[Federal Register Volume 78, Number 47 (Monday, March 11, 2013)]
[Proposed Rules]
[Pages 15553-15558]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-04952]



Federal Register / Vol. 78, No. 47 / Monday, March 11, 2013 / 
Proposed Rules

[[Page 15553]]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

45 CFR Parts 155 and 156

[CMS-9964-P2]
RIN 0938-AR76


Patient Protection and Affordable Care Act; Establishment of 
Exchanges and Qualified Health Plans; Small Business Health Options 
Program

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule would implement provisions of the Patient 
Protection and Affordable Care Act and the Health Care and Education 
Reconciliation Act of 2010 (collectively referred to as the Affordable 
Care Act) related to the Small Business Health Options Program (SHOP). 
Specifically, this proposed rule would amend existing regulations 
regarding triggering events and special enrollment periods for 
qualified employees and their dependents and would implement a 
transitional policy regarding employees' choice of qualified health 
plans (QHPs) in the SHOP.

DATES: To be assured consideration, comments must be received at one of 
the addresses provided below, no later than 5 p.m. on April 1, 2013.

ADDRESSES: In commenting, please refer to file code CMS-9964-P2. 
Because of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    You may submit comments in one of four ways (please choose only one 
of the ways listed):
    1. Electronically. You may submit electronic comments on this 
regulation to http://www.regulations.gov. Follow the ``Submit a 
comment'' instructions.
    2. By regular mail. You may mail written comments to the following 
address only: Centers for Medicare & Medicaid Services, Department of 
Health and Human Services, Attention: CMS-9964-P2, P.O. Box 8016, 
Baltimore, MD 21244-8016.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By express or overnight mail. You may send written comments to 
the following address only: Centers for Medicare & Medicaid Services, 
Department of Health and Human Services, Attention: CMS-9964-P2, Mail 
Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
    4. By hand or courier. Alternatively, you may deliver (by hand or 
courier) your written comments only to the following addresses prior to 
the close of the comment period:
    a. For delivery in Washington, DC--Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, Room 445-G, Hubert 
H. Humphrey Building, 200 Independence Avenue SW., Washington, DC 
20201. (Because access to the interior of the Hubert H. Humphrey 
Building is not readily available to persons without Federal government 
identification, commenters are encouraged to leave their comments in 
the CMS drop slots located in the main lobby of the building. A stamp-
in clock is available for persons wishing to retain a proof of filing 
by stamping in and retaining an extra copy of the comments being 
filed.)
    b. For delivery in Baltimore, MD--Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, 7500 Security 
Boulevard, Baltimore, MD 21244-1850.
    If you intend to deliver your comments to the Baltimore address, 
call telephone number (410) 786-7195 in advance to schedule your 
arrival with one of our staff members.
    Comments erroneously mailed to the addresses indicated as 
appropriate for hand or courier delivery may be delayed and received 
after the comment period.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: Leigha Basini at (301) 492-4307.

SUPPLEMENTARY INFORMATION: Inspection of Public Comments: All comments 
received before the close of the comment period are available for 
viewing by the public, including any personally identifiable or 
confidential business information that is included in a comment. We 
post all comments received before the close of the comment period on 
the following Web site as soon as possible after they have been 
received: http://www.regulations.gov. Follow the search instructions on 
that Web site to view public comments.
    Comments received timely will also be available for public 
inspection as they are received, generally beginning approximately 3 
weeks after publication of a document, at the headquarters of the 
Centers for Medicare & Medicaid Services, 7500 Security Boulevard, 
Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 
a.m. to 4 p.m. To schedule an appointment to view public comments, 
phone 1-800-743-3951.

