[Federal Register Volume 78, Number 210 (Wednesday, October 30, 2013)]
[Rules and Regulations]
[Pages 65046-65105]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-25326]
[[Page 65045]]
Vol. 78
Wednesday,
No. 210
October 30, 2013
Part II
Department of Health and Human Services
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45 CFR Parts 144, 146, 147, et al.
Patient Protection and Affordable Care Act; Program Integrity:
Exchange, Premium Stabilization Programs, and Market Standards;
Amendments to the HHS Notice of Benefit and Payment Parameters for
2014; Final Rule
Federal Register / Vol. 78 , No. 210 / Wednesday, October 30, 2013 /
Rules and Regulations
[[Page 65046]]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
45 CFR Parts 144, 146, 147, 153, 155, and 156
[CMS-9957-F2; CMS-9964-F3]
RIN 0938-AR82; RIN 0938-AR74
Patient Protection and Affordable Care Act; Program Integrity:
Exchange, Premium Stabilization Programs, and Market Standards;
Amendments to the HHS Notice of Benefit and Payment Parameters for 2014
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). Specifically, this final rule outlines financial integrity
and oversight standards with respect to Affordable Insurance Exchanges,
qualified health plan (QHP) issuers in Federally-facilitated Exchanges
(FFEs), and States with regard to the operation of risk adjustment and
reinsurance programs. It also establishes additional standards for
special enrollment periods, survey vendors that may conduct enrollee
satisfaction surveys on behalf of QHP issuers, and issuer participation
in an FFE, and makes certain amendments to definitions and standards
related to the market reform rules. These standards, which include
financial integrity provisions and protections against fraud and abuse,
are consistent with Title I of the Affordable Care Act. This final rule
also amends and adopts as final interim provisions set forth in the
Amendments to the HHS Notice of Benefit and Payment Parameters for 2014
interim final rule, published in the Federal Register on March 11,
2013, related to risk corridors and cost-sharing reduction
reconciliation.
DATES: These regulations are effective on December 30, 2013.
FOR FURTHER INFORMATION CONTACT: Leigha Basini at (301) 492-4380 for
general information.
Jacob Ackerman at (301) 492-4179 for matters relating to Parts 144
and 147, single risk pool and catastrophic plans.
Adam Shaw at (410) 786-1091 for matters relating to the oversight
of risk adjustment and reinsurance.
Jaya Ghildiyal at (301) 492-5149 for matters relating to risk
corridors.
Shelley Bain at (301) 492-4453 or Anne Pesto at (410) 786-3492 for
matters relating to Part 155, Subpart M.
Ariel Novick at (301) 492-4309 for matters relating to the
oversight of cost-sharing reductions and advance payments of the
premium tax credit.
Johanna Lauer at (301) 492-4397 for matters relating to cost-
sharing reduction reconciliation.
Rebecca Zimmermann at (301) 492-4396 for matters relating to
quality standards, Part 156, Subpart L.
Cindy Yen at (301) 492-5142 for matters relating to Part 156 other
than cost-sharing reductions, advance payments of the premium tax
credit, and quality standards.
Pat Meisol at (410) 786-1917 for matters relating to confirmation
of HHS payment and collections reports.
SUPPLEMENTARY INFORMATION:
Electronic Access
This Federal Register document is also available from the Federal
Register online database through Federal Digital System (FDsys), a
service of the U.S. Government Printing Office. This database can be
accessed via the internet at http://www.gpo.gov/fdsys.
Executive Summary
Starting October 1, 2013, qualified individuals and qualified
employees may purchase private health insurance coverage through
competitive marketplaces called Affordable Insurance Exchanges, or
``Exchanges'' (also called Health Insurance Marketplaces). This final
rule sets forth oversight and financial integrity standards with
respect to Exchanges, Qualified Health Plan (QHP) issuers in Federally-
facilitated Exchanges (FFEs), and States with regard to the operation
of risk adjustment and reinsurance programs. It establishes additional
standards for special enrollment periods, survey vendors that may
conduct enrollee satisfaction surveys on behalf of QHP issuers in
Exchanges, and issuer participation in an FFE, and makes certain
amendments to definitions and standards related to the market reform
rules. These standards were proposed in a proposed rule, titled
``Patient Protection and Affordable Care Act; Program Integrity:
Exchange, SHOP, Premium Stabilization Programs, and Market Standards''
(78 FR 37032), which was published in the Federal Register on June 19,
2013. Finally, this final rule amends standards and adopts as final
interim provisions set forth in the Amendments to the HHS Notice of
Benefit and Payment Parameters for 2014 interim final rule, published
in the Federal Register on March 11, 2013 (78 FR 15541), related to
risk corridors and cost-sharing reduction reconciliation.
Although many of the provisions in this rule become effective by
January 1, 2014, we believe that affected parties will not have
difficulty complying with the provisions by their effective dates,
because most of the standards are based on existing standards currently
in effect in the private market, were previously proposed through the
Blueprint process, were discussed in agency-issued sub-regulatory
guidance, or were discussed in the preambles to the Exchange
Establishment Rule,\1\ Premium Stabilization Rule,\2\ Market Reform
Rule,\3\ or the HHS Notice of Benefit and Payment Parameters for 2014
(2014 Payment Notice).\4\ In addition to soliciting general comments on
the substance of the proposed provisions, we sought input on ways to
implement these policies to minimize burden.
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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).
\2\ Patient Protection and Affordable Care Act; Standards
Related to Reinsurance, Risk Corridors and Risk Adjustment, 77 FR
17220 (March 23, 2012).
\3\ Patient Protection and Affordable Care Act; Health Insurance
Market Rules; Rate Review, 78 FR 13406 (February 27, 2013).
\4\ Patient Protection and Affordable Care Act; HHS Notice of
Benefit and Payment Parameters for 2014, 78 FR 15410 (March 11,
2013).
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Table of Contents
I. Background
A. Legislative Overview
B. Stakeholder Consultation and Input
II. Provisions of the Final Regulation and Analysis of and Responses
to Public Comments
A. Part 144--Requirements Relating to Health Insurance Coverage
1. Subpart A--General Provisions
a. Scope and Applicability (Sec. 144.102(c))
b. Definitions (Sec. 144.103)
B. Part 147--Health Insurance Reform Requirements for the Group
and Individual Health Insurance Markets
1. Guaranteed Availability and Renewability of Coverage (Sec.
147.104 and Sec. 147.106)
C. Part 153--Standards Related to Reinsurance, Risk Corridors,
and Risk Adjustment Under the Affordable Care Act
1. Subpart A--General Provisions
a. Definitions (Sec. 153.20)
2. Subpart C--State Standards Related to the Reinsurance Program
a. Maintenance of Records (Sec. 153.240(c))
b. General Oversight Requirements for State-Operated Reinsurance
Programs (Sec. 153.260)
c. Restrictions on Use of Reinsurance Funds for Administrative
Expenses (Sec. 153.265)
3. Subpart D--State Standards Related to the Risk Adjustment
Program
[[Page 65047]]
a. Maintenance of Records (Sec. 153.310(c)(4))
b. Interim Report and State Summary Report (Sec. 153.310(d))
c. General Oversight Requirements for State-Operated Risk
Adjustment Programs (Sec. 153.365)
4. Risk Adjustment Methodology
a. Modification to the Transfer Formula in the HHS Risk
Adjustment Methodology
5. Subpart E--Health Insurance Issuer and Group Health Plan
Standards Related to the Reinsurance Program
a. Reinsurance Contribution Funds (Sec. 153.400)
b. Maintenance of Records (Sec. 153.405(h) and Sec.
