensive major medical 
coverage at the State level in a consistent manner across all 
Blanks, providing more extensive information about this market than 
was previously available. We note that issuers electing not to offer 
non-grandfathered individual or small group market policies would 
not be affected by the proposed rule.

Table IV.2--Estimated Number of Issuers and Licensed Entities Affected by the EHB and AV Requirements by Market,
                                                      2011
----------------------------------------------------------------------------------------------------------------
                                                       Issuers \1\ offering       Licensed entities \2\ offering
                                                    comprehensive major medical     comprehensive major medical
                   Description                               coverage                        coverage
                                                 ---------------------------------------------------------------
                                                      Number        % of Total        Number        % of Total
----------------------------------------------------------------------------------------------------------------
Total Issuers Offering Comprehensive Major                   446           100.0           2,107           100.0
 Medical Coverage \3\...........................
By Market: \4\
    Individual Market...........................             355            79.6           1,663            78.9
    Small Group Market \5\......................             366            82.1           1,039            49.3
    Large Group Market..........................             375            84.1             922            43.8
    Individual and/or Small Group Markets \6\...             427            95.7           1,993            94.6
    Individual Market Only......................              82            18.4             904            42.9
    Small Group Market Only.....................              39             8.7             117             5.6
    Individual & Small Group Markets Only.......              29             6.5             164             7.8
    All Three Markets...........................             279            62.6             545            25.9
----------------------------------------------------------------------------------------------------------------
Notes: \1\ Issuers represents companies (for example, NAIC company codes).
\2\ Licensed Entities represents company/state combinations.
\3\ Total issuers excludes data for companies that are regulated by the California Department of Managed Health
  Care.
\4\ To be counted as offering coverage in a particular comprehensive major medical market, the issuer must have
  reported non-zero premiums and claims and had at least $1,000 in total premiums per life year for at least one
  state.
\5\ Small group is defined based on the current definition in the PHS Act.
\6\ Subcategories do not add to the total because other categories are not shown separately such as those
  entities in the large group and small group markets, but not in the individual market.
Source: ASPE analysis of 2011 NAIC Supplemental Health Care Exhibit data.

b. Individuals
    Persons enrolled in non-grandfathered individual or small group 
market coverage inside or outside of the Exchanges beginning in 2014 
will be affected by the provisions of this final rule.\41\
---------------------------------------------------------------------------

    \41\ The provisions in this proposed regulation could also 
potentially affect some enrollees with non-grandfathered large group 
market coverage in States that choose to give larger employers the 
option of purchasing coverage through the Exchange starting in 2017. 
However, the Congressional Budget Office (CBO) and Joint Committee 
on Taxation (JCT) ``expect that few large firms would take 
[advantage of] that option if offered because their administrative 
costs would generally be lower than those of nongroup policies that 
would be available in the exchanges.'' (For more information, see 
Congressional Budget Office, ``Letter to the Honorable Evan Bayh: An 
Analysis of Health Insurance Premiums under the Patient Protection 
and Affordable Care Act,'' Washington, DC, 2009.)
---------------------------------------------------------------------------

    In July 2012, CBO estimated that there will be approximately 24 
million enrollees in Exchange coverage by 2016.\42\ Participation rates 
among potential enrollees are expected to be lower in the first few 
years of Exchange availability as employers and individuals adjust to 
the features of the Exchanges.\43\ Additionally, the EHB and AV 
provisions of this final rule will also affect enrollees in non-
grandfathered individual and small group coverage outside of the 
Exchanges.
---------------------------------------------------------------------------

    \42\ ``CBO's February 2013 Estimate of the Effects of the 
Affordable Care Act on Health Insurance Coverage,'' Congressional 
Budget Office, February 2013. Available at http://www.cbo.gov/sites/default/files/cbofiles/attachments/43900_ACAInsuranceCoverageEffects.pdf.
    \43\ Congressional Budget Office, ``Letter to the Honorable Evan 
Bayh: An Analysis of Health Insurance Premiums under the Patient 
Protection and Affordable Care Act,'' Washington, DC 20009.
---------------------------------------------------------------------------

G. Anticipated Benefits

    The Affordable Care Act ensures non-grandfathered health plans 
offered in the individual and small group markets offer a basic package 
of items and services. The benefits of health insurance coverage are 
well documented and discussed at length in previous RIAs,\44\ including 
improvement in clinical outcomes and financial security.\45\ \46\ This 
final rule applies a definition to EHB and finalizes other standards 
that are required of health plans, as directed under the statute.
---------------------------------------------------------------------------

    \44\ Available at: http://cciio.cms.gov/resources/files/Files2/03162012/hie3r-ria-032012.pdf.
    \45\ Institute of Medicine (2001). Coverage Matters: Insurance 
and Health Care. National Academies Press: Washington, DC. Burstin 
HR, Swartz K, O'Neil AC, Orav EJ, Brennan TA. 1999. The effect of 
change of health insurance on access to care. Inquiry; 35: 389-97. 
Finkelstein A et al. 2011. The Oregon health insurance experiment: 
Evidence from the first year. NBER Working Paper No. 17190.
    \46\ Institute of Medicine (2002). Care without coverage: too 
little, too late. National Academies Press. Ayanian J, et al. 
``Unmet Health Needs of Uninsured Adults in the United States.'' 
JAMA. 284(16). 2000:2061-9. 27; Roetzheim R, et al. ``Effects of 
Health Insurance and Race on Colorectal Cancer Treatments and 
Outcomes.'' American Journal of Public Health 90(11). 2000: 1746-54; 
Wilper, et al. ``Health Insurance and Mortality in US Adults.'' 
American Journal of Public Health. 99(12). 2009: 2289-2295.
---------------------------------------------------------------------------

    In the market today, it is difficult for consumers to make well-
informed choices when selecting from among competing health plans. The 
benefits offered are complicated and can vary widely across plans, 
making it difficult for consumers to understand which benefits are 
covered.\47\ Further, wide variation in deductibles, coinsurance,

[[Page 12860]]

and other cost sharing features make it difficult for consumers to 
understand the relative levels of financial protection they will 
receive under competing plans.\48\ \49\
---------------------------------------------------------------------------

    \47\ Garnick, D.W. et al. (1993). ``How well do Americans 
understand their health coverage?'' Health Affairs, 12(3); 204-212.
    \48\ Consumers Union. (2012). ``What's Behind the Door: 
Consumers' Difficulties Selecting Health Plans.'' Available at: 
http://www.consumersunion.org/pub/pdf/Consumer%20Difficulties%20Selecting%20Health%20Plans%20Jan%202012.pdf
.
    \49\ Isaacs, S.L. (2006). Consumer's information needs: results 
of a national survey. Health Affairs, 15(4): 31-41.
---------------------------------------------------------------------------

    Under the provisions in this final rule, the EHB-benchmark plan 
will reflect both the scope of services and any limits offered by a 
``typical employer plan'' in that state. This approach, applying for at 
least the 2014 and 2015 benefit years, will allow states to build on 
coverage that is already widely available, minimize market disruption, 
and provide consumers with familiar products. This should heighten 
consumer understanding of plan options and may facilitate consumers' 
abilities to make choices that better suit their needs. In addition, by 
ensuring that all plans cover a core set of benefits and services that 
will be compared against other plans that offer the same financial 
protection to the consumer, this final rule is expected to improve the 
quality and value of the coverage that is available for EHB.
    Information on AV is expected to be used by consumers to compare 
non-grandfathered individual and small group market plans, and provides 
a method for consumers to understand relative plan value. Proposing 
standard pricing and utilization assumptions for AV calculations for 
QHPs and non-grandfathered health plans in the individual and small 
group markets will promote transparency and simplicity in the consumer 
shopping experience, as well as offer issuers the flexibility to set 
cost-sharing rates that are simple and competitive. Without this 
approach, plans with the same cost-sharing provisions could have 
different AVs making it difficult for consumers to compare and choose 
among health plans. It also fosters plan competition based on price, 
quality, and service--rather than variations in benefit design.

H. Anticipated Costs and Transfers

    In addition to the administrative costs described in the 
Information Collection Requirements section of this proposed rule, HHS 
anticipates that the provisions of this final rule could result in 
increased costs related to increased utilization of health care 
services by people receiving coverage for previously uncovered or 
unaffordable benefits.
    States have primary enforcement authority over health insurance 
issuers and this proposed rule extends this primary enforcement 
authority for compliance with EHB and AV requirements defined in this 
rule. In addition, states must defray the cost of any state-required 
benefits in excess of the EHB that apply to QHPs and multi-state plans 
offered through Exchanges. As stated earlier, we expect that this will 
rarely occur, if at all, in 2014 and 2015, the period coverage by the 
benchmark policy.
    The anticipated effects on enrollees in the individual market are 
expected to be larger than the effects on enrollees in the small group 
market. Coverage in the small group market is much more likely to 
include EHB already and, in fact, is included in the choice of 
benchmark plans.\50\ Second, almost all products in the group market 
have AV above 60 percent,\51\ while there are likely to be changes to 
products in the individual market due to the provisions of this 
proposed rule.
---------------------------------------------------------------------------

    \50\ A study conducted by the Assistant Secretary for Planning 
and Evaluation (ASPE) found that commonly purchased products in the 
small group market, state employee plans, and federal employee plans 
do not differ significantly in the range of services they cover. 
Because one of these plans will be chosen as the reference plan for 
EHB, most small group plans will provide benefits that are similar 
to EHB. (ASPE Issue Brief (2011). ``EHB: Comparing Benefits in Small 
Group Products and State and Federal Employee Plans,'' U.S. 
Department of Health & Human Services.) In contrast, another ASPE 
study found that many current subscribers in the individual market 
lack coverage for some EHB benefits and services, such as maternity 
care and prescription drugs. (ASPE Research Brief (2011). ``EHB: 
Individual Market Coverage'' U.S. Department of Health & Human 
Services.)
    \51\ ASPE Research Brief (2011). ``AV and Employer Sponsored 
Insurance,'' available at: http://aspe.hhs.gov/health/reports/2011/AV-ESI/rb.pdf. Similar results were found in a recent study by Gabel 
and colleagues. Jon R. Gabel, Ryan Lore, Roland D. McDevitt, Jeremy 
D. Pickreign, Heidi Whitmore, Michael Slover and Ethan Levy-
Forsythe, ``More Than Half Of Individual Health Plans Offer Coverage 
That Falls Short Of What Can Be Sold Through Exchanges As Of 2014,'' 
Health Affairs, (2012), available at: http://
content.healthaffairs.org/content/early/2012/05/22/
hlthaff.2011.1082.full.pdf+html.
---------------------------------------------------------------------------