I. Executive Summary

    Beginning in 2014, individuals and small businesses will be able to 
purchase private health insurance through competitive marketplaces, 
called Affordable Insurance Exchanges or ``Exchanges.'' Section 
1311(b)(1)(B) of the Affordable Care Act directs each state that 
chooses to operate an Exchange to also establish a SHOP that assists 
eligible small businesses in providing health insurance options for 
their employees. The final rule Patient Protection and Affordable Care 
Act; Establishment of Exchanges and Qualified Health Plans; Exchange 
Standards for Employers (Exchange Establishment Rule) \1\ as modified 
by the Notice of Benefit and Payment Parameters for 2014, published 
elsewhere in this issue of the Federal Register, set forth standards 
for the administration of SHOP Exchanges. In this proposed rule, we 
would amend some of the standards established in that final rule.
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    \1\ Patient Protection and Affordable Care Act; Establishment of 
Exchanges and Qualified Health Plans; Exchange Standards for 
Employers, 77 FR 18310 (Mar. 27, 2012) (to be codified at 45 CFR 
parts 155, 156, & 157).
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    In the Exchange Establishment Rule, we established standards for 
special enrollment periods for people enrolled through an Exchange or 
SHOP and provided that, in most instances, a special enrollment period 
is 60 days from the date of the triggering event. See 45 CFR 155.420. 
We also made these provisions applicable to SHOPs, at Sec.  
155.725(a)(3). We now propose to amend the special enrollment period 
for the SHOP to 30 days for most applicable triggering events, so that 
it aligns with the special enrollment periods for the group market 
established by the Health Insurance Portability and Accountability Act 
of 1996 (HIPAA). To further align the SHOP provisions with HIPAA, we 
also propose that if an employee or dependent becomes eligible for 
premium assistance under Medicaid or the Children's Health Insurance 
Program (CHIP) or loses eligibility for Medicaid or CHIP, this would be 
a triggering event, and the employee or dependent would have a 60-day 
special enrollment period to select a QHP. This triggering event had 
previously been inadvertently omitted from the regulations because it 
applies only to group health plans and health insurance coverage in the 
group market. We are also proposing to make a conforming change to 
Sec.  156.285(b)(2), so that this section references the SHOP special 
enrollment periods in a way that

[[Page 15554]]

is consistent with our proposed changes to Sec.  155.725.
    In the Exchange Establishment Rule, we also set forth the minimum 
functions of a SHOP, including that the SHOP must allow employers the 
option to offer employees all QHPs at a level of coverage chosen by the 
employer, and that the SHOP may allow employers to offer one or more 
QHPs to qualified employees by other methods. We now propose the 
following transitional policy. For plan years beginning on or after 
January 1, 2014 and before January 1, 2015, a SHOP would not be 
required to permit qualified employers to offer their qualified 
employees a choice of QHPs at a single level of coverage but would have 
the option of doing so. For plan years beginning on or after January 1, 
2014 and before January 1, 2015, Federally-facilitated SHOPs (FF-SHOPs) 
would not exercise this option, but would instead assist employers in 
choosing a single QHP to offer their qualified employees. This 
transitional policy is intended to provide additional time to prepare 
for an employee choice model and to increase the stability of the small 
group market while providing small groups with the benefits of SHOP in 
2014 (such as a choice among competing QHPs and access for qualifying 
small employers to the small business health insurance tax credit). We 
are also proposing changes to the effective date of the SHOP premium 
aggregation function set forth at Sec.  155.705(b)(4) in the Exchange 
Establishment Rule consistent with this transitional policy.

II. Background

A. Legislative Overview

    Section 1311(b) of the Affordable Care Act establishes that each 
state that operates an Exchange will also operate a SHOP. The SHOP is 
designed to assist qualified small employers in providing health 
insurance options to their employees.
    Section 1311(c)(6) of the Affordable Care Act sets forth that the 
Secretary of Health and Human Services (HHS) shall require Exchanges to 
provide for special enrollment periods. Section 155.420 of the Exchange 
Establishment Rule established special enrollment periods for the 
individual market, and Sec.  155.725(a)(3) established them for the 
SHOP.
    Section 1312(a)(2) of the Affordable Care Act provides that 
qualified employers may offer qualified employees a choice among all 
QHPs at a level of coverage chosen by the employer. Section 
1312(f)(2)(A) defines a qualified employer as a small employer that 
elects to make all full-time employees of such employer eligible for 
one or more QHPs offered in the small group market through an Exchange 
that offers QHPs. The Exchange Establishment Rule set forth standards 
for the SHOP and implemented section 1312 at 45 CFR, part 155, subpart 
H.