153.410(c))
6. Subpart F--Health Insurance Issuer Standards Related to the
Risk Corridors Program
a. Definitions (Sec. 153.500)
b. Calculation of Allowable Costs, Attribution and Allocation of
Revenue and Expense Items, and Risk Corridors Data Requirements
(Sec. 153.500, Sec. 153.520, and Sec. 153.530)
7. Subpart G--Health Insurance Issuer Standards Related to the
Risk Adjustment Program
8. Subpart H--Distributed Data Collection for HHS-Operated
Programs
a. Failure To Comply With HHS-Operated Risk Adjustment and
Reinsurance Data Requirements (Sec. 153.740(a))
b. Default Risk Adjustment Charge (Sec. 153.740(b))
D. Part 155--Exchange Establishment Standards and Other Related
Standards Under the Affordable Care Act
1. Subpart D--Exchange Functions in the Individual Market:
Eligibility Determinations for Exchange Participation and Insurance
Affordability Programs
a. Administration of Advance Payments of the Premium Tax Credit
and Cost-Sharing Reductions (Sec. 155.340)
2. Subpart E--Exchange Functions in the Individual Market:
Enrollment in Qualified Health Plans
a. Special Enrollment Periods (Sec. 155.420)
3. Subpart H--Exchange Functions: Small Business Health Options
Program (SHOP)
a. Enrollment Periods Under SHOP (Sec. 155.725)
4. Subpart M--Oversight and Program Integrity Standards for
State Exchanges
a. General Program Integrity and Oversight Requirements (Sec.
155.1200)
b. Maintenance of Records (Sec. 155.1210)
E. Part 156--Health Insurance Issuer Standards Under the
Affordable Care Act, Including Standards Related to Exchanges
1. Subpart A--General Provisions
a. Definitions (Sec. 156.20)
b. Single Risk Pool (Sec. 156.80)
2. Subpart B--Essential Health Benefits Package
a. Enrollment in Catastrophic Plans (Sec. 156.155)
3. Subpart D--Federally-Facilitated Exchange Qualified Health
Plan Issuer Standards
a. Changes of Ownership of Issuers of Qualified Health Plans in
Federally-Facilitated Exchanges (Sec. 156.330)
4. Subpart E--Health Insurance Issuer Responsibilities With
Respect to Advance Payments of the Premium Tax Credit and Cost-
Sharing Reductions
a. Definitions (Sec. 156.400)
b. Improper Plan Assignment and Application of Cost-Sharing
Reductions (Sec. 156.410(c) Through (d))
c. Payment for Cost-Sharing Reductions (Sec. 156.430)
d. Failure To Reduce an Enrollee's Premium To Account for
Advance Payments of the Premium Tax Credit (Sec. 156.460(c))
e. Oversight of the Administration of Cost-Sharing Reductions
and Advance Payments of the Premium Tax Credit Programs (Sec.
156.480)
5. Subpart H--Oversight & Financial Integrity Requirements for
Issuers of Qualified Health Plans in Federally-Facilitated Exchanges
a. Maintenance of Records for Federally-Facilitated Exchanges
(Sec. 156.705)
b. Compliance Reviews of QHP Issuers in Federally-Facilitated
Exchanges (Sec. 156.715)
6. Subpart J--Administrative Review of QHP Issuer Sanctions in a
Federally-Facilitated Exchange
a. Administrative Review in a Federally-Facilitated Exchange
(Sec. Sec. 156.901 Through 156.963)
7. Subpart L--Quality Standards
a. Establishment of Standards for HHS-Approved Enrollee
Satisfaction Survey Vendors for Use by QHP Issuers in Exchanges
(Sec. 156.1105)
8. Subpart M--Qualified Health Plan Issuer Responsibilities
a. Confirmation of HHS Payment and Collections Reports (Sec.
156.1210)
III. Collection of Information Requirements
IV. Regulatory Impact Analysis
V. Regulations Text
Acronyms and Short Forms
Because of the many organizations and terms to which we refer by
acronym in this final rule, we are listing these acronyms and their
corresponding terms in alphabetical order below:
Affordable Care Act The collective term for the Patient Protection
and Affordable Care Act (Pub. L. 111-148) and the Health Care and
Education Reconciliation Act of 2010 (Pub. L. 111-152))
ALJ Administrative Law Judge
ARF Allowable Rating Factor
AV Actuarial Value
CAHPS[supreg] Consumer Assessment of Healthcare Providers and
Systems
CFR Code of Federal Regulations
CMP Civil money penalty
CMS Centers for Medicare & Medicaid Services
DOI State Department of Insurance
DOL U.S. Department of Labor
EHB Essential Health Benefits
FEHB Federal Employees Health Benefits
FFE Federally-facilitated Exchange
FF-SHOP Federally-facilitated Small Business Health Options Program
GAAP Generally accepted accounting principles
GAAS Generally accepted auditing standards
GAGAS Generally accepted governmental auditing standards
GAO U.S. Government Accountability Office
HHS U.S. Department of Health and Human Services
HIPAA Health Insurance Portability and Accountability Act of 1996
(Pub. L. 104-191)
IRS Internal Revenue Service
MAGI Modified Adjusted Gross Income
MLR Medical Loss Ratio
NCQA National Committee for Quality Assurance
OIG Office of the Inspector General of the U.S. Department of Health
and Human Services
OMB Office of Management and Budget
PHSAct Public Health Service Act
PRA Paperwork Reduction Act
QHP Qualified Health Plan
SHOP Small Business Health Options Program
The Code Internal Revenue Code of 1986
TIN Taxpayer Identification Number
I. Background
A. Legislative Overview
The Patient Protection and Affordable Care Act (Pub. L. 111-148)
was enacted on March 23, 2010. The Health Care and Education
Reconciliation Act of 2010 (Pub. L. 111-152), which amended and revised
several provisions of the Patient Protection and Affordable Care Act,
was enacted on March 30, 2010. In this final rule, we refer to the two
statutes collectively as the ``Affordable Care Act.''
Subtitles A and C of Title I of the Affordable Care Act
reorganized, amended, and added to the provisions of Title XXVII of the
Public Health Service Act (PHS Act) relating to health insurance
issuers in the group and individual markets and to group health plans
that are non-Federal governmental plans. As relevant here, section 2702
of the PHS Act (guaranteed availability of coverage) directs a health
insurance issuer offering non-grandfathered health insurance coverage
in the group or individual market in a State to accept every employer
and individual in the State who applies for coverage, subject to
certain exceptions. Section 2703 of the PHS Act (guaranteed
renewability of coverage) requires a health insurance issuer offering
non-grandfathered health insurance coverage in the group or individual
market to renew or continue in force such coverage at the option of the
plan sponsor or individual, subject to certain exceptions.
As of October 2013 for coverage starting as soon as January 1,
2014, qualified individuals and qualified employers will be able to
enroll in QHPs--private health insurance that has
[[Page 65048]]
been certified as meeting certain standards--through competitive
marketplaces called ``Exchanges'' or ``Health Insurance Marketplaces.''
The Departments of Health and Human Services, Labor, and the Treasury
have been working in close coordination to release guidance related to
QHPs and Exchanges in several phases. The word ``Exchanges'' refers to
both State Exchanges, also called State-based Exchanges, and FFEs. In
this final rule, we use the terms ``State Exchange'' or ``FFE'' when we
are referring to a particular type of Exchange. When we refer to
``FFEs,'' we are also referring to State Partnership Exchanges, which
are a form of FFE.
In this final rule, we encourage State flexibility within the
boundaries of the law. Sections 1311(b) and 1321(b) of the Affordable
Care Act provide that each State has the opportunity to establish an
Exchange. Section 1311(b)(1) gives each State the opportunity to
establish an Exchange that both facilitates the purchase of QHPs and
provides for the establishment of a Small Business Health Options
Program (SHOP) that will help qualified employers enroll their
employees in QHPs.
Section 1302(e) of the Affordable Care Act outlines standards for
offering catastrophic plans in the individual market for certain young
adults and people who obtain certification of exemption from the
requirement to maintain minimum essential coverage because they cannot
afford health insurance or experience other hardship.
Section 1311(c)(4) of the Affordable Care Act directs the Secretary
to establish an enrollee satisfaction survey system that would evaluate
the level of enrollee satisfaction with QHPs offered through an
Exchange for each such QHP with more than 500 enrollees in the previous
year.