Impact on Issuers
    Commonly purchased products in the small group market, state 
employee plans, and the FEHBP Blue Cross Blue Shield (BCBS) Standard 
and Basic Options and Government Employees Health Association (GEHA) 
plans do not differ significantly in the range of services they 
cover.\52\ Because one of these plans will be chosen as the reference 
plan for EHB, most small group plans will provide benefits that are 
similar to EHB, and changes in benefits offered to comply with EHB 
provisions will be relatively minor.
---------------------------------------------------------------------------

    \52\ ASPE Issue Brief (2011). ``EHB: Comparing Benefits in Small 
Group Products and State and Federal Employee Plans,'' U.S. 
Department of Health & Human Services (2011).
---------------------------------------------------------------------------

    Notwithstanding this general conclusion, there are four types of 
benefits where changes are expected in the small group market: Mental 
health and substance use disorder, habilitative services, pediatric 
dental care, and pediatric vision services. In addition, individual 
health plans are less likely than small group health plans to cover all 
of the 10 statutory EHB categories. Below we discuss two categories of 
benefits and services that are less likely to be covered in the market 
today: mental health and substance use disorder services, and 
habilitative services.
    Coverage of additional benefits results in a transfer from out-of-
pocket payments to premium payments. Increased access to insurance 
coverage for previously excluded benefits will make medical care for 
those benefit categories more affordable for consumers by covering a 
portion of the costs of those services. While out-of-pocket costs would 
decline, consumers could purchase benefits and services inefficiently--
that is, purchase more than the efficient amount of the previously 
excluded benefits and services. However, studies of the Medicare 
program suggest that the costs of this inefficiency are likely more 
than offset by the benefits of risk reduction.\53\ The introduction of 
the Medicare program resulted largely in changes from uninsured to 
insured--research suggests that only 25 percent of seniors had private 
hospital insurance before the introduction of the program.\54\ In 
contrast, this final rule will likely result in incremental gains in 
access, rather than changes in status from uninsured to insured. 
Accordingly, CMS expects that the tradeoff between the costs of 
inefficiency and the benefits of risk reduction will be as or more 
favorable as the results observed in studies of the Medicare program. 
As discussed previously, many other provisions of the Affordable Care 
Act, including healthier risk pools, greater administrative 
efficiencies, premium tax credits, and the transitional reinsurance 
program will lower premiums in the individual market and Exchanges.
---------------------------------------------------------------------------

    \53\ Finkelstein A, McKnight R: ``What Did Medicare Do (And Was 
It Worth It)?'' Journal of Public Economics 2008, 92:1644-1669; and 
Finkelstein, A, ``The Aggregate Effects of Health Insurance: 
Evidence from the Introduction of Medicare,'' National Bureau of 
Economic Research. Working Paper No. 11619, Sept, 2005.
    \54\ Finkelstein, A, ``The Aggregate Effects of Health 
Insurance: Evidence from the Introduction of Medicare,'' National 
Bureau of Economic Research. Working Paper No. 11619, Sept, 2005.

---------------------------------------------------------------------------

[[Page 12861]]

    The statute requires that all plans covering EHB offer mental 
health and substance use disorder service benefits, including 
behavioral health treatment and services. The preamble of this rule 
provides that coverage of EHB must provide parity in treatment 
limitations between medical and surgical benefits and the mental health 
and substance use disorder benefits required to be covered as EHB in 
both the individual and small group markets. Many states \55\ \56\ have 
already added some form of mental health parity in some or all insured 
markets.\57\ About 95 percent of those with coverage through the three 
largest small group products in each state had substance use disorder 
and mental health benefits.\58\ Additionally, a study of implementation 
of parity in the FEHBP plans \59\ as well as research into state-passed 
mental health parity laws \60\ have shown little or no increase in 
utilization of mental health services, but found that parity reduced 
out-of-pocket spending among those who used mental health and substance 
abuse services.
---------------------------------------------------------------------------

    \55\ Kaiser State Health Facts. State mandated benefits in small 
group private health insurance: Mandated coverage in mental health, 
as of January 2010. Available at: http://www.statehealthfacts.org/comparereport.jsp?rep=2&cat=7.
    \56\ Health Insurance Mandates in the States 2010, Council for 
Affordable Health Insurance, available at: http://www.cahi.org/cahi_contents/resources/pdf/MandatesintheStates2010ExecSummary.pdf.
    \57\ Health Insurance Mandates in the States 2010, Council for 
Affordable Health Insurance, available at: http://www.cahi.org/cahi_contents/resources/pdf/MandatesintheStates2010ExecSummary.pdf.
    \58\ ASPE Issue Brief, ``EHB: Comparing Benefits in Small Group 
Products and State and Federal Employee Plans, U.S. Department of 
Health & Human Services (2011).
    \59\ Goldman HH, et al. 2006. Behavioral health insurance parity 
for federal employees. New Engl J Med;354 1378-86.
    \60\ Barry CL, Busch SH. 2007. Effects of state parity laws on 
the family financial burden of children with mental health care 
needs. Health Serv Res; 42: 1061-84. Ma CA, McGuire TG. 1998. Cost 
and incentives in a behavioral health carve-out. Health Affairs;17: 
56-67.
---------------------------------------------------------------------------

    As indicated in the preamble, many health insurance plans do not 
identify habilitative services as a distinct group of services.\61\ By 
implementing a transitional policy for coverage of habilitative 
services, this rule allows issuers time for review and development of 
policy in this area, and to gain experience to define these benefits. 
To the extent that states exercise the option to define habilitative 
services, small group market issuers may incur administrative and 
contracting costs associated with bringing their products into 
compliance with a state's definition. However, because it is not yet 
clear which states will exercise this option or how any such states 
will define habilitative services, HHS cannot estimate these costs at 
this time.
---------------------------------------------------------------------------

    \61\ ASPE Research Brief (2011). ``EHB: Comparing Benefits in 
Small Group Products and State and Federal Employee Plans.'' 
Available at: http://aspe.hhs.gov/health/reports/2011/MarketComparison/rb.shtml.
---------------------------------------------------------------------------

    With respect to AV and MV, research indicates that the overwhelming 
majority of employer-sponsored health plans meets and exceeds an AV of 
60 percent.\62\ Combining both small group and large group, an 
estimated 1.6 percent to 2.0 percent of people covered by employer-
sponsored insurance are enrolled in plans with an AV of less than 60 
percent.
---------------------------------------------------------------------------

    \62\ ASPE Research Brief (2011). ``AV and Employer Sponsored 
Insurance,'' available at: http://aspe.hhs.gov/health/reports/2011/AV-ESI/rb.pdf. Similar results were found in a recent study by Gabel 
and colleagues. Jon R. Gabel, Ryan Lore, Roland D. McDevitt, Jeremy 
D. Pickreign, Heidi Whitmore, Michael Slover and Ethan Levy-
Forsythe, ``More Than Half Of Individual Health Plans Offer Coverage 
That Falls Short Of What Can Be Sold Through Exchanges As Of 2014,'' 
Health Affairs, (2012), available at: http://
content.healthaffairs.org/content/early/2012/05/22/
hlthaff.2011.1082.full.pdf+html.
---------------------------------------------------------------------------

    To keep premium costs low, the Affordable Care Act allows certain 
individuals (adults under age 30 and people who otherwise have 
unaffordable coverage) to purchase catastrophic coverage, which still 
guarantees first dollar coverage of preventive services and primary 
care check-ups but has higher deductibles and lower AVs.
Costs to States
    State governments are generally responsible for health insurance 
enforcement in the individual and small group markets, with the federal 
government assuming that role in connection with federal law 
requirements if a state does not do so. While HHS expects that states 
may need additional resources to enforce the requirements that non-
grandfathered plans in the individual and small group market provide 
EHB, and that these plans offer coverage with an AV equal to one of the 
four metal levels, these costs will be relatively minor.
    If a state requires issuers to cover benefits in excess of EHB, the 
Affordable Care Act directs the state to defray the costs of these 
benefits in QHPs. States may include as part of their benchmark plan 
state benefit requirements that were enacted before December 31, 2011, 
avoiding costs associated with these provisions.
Costs to Health Insurance Issuers
    Issuers will incur administrative costs to modify existing 
offerings to meet EHB and AV standards as defined in this final rule. 
For example, issuers that do not currently meet the standards for 
prescription drug coverage will incur contracting and one-time 
administrative costs to bring their pharmacy benefits into compliance. 
Issuers may also incur minor administrative costs related to AV 
standards and computing AV. However, because EHB will be based on a 
benchmark plan that is typical of what is offered in the market in each 
state currently, the modifications in benefits are expected to be 
relatively minor for most issuers. Further, issuers have extensive 
experience in offering products with various levels of cost sharing, 
and HHS expects that following the process for computing AV outlined in 
this proposed rule will not demand many additional resources.

I. Regulatory Alternatives

    In addition to the regulatory approach outlined in the Essential 
Health Bulletin issued on December 16, 2011, HHS considered several 
alternatives when developing policy around defining EHBs and 
calculating AV.
Definition of EHBs
    At the request of some commenters, HHS considered one national 
definition of EHB that would have applicable issuers offer a uniform 
list of benefits. However, this approach would not allow for state 
flexibility and issuer innovation in benefit design, would require a 
burdensome overhaul for issuers, and would disrupt the market.
    HHS also considered codifying the 10 statutorily required 
categories without additional definition and allowing issuers to adjust 
their benefit packages accordingly. However, this approach would have 
allowed extremely wide variation across plans in the benefits offered, 
would not have assured consumers that they would have coverage for 
basic benefits, and would not have improved the ability of consumers to 
make comparisons among plans.
    HHS believes the benchmark approach best strikes the balance 
between comprehensiveness, affordability, and state flexibility. 
Additionally, HHS believes that the benchmark approach, supplemented 
when necessary, best addresses the statutory requirements that EHBs 
reflect a typical employer plan and encompass at least the 10 statutory 
EHB categories of items and services outlined in the statute.

