[Federal Register Volume 78, Number 107 (Tuesday, June 4, 2013)]
[Rules and Regulations]
[Pages 33233-33240]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-13149]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
45 CFR Parts 155 and 156
[CMS-9964-F2]
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: Final rule.
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SUMMARY: This final rule implements 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 final rule amends existing regulations regarding
triggering events and special enrollment periods for qualified
employees and their dependents and implements a transitional policy
regarding employees' choice of qualified health plans (QHPs) in the
SHOP.
DATES: These regulations are effective on July 1, 2013.
FOR FURTHER INFORMATION CONTACT: Leigha Basini at (301) 492-4307.
SUPPLEMENTARY INFORMATION:
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'' (also called
Health Insurance Marketplaces). Section 1311(b)(1)(B) of the Affordable
Care Act contemplates that in each State there will be a SHOP that
assists qualified employers 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,\2\ sets forth
standards for the administration of SHOP Exchanges. In this rule, we
finalize provisions proposed in the Establishment of Exchanges and
Qualified Health Plans; Small Business Health Options Program Notice of
Proposed Rule Making,\3\ which amends some of the standards established
in the Exchange Establishment 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 (March 27, 2012) (to be codified at 45 CFR
parts 155, 156, & 157).
\2\ Patient Protection and Affordable Care Act; CMS Notice of
Benefit and Payment Parameters for 2014, 78 FR 15410 (March 11,
2013) (to be codified at 45 CFR parts 153, 155, 156, 157, & 158).
\3\ Patient Protection and Affordable Care Act; Establishment of
Exchanges and Qualified Health Plans; Small Business Health Options
Program, 77 FR 15553 (March 11, 2013) (to be codified at 45 CFR
parts 155 & 156).
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In the Exchange Establishment Rule, we established standards for
special enrollment periods for people enrolled through an individual
market Exchange, 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). In the proposed rule we proposed and this final
rule amends, 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).\4\ To
further align the SHOP provisions with HIPAA, we also proposed 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 also proposed 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 is consistent with our proposed changes to Sec. 155.725.
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\4\ HIPAA added section 9801(f) to the Internal Revenue Code
(the Code), section 701(f) to the Employee Retirement Income
Security Act (ERISA), and section 2704(f) to the Public Health
Service Act.
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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 proposed and are now
finalizing the following transitional policy. For plan years beginning
on or after January 1, 2014 and before January 1, 2015, a SHOP will not
be required to permit qualified employers to offer their qualified
employees a choice of QHPs at a single level of coverage, but will have
the option of doing so. Federally-facilitated SHOPs (FF-SHOPs) will not
exercise this option, but will instead allow employers to choose a
single QHP from the choices available in FF-SHOP 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 care tax credit). We also proposed 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, which we are finalizing in this rule.
II. Background
A. Legislative Overview
Section 1311(b) of the Affordable Care Act establishes that there
will be a SHOP in each State 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 direct 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
[[Page 33234]]
National Association of Insurance Commissioners (NAIC), employers,
health insurance issuers, trade groups, consumer advocates, 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,\5\ 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,\6\ to which we responded in the Notice of Benefit and
Payment Parameters for 2014 final rule (78 FR 15410). We considered
these stakeholder comments in developing this final rule.
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\5\ 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 & 156).
\6\ Patient Protection and Affordable Care Act; HHS Notice of
Benefit and Payment Parameters for 2014; Proposed Rule, 77 FR 73118
(December 7, 2012) (to be codified at 45 CFR parts 153, 155, 156,
157, & 158).
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C. Structure of the Final Rule
The regulations outlined in this final rule will 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.
This final rule finalizes provisions set forth in the March 11,
2013 proposed rule (78 FR 15553).
III. Provisions of the Proposed Rule and Responses to Public Comments
We received 40 comments to the proposed rule, including comments
from consumer advocacy groups, health care providers, employers, health
insurers, health care associations, Members of Congress, and
individuals. The comments ranged from general support or opposition to
the proposed provisions to very specific questions or comments
regarding proposed changes. In this section, we summarize the
provisions of the proposed rule and discuss and provide responses to
the comments. We have carefully considered these comments in finalizing
this rule.