Section 1311(d)(4)(A) of the Affordable Care Act directs that each
Exchange must implement procedures for the certification,
recertification, and decertification of health plans as QHPs,
consistent with guidelines developed by the Secretary.
Section 1311(d)(5)(A) of the Affordable Care Act provides that
States, when establishing Exchanges, must ensure that such Exchanges
are self-sustaining beginning on January 1, 2015, and permits Exchanges
to charge assessments or user fees to participating health insurance
issuers to generate funding to support their operations. When operating
an FFE under section 1321(c)(1) of the Affordable Care Act, HHS has the
authority under sections 1321(c)(1) and 1311(d)(5)(A) to collect and
spend such user fees. In addition, 31 U.S.C. 9701 permits a Federal
agency to establish a charge for a service provided by the agency.
Office of Management and Budget (OMB) Circular A-25 Revised establishes
Federal policy regarding user fees and specifies that a user charge
will be assessed against each identifiable recipient for special
benefits derived from Federal activities beyond those received by the
general public. Section 1311(d)(5)(B) contains a prohibition on the
wasteful use of funds.
Section 1312(c) of the Affordable Care Act directs a health
insurance issuer to consider all enrollees in all health plans (other
than grandfathered health plans) offered by such issuer to be members
of a single risk pool for each of its individual and small group
markets. Section 1312(c) of the Affordable Care Act gives States the
option to merge the individual and small group markets within the State
into a single risk pool (merged market).
Section 1313 of the Affordable Care Act, combined with section 1321
of the Affordable Care Act, provides the Secretary with the authority
to oversee financial integrity, compliance with HHS standards, and
efficient and non-discriminatory administration of State Exchange
activities. Section 1313(a)(6)(A) of the Affordable Care Act specifies
that payments made by, through, or in connection with an Exchange are
subject to the False Claims Act (31 U.S.C. 3729, et seq.) if those
payments include any Federal funds.
Section 1341 of the Affordable Care Act establishes a transitional
reinsurance program that begins in 2014 and is designed to provide
issuers with greater stability as insurance market reforms are
implemented and individuals begin to enroll in QHPs sold through
Exchanges. Section 1342 of the Affordable Care Act establishes a
temporary risk corridors program which permits the Federal government
and QHPs to share in gains or losses resulting from inaccurate rate
setting from 2014 through 2016. Section 1343 of the Affordable Care Act
establishes a permanent risk adjustment program which is intended to
provide payments to health insurance issuers that attract higher-risk
populations, such as those with chronic conditions, and eliminate
incentives for issuers to avoid higher-risk enrollees.
Section 1321(a)(1) of the Affordable Care Act provides general
authority for the Secretary of Health and Human Services (referred to
throughout this rule as the Secretary) to establish standards and
regulations to implement the statutory requirements related to
Exchanges, QHPs, and other components of Title I of the Affordable Care
Act.
Section 1401 of the Affordable Care Act amended the Internal
Revenue Code (26 U.S.C.) to add section 36B, allowing a refundable
premium tax credit to help individuals and families afford health
insurance coverage. Under sections 1401, 1411, and 1412 of the
Affordable Care Act and 45 CFR part 155, subpart D, an Exchange will
make a determination of advance payments of the premium tax credit for
individuals who enroll in QHP coverage through an Exchange and seek
financial assistance. Section 1402 of the Affordable Care Act provides
for the reduction of cost sharing for certain individuals enrolled in a
QHP through an Exchange, and section 1412 of the Affordable Care Act
provides for the advance payment of these reductions to issuers.
Under section 1411 of the Affordable Care Act, the Secretary is
directed to establish a program for determining whether an individual
meets the eligibility standards for Exchange participation, advance
payments of the premium tax credit, cost-sharing reductions, and
exemptions from the shared responsibility payment under section 5000A
of the Code.
Sections 1412 and 1413 of the Affordable Care Act and section 1943
of the Social Security Act (the Act), as added by section 2201 of the
Affordable Care Act, contain additional provisions regarding
eligibility for advance payments of the premium tax credit and cost-
sharing reductions, as well as provisions regarding simplification and
coordination of eligibility determinations and enrollment with other
health programs.
Unless otherwise specified, the provisions in this final rule
related to the establishment of minimum functions of an Exchange are
based on the general authority of the Secretary under section
1321(a)(1) of the Affordable Care Act.
B. Stakeholder Consultation and Input
HHS has consulted with stakeholders on a number of polices related
to the operation of Exchanges, including the SHOP and premium
stabilization programs. HHS has held a number of listening sessions
with consumers, providers, employers, health plans, and State
representatives to gather public input. HHS consulted with stakeholders
through regular meetings with the National Association of Insurance
Commissioners; regular contact with States through the Exchange
establishment grant process and the Exchange Blueprint approval
process; and meetings with tribal leaders and
[[Page 65049]]
representatives, health insurance issuers, trade groups, consumer
advocates, employers, and other interested parties. We considered all
of the public input as we developed the policies in the proposed rule,
the interim final rule, and this final rule.
II. Provisions of the Final Regulations and Analysis of and Responses
to Public Comments
A proposed rule, titled ``Patient Protection and Affordable Care
Act; Program Integrity: Exchange, SHOP, Premium Stabilization Programs,
and Market Standards'' (78 FR 37032), was published in the Federal
Register on June 19, 2013 with a comment period ending on July 19,
2013. In total, we received approximately 99 public comments from
various stakeholders including States, health insurance issuers,
consumer groups, agents and brokers, provider groups, Members of
Congress, tribal organizations, and other stakeholders. We received a
few comments that were outside the scope of the proposed rule. A number
of the provisions in the proposed rule were finalized in the final rule
published in the Federal Register on August 30, 2013, titled ``Patient
Protection and Affordable Care Act; Program Integrity: Exchange, SHOP,
and Eligibility Appeals'' (78 FR 54070), hereinafter referred to as the
``first Program Integrity final rule.'' We are finalizing the remaining
provisions of the proposed rule here.
The interim final rule, titled ``Patient Protection and Affordable
Care Act; Amendments to the HHS Notice of Benefit and Payment
Parameters for 2014'' (78 FR 15541) was published in the Federal
Register on March 11, 2013 with a comment period that ended on April
30, 2013. Provisions of this rule align risk corridors calculations
with the single risk pool provision, and finalize standards permitting
issuers of QHPs the option of using an alternate methodology for
calculating the value of cost-sharing reductions provided for the
purpose of reconciliation of advance payments of cost-sharing
reductions. We received seven comments on the interim final rule from
issuers, advocacy organizations, and tribal organizations. We amend
standards from the interim final rule and adopt interim provisions as
final.
In this final rule, we provide a summary of each proposed or
interim provision, a summary of the public comments received and our
responses to them, and the provisions we are finalizing. We note that
nothing in these regulations would limit the authority of the Office of
the Inspector General (OIG) as set forth by the Inspector General Act
of 1978 or other applicable law.
A. Part 144--Requirements Relating to Health Insurance Coverage
1. Subpart A--General Provisions
a. Scope and Applicability (Sec. 144.102(c))
In Sec. 144.102(c), we proposed a technical amendment to clarify
whether coverage sold through associations is group or individual
coverage under the PHS Act. Specifically, we proposed to delete a
reference to coverage offered in connection with a ``group health plan
that has fewer than two participants who are current employees on the
first day of the plan year'' (very small plans) as being individual
health insurance coverage under title XXVII of the PHS Act. This
correction aligns with the amendments made by the Affordable Care Act
redefining a small employer to include groups consisting of only one
common law employee.
Comment: Commenters expressed support for the proposed
clarification in Sec. 144.102(c).
Response: We are finalizing the regulation as proposed.