[[Page 12862]]

Calculation of AV
    In the calculation of AV, the statute specifies the use of a 
standard population. As described in the AV/CSR Bulletin, HHS 
considered allowing issuers to use their own utilization and pricing 
data in connection with an HHS-defined standard population (that is, 
HHS-set demographics for the standard population) to calculate a 
standard population. However, this would not have allowed for consumer 
transparency and would not have increased competition. The approach in 
this final rule instead reduces issuer burden while allowing consumers 
to compare more easily among plans.
    The comments and our responses to the RIA are set forth below.
    Comment: A few commenters stated that the RIA included in the 
proposed rule was insufficiently quantitative; failed to address 
specific potential impacts of the regulation, such as access to 
previously uncovered benefits and premium costs associated with induced 
utilization; and did not adequately describe other regulatory 
alternatives considered by HHS.
    Response: HHS published the Establishment of Exchanges Final Rule 
on March 27, 2012. In the regulatory impact analysis associated with 
that final rule, HHS codified standards related to coverage of EHB, 
compliance with AV levels, and accreditation of QHPs. The costs, 
benefits, and other impacts associated with those standards are 
described in the RIA associated with CMS-9989-F. This final rule builds 
upon CMS-9989-F by establishing a specific definition of EHB and AV, 
and detailing a timeline for issuers to obtain accreditation. 
Accordingly, the RIA associated with this final rule assesses only the 
costs and benefits of applying that specific definition and timeline 
(that is, adopting a benchmark-based approach to defining EHB and a 
calculator-based approach to computing AV). HHS provided quantitative 
estimates of the costs and benefits associated with the specific 
provisions of this regulation where possible, and supplemented those 
estimates with qualitative discussion. HHS and OMB reviewed the RIA to 
confirm that it addressed all critical components required by Executive 
Orders 12866 and 13563, including a description of regulatory 
alternatives that HHS considered.

VI. Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) (RFA) 
requires agencies to analyze options for regulatory relief of small 
businesses if a proposed rule has a significant 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.
    This final rule is necessary to implement standards related to the 
EHB, AV, cost-sharing limitations, and quality, as authorized by the 
Affordable Care Act. For purposes of the Regulatory Flexibility 
Analysis, we expect the following types of entities to be affected by 
this final rule: (1) Issuers; (2) employers; and (3) providers.
    We believe that health insurers would be classified under the North 
American Industry Classification System (NAICS) Code 524114 (Direct 
Health and Medical Insurance Carriers). According to SBA size 
standards, entities with average annual receipts of $7 million or less 
would be considered small entities for this NAICS code. Health issuers 
could possibly also be classified in NAICS Code 621491 (HMO Medical 
Centers) and, if this is the case, the SBA size standard would be $10 
million or less.
    As discussed in the Web Portal interim final rule (75 FR 24481), 
HHS examined the health insurance industry in depth in the Regulatory 
Impact Analysis we prepared for the proposed rule on establishment of 
the Medicare Advantage program (69 FR 46866, August 3, 2004). In that 
analysis we determined that there were few, if any, insurance firms 
underwriting comprehensive health insurance policies (in contrast, for 
example, to travel insurance policies or dental discount policies) that 
fell below the size thresholds for ``small'' business established by 
the SBA (currently $7 million in annual receipts for health insurers, 
based on North American Industry Classification System Code 
524114).\63\
---------------------------------------------------------------------------

    \63\ `Table of Size Standards Matched to North American Industry 
Classification System Codes,'' effective November 5, 2010, U.S. 
Small Business Administration, available at http://www.sba.gov.
---------------------------------------------------------------------------

    In the proposed rule, we noted that HHS used 2011 National 
Association of Insurance Commissioners (NAIC) Supplemental Health Care 
Exhibit data to develop an updated estimate of the number of small 
entities that offer comprehensive major medical coverage in the 
individual and small group markets. HHS used total Accident and Health 
(A&H) earned premiums as a proxy for annual receipts. Table IV.3 shows 
that HHS estimates that there were 35 small entities with less than $7 
million in accident and health earned premiums offering individual or 
small group comprehensive major medical (CMM) coverage; however, this 
estimate may overstate the actual number of small health insurance 
issuers offering such coverage, since it does not include receipts from 
these companies' other lines of business.
    HHS estimates that 83 percent of these small issuers are 
subsidiaries of larger carriers, and 71 percent also offer large group 
or other types of A&H coverage. On average, HHS estimates that 
individual and small group CMM coverage accounts for approximately 45 
percent of total A&H earned premiums for these small issuers. HHS 
estimates that 75 percent of these small issuers only offer individual 
and small group CMM coverage in a single state. Additionally, HHS 
estimates that approximately a third (11) of these small issuers only 
offer individual market CMM coverage.

[[Page 12863]]



             Table IV.3--Description of Issuers Offering Individual or Small Group Comprehensive Major Medical (CMM) Coverage by Size, 2011
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                            Percent of
                                           Total issuers                  Average number   issuers only    Individual &     Percent of       Number of
                                             offering       Percent of     of States in      offering       small group    issuers also    issuers only
 Total earned premiums for accident and    individual or   issuers that        which       individual or   CMM premiums   offering large     offering
             health coverage                small group     are part of    individual or    small group    as a percent    group CMM or     individual
                                            market CMM        larger        small group    CMM coverage    of total A&H      other A&H      market CMM
                                             coverage        carriers      CMM coverage     in a single      premiums        coverage        coverage
                                                                            is offered         State
--------------------------------------------------------------------------------------------------------------------------------------------------------
Less Than $7 Million....................              35            82.9             2.3            74.3            45.0            71.4              11
$7 million to $99 million...............              93            68.8             4.5            62.4            37.2            66.7               6
$100 million to $999 million............             184            87.0             5.2            65.8            27.0            84.8              11
$1 billion or more......................             115            87.8             4.8            69.6            24.0            93.9               1
                                         ---------------------------------------------------------------------------------------------------------------
    Total...............................             427            82.9             4.7            66.7            24.5            82.2              29
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes: (1) Issuers represents companies (for example, NAIC company codes). (2) Licensed Entities represents company/state combinations. (3) Total
  issuers excludes data for companies that are regulated by the California Department of Managed Health Care. (4) To be counted as offering coverage in
  a particular comprehensive major medical market, the issuer must have reported positive premiums, non-zero claims and had at least $1,000 in total
  premiums per life year for at least one state. (5) Small group is defined based on the current definition in the PHS Act.
Sources: ASPE analysis of 2011 NAIC Supplemental Health Care Exhibit data.

    This rule finalizes standards related to EHB, AV, and accreditation 
of QHPs (specifically, by establishing a timeline for accreditation for 
QHPs seeking certification in Federally-facilitated Exchanges and 
recognition of accrediting entities). These standards may impose some 
additional costs on issuers offering coverage that is affected by these 
provisions. For example, as discussed earlier, issuers are likely to 
experience some administrative costs associated with reconfiguring 
existing non-grandfathered plans to meet EHB and AV metal level 
standards as defined in this final rule. However, these costs will vary 
depending on a number of factors, including the extent to which an 
issuer offers coverage in multiple states or is a subsidiary of a 
larger carrier, and the variation between these standards and current 
practice. Further, some of the changes that standardize coverage may 
reduce administrative costs.
    As discussed in the regulatory impact analysis for the 
Establishment of Exchanges Final Rule, the cost of participating in an 
Exchange is an investment for QHP issuers, with benefits expected to 
accrue to QHP issuers because of access to new markets where consumers 
may receive tax credits to purchase insurance.
    This final rule also establishes standards that will affect 
employers participating in the small group market, including those that 
choose to participate in a SHOP. As discussed in the Summary of 
Regulatory Impact Analysis for the Establishment of Exchanges Final 
Rule, the SHOP is limited by statute to employers with at least one but 
not more than 100 employees. For this reason, we expect that many 
affected employers would meet the SBA standard for small entities. 
However, the standards outlined in this proposed rule apply to issuers 
of small group market health insurance coverage, and not to any small 
employers that elect to purchase such coverage on behalf of their 
employees (that is, the final rule impacts what coverage is available 
to be purchased). We anticipate that the essential health benefits, 
coupled with the ability to compare plans based on metal level, will 
lead to greater transparency and reduce transaction costs for small 
employers.
    HHS anticipates that the provisions in this proposed rule will have 
a positive effect on providers--particularly those offering services in 
areas where many individual market enrollees previously did not have 
coverage for these services, and those who serve a substantial share of 
the low-income population. HHS anticipates that small providers will 
also experience positive effects relating to the provisions of this 
proposed rule.
    Therefore, the Secretary certifies that this final rule will not 
have a significant impact on a substantial number of small entities. We 
welcomed comments on the analysis described in this section and on 
HHS's conclusion.

VII. Unfunded Mandates

    Section 202 of the Unfunded Mandates Reform Act (UMRA) of 1995 
requires that agencies assess anticipated costs and benefits before 
issuing any final rule that includes a federal mandate that could 
result in expenditure in any one year by state, local or tribal 
governments, in the aggregate, or by the private sector, of $100 
million in 1995 dollars, updated annually for inflation. In early 2013, 
that threshold level is approximately $139 million.
    UMRA does not address the total cost of a final rule. Rather, it 
focuses on certain categories of cost, mainly those ``Federal mandate'' 
costs resulting from: (1) Imposing enforceable duties on state, local, 
or tribal governments, or on the private sector; or (2) increasing the 
stringency of conditions in, or decreasing the funding of, state, 
local, or tribal governments under entitlement programs.
    Because states are not required to set up an Exchange, and because 
grants are available for funding of the establishment of an Exchange by 
a state, we anticipate that this final rule would not impose costs 
above that threshold on state, local, or Tribal governments. In 
addition, because states largely already collect information on plan 
rates and benefits to license them, we believe that the burden on 
states is limited. However, because these costs have not been 
estimated, HHS sought comments on any additional burdens.
    Under the final rule, issuers will provide coverage of certain 
benefits. While some issuers may not currently offer benefit packages 
that meet the standards outlined in the final rule, we anticipate that 
the administrative costs associated with compliance will fall below the 
threshold. We anticipate that such administrative costs will be 
concentrated in the initial year, with costs significantly tapering off 
during subsequent years.
    The benchmark-based approach to defining EHB ensures that EHB will 
reflect the scope of services offered by a ``typical employer plan.'' 
Accordingly, we anticipate that many small group market plans meet or 
are close to meeting the coverage requirements for EHB and will not 
need to incur significant administrative costs to bring

[[Page 12864]]

currently available plans into compliance. Individual market plans are 
somewhat less likely to cover all statutorily required benefits and 
services as described in this final rule; however, many such plans are 
offered by issuers with diverse portfolios that may include small and 
large group products or other individual market products that do 
include the required services. Accordingly, we do not anticipate that 
the provisions related to the EHB package outlined in the final rule 
impose costs greater than $139 million on the private sector.
    Consistent with policy embodied in UMRA, this final rule has been 
designed to be a low-burden alternative for state, local and tribal 
governments, and the private sector while achieving the objectives of 
the Affordable Care Act.