B. Stakeholder Consultation and Input

    HHS has consulted with a wide range of interested stakeholders on 
policy matters related to the SHOP, including through regular 
conversations with the National Association of Insurance Commissioners 
(NAIC), health insurance issuers, trade groups, consumer advocates, 
employers, agents and brokers, and other interested parties. HHS has 
also held many consultations with states about the SHOP, both 
individually and through group conversations. HHS received many 
comments in response to the Exchange Establishment proposed rule,\2\ 
including comments regarding the statutory provisions on SHOP employee 
choice and special enrollment periods for employees and their 
dependents, to which we responded in the Exchange Establishment Rule. 
HHS also received comments in response to the December 2012 Notice of 
Benefit and Payment Parameters for 2014 proposed rule,\3\ to which we 
responded in the Notice of Benefit and Payment Parameters for 2014 
final rule, published elsewhere in this issue of the Federal Register. 
We considered these stakeholder comments in developing this proposed 
rule.
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    \2\ Patient Protection and Affordable Care Act; Establishment of 
Exchanges and Qualified Health Plans; Proposed Rule, 76 FR 41866 
(July 15, 2011) (to be codified at 45 CFR parts 155 and 156).
    \3\ Patient Protection and Affordable Care Act; HHS Notice of 
Benefit and Payment Parameters for 2014; Proposed Rule, 77 FR 73118 
(Dec. 7, 2012) (to be codified at 45 CFR parts 153, 155, 156, 157, 
and 158).
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C. Structure of the Proposed Rule

    The regulations outlined in this proposed rule would be codified in 
45 CFR parts 155 and 156. The provisions in part 155 outline the 
standards relative to the establishment, operation, and functions of 
Exchanges, including the SHOP. The provisions in part 156 outline the 
health insurance issuer standards under the Affordable Care Act, 
including standards related to Exchanges and SHOPs.

III. Provisions of the Proposed Regulations

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

1. Subpart H--Exchange Functions: Small Business Health Options Program 
(SHOP)
a. Functions of a SHOP (Sec.  155.705)
    Facilitating employee choice at a single level of coverage selected 
by the employer--bronze, silver, gold, or platinum--is a required SHOP 
function established in the Exchange Establishment Rule (45 CFR 
155.705(b)(2)) and discussed in greater detail in the preamble to the 
December 2012 HHS Notice of Benefit and Payment Parameters for 2014 
proposed rule. In addition, the rules permit SHOPs to allow a qualified 
employer to choose one QHP for employees (Sec.  155.705(b)(3)). Because 
providing employees with a choice of QHPs at the same level of coverage 
would create no additional costs for an employer who would otherwise 
offer only one QHP to its employees, we proposed in the December 2012 
HHS Notice of Benefit and Payment Parameters for 2014 proposed rule 
that qualified employers in FF-SHOPs would choose a level of coverage 
(bronze, silver, gold, or platinum) and a contribution, and employees 
would then choose any QHP at that level.
    When we proposed this policy, we also sought comments on a 
transitional policy in which a FF-SHOP would allow or direct employers 
to offer to their employees a single QHP from those offered through the 
SHOP (77 FR 73184). A few commenters opposed offering the single QHP 
option, suggesting that each FF-SHOP should focus on providing employee 
choice. Most commenters on this issue, however, supported offering a 
single QHP option for employers, either as an additional option or as 
the only option in the initial years of the FF-SHOP. The commenters who 
supported providing a qualified employer only the option of offering a 
single QHP in the initial years of FF-SHOP operation cited several 
concerns, including the following: Whether issuers could meet the 
deadlines for submission of small group market QHPs given the new small 
group market rating rules; whether issuers could complete enrollment 
and accounting system changes required to interact with the SHOP 
enrollment and premium aggregation systems required by employee choice; 
and whether there would be adequate time to educate employers, 
employees, and brokers