Summary of Regulatory Changes
We are finalizing the amendments to Sec. 144.102(c) as proposed.
b. Definitions (Sec. 144.103)
Under Sec. 144.103, we proposed to amend several definitions of
terms that are used throughout parts 146 (group market requirements),
148 (individual market requirements), and 150 (enforcement) of
subchapter B of title 45 of the Code of Federal Regulations (CFR),
consistent with the Affordable Care Act. These included definitions of
``group market,'' ``individual market,'' ``large employer,'' ``policy
year,'' and ``small employer.'' Unless otherwise provided, the
definitions in Sec. 144.103 also apply for purposes of part 147 (group
and individual market insurance reform requirements), and we make this
explicit in this final rule.
We noted that, although the Affordable Care Act made changes to the
definition of ``small employer'' for purposes of the PHS Act, the
Employee Retirement Income Security Act (ERISA) and the Internal
Revenue Code (the Code) continue to define a ``small employer'' as
having 2 to 50 employees. Similarly, we noted that the Affordable Care
Act deleted the exception for very small plans in PHS Act section
2721,\5\ without removing parallel provisions in ERISA section 732(a)
and Code section 9831(a)(2). We requested comments on how to interpret
the PHS Act, ERISA, and the Code to ensure that shared provisions of
the Departments of HHS, Labor, and the Treasury are administered
consistently.
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\5\ The Affordable Care Act redesignated section 2721 as section
2722 of the PHS Act.
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Comment: Several commenters were in favor of adopting a consistent
definition of ``small employer'' for purposes of the PHS Act, ERISA,
and the Code. Some commenters thought the upper limit of small employer
size should be 50 employees consistent with ERISA and the Code, while
others suggested an upper limit of 100 employees consistent with the
PHS Act and the Affordable Care Act. One commenter requested
clarification that, although employers with one common law employee are
now treated as small employer groups under the Affordable Care Act,
retiree-only plans continue to be exempt from the group market reforms
under the Health Insurance Portability and Accountability Act of 1996
(HIPAA) and the Affordable Care Act.
Response: Consistent with section 2791(e)(4) of the PHS Act and
section 1304(b) of the Affordable Care Act, in this final rule, we
maintain the definition of ``small employer,'' for purposes of health
coverage, as an employer who employed an average of at least one but
not more than 100 employees on business days during the preceding
calendar year and who employs at least one employee on the first day of
the plan year. Prior to 2016, States have discretion to set the upper
limit of small employer size at 50 employees. Additionally, we conform
the definitions of ``individual market'' and ``group market,'' as
proposed, by removing references to group health plans with fewer than
two participants who are current employees from being treated as being
in the individual market rather than the group market. In the proposed
rule, we noted the change to the law and proposed to make conforming
amendments to update our rules to reflect the law with the intention of
doing so for all applicable rules. While we inadvertently omitted
reference to the exception for certain small group plans in Sec.
146.145(b), we note that we believe that our intention to conform our
rules to the law amended by the Affordable Care Act was clear and,
accordingly, we make this conforming amendment in this final rule. As
we pointed out earlier, identical language exempting group health plans
with fewer than two participants from certain provisions of the PHS Act
that formerly was in PHS Act section 2721(a) was stricken by the
Affordable Care Act. We note that nothing in this final rule
[[Page 65050]]
should be construed as affecting the Departments' position regarding
retiree-only plans.\6\
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\6\ Group Health Plans and Health Insurance Coverage Relating to
Status as a Grandfathered Health Plan Under the Patient Protection
and Affordable Care Act, 75 FR at 34539-40 (June 17, 2010).
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Comment: Several commenters addressed the issue of how employees
should be counted in determining employer size. Commenters noted that
States use different methods to calculate employer group size and noted
that there are also different Federal methods for determining employer
size for different purposes. These commenters suggested that there are
compelling practical and efficiency reasons to use a consistent
counting method for all Affordable Care Act purposes and between
Federal and State law.
Response: HHS has previously set forth the method for determining
employer size for purposes relating to the Exchange and SHOP
regulations based on the full-time equivalent method used in section
4980H(c)(2) of the Code, generally effective for plan years beginning
on or after January 1, 2016.\7\ We expect to address the counting
method for purposes of the PHS Act in future rulemaking or guidance.
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\7\ For operations of a Federally-facilitated SHOP, the method
set forth in section 4980H(c)(2) of the Code is effective for plan
years beginning on or after January 1, 2014, including in connection
with open enrollment activities beginning October 1, 2013.
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Summary of Regulatory Changes
We are finalizing the provisions proposed in Sec. 144.103 of the
proposed rule with the following minor modifications for consistency
and clarity. We state expressly that the definitions in this section
which are based on PHS Act requirements enacted by HIPAA and other
statutes (implemented in parts 146, 148, and 150) are equally
applicable to PHS Act requirements enacted by the Affordable Care Act
(implemented in part 147). In the proposed definition of ``policy
year,'' we replace the reference to January 1, 2015 with the phrase,
``for coverage issued or renewed beginning January 1, 2014,'' to
clarify the definition's applicability to calendar year plans, as
discussed in connection with Sec. 147.104(b)(2) of this final rule.
Finally, we remove the exception for certain small group health plans
in Sec. 146.145(b) to conform to the amendments in Sec. 144.102 and
Sec. 144.103 of this final rule.
B. Part 147--Health Insurance Reform Requirements for the Group and
Individual Health Insurance Markets
1. Guaranteed Availability and Renewability of Coverage (Sec. 147.104
and Sec. 147.106)
In the proposed rule, we proposed to recognize the distinction of
the large group and small group segments of the group market for
purposes of sections 2702 and 2703 of the PHS Act, as amended by the
Affordable Care Act, and their implementing regulations at 45 CFR
147.104 and 147.106, respectively. These proposed amendments would
clarify that under the guaranteed availability provisions, an issuer is
required to offer to an employer only those products that are approved
for sale in the applicable market segment (large group or small group
market) based on the employer's group size (rather than all group
market products). The proposed amendments would also clarify that under
the guaranteed renewability provisions, an issuer could, in accordance
with applicable State law and subject to the other requirements of
Sec. 147.106(d), elect to discontinue all products in one segment of
the group market (for example, the large group market) without having
to discontinue all products in the other segment of the group market
(for example, small group market).\8\
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\8\ These clarifications were consistent with the information we
provided in ``Frequently Asked Questions on Health Insurance
Marketplaces'' (May 14, 2013). Available at: http://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/Downloads/marketplace-faq-5-14-2013.pdf.
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We also proposed to clarify in Sec. 147.104(b)(2) that all non-
grandfathered coverage in the individual or merged market must be
offered on a calendar year basis as of January 1, 2015. We specified
that, for purposes of new enrollment effective on any date other than
January 1, the first policy year following such enrollment may comprise
a prorated policy year ending on December 31.
Comment: Commenters generally expressed support for the proposed
revisions in Sec. 147.104 and Sec. 147.106. However, one commenter
disagreed with proposed Sec. 147.104(b)(2), in which all non-
grandfathered individual or merged market plans would be offered on a
calendar year basis. The commenter suggested that individuals with non-
calendar year plans should be permitted to maintain their plans'
current renewal date.
Response: We seek consistency between the Exchange and non-Exchange
markets to mitigate adverse selection, reduce consumer confusion, and
ensure compliance with the single risk pool requirements. For these
reasons, in the Market Reform Rule at Sec. 147.104(b), we aligned
individual market open enrollment periods and coverage effective dates
with those in the individual market Exchanges (which are based on a
calendar policy year) and, to facilitate the transition to calendar
policy years, established a one-time enrollment period allowing
individuals with non-calendar year plans the opportunity to enroll in a
calendar year plan upon renewal in 2014. This final rule simply affirms
the intent of the Market Reform Rule and does not represent a change in
policy. We reiterate that, for purposes of new enrollment effective on
any date other than January 1, the first policy year following such
enrollment may comprise a prorated policy year ending on December 31 of
that year.
Comment: A few commenters sought clarification on whether an issuer
is required to renew coverage purchased by an employer whose size
shifts between the small and large group markets.