VIII. Federalism

    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule that imposes 
substantial direct requirement costs on state and local governments, 
preempts state law, or otherwise has federalism implications.
    States regulate health insurance coverage. States would continue to 
apply state laws regarding health insurance coverage. However, if any 
state law or requirement prevents the application of a federal 
standard, then that particular state law or requirement would be 
preempted. State requirements that are more stringent than the federal 
requirements would not be preempted by this proposed rule unless such 
requirements prevent the application of federal law. Accordingly, 
states have significant latitude to impose requirements with respect to 
health insurance coverage that are more consumer-protective than the 
Federal law.
    In the view of HHS, this final rule does not impose substantial 
direct costs on state and local governments. However, we believe that 
this final rule has federalism implications due to direct effects on 
the distribution of power and responsibilities among the state and 
Federal governments relating to determining standards for health 
insurance coverage that is offered in the individual and small group 
markets. Each state would adhere to the federal standards outlined in 
this final rule for purposes of determining whether non-grandfathered 
individual and small group market health insurance coverage includes 
the EHB package, or have HHS enforce these policies.
    HHS expects that the federalism implications, if any, are 
substantially mitigated for a number of reasons. First, the final rule 
affords discretion to states to select an EHB-benchmark plan. States 
also can choose to be responsible for evaluating the selected benchmark 
and making adjustments as needed, and for determining whether non-
grandfathered individual and small group market health insurance 
coverage meets the standards outlined in this final rule. While this 
final rule establishes new federal standards for certain health 
insurance coverage, states will retain their traditional regulatory 
roles. Further, if a state elects not to substantially enforce the 
standards outlined in the final rule, the federal government will 
assume responsibility for these standards.
    In compliance with the requirement of Executive Order 13132 that 
agencies examine closely any policies that may have federalism 
implications or limit the policymaking discretion of the states, HHS 
has made efforts to consult with and work cooperatively with states as 
evidenced by continued communication through weekly calls and listening 
sessions.
    HHS initiated weekly calls with key stakeholders from states in 
April 2010 as a way for HHS and states to have a regular means of 
communication about the Affordable Care Act. The audience for the call 
is ``State Government Implementers of the Affordable Care Act'' which 
often includes Governors' office staff, state Medicaid Directors' 
staff, Insurance Commissioners' staff, state high risk pool staff, 
Exchange grantees, health reform coordinators, and other state staff. 
National intergovernmental organizations are also invited to 
participate. Regular participants also include representatives from the 
following intergovernmental organizations:

 National Governors Association
 National Conference of State Legislatures
 National Association of Medicaid Directors
 National Association of Insurance Commissioners
 American Public Human Services Association
 The Council of State Governments
 National Academy for State Health Policy
 National Association of Counties

    These calls, in addition to listening sessions specifically related 
to EHB, have helped HHS understand states' major questions about 
implementation of the Affordable Care Act. Ongoing communication with 
states allowed HHS to develop policy that addressed two central issues: 
Flexibility and state-required benefits. The benchmark approach allows 
states to select a benchmark option that offer benefit packages that 
reflect the needs of their populations and maintain state-required 
benefits that were enacted before December 31, 2011. This approach 
minimizes state burden while increasing access to quality health care.

List of Subjects

45 CFR Part 147

    Health care, Health insurance, Reporting and recordkeeping 
requirements, State regulation of health insurance.

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.

Department of Health and Human Services

    For the reasons set forth in the preamble, the Department of Health 
and Human Services amends 45 CFR parts 147, 155, and 156 as set forth 
below:

Subchapter B--Requirements Relating to Health Care Access

PART 147--HEALTH INSURANCE REFORM REQUIREMENTS FOR THE GROUP AND 
INDIVIDUAL HEALTH INSURANCE MARKETS

0
1. The authority citation for part 147 continues to read as follows:


[[Page 12865]]


    Authority: Secs 2701 through 2763, 2791, and 2792 of the Public 
Health Service Act (42 USC 300gg through 300gg-63, 300gg-91, and 
300gg-92), as amended.


0
2. Section 147.150 is added to read as follows:


Sec.  147.150  Coverage of essential health benefits.

    (a) Requirement to cover the essential health benefits package. A 
health insurance issuer offering health insurance coverage in the 
individual or small group market must ensure that such coverage 
includes the essential health benefits package as defined in section 
1302(a) of the Affordable Care Act effective for plan or policy years 
beginning on or after January 1, 2014.
    (b) Cost-sharing under group health plans. [Reserved.]
    (c) Child-only plans. If a health insurance issuer offers health 
insurance coverage in any level of coverage specified under section 
1302(d)(1) of the Affordable Care Act, the issuer must offer coverage 
in that level as a plan in which the only enrollees are individuals 
who, as of the beginning of a plan year, have not attained the age of 
21.

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

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

    Authority: Title I of the Affordable Care Act, sections 1301, 
1302, 1303, 1304, 1311, 1312, 1313, 1321, 1322, 1331, 1334, 1402, 
1411, 1412, 1413, Pub. L. 111-148, 124 Stat. 119 (42 U.S.C. 18021-
18024, 18031-18033, 18041-18042, 18051, 18054, 18071, and 18081-
18083.


0
4. Section 155.170 is added to subpart B to read as follows:


Sec.  155.170  Additional required benefits.

    (a) Additional required benefits. (1) A State may require a QHP to 
offer benefits in addition to the essential health benefits.
    (2) A State-required benefit enacted on or before December 31, 2011 
is not considered in addition to the essential health benefits.
    (3) The Exchange shall identify which state-required benefits are 
in excess of EHB.
    (b) Payments. The State must make payments to defray the cost of 
additional required benefits specified in paragraph (a) of this section 
to one of the following:
    (1) To an enrollee, as defined in Sec.  155.20 of this subchapter; 
or
    (2) Directly to the QHP issuer on behalf of the individual 
described in paragraph (b)(1) of this section.
    (c) Cost of additional required benefits. (1) Each QHP issuer in 
the State shall quantify cost attributable to each additional required 
benefit specified in paragraph (a) of this section.
    (2) A QHP issuer's calculation shall be:
    (i) Based on an analysis performed in accordance with generally 
accepted actuarial principles and methodologies;
    (ii) Conducted by a member of the American Academy of Actuaries; 
and
    (iii) Reported to the Exchange.

0
5. Revise Sec.  155.1045 to read as follows:


Sec.  155.1045  Accreditation timeline.

    (a) Timeline. The Exchange must establish a uniform period 
following certification of a QHP within which a QHP issuer that is not 
already accredited must become accredited as required by Sec.  156.275 
of this subchapter, except for multi-state plans. The U.S. Office of 
Personnel Management will establish the accreditation period for multi-
state plans.
    (b) Federally-facilitated Exchange. The accreditation timeline used 
in federally-facilitated Exchanges follows:
    (1) During certification for an issuer's initial year of QHP 
certification (for example, in 2013 for the 2014 coverage year), a QHP 
issuer without existing commercial, Medicaid, or Exchange health plan 
accreditation granted by a recognized accrediting entity for the same 
State in which the issuer is applying to offer coverage must have 
scheduled or plan to schedule a review of QHP policies and procedures 
of the applying QHP issuer with a recognized accrediting entity.
    (2) Prior to a QHP issuer's second year and third year of QHP 
certification (for example, in 2014 for the 2015 coverage year and 2015 
for the 2016 coverage year), a QHP issuer must be accredited by a 
recognized accrediting entity on the policies and procedures that are 
applicable to their Exchange products, or a QHP issuer must have 
commercial or Medicaid health plan accreditation granted by a 
recognized accrediting entity for the same State in which the issuer is 
offering Exchange coverage and the administrative policies and 
procedures underlying that accreditation must be the same or similar to 
the administrative policies and procedures used in connection with the 
QHP.
    (3) Prior to the QHP issuer's fourth year of QHP certification and 
in every subsequent year of certification (for example, in 2016 for the 
2017 coverage year and forward), a QHP issuer must be accredited in 
accordance with Sec.  156.275 of this subchapter.

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

0
6. The authority citation for part 156 is revised to read as follows:

    Authority:  Title I of the Affordable Care Act, sections 1301-
1304, 1311-1312, 1321-1322, 1324, 1334, 1342-1343, and 1401-1402, 
Pub. L. 111-148, 124 Stat. 119 (42 U.S.C. 18021-18024, 18031-18032, 
18041-18042, 18044, 18054, 18061, 18063, 18071, and 26 U.S.C. 36B).


0
7. Section 156.20 is amended by adding new definitions for ``Actuarial 
value (AV),'' ``Base-benchmark plan,'' ``EHB-benchmark plan,'' 
``Essential health benefits package or EHB package,'' and ``Percentage 
of the total allowed costs of benefits'' in alphabetical order to read 
as follows:


Sec.  156.20  Definitions.