[[Page 15555]]

about the employer and employee choices available in the SHOP. The 
commenters stated that issuer efforts to prepare and price QHPs for an 
employee choice environment and to make the systems and operational 
changes required for SHOP enrollment and premium aggregation could 
compete with efforts to prepare for participation in the Exchange (both 
individual and SHOP).
    Most of these comments supported allowing employers the option to 
offer only a single QHP in the FF-SHOP. Consequently, we concluded in 
the final HHS Notice of Benefit and Payment Parameters for 2014, 
published concurrently with this proposed rule, that the FF-SHOP would 
provide employers the choice of offering only a single QHP, as 
employers customarily do today, in addition to the choice of offering 
all QHPs at a single level of coverage.
    We note that the comments in response to the draft Notice of 
Benefit and Payment Parameters for 2014 identified challenges to 
effective implementation of employee choice in the FF-SHOP in 2014; we 
also note that most of the comments also apply to implementation 
challenges in State-based SHOPs. In order to respond to these comments 
and to provide both State-based SHOPs and FF-SHOPs with greater 
flexibility, we therefore now propose to delay until 2015 
implementation of the employee choice model as a requirement for all 
SHOPs. We also now propose that FF-SHOPs should assist qualified 
employers in offering qualified employees a single QHP choice for plan 
years beginning during calendar year 2014, which qualifies certain of 
these employers for the small business tax credit.
    The Exchange Establishment Rule also included a premium aggregation 
function for the SHOP that was designed to assist employers whose 
employees were enrolled in multiple QHPs. Because this function will 
not be necessary in 2014 for SHOPs that delay implementation of the 
employee choice model, we have also proposed at Sec.  155.705(b)(4) 
that the premium aggregation function be optional for plan years 
beginning before January 1, 2015.
    Specifically, we are now proposing amendments to Sec.  
155.705(b)(2), (b)(3), and (b)(4) providing as follows: (1) The 
effective date of the employer choice requirements at Sec.  
155.705(b)(2) and the premium aggregation requirements at Sec.  
155.705(b)(4) for both State-based SHOPs and FF-SHOPs will be January 
1, 2015; (2) State-based SHOPs could elect to offer employee choice and 
perform premium aggregation for plan years beginning before January 1, 
2015, but need not do so; and (3) FF-SHOPs will begin to offer employee 
choice and premium aggregation in plan years beginning on or after 
January 1, 2015. We welcome further comment on this proposal.
b. Enrollment Periods Under SHOP (Sec.  155.725)
    The Exchange Establishment Rule established special enrollment 
periods for Exchanges serving the individual market (Sec.  155.420), 
and the SHOP regulations adopted most of these provisions by reference 
(Sec.  155.725(a)(3)). Under these regulations, unless specifically 
stated otherwise in the regulations, a qualified individual has 60 days 
from the date of the triggering event to select a QHP (Sec.  
155.420(c)).
    This SHOP provision differs from the length of special enrollment 
periods in group markets provided by HIPAA, which last for 30 days 
after loss of eligibility for other private insurance coverage or after 
a person becomes a dependent through marriage, birth, adoption, or 
placement for adoption.\4\ Because we believe that there is no 
rationale for providing a longer special enrollment period in a SHOP 
than is provided in the group market outside the SHOP, we propose 
amendments to Sec.  155.725 to clarify that a qualified employee or 
dependent of a qualified employee who has obtained coverage through the 
SHOP would have 30 days from the date of most of the triggering events 
specified in Sec.  155.420 to select a QHP. Additionally, consistent 
with revisions to HIPAA enacted by the Children's Health Insurance 
Program Reauthorization Act of 2009 (CHIPRA), Public Law 111-3, Sec.  
311 (Feb. 4, 2009), we propose that a qualified employee or dependent 
of a qualified employee who has become ineligible for Medicaid or CHIP 
or who has become eligible for state premium assistance under a 
Medicaid or CHIP program would be eligible for a special enrollment 
period in a SHOP and would have 60 days from the date of the triggering 
event to select a QHP. Specifically, we propose striking Sec.  
155.725(a)(3) and adding a new paragraph (j) consolidating the proposed 
SHOP special enrollment provisions in one paragraph. We propose a 
provision clarifying that a dependent of a qualified employee is only 
eligible for a special enrollment period if the employer offers 
coverage to dependents of qualified employees. We also propose 
paragraphs (j)(5) and (j)(6) that retain certain provisions relating to 
effective dates of coverage and loss of minimum essential coverage from 
the original Sec.  155.420. We propose conforming revisions to Sec.  
156.285(b)(2), so that provision would reference the special enrollment 
periods in proposed Sec.  155.725(j) instead of those set forth at 
Sec.  155.420. We believe these changes appropriately align the SHOP 
provisions with provisions applicable to the rest of the group market, 
and welcome comment on the proposal.
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    \4\ See 26 CFR 54.9801-6, 29 CFR 2590.701-6, and 45 CFR 146.117 
for regulations regarding special enrollment periods under HIPAA.
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IV. Collection of Information Requirements