Response: HHS has previously issued guidance on how the guaranteed
renewability requirement applies to employers whose size shifts between
the small and large group markets after purchasing coverage in one or
the other of these markets.\9\ The general rule set forth in section
2703 of the PHS Act and its implementing regulations at Sec. 147.106
makes clear that a health insurance issuer must guarantee the renewal
of coverage at the option of the plan sponsor. The exceptions to this
rule do not include the situation in which the employer that sponsors
the group health plan grows from a small employer to a large employer,
or the reverse, between the time the policy is purchased and the time
it comes up for renewal. Therefore, the law guarantees the employer the
right to renew or continue in force the coverage it purchased in the
small (or large) group market even though the employer ceases to be a
small (or large) employer by reason of an increase (or decrease) in its
number of employees.
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\9\ HCFA Insurance Standards Bulletin Series No. 99-03
(September 1999). Available at: https://www.cms.gov/HealthInsReformforConsume/downloads/HIPAA-99-03.pdf.
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For example, an employer that originally purchased coverage in the
small group market and that increases in size beyond the definition of
a small employer has the option of keeping the product it purchased in
the small group market. Furthermore, any changes to
[[Page 65051]]
that product must satisfy the uniform modification of coverage
requirements set forth in section 2703(d) of the PHS Act and Sec.
147.106(e). Under these provisions, an issuer is permitted at the time
of renewal to modify the coverage for that product, but only if the
modification is consistent with State law and effective uniformly to
all employers with that product. Thus, if other employers with that
product were still participating in the small group market, the issuer
could not modify the benefits or cost sharing for the product in a
manner inconsistent with the rules that apply to small group coverage.
We note that under this scenario, if the employer drops coverage it
purchased in the small group market, it will not be able to purchase
the same coverage again if it no longer meets the definition of a small
employer.
The requirements of guaranteed renewability do not change the
underlying employer group's size for other provisions of the PHS Act
and the Affordable Care Act. For example, the premium rating rules (PHS
Act section 2701 and implementing regulations at Sec. 147.102) and the
single risk pool provision (Affordable Care Act section 1312(c) and
implementing regulations at Sec. 156.80) apply to health insurance
coverage in the individual and small group markets, but generally do
not apply to health insurance coverage in the large group market.\10\
These provisions of Federal law generally would not therefore apply
where an employer increases in size to become a large employer, even if
the employer is renewing a product originally purchased in the small
group market.\11\
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\10\ Beginning in 2017, States will have the option to allow
issuers to offer QHPs in the large group market through the SHOP. If
a State elects this option, the rating rules under PHS Act section
2701 will apply to all coverage offered in such State's large group
market (except for self-insured group health plans) pursuant to
section 2701(a)(5) of the PHS Act and Sec. 147.102(f).
\11\ However, pursuant to section 1304(b)(4)(D) of the
Affordable Care Act, a qualified employer that is a small employer
participating in the SHOP may continue to participate in the SHOP,
and will continue to be treated as a small employer for purposes of
subtitle D of the Affordable Care Act, even if the employer ceases
to be a small employer by reason of an increase in its number of
employees. Subtitle D includes the provisions governing SHOP
Exchanges, EHB, the single risk pool, and the premium stabilization
programs but not premium rating requirements under section 2701 of
the PHS Act. We intend to propose in future rulemaking how plans
that are sold through the SHOP to employers that grow from small to
large will be required to comply with single risk pool and premium
rating requirements and how these plans, therefore, participate in
the risk corridors programs.
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Summary of Regulatory Changes
We are finalizing these provisions with the following minor
modification. In Sec. 147.104(b)(2), we remove the reference to
January 1, 2015 to avoid unwarranted confusion as to when non-
grandfathered plans in the individual or merged market must be offered
on a calendar year basis. Pursuant to Sec. 147.104(f), all non-
grandfathered individual and merged market coverage issued or renewed
on or after January 1, 2014 must be offered on a calendar year basis,
with a policy year ending on December 31 of each year and the next
policy year beginning on January 1 of the following year. The proposed
rule included January 1, 2015 as the latest date by which a non-
calendar year plan renewing in 2014 (i.e., a plan renewing on December
31, 2014) would be subject to this requirement. We believe the proposed
text may have been subject to unintended ambiguity and are finalizing
revised text to eliminate that concern.
C. Part 153--Standards Related to Reinsurance, Risk Corridors, and Risk
Adjustment Under the Affordable Care Act
In the proposed rule, we proposed certain provisions related to
program integrity for State-operated risk adjustment and reinsurance
programs, including provisions governing reporting requirements and
restricting the use of reinsurance funds for administrative expenses.
In addition, we proposed record retention standards for States
operating risk adjustment, for contributing entities, and for
reinsurance-eligible plans when HHS operates reinsurance on behalf of a
State. We intend to propose additional standards related to the
oversight of the premium stabilization programs in future regulations
and guidance.
We also note that, to alleviate the upfront burden of the
reinsurance contributions, we intend to propose in future rulemaking to
collect reinsurance contributions in two installments--the reinsurance
contributions for reinsurance payments and administrative expenses
would be collected at the beginning of the calendar year following the
applicable benefit year, and the contributions for payments to the U.S.
Treasury would be collected at the end of the calendar year following
the applicable benefit year. We also intend to propose in future
rulemaking to exempt certain self-insured, self-administered plans from
the requirement to make reinsurance contributions for the 2015 and 2016
benefit years.
1. Subpart A--General Provisions
a. Definitions (Sec. 153.20)
We proposed an amendment to the definition of a ``contributing
entity'' to address a situation in which the healthcare coverage
provided to a participant under a group health plan is partially
insured and partially self-insured--for example, if medical benefits
are provided under a self-insured arrangement but prescription drug
benefits are provided under an insured arrangement. We proposed this
amendment to clarify that, for purposes of determining whether an
entity bears liability for reinsurance contributions, a self-insured
group health plan includes a group health plan that is partially self-
insured and partially insured, but only where the insured coverage does
not constitute major medical coverage (whether or not the self-insured
coverage is major medical coverage). This amendment clarifies that if a
group health plan is structured in such a manner, the group health plan
would be liable for reinsurance contributions under the counting rules
applicable to self-insured group health plans at 45 CFR 153.405(f), but
if the insured component of the group health plan is major medical
coverage, the issuer remains liable for the contributions.
We also sought comment on whether we should adopt a definition for
``major medical coverage'' that would provide additional clarity on
when a contributing entity would have the responsibility to make
reinsurance contributions.
Comment: Several commenters supported the proposed amendment. One
commenter sought clarification as to which party is liable for
reinsurance contributions with respect to a group health plan that is
partially self-insured and partially insured when both forms of
coverage are major medical coverage. The commenter recommended that the
issuer be liable for reinsurance contributions in a situation in which
the in-network coverage is insured, because the insured in-network
coverage would account for the majority of the total health coverage
for the covered individuals.
Response: We clarify that the amendment to the definition of
``contributing entity'' does not alter the responsibility of the issuer
for the reinsurance contributions under these facts. The amendment to
the definition of ``contributing entity'' addresses a scenario in which
a self-insured plan includes insured coverage that is not major medical
coverage; however, the fact pattern described above concerns a self-
insured plan that includes insured
[[Page 65052]]
major medical coverage. Under Sec. 153.400(a)(1)(i) and Sec. 153.20,
an issuer that offers major medical coverage to its covered lives is a
``contributing entity,'' and is responsible for reinsurance
contributions for the covered lives, and under these facts the self-
insured plan under this proposed amendment would not be a contributing
entity because the insured component of the plan is major medical
coverage.
Comment: Certain commenters requested that HHS codify a definition
of major medical coverage for purposes of reinsurance contributions.
One commenter asked HHS to codify in regulation text the definition of
major medical coverage set forth in the preamble to the 2014 Payment
Notice (78 FR at 15456), while continuing to carefully examine this
issue to determine if the definition should be revised, expanded, or
made more specific in the future. One commenter asked HHS to include in
a definition of ``major medical coverage'' the set of health benefits
defined in the American Academy of Pediatrics' Scope of Health Care
Benefits for Children from Birth through Age 26.