    Actuarial value (AV) means the percentage paid by a health plan of 
the percentage of the total allowed costs of benefits.
* * * * *
    Base-benchmark plan means the plan that is selected by a State from 
the options described in Sec.  156.100(a) of this subchapter, or a 
default benchmark plan, as described in Sec.  156.100(c) of this 
subchapter, prior to any adjustments made pursuant to the benchmark 
standards described in Sec.  156.110 of this subchapter.
* * * * *
    EHB-benchmark plan means the standardized set of essential health 
benefits that must be met by a QHP, as defined in Sec.  155.20 of this 
section, or other issuer as required by Sec.  147.150 of this 
subchapter.
    Essential health benefits package or EHB package means the scope of 
covered benefits and associated limits of a health plan offered by an 
issuer that provides at least the ten statutory categories of benefits, 
as described in Sec.  156.110(a) of this subchapter; provides the 
benefits in the manner described in Sec.  156.115 of this subchapter; 
limits cost sharing for such coverage as described in Sec.  156.130; 
and subject to offering catastrophic plans as described in section 
1302(e) of the Affordable Care Act, provides distinct levels of 
coverage as described in Sec.  156.140 of this subchapter.
* * * * *
    Percentage of the total allowed costs of benefits means the 
anticipated

[[Page 12866]]

covered medical spending for EHB coverage (as defined in Sec.  
156.110(a) of this subchapter) paid by a health plan for a standard 
population, computed in accordance with the plan's cost-sharing, 
divided by the total anticipated allowed charges for EHB coverage 
provided to a standard population, and expressed as a percentage.
* * * * *

0
8. Subpart B is revised to read as follows:
Subpart B--Essential Health Benefits Package
Sec.
156.100 State selection of benchmark.
156.105 Determination of EHB for multi-state plans.
156.110 EHB-benchmark plan standards.
156.115 Provision of EHB.
156.122 Prescription drug benefits.
156.125 Prohibition on discrimination.
156.130 Cost-sharing requirements.
156.135 AV calculation for determining level of coverage.
156.140 Levels of coverage.
156.145 Determination of minimum value.
156.150 Application to stand-alone dental plans inside the Exchange.

Subpart B--Essential Health Benefits Package


Sec.  156.100  State selection of benchmark.

    Each State may identify a single EHB-benchmark plan according to 
the selection criteria described below:
    (a) State selection of base-benchmark plan. The options from which 
a base-benchmark plan may be selected by the State are the following:
    (1) Small group market health plan. The largest health plan by 
enrollment in any of the three largest small group insurance products 
by enrollment, as defined in Sec.  159.110 of this subpart, in the 
State's small group market as defined in Sec.  155.20 of this 
subchapter.
    (2) State employee health benefit plan. Any of the largest three 
employee health benefit plan options by enrollment offered and 
generally available to State employees in the State involved.
    (3) FEHBP plan. Any of the largest three national Federal Employees 
Health Benefits Program (FEHBP) plan options by aggregate enrollment 
that is offered to all health-benefits-eligible federal employees under 
5 USC 8903.
    (4) HMO. The coverage plan with the largest insured commercial non-
Medicaid enrollment offered by a health maintenance organization 
operating in the State.
    (b) EHB-benchmark selection standards. In order to become an EHB-
benchmark plan as defined in Sec.  156.20 of this subchapter, a state-
selected base-benchmark plan must meet the requirements for coverage of 
benefits and limits described in Sec.  156.110 of this subpart; and
    (c) Default base-benchmark plan. If a State does not make a 
selection using the process defined in Sec.  156.100 of this section, 
the default base-benchmark plan will be the largest plan by enrollment 
in the largest product by enrollment in the State's small group market. 
If Guam, the U.S. Virgin Islands, American Samoa, or the Northern 
Marianna Islands do not make a benchmark selection, the default base-
benchmark plan will be the largest FEHBP plan by enrollment.


Sec.  156.105  Determination of EHB for multi-state plans.

    A multi-state plan must meet benchmark standards set by the U.S. 
Office of Personnel Management.


Sec.  156.110  EHB-benchmark plan standards.

    An EHB-benchmark plan must meet the following standards:
    (a) EHB coverage. Provide coverage of at least the following 
categories of benefits:
    (1) Ambulatory patient services.
    (2) Emergency services.
    (3) Hospitalization.
    (4) Maternity and newborn care.
    (5) Mental health and substance use disorder services, including 
behavioral health treatment.
    (6) Prescription drugs.
    (7) Rehabilitative and habilitative services and devices.
    (8) Laboratory services.
    (9) Preventive and wellness services and chronic disease 
management.
    (10) Pediatric services, including oral and vision care.
    (b) Coverage in each benefit category. A base-benchmark plan not 
providing any coverage in one or more of the categories described in 
paragraph (a) of this section, must be supplemented as follows:
    (1) General supplementation methodology. A base-benchmark plan that 
does not include items or services within one or more of the categories 
described in paragraph (a) of this section must be supplemented by the 
addition of the entire category of such benefits offered under any 
other benchmark plan option described in Sec.  156.100(a) of this 
subpart unless otherwise described in this subsection.
    (2) Supplementing pediatric oral services. A base-benchmark plan 
lacking the category of pediatric oral services must be supplemented by 
the addition of the entire category of pediatric oral benefits from one 
of the following:
    (i) The FEDVIP dental plan with the largest national enrollment 
that is described in and offered to federal employees under 5 U.S.C. 
8952; or
    (ii) The benefits available under that State's separate CHIP plan, 
if a separate CHIP plan exists, to the eligibility group with the 
highest enrollment.
    (3) Supplementing pediatric vision services. A base-benchmark plan 
lacking the category of pediatric vision services must be supplemented 
by the addition of the entire category of pediatric vision benefits 
from one of the following:
    (i) The FEDVIP vision plan with the largest national enrollment 
that is offered to federal employees under 5 USC 8982; or
    (ii) The benefits available under the State's separate CHIP plan, 
if a separate CHIP plan exists, to the eligibility group with the 
highest enrollment.
    (c) Supplementing the default base-benchmark plan. A default base-
benchmark plan as defined in Sec.  156.100(c) of this subpart that 
lacks any categories of essential health benefits will be supplemented 
by HHS in the following order, to the extent that any of the plans 
offer benefits in the missing EHB category:
    (1) The largest plan by enrollment in the second largest product by 
enrollment in the State's small group market, as defined in Sec.  
155.20 of this subchapter (except for pediatric oral and vision 
benefits);
    (2) The largest plan by enrollment in the third largest product by 
enrollment in the State's small group market, as defined in Sec.  
155.20 of this subchapter (except for pediatric oral and vision 
benefits);
    (3) The largest national FEHBP plan by enrollment across States 
that is offered to federal employees under 5 USC 8903 (except for 
pediatric oral and vision benefits);
    (4) The plan described in paragraph (b)(2)(i) of this section with 
respect to pediatric oral care benefits;
    (5) The plan described in paragraph (b)(3)(i) of this section with 
respect to pediatric vision care benefits; and
    (6) A habilitative benefit determined by the plan as described in 
Sec.  156.115(a)(5) of this subpart or by the State as described in 
paragraph (f) of this section.
    (d) Non-discrimination. Not include discriminatory benefit designs 
that contravene the non-discrimination standards defined in Sec.  
156.125 of this subpart.
    (e) Balance. Ensure an appropriate balance among the EHB categories 
to ensure that benefits are not unduly weighted toward any category.
    (f) Determining habilitative services. If the base-benchmark plan 
does not include coverage for habilitative

[[Page 12867]]

services, the State may determine which services are included in that 
category.


Sec.  156.115  Provision of EHB.

    (a) Provision of EHB means that a health plan provides benefits 
that--
    (1) Are substantially equal to the EHB-benchmark plan including:
    (i) Covered benefits;
    (ii) Limitations on coverage including coverage of benefit amount, 
duration, and scope; and
    (iii) Prescription drug benefits that meet the requirements of 
Sec.  156.122 of this subpart;
    (2) With the exception of the EHB category of coverage for 
pediatric services, do not exclude an enrollee from coverage in an EHB 
category.
    (3) With respect to the mental health and substance use disorder 
services, including behavioral health treatment services, required 
under Sec.  156.110(a)(5) of this subpart, comply with the requirements 
of Sec.  146.136 of this subchapter.
    (4) Include preventive health services described in Sec.  147.130 
of this subchapter.
    (5) If the EHB-benchmark plan does not include coverage for 
habilitative services, as described in Sec.  156.110(f) of this 
subpart, include habilitative services in a manner that meets one of 
the following--
    (i) Provides parity by covering habilitative services benefits that 
are similar in scope, amount, and duration to benefits covered for 
rehabilitative services; or
    (ii) Is determined by the issuer and reported to HHS.
    (b) Unless prohibited by applicable State requirements, an issuer 
of a plan offering EHB may substitute benefits if the issuer meets the 
following conditions--
    (1) Substitutes a benefit that:
    (i) Is actuarially equivalent to the benefit that is being replaced 
as determined in paragraph (b)(2) of this section;
    (ii) Is made only within the same essential health benefit 
category; and
    (iii) Is not a prescription drug benefit.
    (2) Submits evidence of actuarial equivalence that is:
    (i) Certified by a member of the American Academy of Actuaries;
    (ii) Based on an analysis performed in accordance with generally 
accepted actuarial principles and methodologies;
    (iii) Based on a standardized plan population; and
    (iv) Determined regardless of cost-sharing.
    (c) A health plan does not fail to provide EHB solely because it 
does not offer the services described in Sec.  156.280(d) of this 
subchapter.
    (d) An issuer of a plan offering EHB may not include routine non-
pediatric dental services, routine non-pediatric eye exam services, 
long-term/custodial nursing home care benefits, or non-medically 
necessary orthodontia as EHB.


Sec.  156.122  Prescription drug benefits.

    (a) A health plan does not provide essential health benefits unless 
it:
    (1) Subject to the exception in paragraph (b) of this section, 
covers at least the greater of:
    (i) One drug in every United States Pharmacopeia (USP) category and 
class; or
    (ii) The same number of prescription drugs in each category and 
class as the EHB-benchmark plan; and
    (2) Submits its drug list to the Exchange, the State, or OPM.
    (b) A health plan does not fail to provide EHB prescription drug 
benefits solely because it does not offer drugs approved by the Food 
and Drug Administration as a service described in Sec.  156.280(d) of 
this subchapter.
    (c) A health plan providing essential health benefits must have 
procedures in place that allow an enrollee to request and gain access 
to clinically appropriate drugs not covered by the health plan.


Sec.  156.125  Prohibition on discrimination.

    (a) An issuer does not provide EHB if its benefit design, or the 
implementation of its benefit design, discriminates based on an 
individual's age, expected length of life, present or predicted 
disability, degree of medical dependency, quality of life, or other 
health conditions.
    (b) An issuer providing EHB must comply with the requirements of 
Sec.  156.200(e) of this subchapter; and
    (c) Nothing in this section shall be construed to prevent an issuer 
from appropriately utilizing reasonable medical management techniques.


Sec.  156.130  Cost-sharing requirements.