    This proposed rule, if finalized, would not impose new or alter 
existing information collection and recordkeeping requirements. 
Consequently, it need not be reviewed by the Office of Management and 
Budget under the authority of the Paperwork Reduction Act of 1995.

V. Response to Comments

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

VI. Regulatory Impact Analysis

    We have examined the impact of this final rule as required by 
Executive Order 12866 on Regulatory Planning and Review (September 30, 
1993) and Executive Order 13563 on Improving Regulation and Regulatory 
Review (January 18, 2011). Executive Orders 12866 and 13563 direct 
agencies to assess all costs and benefits of available regulatory 
alternatives and, if regulation is necessary, to select regulatory 
approaches that maximize net benefits (including potential economic, 
environmental, public health and safety effects, distributive impacts, 
and equity). A regulatory impact analysis (RIA) must be prepared for 
major rules with economically significant effects ($100 million or more 
in any one year). It is HHS's belief that this proposed rule does not 
reach this economic threshold and thus is not considered a major rule.
    This proposed rule consists of a provision to amend the duration of 
certain special enrollment periods to correspond to the duration in 
group markets under HIPAA. The rule also proposes to add a triggering 
event that would create a special enrollment

[[Page 15556]]

period for qualified employees and/or their eligible dependents when an 
employee or qualified dependent with coverage through the SHOP becomes 
eligible for state premium assistance under Medicaid or CHIP or loses 
eligibility for Medicaid or CHIP. HIPAA, as revised by CHIPRA, already 
includes this triggering event, which was inadvertently omitted from 
the original list in Sec.  155.420(d) because it applies only to group 
health plans and health insurance coverage in the group market. We do 
not believe either of these actions would impose any new costs on 
issuers, employers, enrollees, or the SHOP. In fact, the proposed 
amendment would create alignment of SHOP regulations with laws for the 
existing group market and could potentially create efficiencies for QHP 
issuers.
    Finally, this proposed rule would require SHOPs to provide 
qualified employers the option to offer qualified employees a choice of 
any QHP at a single metal level starting with plan years beginning on 
or after January 1, 2015, instead of January 1, 2014. For plan years 
beginning in calendar year 2014, qualified employers would offer 
qualified employees coverage under a single QHP in FF-SHOPs; State-
based SHOPs would have the flexibility to offer either employer or 
employee choice in 2014. In our analysis of the impact of employer and 
employee choices in the Notice of Benefit and Payment Parameters for 
2014 final rule, published elsewhere in this issue of the Federal 
Register, we noted that adding the option for employers to offer a 
single QHP would have the potential effect of reducing adverse 
selection and any associated risk premium and a slight effect of 
decreasing the consumer benefit resulting from choice. We believe the 
same analysis applies to our proposal to provide employer choice in 
2014.
    Issuers will incur costs adapting their enrollment and financial 
systems to interact with a SHOPs enrollment and premium aggregation 
systems. The costs and benefits of Exchange and SHOP implementation 
were assessed in the RIA for the Exchange Establishment final rule, 
titled Patient Protection and Affordable Care Act; Establishment of 
Exchanges and Qualified Health Plans, Exchange Standards for Employers 
and Standards Related to Reinsurance, Risk Corridors and Risk 
Adjustment Regulatory Impact Analysis (Exchange RIA).\5\ Because 
issuers may now have an additional year to develop these systems and 
may thus be able to stage their efforts rather than implementing all 
system changes by October 1, 2013, we believe that the total cost will 
be unchanged in total.
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    \5\ Patient Protection and Affordable Care Act; Establishment of 
Exchanges and Qualified Health Plans, Exchange Standards for 
Employers and Standards Related to Reinsurance, Risk Corridors and 
Risk Adjustment Regulatory Impact Analysis, March 2012. Available 
at: http://cciio.cms.gov/resources/files/Files2/03162012/hie3r-ria-032012.pdf.
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    From the Exchange perspective, in the Exchange RIA, we noted that a 
State-based Exchange could incur costs in establishing a premium 
aggregation function for the SHOP. Therefore, the policy in this 
proposed rule could decrease costs to states that operate a State-based 
Exchange for the 2014 plan year.