Response: We agree that a more specific definition of ``major
medical coverage'' for purposes of reinsurance contributions would add
certainty for some contributing entities. We therefore intend to
propose a specific definition in the HHS Notice of Benefit and Payment
Parameters for 2015.
Summary of Regulatory Changes
We are finalizing the amendment to the definition of ``contributing
entity'' as proposed.
2. Subpart C--State Standards Related to the Reinsurance Program
a. Maintenance of Records (Sec. 153.240(c))
We proposed to amend 45 CFR 153.240(c) to be consistent with the
maintenance of records requirement for State-operated risk adjustment
programs proposed in Sec. 153.310(c)(4). We proposed to amend Sec.
153.240(c) such that a State establishing a reinsurance program would
be directed to maintain documents and records relating to the
reinsurance program, whether paper, electronic, or in other media, for
each benefit year for at least 10 years, and make them available upon
request from HHS, the OIG, the Comptroller General, or their designees,
to any such entity. The documents and records must be sufficient to
enable HHS to evaluate whether the State-operated reinsurance program
complies with Federal standards. States would also be directed to
ensure that their contractors, subcontractors, and agents similarly
maintain and make relevant documents and records available upon request
from HHS, the OIG, the Comptroller General, or their designees.
Comment: Several commenters asked that HHS reduce the 10-year
record retention standard, while other commenters supported the 10-year
retention timeframe. One commenter suggested that a 10-year record
retention standard is not needed for the False Claims Act.
Response: We are finalizing the maintenance of records provisions
as proposed, in alignment with the statute of limitations for the False
Claims Act and existing related regulations. A civil action may be
brought under the False Claims Act ``no more than 10 years after the
date on which the violation is committed.'' Additionally, similar 10-
year record retention standards were previously finalized in the
Exchange Establishment Rule and the Premium Stabilization Rule. We
believe that maintaining consistency in our record retention standards
will help ensure that entities maintain records across programs in a
consistent manner, allowing HHS and States to coordinate oversight
efforts across those program areas and reduce the burden on
stakeholders. We note that the 10-year obligation to retain records
begins when the record is created.
Comment: One commenter recommended that electronic maintenance of
records should satisfy the maintenance of records standard.
Response: An entity subject to the maintenance of records standard
may satisfy the standard by maintaining the records electronically and
ensuring that they are accessible if needed in the event of an
investigation, audit, or other review.
Comment: Several commenters asked HHS to provide details on the
specific documents and records that States, contributing entities or
issuers would be required to maintain for oversight purposes. In
particular, one commenter suggested that issuers should not be required
to retain medical records in connection with the risk adjustment
program.
Response: We will provide further details on the documents and
records to be maintained in future guidance or rulemaking. Because risk
adjustment-eligible claims, medical documents, and medical records will
be subject to medical record review as part of the risk adjustment data
validation process, issuers of risk adjustment covered plans must
maintain these documents. We note that this record maintenance and
medical record review is subject to applicable privacy law, including
the protections of HIPAA.
Comment: One commenter asked that HHS reserve the authority to use
the documents and records maintained pursuant to these provisions to
verify whether issuers are in compliance with certain other
requirements under the Affordable Care Act. For example, these
documents and records could be used to help determine whether issuers
are in compliance with the single risk pool premium rating requirement.
Response: We do not intend to use the documents and records
maintained pursuant to these provisions for purposes other than
monitoring compliance with the applicable statutes and regulations for
those programs. In general, primary enforcement jurisdiction over the
single risk pool premium rating requirement lies with the States.
Summary of Regulatory Changes
We are finalizing the maintenance of records provision set forth in
Sec. 153.240(c) as proposed, as well as the maintenance of records
provisions set forth in Sec. 153.310(c)(4). We are also finalizing the
maintenance of records provision set forth in Sec. 153.405(h), Sec.
153.410(c) and Sec. 153.620(b) with conforming technical corrections.
In these provisions, to conform with our other record retention
standards in this rule, we are clarifying that in each provision it is
the ``documents and records'' that must be made available upon request.
In Sec. 153.620(b), we clarify that records must be maintained for 10
years. Finally, we are making a conforming amendment to Sec.
153.520(e) so that the risk corridors recordkeeping requirement is
consistent with the foregoing provisions. Section 153.520(e) will read:
``A QHP issuer must maintain documents and records whether paper,
electronic, or in other media, sufficient to enable the evaluation of
the issuer's compliance with applicable risk corridors standards, for
each benefit year for at least 10 years, and must make those documents
and records available upon request from HHS, the OIG, the Comptroller
General, or their designees, to any such entity, for purposes of
verification, investigation, audit or other review.''
b. General Oversight Requirements for State-Operated Reinsurance
Programs (Sec. 153.260)
HHS expects that States will operate the reinsurance program under
section 1341 of the Affordable Care Act in an effective and efficient
manner and in accordance with the provisions of subparts B and C of 45
CFR part 153.
[[Page 65053]]
Therefore, pursuant to our authority under sections 1321(a)(1) and 1341
of the Affordable Care Act, we proposed certain general oversight
requirements for State-operated reinsurance programs. In Sec.
153.260(a), we proposed that a State establishing the reinsurance
program ensure that its applicable reinsurance entity keeps, for each
benefit year, an accounting of the following: (1) All reinsurance
contributions received from HHS for reinsurance payments and for
administrative expenses; (2) all claims for reinsurance payments
received from issuers of reinsurance-eligible plans; (3) all
reinsurance payments made to issuers of reinsurance-eligible plans; and
(4) all administrative expenses incurred for the State's reinsurance
program. We proposed to require that this accounting be kept in
accordance with GAAP, consistently applied.
In Sec. 153.260(b), we proposed that a State that establishes the
reinsurance program submit to HHS and make public a summary report on
its reinsurance program operations for each benefit year. This report
would include a summary of the accounting for the benefit year as set
forth in proposed Sec. 153.260(a).
In Sec. 153.260(c), we proposed that a State that establishes the
reinsurance program engage an independent qualified auditing entity to
perform a financial and programmatic audit of the program for each
benefit year in accordance with GAAS. Pursuant to Sec. 153.260(c)(2),
the State would be directed to ensure that this audit addresses the
prohibitions set forth in Sec. 153.265 (concerning improper use of
reinsurance funds for administrative expenses).
In paragraph (c)(1), we proposed that the State provide to HHS the
results of the independent external audit for each benefit year, and in
paragraph (c)(3), we proposed that the State identify to HHS any
material weakness or significant deficiency identified in the audit (as
these terms are defined in GAAS issued by the American Institute of
Certified Public Accountants, and Government Auditing Standards issued
by the Government Accountability Office (GAO) \12\). We further
proposed that the State address in writing to HHS how the State intends
to correct any such material weakness or significant deficiency. To
ensure transparency and accountability of a State-operated reinsurance
program's finances and activities, we proposed in paragraph (c)(4) that
the State make public a summary of the results of the external audit,
including any material weakness or significant deficiency. We believe
that these measures are necessary to ensure the proper use of
reinsurance contributions under the uniform contribution rate, which
HHS will collect from all contributing entities pursuant to 45 CFR
153.220. We received several comments supporting these provisions.
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\12\ See, Government Auditing Standards (2011 Revision),
available at: http://www.gao.gov/yellowbook. For public companies,
the Public Company Accounting Oversight Board (PCAOB) sets audit
standards. See, http://pcaobus.org/Standards/Auditing/Pages/default.aspx. For non-public companies, the AICPA sets audit
standards. See, http://www.aicpa.org/Research/Standards/AuditAttest/Pages/SAS.aspx.
---------------------------------------------------------------------------
Summary of Regulatory Changes
We are finalizing these provisions as proposed. We are finalizing
these provisions with one modification. We are clarifying in paragraph
(c)(4) that in making public any material weakness or significant
deficiency from the external audit, the State must also make public how
it intends to correct the material weakness or significant deficiency.