    (a) Annual limitation on cost sharing. (1) For a plan year 
beginning in the calendar year 2014, cost sharing may not exceed the 
following:
    (i) For self-only coverage--the annual dollar limit as described in 
section 223(c)(2)(A)(ii)(I) of the Internal Revenue Code of 1986 as 
amended, for self-only coverage that that is in effect for 2014; or
    (ii) For other than self-only coverage--the annual dollar limit in 
section 223(c)(2)(A)(ii)(II) of the Internal Revenue Code of 1986 as 
amended, for non-self-only coverage that is in effect for 2014.
    (2) For a plan year beginning in a calendar year after 2014, cost 
sharing may not exceed the following:
    (i) For self-only coverage--the dollar limit for calendar year 2014 
increased by an amount equal to the product of that amount and the 
premium adjustment percentage, as defined in paragraph (e) of this 
section.
    (ii) For other than self-only coverage--twice the dollar limit for 
self-only coverage described in paragraph (a)(2)(i) of this section.
    (b) Annual limitation on deductibles for plans in the small group 
market. (1) For a plan year beginning in calendar year 2014, the annual 
deductible for a health plan in the small group market may not exceed 
the following:
    (i) For self-only coverage--$2,000; or
    (ii) For coverage other than self-only--$4,000.
    (2) For a plan year beginning in a calendar year after 2014, the 
annual deductible for a health plan in the small group market may not 
exceed the following:
    (i) For self-only coverage--the annual limitation on deductibles 
for calendar year 2014 increased by an amount equal to the product of 
that amount and the premium adjustment percentage as defined in 
paragraph (e) of this section; and
    (ii) For other than self-only coverage--twice the annual deductible 
limit for self-only coverage described in paragraph (b)(2)(i) of this 
section.
    (3) A health plan's annual deductible may exceed the annual 
deductible limit if that plan may not reasonably reach the actuarial 
value of a given level of coverage as defined in Sec.  156.140 of this 
subpart without exceeding the annual deductible limit.
    (c) Special rule for network plans. In the case of a plan using a 
network of providers, cost-sharing paid by, or on behalf of, an 
enrollee for benefits provided outside of such network shall not count 
towards the annual limitation on cost-sharing (as defined in paragraph 
(a) of this section), or the annual limitation on deductibles (as 
defined in paragraph (b) of this section).
    (d) Increase annual dollar limits in multiples of 50. For a plan 
year beginning in a calendar year after 2014, any increase in the 
annual dollar limits described in paragraphs (a) and (b) of this 
section that do not result in a multiple of 50 dollars must be rounded 
to the next lowest multiple of 50 dollars.
    (e) Premium adjustment percentage. The premium adjustment 
percentage is the percentage (if any) by which the average per capita 
premium for health insurance coverage for the preceding calendar year 
exceeds such average per capita premium for health insurance for 2013. 
HHS will publish the annual premium adjustment percentage in the

[[Page 12868]]

annual HHS notice of benefits and payment parameters.
    (f) Coordination with preventive limits. Nothing in this subpart is 
in derogation of the requirements of Sec.  147.130 of this subchapter.
    (g) Coverage of emergency department services. Emergency department 
services must be provided as follows:
    (1) Without imposing any requirement under the plan for prior 
authorization of services or any limitation on coverage where the 
provider of services is out of network that is more restrictive than 
the requirements or limitations that apply to emergency department 
services received in network; and
    (2) If such services are provided out-of-network, cost-sharing must 
be limited as provided in Sec.  147.138(b)(3) of this subchapter.


Sec.  156.135  AV calculation for determining level of coverage.

    (a) Calculation of AV. Subject to paragraph (b) of this section, to 
calculate the AV of a health plan, the issuer must use the AV 
Calculator developed and made available by HHS.
    (b) Exception to the use of the AV Calculator. If a health plan's 
design is not compatible with the AV Calculator, the issuer must meet 
the following:
    (1) Submit the actuarial certification from an actuary, who is a 
member of the American Academy of Actuaries, on the chosen methodology 
identified in paragraphs (b)(2) and (b)(3) of this section:
    (2) Calculate the plan's AV by:
    (i) Estimating a fit of its plan design into the parameters of the 
AV Calculator; and
    (ii) Having an actuary, who is a member of the American Academy of 
Actuaries, certify that the plan design was fit appropriately in 
accordance with generally accepted actuarial principles and 
methodologies; or
    (3) Use the AV Calculator to determine the AV for the plan 
provisions that fit within the calculator parameters and have an 
actuary, who is a member of the American Academy of Actuaries calculate 
and certify, in accordance with generally accepted actuarial principles 
and methodologies, appropriate adjustments to the AV identified by the 
calculator, for plan design features that deviate substantially from 
the parameters of the AV Calculator.
    (4) The calculation methods described in paragraphs (b)(2) and (3) 
of this section may include only in-network cost-sharing, including 
multi-tier networks.
    (c) Employer contributions to health savings accounts and amounts 
made available under certain health reimbursement arrangements. For 
plans other than those in the individual market that at the time of 
purchase are offered in conjunction with an HSA or with integrated HRAs 
that may be used only for cost-sharing, annual employer contributions 
to HSAs and amounts newly made available under such HRAs for the 
current year are:
    (1) Counted towards the total anticipated medical spending of the 
standard population that is paid by the health plan; and
    (2) Adjusted to reflect the expected spending for health care costs 
in a benefit year so that:
    (i) Any current year HSA contributions are accounted for; and
    (ii) The amounts newly made available under such integrated HRAs 
for the current year are accounted for.
    (d) Use of state-specific standard population for the calculation 
of AV. Beginning in 2015, if submitted by the State and approved by 
HHS, a state-specific data set will be used as the standard population 
to calculate AV in accordance with paragraph (a) of this section. The 
data set may be approved by HHS if it is submitted in accordance with 
paragraph (e) of this section and:
    (1) Supports the calculation of AVs for the full range of health 
plans available in the market;
    (2) Is derived from a non-elderly population and estimates those 
likely to be covered by private health plans on or after January 1, 
2014;
    (3) Is large enough that: (i) The demographic and spending patterns 
are stable over time; and (ii) Includes a substantial majority of the 
State's insured population, subject to the requirement in paragraph 
(d)(2) of this section;
    (4) Is a statistically reliable and stable basis for area-specific 
calculations; and (5) Contains claims data on health care services 
typically offered in the then-current market.
    (e) Submission of state-specific data. AV will be calculated using 
the default standard population described in paragraph (f) of this 
section, unless a data set in a format specified by HHS that can 
support the use of the AV Calculator as described in paragraph (a) of 
this section is submitted by a State and approved by HHS consistent 
with paragraph (d) of this section by a date specified by HHS.
    (f) Default standard population. The default standard population 
for AV calculation will be developed and summary statistics, such as in 
continuance tables, will be provided by HHS in a format that supports 
the calculation of AV as described in paragraph (a) of this section.


Sec.  156.140  Levels of coverage.

    (a) General requirement for levels of coverage. AV, calculated as 
described in Sec.  156.135 of this subpart, and within a de minimis 
variation as defined in paragraph (c) of this section, determines 
whether a health plan offers a bronze, silver, gold, or platinum level 
of coverage.
    (b) The levels of coverage are:
    (1) A bronze health plan is a health plan that has an AV of 60 
percent.
    (2) A silver health plan is a health plan that has an AV of 70 
percent.
    (3) A gold health plan is a health plan that has an AV of 80 
percent.
    (4) A platinum health plan is a health plan that has as an AV of 90 
percent.
    (c) De minimis variation. The allowable variation in the AV of a 
health plan that does not result in a material difference in the true 
dollar value of the health plan is +/-2 percentage points.


Sec.  156.145  Determination of minimum value.

    (a) Acceptable methods for determining MV. An employer-sponsored 
plan provides minimum value (MV) if the percentage of the total allowed 
costs of benefits provided under the plan is no less than 60 percent. 
An employer-sponsored plan may use one of the following methods to 
determine whether the percentage of the total allowed costs of benefits 
provided under the plan is not less than 60 percent.
    (1) The MV Calculator to be made available by HHS and the Internal 
Revenue Service. The result derived from the calculator may be modified 
under the rules in paragraph (b) of this section.
    (2) Any safe harbor established by HHS and the Internal Revenue 
Service.
    (3) A group health plan may seek certification by an actuary to 
determine MV if the plan contains non-standard features that are not 
suitable for either of the methods described in paragraphs (a)(1) or 
(2) of this section. The determination of MV must be made by a member 
of the American Academy of Actuaries, based on an analysis performed in 
accordance with generally accepted actuarial principles and 
methodologies.
    (4) Any plan in the small group market that meets any of the levels 
of coverage, as described in Sec.  156.140 of this subpart, satisfies 
minimum value.
    (b) Benefits that may be counted towards the determination of MV. 
(1) In the event that a group health plan uses the MV Calculator and 
offers an EHB

[[Page 12869]]

outside of the parameters of the MV Calculator, the plan may seek an 
actuary, who is a member of the American Academy of Actuaries, to 
determine the value of that benefit and adjust the result derived from 
the MV Calculator to reflect that value.
    (2) For the purposes of applying the options described in paragraph 
(a) of this section in determining MV, a group health plan will be 
permitted to take into account all benefits provided by the plan that 
are included in any one of the EHB-benchmarks.
    (c) Standard population. The standard population for MV 
determinations described in paragraph (a) of this section is the 
standard population developed by HHS for such use and described through 
summary statistics issued by HHS. The standard population for MV must 
reflect the population covered by self-insured group health plans.
    (d) Employer contributions to health savings accounts and amounts 
made available under certain health reimbursement arrangements. For 
employer-sponsored self-insured group health plans and insured group 
health plans that at the time of purchase are offered in conjunction 
with an HSA or with integrated HRAs that may be used only for cost-
sharing, annual employer contributions to HSAs and amounts newly made 
available under such HRAs for the current year are:
    (1) Counted towards the total anticipated medical spending of the 
standard population that is paid by the health plan; and
    (2) Adjusted to reflect the expected spending for health care costs 
in a benefit year so that:
    (i) Any current year HSA contributions are accounted for; and
    (ii) The amounts newly made available under such integrated HRAs 
for the current year are accounted for.


Sec.  156.150  Application to stand-alone dental plans inside the 
Exchange.