Brief summaries of each proposed provision, a summary of the public
comments we received and our responses to the comments are as follows.
We received a number of comments that fall outside the scope of these
regulations, which we do not address in this final rule.
The following summarizes comments about the rule, in general, or
regarding issues not contained in specific provisions:
Comment: Two commenters suggested that HHS should revisit Sec.
156.200(g), as finalized in the Notice of Benefit and Payment
Parameters for 2014. Section 156.200(g) is a QHP certification
requirement linking, or tying, federally-facilitated Exchange and FF-
SHOP participation. Generally, the certification requirement applies
when an issuer or a member of the same issuer group as the issuer
(defined at Sec. 156.20 as a group under common ownership and control,
or using a common national service mark) has a share of the small group
market in a State with a federally-facilitated Exchange/FF-SHOP that
exceeds 20 percent, as determined from the most recent earned premiums
data reported to HHS. .Specifically, the certification requirement
applies in the following circumstances: We interpret Sec.
156.200(g)(1) to require that issuers that have greater than 20 percent
small group market share offer at least one silver-level QHP and one
gold-level QHP through the FF-SHOP as a condition of participation in
the federally facilitated individual market Exchange.
We also interpret Sec. 156.200(g)(1) to require that issuers that
do not have greater than 20 percent market share in a State's small
group market, but that are members of an issuer group that has at least
one member with greater than 20 percent market share, have to offer the
required silver and gold level coverage through the SHOP as a condition
of participation in the individual market Exchange.
Under Sec. 156.200(g)(2), issuers that do not offer small group
market products in a State, but that are members of an issuer group
that has at least one member with greater than 20 percent market share,
would not have to offer the required SHOP coverage themselves. Instead,
another issuer in that issuer's group would do so, and in light of the
fact that we intend the tying provision to fall primarily on issuers
with greater than 20 percent market share, we interpret Sec.
156.200(g)(2) to require that the issuer meeting the requirement in
these circumstances be an issuer whose small group market share exceeds
20 percent.
The commenters on this certification requirement stated that tying
Exchange participation to SHOP participation could lead to higher costs
in the SHOPs and may have a disparate effect on larger issuers in the
small group market.
Response: Section 156.200(g) has been finalized and will apply in
the 2014 plan year. HHS intends to evaluate in future years the effect
this certification standard is having generally on a State's small
group market and specifically on employee choice in SHOPs.
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)).
When we proposed this policy, we also sought comments on a
transitional policy in which a FF-SHOP would allow employers to offer
to their employees a single QHP from those offered through the SHOP (77
FR 73184). A few commenters suggested that each FF-SHOP should provide
employee choice. Most commenters on this issue, however, supported
allowing employers to choose a single QHP option for employees, 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 choosing a single QHP to offer 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. 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
[[Page 33235]]
aggregation could compete with efforts to prepare for participation in
the Exchange (both individual and SHOP).
In light of these concerns, we concluded in the final HHS Notice of
Benefit and Payment Parameters for 2014 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.
To respond to these comments we proposed a transition policy until
2015 that allows, but does not require implementation of the employee
choice model for all SHOPs. We also proposed that FF-SHOPs should
assist qualified employers in offering qualified employees a single QHP
choice for plan years beginning during calendar year 2014.
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 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 proposed 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 received the
following comments concerning these proposals.
Comment: Many commenters expressed support for the proposed
transition policy for both the employer choice requirement of Sec.
155.705(b)(2) and the premium aggregation requirement of Sec.
155.705(b)(4), stating that the transition would provide the additional
time needed to build the systems necessary to ensure the success of
employee choice and premium aggregation. Other commenters opposed the
delay, believing that transitioning to employee choice would undermine
the value proposition of the SHOP in any State that exercised this
option and reduce enrollment in the SHOP. One commenter suggested that
during the transitional policy SHOPs operate under a simplified
implementation that does not include a web portal and plan comparison
tool.
Response: Section 1312 of the Affordable Care Act permits an
employer to select a level of coverage and an employee to have the
choice of enrolling in any qualified health plan that offers coverage
at that level. We have serious concerns that issuers would not be
operationally ready to offer QHPs through the SHOP if we implemented
employee choice for 2014.