VII. Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) (RFA) 
requires agencies to prepare an initial regulatory flexibility analysis 
to describe the impact of the proposed rule on small entities, unless 
the head of the agency can certify that the rule would not have a 
significant economic impact on a substantial number of small entities. 
The RFA generally defines a ``small entity'' as--(1) a proprietary firm 
meeting the size standards of the Small Business Administration (SBA); 
(2) a not-for-profit organization that is not dominant in its field; or 
(3) a small government jurisdiction with a population of less than 
50,000. States and individuals are not included in the definition of 
``small entity.'' HHS uses as its measure of significant economic 
impact on a substantial number of small entities a change in revenues 
of more than 3 percent.
    The 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. For purposes of the RFA, small 
entities include small businesses, nonprofit organizations, and small 
government jurisdictions. Small businesses are those with sizes below 
thresholds established by the SBA.
    For the purposes of the regulatory flexibility analysis, we expect 
the following types of entities to be affected by this proposed rule--
(1) small employers and (2) QHP issuers.
    As discussed in Health Insurance Issuers Implementing Medical Loss 
Ratio (MLR) Requirements Under the Patient Protection and Affordable 
Care Act; Interim Final Rule,\6\ few, if any, issuers are small enough 
to fall below the size thresholds for small business established by the 
SBA. In that rule, we used a data set created from 2009 National 
Association of Insurance Commissioners (NAIC) Health and Life Blank 
annual financial statement data to develop an updated estimate of the 
number of small entities that offer comprehensive major medical 
coverage in the individual and group markets. For purposes of that 
analysis, HHS used total Accident and Health earned premiums as a proxy 
for annual receipts. We estimated that there are 28 small entities with 
less than $7 million in accident and health earned premiums offering 
individual or group comprehensive major medical coverage.\7\ 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. We further estimate that any 
issuers that would be considered small businesses are likely to be 
subsidiaries of larger issuers that are not small businesses.
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    \6\ Health Insurance Issuers Implementing Medical Loss Ratio 
(MLR) Requirements Under the Patient Protection and Affordable Care 
Act; Interim Final Rule, 75 FR 74864, 74918-20 (Dec. 1, 2010) (to be 
codified at 45 CFR part 158).
    \7\ According to SBA size standards, entities with average 
annual receipts of $7 million or less would be considered small 
entities for North American Industry Classification System (NAICS) 
Code 524114 (Direct Health and Medical Insurance Carriers). For more 
information, see ``Table of Size Standards Matched To North American 
Industry Classification System Codes,'' effective March 26, 2012, 
U.S. Small Business Administration, available at http://www.sba.gov.
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    The SHOP is limited by statute to employers with at least one but 
not more than 100 employees. For this reason, we expect that many 
employers would meet the SBA standard for small entities. We do not 
believe that this proposed regulation would impose requirements on 
employers offering coverage through the SHOP that are more restrictive 
than current requirements on employers offering employer-sponsored 
health insurance. Specifically, small employers are currently required 
to offer the special enrollment period that we propose would apply to 
eligible employees and dependents with coverage through the SHOP, and 
the triggering event that we propose currently applies to eligible 
individuals and dependents, as well. The proposed provision would 
merely apply existing standards to the SHOP. Additionally, the 
transitional policy regarding employee choice does not impose new 
requirements on small employers because most small employers currently 
offer only one health insurance plan to their employees.
    Based on the foregoing, we are not preparing an analysis for the 
RFA

[[Page 15557]]

because we have determined, and the Secretary certifies, that this 
proposed rule would not have a significant economic impact on a 
substantial number of small entities.