Summary of Regulatory Changes
We are finalizing these provisions with one modification. We are
clarifying that when the State makes public a summary of the results of
the external audit, including any material weakness or significant
deficiency, it must also make public how it intends to correct the
material weakness or significant deficiency, in the manner and
timeframe to be specified by HHS.
c. Restrictions on Use of Reinsurance Funds for Administrative Expenses
(Sec. 153.265)
To achieve the intended purpose of the reinsurance program,
reinsurance contributions collected must be spent on reinsurance
payments, payments to the U.S. Treasury, and on reasonable expenses to
administer the reinsurance program. In Sec. 153.260(a), we proposed
that a State operating reinsurance would be directed to keep an
accurate accounting of the reinsurance funds received from HHS for
administrative expenses and all the administrative expenses incurred
for the State-operated reinsurance program. If a State incurs fewer
expenses in operating reinsurance for a benefit year than are allocated
to it under the uniform reinsurance contribution rate the State would
be directed to use those funds to operate reinsurance in subsequent
benefit years.
Section 1311(d)(5)(B) of the Affordable Care Act prohibits an
Exchange from using any funds intended for the administrative and
operational expenses of the Exchange for staff retreats, promotional
giveaways, excessive executive compensation, or the promotion of
Federal or State legislative and regulatory modifications. In Sec.
153.265, we proposed to extend these prohibitions to State-operated
reinsurance programs, so that a State establishing a reinsurance
program would be directed to ensure that its applicable reinsurance
entity did not use funds that were intended to support reinsurance
program operations (including any reinsurance contributions collected
under the national contribution rate for administrative expenses) for
any purpose prohibited in section 1311(d)(5)(B) of the Affordable Care
Act. We received comments supporting this provision.
Summary of Regulatory Changes
We are finalizing this provision as proposed.
3. Subpart D--State Standards Related to the Risk Adjustment Program
In the first Program Integrity final rule (78 FR 54070), we revised
the definition of ``Exchange'' in Sec. 155.20 and amended various
other provisions of Part 155 to permit a State to establish and operate
only a State-based SHOP while the individual market Exchange for the
State is established and operated as an FFE. Because Sec.
153.310(a)(1) provides that a State that elects to operate an Exchange
is eligible to establish a risk adjustment program, when proposing
these amendments, we sought comment on whether a State that elects to
establish and operate a SHOP but not an individual market Exchange
should also be eligible to establish a risk adjustment program.
Additionally, we sought comment on whether such a State would be
eligible to establish a risk adjustment program only for the small
group market or would be required to establish the program for both
markets. All these amendments were finalized in the first Program
Integrity final rule, and we are not re-proposing or finalizing any of
them in this rulemaking. However, we elected to address the comments we
received on the risk adjustment options for States electing to
establish and operate only a SHOP in the preamble to this final rule,
rather than in the preamble to the first Program Integrity final rule.
Comment: Several commenters asked that HHS permit a State that is
operating a SHOP-only Exchange to operate a risk adjustment program for
both the small group market and the individual market. One commenter
opposed permitting a State that elects to operate a SHOP-only Exchange
to establish a risk adjustment program only in the small group market.
[[Page 65054]]
Several commenters stated that restricting a State's ability to operate
risk adjustment to the small group market could deprive the State of
economies of scale, add compliance burdens to issuers who operate in
both markets, and add complexity to operational requirements such as
data collection and reporting.
Response: For 2015 and later years, HHS will permit a State
operating a SHOP-only Exchange to propose an alternate risk adjustment
methodology that covers both the individual and small group markets,
and to apply for approval to operate a risk adjustment program in both
markets. HHS will evaluate the proposed alternate risk adjustment
methodology using the same alternate risk adjustment methodology
certification process set forth in the Premium Stabilization Rule and
2014 Payment Notice, in accordance with the standards set forth in 45
CFR 153.330(b), to ensure that it appropriately addresses risk
selection in both markets, and will evaluate the State's application to
operate risk adjustment in accordance with the standards set forth in
45 CFR 153.310(d) to ensure the State is ready to operate risk
adjustment in both markets. We emphasize that this policy does not
alter the definition of ``Exchange'' or any of the other amendments to
provide States with the option of establishing and operating only a
SHOP Exchange that we finalized in the first Program Integrity final
rule.
a. Maintenance of Records (Sec. 153.310(c)(4))
In Sec. 153.310(c)(4), we proposed that a State operating a risk
adjustment program would be directed to maintain documents and records
relating to the risk adjustment program, whether paper, electronic, or
in other media, for each benefit year for at least 10 years, and make
them available upon request from HHS, the OIG, the Comptroller General,
or their designees, to any such entity. The documents and records must
be sufficient to enable the evaluation of a State-operated risk
adjustment program's compliance with Federal standards. States would
also be directed to ensure that their contractors, subcontractors, and
agents maintain and make those documents and records available upon
request from HHS, the OIG, the Comptroller General, or their designees.
We noted that a State may satisfy this standard by archiving these
documents and records and ensuring that they are accessible if needed
in the event of an investigation, audit, or other review. This
provision is consistent with the requirements set forth in Sec.
153.240(c), which contains record retention standards for State-
operated reinsurance programs. We note that the 10-year obligation to
retain records begins when the record is created.
We addressed the comments received on the proposed maintenance of
records provisions in the preamble discussion of Sec. 153.240(c)
above. Below we address a comment specific to this provision.
Comment: One commenter asked HHS to amend this standard to provide
that these documents and records be made available to the State
validation auditor as well as HHS, the OIG, the Comptroller General, or
their designees.
Response: We are not making this amendment because risk adjustment
data validation validates the records of an issuer, not the records of
the State entity operating risk adjustment. Thus, a State validation
auditor should not need to review the State risk adjustment entity's
documents.
Summary of Regulatory Changes
We are finalizing this provision as proposed.
b. Interim Report and State Summary Report (Sec. 153.310(d))
In Sec. 153.310(d)(3), we proposed that, in addition to the
requirements set forth in 45 CFR 153.310(d)(1) and (d)(2), a State
would be directed to provide to HHS an interim report, in a manner
specified by HHS, that includes a detailed summary of its risk
adjustment activities in the first 10 months of the benefit year in
order to obtain re-approval from HHS to operate risk adjustment for a
third benefit year.\13\ This report would be due no later than December
31 of the first benefit year for which a State operates risk
adjustment. We note that because the process for obtaining re-approval
to operate risk adjustment begins more than one year before the
beginning of the applicable benefit year, the first benefit year for
which an interim report based on the first year's operations could be
used for approval purposes is the third benefit year.
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\13\ In the 2014 Payment Notice, we finalized a process for
approving the operational aspects of a State's risk adjustment
program. This process is distinct from the previously established
process through which a State may obtain Federal certification of an
alternate risk adjustment methodology. In an attempt to clarify
these two related but distinct concepts, we have made minor
technical corrections to ensure that the terms ``approval'' and
``re-approval'' refer to HHS's evaluation of a State's risk
adjustment operations and the terms ``certification'' and
``recertification'' refer to our evaluation of a proposed alternate
risk adjustment methodology.
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We proposed to amend 45 CFR 153.310(f) and re-designate it as Sec.
153.310(d)(4). In Sec. 153.310(d)(4), we proposed that in order to
obtain re-approval from HHS to operate risk adjustment for each benefit
year after the third benefit year for which it is approved, each State
operating a risk adjustment program would be directed to submit to HHS
and make public a detailed summary of risk adjustment program
operations for the most recent benefit year for which risk adjustment
operations have been completed, in the manner and timeframe specified
by HHS. We proposed that the summary report must include the results of
a programmatic and financial audit for the benefit year of the State-
operated risk adjustment program conducted by an independent qualified
auditing entity in accordance with GAAS. In Sec. 153.310(d)(4)(ii), we
proposed that the summary report would identify to HHS any material
weakness or significant deficiency (as these terms are defined in GAAS
issued by the American Institute of Certified Public Accountants, and
Government Auditing Standards issued by the GAO \14\) identified in the
independent external audit and address in writing to HHS how the State
intends to correct any such material weakness or significant
deficiency.