As described in the proposed rule, HHS proposed a transitional
period for employee choice and premium aggregation in the SHOP based on
comments issuers made about whether issuers could complete the
enrollment and accounting system changes required to interact with the
SHOP enrollment and premium aggregation systems required by employee
choice and whether issuers could meet the deadlines for submission of
small group market QHPs.
As finalized at 45 CFR 147.102, the new rating rules for coverage
beginning on January 1, 2014 significantly reform rating practices in
many States. In comments to the Final Notice of Benefit and Payment
Parameters for 2014, issuers expressed concern that implementation of
employee choice would complicate SHOP pricing in light of the
compressed timeframe for finalizing rates because employee choice may
significantly modify the population expected to participate in a plan
in a manner that will be difficult for issuers to predict.
In other comments to the Exchange Establishment Rule and Notice of
Benefit and Payment Parameters for 2014, issuers also expressed concern
with the compressed timeline for completing the modifications to their
information technology systems necessitated by employee choice and
premium aggregation. For example, many health insurance issuers expect
that their accounting and enrollment systems will be the sole system of
record. Integrating such a system into a SHOP with employee choice and
premium aggregation might require additional modifications to the
system, as the system must be synchronized with the SHOP's enrollment
and accounting systems and responsibility for determining certain group
changes in enrollment and billing might be effectuated by the SHOP
instead of the issuer.
Issuers also expressed concern that there would be inadequate time
to educate employers, employees, and agents and brokers about how they
are expected to interact with the SHOP. For example, issuers noted that
they accommodate many of the unique needs of small businesses through
changes in enrollment at the time of payment. Under employee choice and
premium aggregation, some standardization of these processes is
necessary because an employee group may interact with a variety of
carriers, each potentially with its own set of rules. Issuers suggested
that they needed additional time to educate employers and agents and
brokers about these new standardized processes.
We believe that even in SHOPs that elect to transition to employee
choice, there is still significant value to the SHOP for small
employers when compared to the small group market outside the SHOP and
therefore significant value to operating a SHOP under this transitional
policy. Employers participating in the SHOP may qualify for a small
business health care tax credit of up to 50 percent of the employer
paid premium cost of coverage. The SHOP will still provide employers
with a streamlined comparison of health plans from multiple health
insurance issuers, assistance modeling employee contributions, and
real-time premium quotes. These benefits would not be available to
employers under simplified implementation suggested by one commenter.
Further, plans sold on the SHOP must be certified as QHPs, meaning that
they must meet minimum standards in order for issuers to sell them on
the SHOP. We believe that because of this strong value proposition, the
SHOP may still have robust enrollment despite the adoption of this
transitional policy.
Comment: Some commenters suggested that HHS further delay full
implementation of employee choice and extend the transitional period
for up to five years. Two commenters suggested that HHS test employee
choice and premium aggregation in a few States to study their effect on
the small group market before requiring their implementation in every
SHOP.
Response: We believe a one-year transitional period best addresses
these concerns, as it provides issuers with a year's worth of
experience under the new small group rating methodology, gives issuers
significantly more time to design and implement the modifications to
their systems necessary for employee choice and premium aggregation,
and allows additional time for education and outreach about employee
choice.
HHS will monitor through any information provided under Sec.
155.720(i)
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the effect of implementing employee choice in States that elect to
implement it in 2014. This process will provide much of the systematic
testing suggested by commenters.
Comment: Some commenters suggested that HHS use the additional time
afforded to SHOPs to implement employee choice under the proposed rule
to further streamline the paperwork and regulatory burden on employers
and to streamline other Exchange-related employer reporting
requirements.
Response: We received comments on the ``Data Collection to Support
Eligibility Determinations and Enrollment for Employees in the Small
Business Health Options Program'' Paperwork Reduction Act packages
through both the 60-day Federal Register Notice published on January
29, 2013 (78 FR 6109) and the 30-day Federal Register Notice published
on July 6, 2012 (77 FR 40061). These comments helped us to reduce the
burden of SHOP applications on small employers by streamlining the
application form. HHS has used these opportunities to create
application questions for determining an employer's size that are
easier for an employer to understand. HHS, the Departments of Labor,
and the Treasury continue to explore methods to minimize any employer
burden.