VIII. Unfunded Mandates

    Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) 
requires that agencies assess anticipated costs and benefits and take 
certain other actions before issuing a proposed rule (and subsequent 
final rule) that includes any federal mandate that may result in 
expenditures in any one year by a state, local, or tribal governments, 
in the aggregate, or by the private sector, of $100 million in 1995 
dollars, updated annually for inflation. In 2012, that threshold is 
approximately $139 million. UMRA does not address the total cost of a 
rule. Rather, it focuses on certain categories of costs, 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.
    This proposed rule does not place any financial mandates on state, 
local, or tribal governments. It proposes the application of a 
triggering event and special enrollment period to coverage through the 
SHOP, modification of the duration of certain special enrollment 
periods, and implementation of employee choice in the SHOP starting 
with plan years on or after January 1, 2015. These proposed amendments 
would only affect state governments to the extent that they operate a 
SHOP and, if they are affected, would not place any new financial 
mandates on them.

IX. Federalism

    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
final rule) that imposes substantial direct costs on state and local 
governments, preempts state law, or otherwise has Federalism 
implications. This proposed regulation does not impose any costs on 
state or local governments.
    In compliance with the requirement of Executive Order 13132 that 
agencies examine closely any policies that may have Federalism 
implications or limit the policy making discretion of the states, HHS 
has engaged in efforts to consult with and work cooperatively with 
affected states, including participating in conference calls with and 
attending conferences of the National Association of Insurance 
Commissioners (NAIC), and consulting with State insurance officials on 
an individual basis. We believe that this proposed rule does not impose 
substantial direct costs on state and local governments, preempt state 
law, or otherwise have federalism implications. We note that we have 
attempted to provide states that choose to operate a SHOP with 
flexibility such that states may, if they choose, offer employee choice 
beginning with plan years starting on or after January 1, 2014, or they 
may delay this implementation until plan years starting on or after 
January 1, 2015.
    Pursuant to the requirements set forth in section 8(a) of Executive 
Order 13132, and by the signatures affixed to this regulation, the 
Department of Health and Human Services certifies that CMS has complied 
with the requirements of Executive Order 13132 for the attached 
proposed regulation in a meaningful and timely manner.

List of Subjects

45 CFR Part 155

    Administrative practice and procedure, Advertising, Advisory 
Committees, Brokers, Conflict of interest, Consumer protection, Grant 
programs-health, Grants administration, Health care, Health insurance, 
Health maintenance organization (HMO), Health records, Hospitals, 
American Indian/Alaska Natives, Individuals with disabilities, Loan 
programs-health, Organization and functions (Government agencies), 
Medicaid, Public assistance programs, Reporting and recordkeeping 
requirements, State and local governments, Sunshine Act, Technical 
assistance, Women, and Youth.

45 CFR Part 156

    Administrative practice and procedure, Advertising, Advisory 
Committees, Brokers, Conflict of interest, Consumer protection, Grant 
programs-health, Grants administration, Health care, Health insurance, 
Health maintenance organization (HMO), Health records, Hospitals, 
Indians, Individuals with disabilities, Loan programs-health, 
Organization and functions (Government agencies), Medicaid, Public 
assistance programs, Reporting and recordkeeping requirements, Safety, 
State and local governments, Sunshine Act, Technical assistance, Women, 
and Youth

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

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

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

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

0
2. Section 155.705 is amended by revising paragraphs (b)(2), (b)(3), 
and (b)(4) to read as follows:


Sec.  155.705  Functions of a SHOP.