    (a) Annual limitation on cost-sharing. A stand-alone dental plan 
covering the pediatric dental EHB under Sec.  155.1065 of this 
subchapter must demonstrate that it has a reasonable annual limitation 
on cost-sharing as determined by the Exchange. Such annual limit is 
calculated without regard to EHBs provided by the QHP and without 
regard to out-of-network services.
    (b) Calculation of AV. A stand-alone dental plan:
    (1) May not use the AV calculator in Sec.  156.135 of this subpart;
    (2) Must demonstrate that the stand-alone dental plan offers the 
pediatric dental essential health benefit at either:
    (i) A low level of coverage with an AV of 70 percent; or
    (ii) A high level of coverage with an AV of 85 percent; and
    (iii) Within a de minimis variation of +/-2 percentage points of 
the level of coverage in paragraphs (b)(2)(i) or (ii) of this section.
    (3) The level of coverage as defined in paragraph (b)(2) of this 
section must be certified by a member of the American Academy of 
Actuaries using generally accepted actuarial principles.

0
9. Section 156.275 is amended by revising paragraphs (c)(1), (c)(4) 
introductory text, and (c)(4)(i) to read as follows:


Sec.  156.275  Accreditation of QHP issuers.

* * * * *
    (c) * * *
    (1) Recognition of accrediting entity by HHS--(i) Application. An 
accrediting entity may apply to HHS for recognition. An application 
must include the documentation described in paragraph (c)(4) of this 
section and demonstrate, in a concise and organized fashion how the 
accrediting entity meets the requirements of paragraphs (c)(2) and (3) 
of this section.
    (ii) Proposed notice. Within 60 days of receiving a complete 
application as described in paragraph (c)(1)(i) of this section, HHS 
will publish a notice in the Federal Register identifying the 
accrediting entity making the request, summarizing HHS's analysis of 
whether the accrediting entity meets the criteria described in 
paragraphs (c)(2) and (3) of this section, and providing no less than a 
30-day public comment period about whether HHS should recognize the 
accrediting entity.
    (iii) Final notice. After the close of the comment period described 
in paragraph (c)(1)(ii) of this section, HHS will notify the public in 
the Federal Register of the names of the accrediting entities 
recognized and those not recognized as accrediting entities by the 
Secretary of HHS to provide accreditation of QHPs.
    (iv) Other recognition. Upon completion of conditions listed in 
paragraphs (c)(2), (3), and (4) of this section, HHS recognized, and 
provided notice to the public in the Federal Register, the National 
Committee for Quality Assurance (NCQA) and URAC as accrediting entities 
by the Secretary of HHS to provide accreditation of QHPs meeting the 
requirement of this section.
* * * * *
    (4) Documentation. An accrediting entity applying to be recognized 
under the process described in (c)(1) of this section must provide the 
following documentation:
    (i) To be recognized, an accrediting entity must provide current 
accreditation standards and requirements, processes and measure 
specifications for performance measures to demonstrate that it meets 
the conditions described in paragraphs (c)(2) and (3) of this section 
to HHS.
* * * * *

    Dated: February 12, 2013.
Marilyn Tavenner,
Acting Administrator, Centers for Medicare & Medicaid Services.

    Approved: February 14, 2013.
Kathleen Sebelius,
Secretary.

    Note: The following appendices will not appear in the Code of 
Federal Regulations.

Appendix A: List of Essential Health Benefits Benchmarks

    The purpose of this appendix is to list the EHB-benchmark plans 
for the 50 States, the U.S. territories (Puerto Rico, Guam, the U.S. 
Virgin Islands, American Samoa, and the Northern Mariana Islands) 
and the District of Columbia. As described in Sec.  156.100 of this 
regulation, each State may select a benchmark plan to serve as the 
standard for plans required to offer EHB in the State.\64\ HHS has 
also stated that the default base-benchmark plan for States, Puerto 
Rico and the District of Columbia that do not exercise the option to 
select a benchmark health plan would be the largest plan by 
enrollment in the largest product by enrollment in the State's small 
group market. The default base-benchmark plan for the territories 
other than Puerto Rico is the largest FEHBP plan by enrollment. As 
described in Sec.  156.110, an EHB-benchmark plan must offer 
coverage in each of the 10 statutory benefit categories. In the 
summary table that follows, we list the EHB-benchmark plans. 
Additional information on the specific benefits, limits, and 
prescription drug categories and classes covered by the EHB-
benchmark plans, and state-required benefits, is provided on the 
Center for Consumer Information and Insurance Oversight (CCIIO) Web 
site (http://cciio.cms.gov/resources/data/ehb.html).
---------------------------------------------------------------------------

    \64\ Non-grandfathered plans in the individual and small group 
markets both inside and outside of the Exchanges along with certain 
other types of plans must cover EHBs beginning in 2014. Self-insured 
group health plans, health insurance coverage offered in the large 
group market, and grandfathered health plans are not required to 
cover the essential health benefits.

[[Page 12870]]



--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                          Supplemented        Supplementary  plan        Habilitative
               State                        Plan type         Issuer and plan name         categories                 type                 services
--------------------------------------------------------------------------------------------------------------------------------------------------------
Alabama............................  Largest small group     Blue Cross Blue Shield  Pediatric oral.......  FEDVIP.................  Yes.
                                      product.                of Alabama PPO 320     Pediatric vision.....  FEDVIP.................
                                                              Plan.
Alaska.............................  Largest small group     Premera Blue Cross      Mental health and      Largest FEHBP..........  Yes.
                                      product.                Blue Shield of Alaska   substance use
                                                              Heritage Select Envoy   disorder services,
                                                              PPO.                    including behavioral
                                                                                      health treatment.
                                                                                     Pediatric oral.......   O='xl'>FEDVIP.........
                                                                                     Pediatric vision.....  FEDVIP.................
American Samoa.....................  Largest National FEHBP  Blue Cross Blue Shield  Pediatric vision.....  FEDVIP.................  Yes.
                                                              Standard Option PPO.
Arizona............................  Largest State employee  Arizona Benefit         Pediatric oral.......  FEDVIP.................  No.
                                      plan.                   Options EPO Plan,      Pediatric vision.....  FEDVIP.................
                                                              administered by
                                                              United HealthCare.
Arkansas...........................  Plan from third         HMO Partners, Inc.      Mental health and      2nd Largest FEHBP......  No.
                                      largest small group     Open Access POS,        substance use
                                      product.                13262 AR001.            disorder services,
                                                                                      including behavioral
                                                                                      health treatment.
                                                                                     Pediatric oral.......  CHIP.
                                                                                     Pediatric vision.....  CHIP...................
California.........................  Plan from largest       Kaiser Foundation       Pediatric oral.......  CHIP...................  Yes.
                                      small group product.    Health Plan, Inc.      Pediatric vision.....  FEDVIP.................
                                                              Small Group HMO 30 ID
                                                              40513CA035.
Colorado...........................  Plan from largest       Kaiser Foundation       Pediatric oral.......  CHIP...................  No.
                                      small group product.    Health Plan of
                                                              Colorado Ded HMO
                                                              1200D.
Connecticut........................  Largest State non-      ConnectiCare HMO......  Pediatric oral.......  CHIP...................  No.
                                      Medicaid HMO.                                  Pediatric vision.....  FEDVIP.................
Delaware...........................  Plan from second        Highmark Blue Cross     Pediatric oral.......  CHIP...................  No.
                                      largest small group     Blue Shield Delaware   Pediatric vision.....  FEDVIP.................
                                      product.                Simply Blue EPO 100
                                                              500.
District of Columbia...............  Plan from largest       Group Hospitalization   Pediatric oral.......  FEDVIP.................  Yes.
                                      small group product.    and Medical Services,  Pediatric vision.....  FEDVIP.................
                                                              Inc. BluePreferred
                                                              PPO.
Florida............................  Plan from largest       Blue Cross Blue Shield  Pediatric oral.......  FEDVIP.................  No.
                                      small group product.    of Florida, Inc.       Pediatric vision.....  FEDVIP.................
                                                              BlueOptions PPO.
Georgia............................  Plan from largest       Blue Cross Blue Shield  Pediatric oral.......  FEDVIP.................  Yes.
                                      small group product.    of Georgia HMO Urgent  Pediatric vision.....  FEDVIP.................
                                                              Care 60 Copay.
Guam...............................  Largest National FEHBP  Blue Cross Blue Shield  Pediatric vision.....  FEDVIP.................  Yes.
                                                              Standard Option PPO.
Hawaii.............................  Plan from largest       Hawaii Medical Service  Pediatric oral.......  CHIP...................  No.
                                      small group product.    Association Preferred  Pediatric vision.....  FEDVIP.................
                                                              Provider Plan 2010.
Idaho..............................  Plan from largest       Blue Cross of Idaho     Pediatric oral.......  FEDVIP.................  Yes.
                                      small group product.    Health Service, Inc.   Pediatric vision.....  FEDVIP.................
                                                              Preferred Blue PPO.
Illinois...........................  Plan from largest       Blue Cross and Blue     Pediatric oral.......  CHIP...................  Yes.
                                      small group product.    Shield of Illinois     Pediatric vision.....  FEDVIP.................
                                                              BlueAdvantage PPO.
Indiana............................  Plan from largest       Anthem Blue Cross and   Pediatric oral.......  FEDVIP.................  Yes.
                                      small group product.    Blue Shield of         Pediatric vision.....  FEDVIP.................
                                                              Indiana Blue 5 Blue
                                                              Access PPO Medical
                                                              Option 6 Rx Option G.
Iowa...............................  Plan from largest       Wellmark Inc. Alliance  Pediatric oral.......  FEDVIP.................  Yes.
                                      small group product.    Select Copayment Plus  Pediatric vision.....  FEDVIP.................
                                                              PPO.
Kansas.............................  Plan from largest       Blue Cross and Blue     Pediatric oral.......  CHIP...................  No.
                                      small group product.    Shield of Kansas       Pediatric vision.....  CHIP...................
                                                              Comprehensive Major
                                                              Medical Blue Choice
                                                              PPO GF 500 deductible
                                                              with Blue Rx card.
Kentucky...........................  Plan from largest       Anthem Health Plans of  Pediatric oral.......  CHIP...................  Yes.
                                      small group product.    Kentucky, Inc. PPO.    Pediatric vision.....  CHIP...................
Louisiana..........................  Plan from largest       Blue Cross and Blue     Pediatric oral.......  FEDVIP.................  Yes.
                                      small group product.    Shield of Louisiana    Pediatric vision.....  FEDVIP.................
                                                              GroupCare PPO.