Comment: One commenter requested HHS clarify how the proposed FF-
SHOP transitional employee choice policy would affect the ability of
employers to offer stand-alone pediatric dental coverage in the FF-
SHOP.
Response: We do not believe that the transitional employee choice
policy would prevent an employer from selecting and offering a single
stand-alone dental plan in addition to a QHP.
Comment: Some commenters requested that HHS clarify how the
transitional employee choice policy would affect the employer
contribution methodology for the FF-SHOP that was issued in the Notice
of Benefit and Payment Parameters for 2014 and codified at Sec.
155.705(b)(11)(ii), as these commenters suggested the purpose of this
contribution model may no longer be pertinent without employee choice,
specifically the ability to calculate composite premiums.
Response: This rule does not modify the premium contribution
methodology codified in Sec. 155.705(b)(11)(ii), which permits either
State law or employers to require the FF-SHOP to base contributions on
a calculated composite premium for employees. In the case of the FF-
SHOP before 2015 operating with the employee choice transitional
policy, we now clarify that the benchmark plan selected by the employer
will be the single QHP offered by the employer to its employees,
simplifying this process for the employer.
Comment: One commenter supporting the FF-SHOP transitional employee
choice policy questioned how the delay of premium aggregation would
affect the collection of user fees from QHP issuers participating in
the FF-SHOP.
Response: We do not believe this transitional employee choice
policy will impact the collection of user fees from QHP issuers
participating in the FF-SHOP. We noted in the preamble to the Notice of
Benefit and Payment Parameters for 2014 (78 FR 15496) that we
anticipate user fees for the FF-SHOP to be collected in the same manner
as they will be collected for the FFE. We anticipate collecting user
fees by deducting the user fee from the federally-administered
Exchange-related program payments. If a QHP issuer does not receive any
Exchange-related program payments, the issuer would be billed for the
user fee on a monthly basis and receive an invoice as described in the
``Supporting Statement for Paperwork Reduction Act Submissions: Initial
Plan Data Collection to Support QHP Certification and other Financial
Management and Exchange Operations'' posted on the CMS Web site in
conjunction with the Federal Register Notice (77 FR 40061).
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 group health plan or health
insurance coverage or after a person becomes a dependent through
marriage, birth, adoption, or placement for adoption.\7\ 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 proposed 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
section 311 of the Children's Health Insurance Program Reauthorization
Act of 2009 (CHIPRA) (Pub. L. 111-3, enacted on February 4, 2009), we
proposed that a qualified employee or dependent of a qualified employee
who has lost eligibility for Medicaid or CHIP coverage, 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 proposed striking Sec. 155.725(a)(3) and adding
a new paragraph (j) consolidating the proposed SHOP special enrollment
provisions in one paragraph. We proposed a provision clarifying that a
dependent of a qualified employee is eligible for a special enrollment
period only if the employer offers coverage to dependents of qualified
employees. We also proposed 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 proposed
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. We
received the following comments concerning these proposals.
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\7\ 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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Comment: We received many comments supporting the proposed
alignment of the length of special enrollment periods in the SHOP with
the small group market at large. Some of these commenters stated that
aligning with the existing market standards will reduce confusion,
simplify public education, and prevent adverse selection. However, some
commenters were concerned that reducing the length of special
enrollment periods may not provide sufficient time for an employee to
understand and compare the plan or plans offered to the employee. These
commenters were particularly concerned that an employee choice model
would require additional time for an employee to make an informed
decision, as employees would have
[[Page 33237]]
many more plans to compare before making a decision.
Response: We believe that even with the employee choice model, the
existing HIPAA standard for the length of special enrollment periods
reduces confusion and balances an employee's need for sufficient time
to review his or her plan options while limiting the potential for
adverse selection. Today, many employers, agents and brokers, and
employees are familiar with the existing HIPAA standard. Maintaining a
policy inconsistent with the HIPAA standard would be confusing to many
employers, agents and brokers, and employees, as they may rationally
expect the market standard to apply inside the SHOP.