* * * * *
    (b) * * *
    (2) Employer choice requirements. With regard to QHPs offered 
through the SHOP for plan years beginning on or after January 1, 2015, 
the SHOP must allow a qualified employer to select a level of coverage 
as described in section 1302(d)(1) of the Affordable Care Act, in which 
all QHPs within that level are made available to the qualified 
employees of the employer.
    (3) SHOP options with respect to employer choice requirements. (i) 
For plan years beginning before January 1, 2015, a SHOP may allow a 
qualified employer to make one or more QHPs available to qualified 
employees:
    (A) By the method described in paragraph (b)(2) of this section, or
    (B) By a method other than the method described in paragraph (b)(2) 
of this section.
    (ii) For plan years beginning on or after January 1, 2015, a SHOP:
    (A) Must allow an employer to make available to qualified employees 
all QHPs at the level of coverage selected by the employer as described 
in paragraph (b)(2) of this section, and
    (B) May allow an employer to make one or more QHPs available to 
qualified employees by a method other than the method described in 
paragraph (b)(2) of this section.
    (iii) For plan years beginning before January 1, 2015, a Federally-
facilitated SHOP will only provide a qualified employer the choice to 
make available to qualified employees a single QHP.
    (iv) For plan years beginning on or after January 1, 2015, a 
Federally-facilitated SHOP will provide a qualified employer a choice 
of two methods to make QHPs available to qualified employees:
    (A) The employer may choose a level of coverage as described in 
paragraph (b)(2) of this section, or
    (B) The employer may choose a single QHP.
    (4)(i) Premium aggregation. Consistent with the effective dates set 
forth in

[[Page 15558]]

paragraph (b)(4)(ii)of this section, the SHOP must perform the 
following functions related to premium payment administration:
    (A) Provide each qualified employer with a bill on a monthly basis 
that identifies the employer contribution, the employee contribution, 
and the total amount that is due to the QHP issuers from the qualified 
employer;
    (B) Collect from each employer the total amount due and make 
payments to QHP issuers in the SHOP for all enrollees; and
    (C) Maintain books, records, documents, and other evidence of 
accounting procedures and practices of the premium aggregation program 
for each benefit year for at least 10 years.
    (ii) Effective dates.
    (A) A State-based SHOP may elect to perform these functions for 
plan years beginning before January 1, 2015, but need not do so.
    (B) A Federally-facilitated SHOP will perform these functions only 
in plan years beginning on or after January 1, 2015.
* * * * *
0
3. Section 155.725 is amended by removing paragraph (a)(3), and adding 
paragraph (j) to read as follows:


Sec.  155.725  Enrollment periods under SHOP.

* * * * *
    (j)(1) Special enrollment periods. The SHOP must provide special 
enrollment periods consistent with this section, during which certain 
qualified employees or a dependent of a qualified employee may enroll 
in QHPs and enrollees may change QHPs.
    (2) The SHOP must provide a special enrollment period for a 
qualified employee or dependent of a qualified employee who:
    (i) Experiences an event described in Sec.  155.420 (d)(1), (2), 
(4), (5), (7), (8), or (9);
    (ii) Loses eligibility for coverage under a Medicaid plan under 
title XIX of the Social Security Act or a state child health plan under 
title XXI of the Social Security Act; or
    (iii) Becomes eligible for assistance, with respect to coverage 
under a SHOP, under such Medicaid plan or a state child health plan 
(including any waiver or demonstration project conducted under or in 
relation to such a plan).
    (3) A qualified employee or dependent of a qualified employee who 
experiences a qualifying event described in paragraph (j)(2) of this 
section has:
    (i) 30 days from the date of a triggering event described in 
paragraph (j)(2)(i) of this section to select a QHP through the SHOP; 
and
    (ii) 60 days from the date of a triggering event described in 
paragraph (j)(2)(ii) of this section or (iii) of this section to select 
a QHP through the SHOP;
    (4) A dependent of a qualified employee is not eligible for a 
special election period if the employer does not extend the offer of 
coverage to dependents.
    (5) The effective dates of coverage are determined using the 
provisions of Sec.  155.420(b).
    (6) Loss of minimum essential coverage is determined using the 
provisions of Sec.  155.420(e).

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

0
4. The authority citation for part 156 continues to read as follows:

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

0
5. Section 156.285 is amended by revising paragraph (b)(2) to read as 
follows:


Sec.  156.285  Additional standards specific to SHOP.

* * * * *
    (b) * * *
    (2) Provide special enrollment periods as described in Sec.  
155.725(j).
* * * * *

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

    Approved: February 27, 2013.
Kathleen Sebelius,
Secretary, Department of Health and Human Services.
[FR Doc. 2013-04952 Filed 3-1-13; 11:15 am]
BILLING CODE 4120-01-P