[[Page 12871]]

 
Maine..............................  Plan from largest       Anthem Health Plans of  Pediatric oral.......  FEDVIP.................  Yes.
                                      small group product.    Maine Blue Choice 20
                                                              PPO with RX 10 30 50
                                                              50.
Maryland...........................  Plan from largest       BlueChoice 20 with RX   Pediatric oral.......  CHIP...................  Yes.
                                      small group product.    10 30 50 50.           Pediatric vision.....  FEDVIP.................
Massachusetts......................  Plan from largest       Blue Cross Blue Shield  Pediatric oral.......  CHIP...................  Yes.
                                      small group product.    of Massachusetts,
                                                              Inc. HMO Blue 2000
                                                              Deductible.
Michigan...........................  Largest State non-      Priority Health         Pediatric oral.......  CHIP...................  No.
                                      Medicaid HMO.           PriorityHMO 100        Pediatric vision.....  FEDVIP.................
                                                              Percent Hospital
                                                              Services Plan.
Minnesota..........................  Plan from largest       HealthPartners 500 25   Pediatric oral.......  FEDVIP.................  Yes.
                                      small group product.    Open Access PPO.       Pediatric vision.....  FEDVIP.................
Mississippi........................  Plan from largest       Blue Cross and Blue     Pediatric oral.......  CHIP...................  Yes.
                                      small group product.    Shield of Mississippi  Pediatric vision.....  CHIP...................
                                                              Network Blue PPO.
Missouri...........................  Plan from largest       Healthy Alliance Life   Pediatric oral.......  FEDVIP.................  Yes.
                                      small group product.    Insurance Co. (Anthem  Pediatric vision.....  FEDVIP.................
                                                              BCBS) Blue 5 Blue
                                                              Access PPO Medical
                                                              Option 4 Rx Option D.
Montana............................  Plan from largest       Blue Cross and Blue     Pediatric oral.......  FEDVIP.................  Yes.
                                      small group product.    Shield of Montana      Pediatric vision.....  FEDVIP.................
                                                              Blue Dimensions PPO.
Nebraska...........................  Plan from largest       Blue Cross and Blue     Pediatric oral.......  FEDVIP.................  Yes.
                                      small group product.    Shield of Nebraska     Pediatric vision.....  FEDVIP.................
                                                              BluePride PPO.
Nevada.............................  Plan from largest       HPN POS Group 1 c XV    Pediatric oral.......  CHIP...................  Yes.
                                      small group product.    500 HCR.               Pediatric vision.....  FEDVIP.................
New Hampshire......................  Plan from second        Matthew Thornton        Pediatric oral.......  FEDVIP.................  Yes.
                                      largest small group     Health Plan (Anthem    Pediatric vision.....  FEDVIP.................
                                      product.                BCBS) HMO.
New Jersey.........................  Plan from largest       Horizon HMO Access HSA  Pediatric oral.......  CHIP...................  Yes.
                                      small group product.    Compatible.            Pediatric vision.....  FEDVIP.................
New Mexico.........................  Plan from largest       Lovelace Insurance      Pediatric oral.......  CHIP...................  Yes.
                                      small group product.    Company Classic PPO.   Pediatric vision.....  CHIP...................
New York...........................  Plan from largest       Oxford Health           Pediatric oral.......  CHIP...................  No.
                                      small group product.    Insurance, Inc.        Pediatric vision.....  CHIP...................
                                                              Oxford EPO.
North Carolina.....................  Plan from largest       Blue Cross and Blue     Pediatric oral.......  FEDVIP.................  No.
                                      small group product.    Shield of North        Pediatric vision.....  FEDVIP.................
                                                              Carolina Blue Options
                                                              PPO.
North Dakota.......................  Largest State non-      Sanford Health Plan     Pediatric oral.......  CHIP...................  No.
                                      Medicaid HMO.           HMO.                   Pediatric vision.....  CHIP...................
Northern Mariana Islands...........  Largest National FEHBP  Blue Cross Blue Shield  Pediatric vision.....  FEDVIP.................  Yes.
                                                              Standard Option PPO.
Ohio...............................  Plan from largest       Community Insurance     Pediatric oral.......  FEDVIP.................  No.
                                      small group product.    Company (Anthem BCBS)  Pediatric vision.....  FEDVIP.................
                                                              Blue 6 Blue Access
                                                              PPO Medical Option D4
                                                              Rx Option G.
Oklahoma...........................  Plan from largest       Blue Cross and Blue     Pediatric oral.......  CHIP...................  Yes.
                                      small group product.    Shield of Oklahoma     Pediatric vision.....  FEDVIP.................
                                                              BlueOptions PPO RYB05.
Oregon.............................  Plan from third         PacificSource Health    Pediatric oral.......  CHIP...................  No.
                                      largest small group     Plans PPO Preferred    Pediatric vision.....  FEDVIP.................
                                      product.                CoDeduct Value 3000
                                                              35 70.
Pennsylvania.......................  Plan from largest       Aetna Health, Inc. PA   Pediatric oral.......  FEDVIP.................  No.
                                      small group product.    POS Cost Sharing 34
                                                              1500 Ded.
Puerto Rico........................  Plan from largest       Triple-S Salud, Inc.    Pediatric vision.....  FEDVIP.................  No.
                                      small group product.    [Oacute]ptimo Plus
                                                              (Plan de Salud PG-OP
                                                              2008).
Rhode Island.......................  Plan from largest       Blue Cross and Blue     Pediatric oral.......  FEDVIP.................  No.
                                      small group product.    Shield of Rhode        Pediatric vision.....  FEDVIP.................
                                                              Island Vantage Blue
                                                              PPO.
South Carolina.....................  Plan from largest       Blue Cross Blue Shield  Pediatric oral.......  FEDVIP.................  No.
                                      small group product.    of South Carolina      Pediatric vision.....  FEDVIP.................
                                                              Business Blue
                                                              Complete PPO.
South Dakota.......................  Plan from largest       Wellmark of South       Pediatric oral.......  FEDVIP.................  Yes.
                                      small group product.    Dakota Blue Select     Pediatric vision.....  FEDVIP.................
                                                              PPO.
Tennessee..........................  Plan from largest       Blue Cross Blue Shield  Pediatric oral.......  FEDVIP.................  Yes.
                                      small group product.    of Tennessee PPO.      Pediatric vision.....  FEDVIP.................

[[Page 12872]]

 
Texas..............................  Plan from largest       Blue Cross Blue Shield  Pediatric oral.......  FEDVIP.................  Yes.
                                      small group product.    of Texas BestChoice    Pediatric vision.....  FEDVIP.................
                                                              PPO RS26.
Utah...............................  Plan from third         Public Employee's       None.................  None...................  Yes.
                                      largest State           Health Program Utah
                                      employee plan.          Basic Plus.
Vermont............................  Plan from largest       The Vermont Health      Pediatric oral.......  CHIP...................  No.
                                      small group product.    Plan, LLC, CDHP-HMO.   Pediatric vision.....  FEDVIP.................
Virginia...........................  Plan from largest       Anthem Health Plans of  Pediatric oral.......  FEDVIP.................  Yes.
                                      small group product.    VA PPO KeyCare 30      Pediatric vision.....  FEDVIP.................
                                                              with KC30 Rx plan 10
                                                              30 50 OR 20.
Virgin Islands.....................  Largest National FEHBP  Blue Cross Blue Shield  Pediatric vision.....  FEDVIP.................  Yes.
                                                              Standard Option PPO.
Washington.........................  Plan from largest       Regence BlueShield non- Pediatric oral.......  CHIP...................  Yes.
                                      small group product.    grandfathered small    Pediatric vision.....  FEDVIP.................
                                                              group product.
West Virginia......................  Plan from largest       Highmark Blue Cross     Pediatric oral.......  CHIP...................  No.
                                      small group product.    Blue Shield West       Pediatric vision.....  FEDVIP.................
                                                              Virginia Super Blue
                                                              PPO Plus 2000 1000
                                                              Ded.
Wisconsin..........................  Plan from largest       UnitedHealthcare        Pediatric oral.......  FEDVIP.................  No.
                                      small group product.    Insurance Company      Pediatric vision.....  FEDVIP.................
                                                              Choice Plus Definity
                                                              HSA Plan A92NS.
Wyoming............................  Plan from largest       Blue Cross Blue Shield  Pediatric oral.......  FEDVIP.................  No.
                                      small group product.    of Wyoming Blue        Pediatric vision.....  FEDVIP.................
                                                              Choice Business 1000
                                                              80 20.
--------------------------------------------------------------------------------------------------------------------------------------------------------

Appendix B: Largest FEDVIP Dental and Vision Plan Options, as of March 
31, 2012

    Section 156.110(b)(2)-(3) directs States to supplement base-
benchmark plans that lack pediatric oral or vision services with 
benefits drawn from either the Federal Employees Dental and Vision 
Program (FEDVIP) or a State's separate CHIP program. Specifically, 
States may select benefits from either: (1) The FEDVIP dental or 
vision plans with the largest national enrollments, or (2) the 
State's separate CHIP program's dental or vision benefits, where 
they exist, which offer benefits to the eligibility group with the 
highest enrollment. To assist States with this process, we collected 
information about the benefits provided in the FEDVIP dental and 
vision plans with the highest national enrollments, as issued by 
MetLife and FED Blue, respectively. Below, we provide a chart with a 
summary of the benefits offered by these plans.

  Largest FEDVIP Dental and Vision Plan Options, as of March 31, 2012 *
------------------------------------------------------------------------
                                                         Additional
          Issuer name               Plan name           information
------------------------------------------------------------------------
MetLife (dental)..............  MetLife Federal    2012 Plan Benefit
                                 Dental Plan--      Brochure:
                                 High.             http://www.opm.gov/insure/health/planinfo/2012/brochures/MetLife.pdf
BCBS Association (vision).....  FEP BlueVision--   2012 Plan Benefit
                                 High.              Brochure:
                                                   http://www.opm.gov/insure/health/planinfo/2012/brochures/FEPBlueVi.pdf
------------------------------------------------------------------------
Source: U.S. Office of Personnel Management.
*Please note that this information will be updated with the latest data
  when released.

[FR Doc. 2013-04084 Filed 2-20-13; 11:15 am]
BILLING CODE 4120-01-P