Additionally, with the assistance of the SHOP, employees will have
online tools that will assist them in easily viewing and comparing
information regarding the premium cost and benefits of their plan
options. These tools were specifically designed to assist employees in
making an informed decision when presented with a large number of
plans. Therefore, we believe that the employee choice model does not
inherently require that employees have additional time to make a plan
selection.
c. Provisions for the Additional Standards Specific to SHOP
In Sec. 156.285, we proposed requiring QHPs in the SHOP to provide
the special enrollment periods added to Sec. 155.725. While we
received many comments on the proposed special enrollment periods, we
received no comments on this conforming amendment. We are finalizing
this provision as proposed.
IV. Provisions of the Final Regulations
This final rule incorporates the provisions of the proposed rule,
and we are finalizing these provisions primarily as proposed.
V. Collection of Information Requirements
This final rule has not imposed new or altered 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.
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), the Regulatory Flexibility Act (RFA)
(September 19, 1980, Pub. L. 96-354), section 202 of the Unfunded
Mandates Reform Act of 1995 (March 22, 1995; Pub. L. 104-4), Executive
Order 13132 on Federalism (August 4, 1999), and the Congressional
Review Act (5 U.S.C. 804(2)).
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 1 year).
It is HHS's belief that this final rule does not reach this economic
threshold and thus is not considered a major rule.
This final 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 adds a triggering event that
creates a special enrollment 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). We do not believe either of these actions would impose any
new costs on issuers, employers, enrollees, or the SHOP. In fact, the
amendment would create alignment of SHOP regulations with laws for the
existing group market and could potentially create efficiencies for QHP
issuers.
Finally, this rule provides a transition so that SHOPs 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 CY 2014, qualified employers will offer qualified
employees coverage through a single QHP in FF-SHOPs; State-based SHOPs
will 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 (78
FR 15410), 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).\8\ 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.
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\8\ 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 final
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 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.
[[Page 33238]]
The RFA requires agencies to analyze options for regulatory relief
of small businesses, if a 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,\9\ 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 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.\10\ 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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\9\ 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 (December 1, 2010)
(codified at 45 CFR part 158).
\10\ 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. Until 2016, States have the option to
reduce this threshold to 50. For this reason, we expect that many
employers would meet the SBA standard for small entities. We do not
believe that this rule imposes 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 the final rule applies to eligible
employees and dependents with coverage through the SHOP, and the
triggering event that the final rule applies to eligible individuals
and dependents, as well. The rule merely applies 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.
Therefore, we are not preparing an analysis for the RFA because we
have determined, and the Secretary certifies, that this final rule will
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 2013, that threshold is
approximately $141 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 rule does not place any financial mandates on State, local, or
tribal governments. It applies a triggering event and special
enrollment period to coverage through the SHOP, modifies the duration
of certain special enrollment periods, and implements employee choice
in the SHOP starting with plan years beginning on or after January 1,
2015. These amendments would affect State governments only 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 rule does not impose any costs on State or local
governments not otherwise imposed by already-finalized provisions of
the regulations implementing the Affordable Care Act.
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 NAIC, and consulting with State insurance
officials on an individual basis. We believe that this 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 implement this policy in plan years starting on or after January 1,
2015.
Under 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.
In accordance with the provisions of Executive Order 12866, this
regulation was reviewed by the Office of Management and Budget.
X. Congressional Review Act
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 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
[[Page 33239]]
States prior to publication of the rule in the Federal Register. This
final rule is not a ``major rule'' as defined by 5 U.S.C. 804(2).
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 amends 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) through (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 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 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:
0
A. Amending paragraph (a)(1) by adding ``and'' at the end of the
paragraph.
0
B. Amending paragraph (a)(2) by removing ``; and'' and by adding a
period in its place at the end of the paragraph.
0
C. Removing paragraph (a)(3), and
0
D. Adding paragraph (j).
The addition reads 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) Thirty (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) Sixty (60) days from the date of a triggering event described
in paragraph (j)(2)(ii) 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).
[[Page 33240]]
(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: May 13, 2013.
Marilyn Tavenner,
Administrator, Centers for Medicare & Medicaid Services.
Approved: May 15, 2013
Kathleen Sebelius,
Secretary, Department of Health and Human Services.
[FR Doc. 2013-13149 Filed 5-31-13; 11:15 am]
BILLING CODE 4120-01-P