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\14\ See, Government Auditing Standards (2011 Revision),
available at: http://www.gao.gov/yellowbook. For public companies,
the Public Company Accounting Oversight Board (PCAOB) sets audit
standards. See, http://pcaobus.org/Standards/Auditing/Pages/default.aspx. For non-public companies, the AICPA sets audit
standards. See, http://www.aicpa.org/Research/Standards/AuditAttest/Pages/SAS.aspx.
---------------------------------------------------------------------------
We are finalizing these provisions with minor changes in paragraph
(d)(4)(ii). We are deleting references in that paragraph to HHS to make
clear that any material weakness or significant deficiency identified
in the audit, including the methods the State intends to use to correct
any such material weakness or significant deficiency, must be made
public, and not only provided to HHS.
Comment: One commenter asked HHS to clarify its expectations for
the interim report and summary report, and the programmatic components
HHS anticipates a State would report through audit findings.
Response: The interim report will help HHS verify the ongoing
implementation of the risk adjustment program and review concerns
identified by HHS or stakeholders (for example, we may request more
information on the State's oversight plan). We will expect the State to
report to HHS regarding the State's implementation of the processes
outlined in the State's application for certification of its alternate
risk adjustment methodology (or
[[Page 65055]]
recertification), if applicable, and its application for approval of
its operations.
We expect that the summary report will include a review of the
State-operated program's operations over a benefit year, including the
State's implementation of the risk adjustment methodology over a full
payment transfer cycle. A full year of risk adjustment operations will
extend beyond a benefit year because payment transfers are not
determined until the year following the applicable benefit year.
Therefore, the State will not need to submit this summary report until
after the end of the benefit year, upon completion of the full payment
transfer cycle. We will provide further details on the risk adjustment
interim and summary reports in future guidance.
Comment: One commenter asked HHS to permit State flexibility in
reporting, and asked that re-approval be based on an assessment of a
State's success in meeting the goals specific to its risk adjustment
program.
Response: We anticipate that we will require standardized reporting
of certain metrics, but that a State will be able to focus on the
specific characteristics of the State's risk adjustment program within
the report.
Comment: One commenter asked whether the summary report in Sec.
153.310(d)(4) will also be required at the conclusion of the first
benefit year and whether an interim report would be required at any
time after the first benefit year.
Response: As required by Sec. 153.310(d)(4), each State operating
a risk adjustment program is required to submit to HHS an annual
summary of risk adjustment program operations in the manner and
timeframe specified by HHS. The summary report will be required after
the conclusion of the first benefit year's risk adjustment operations
(and after the conclusion of each later benefit year's risk adjustment
operations), including the completion of the payment transfer cycle.
However, an interim report will be required only for the first benefit
year.
Comment: One commenter asked whether the interim report must
include an independent external audit.
Response: An independent external audit will not be required for
the interim report.
Comment: One commenter asked how HHS will review a State-operated
risk adjustment program's operations in the second year of operation,
including whether any additional information will be required during
the second year of operation.
Response: Only a summary report, as required by Sec.
153.310(d)(4), will be required for the second year of operation. We
are requiring an interim report for the first year of operations to
inform HHS re-approval for a third benefit year of operation because we
will not yet have access to any summary reports covering a full year at
the time of re-approval. For example, a State operating risk adjustment
in 2014 would submit an interim report no later than December 31, 2014.
HHS would use the information provided in this interim report to
determine if the State will be re-approved to operate risk adjustment
for the 2016 benefit year. We would indicate this re-approval in the
HHS Notice of Benefit and Payment Parameters for 2016, which is
published in 2015.
Comment: One commenter supported the requirement that a State-
operated risk adjustment program submit summary reports, and
recommended that the summary report include an analysis of coding
intensity trends.
Response: We will not require a State operating risk adjustment to
include an analysis of coding intensity trends in the State's summary
report. However, a State may choose to review this information as part
of the State's oversight strategy.
Summary of Regulatory Changes
We are finalizing these provisions with minor changes. We are
deleting references to HHS in paragraph (d)(4)(ii) to make clear that
any material weakness or significant deficiency identified in the
audit, including the methods the State intends to use to correct any
such material weakness or significant deficiency, must be made public,
and not only provided to HHS. We are also including minor conforming
changes so that references to ``certification'' and ``recertification''
in connection with the evaluation of a State's operation of risk
adjustment are changed to references to ``approval'' and ``re-
approval.''
c. General Oversight Requirements for State-Operated Risk Adjustment
Programs (Sec. 153.365)
To enable HHS to re-approve States to operate risk adjustment
pursuant to 45 CFR 153.310(d), HHS proposed in Sec. 153.365 that a
State operating a risk adjustment program keep an accounting of all
receipts and expenditures related to risk adjustment payments and
charges and the administration of risk adjustment-related functions and
activities for each benefit year. This accounting would be kept in
accordance with GAAP, and would apply consistently to all risk
adjustment-related activities. This standard is similar to the standard
proposed at Sec. 153.260(a), which applies to the reinsurance program
when operated by a State. We received no comment on this proposed
provision.
Summary of Regulatory Changes
We are finalizing this provision as proposed.
4. Risk Adjustment Methodology
a. Modification to the Transfer Formula in the HHS Risk Adjustment
Methodology (78 FR at 15430-34)
In the 2014 Payment Notice (78 FR at 15430-34), we noted our intent
to modify the risk adjustment payment transfer formula in order to
accommodate community rated States that utilize family tiering rating
factors. In non-family tiering States, family policy premiums must be
developed by adding up the applicable rates of each individual covered
under the policy, as required under 45 CFR 147.102(c)(1). In the case
of families with more than three children in non-family tiering States,
only the applicable rates of the three oldest covered children under
age 21 are counted towards the family policy premium rate (for example,
for a family with four children under age 21, only the applicable
individual rates of the three oldest children would count towards the
family policy premium). These family rating requirements do not apply
to States that use family tiering rating factors. In family tiering
States, family tiering rating factors are not required to yield
premiums that are equal to the sum of the individual policy members'
applicable rates, nor must they be set in a way that counts only the
rates of the oldest three children under age 21 within a family policy.
For example, a family tiering State could establish a family tiering
rating factor of 1.0 for an adult policy, 1.8 for a policy covering one
adult and one or more children, 2.0 for a policy covering two adults,
and 2.8 for a policy covering two adults and one or more children.
In order to account for the differences in family rating practices
between family tiering States and non-family tiering States, we
proposed two changes to the risk adjustment payment transfer formula
that HHS will use when operating risk adjustment on behalf of a State.
These changes would only apply to States that are using family tiering
rating structures. In the 2014 Payment Notice, we stated that billable
members exclude children who do not count towards family rates (that
is, children
[[Page 65056]]
who do not count toward family policy premiums are excluded) (78 FR at
15432, 15434). We proposed to clarify that in the case of family
tiering States, billable members would be based on the number of
children that implicitly count towards the premium under a State's
family rating factors. For example, assume a State has the following
four family tiers: One adult; one adult plus one or more children; two
adults; and two adults plus one or more children. Under this tiering
structure, only one child would be counted as a billable member in the
payment transfer formula, because additional children covered under a
family policy would not affect the policy's premium.
Additionally, we proposed a modification to the allowable rating
factor (ARF) formula that would be used for family tiering States. In
the 2014 Payment Notice (78 FR at 15433), the ARF is calculated as the
member month weighted average of the age factor applied to each
billable enrollee. In non-family tiering States, the ARF is intended to
measure the extent to which plans are increasing or decreasing their
premiums based on allowable age rating factors. In the case of family
tiering States, premium revenue will not vary by age-specific rating
factors. Rather, policy level premiums will vary only based on the
family tiering factors. In order to capture the impact of the family
tiering factors on plans' premium revenue we proposed that the ARF
formula for family tiering States be based on the family tiering
factors instead of age rating factors.
Specifically, under our proposal, the ARF for family tiering States
would be calculated at the level of the subscriber, as follows:
[GRAPHIC] [TIFF OMITTED] TR30OC13.000
Where:
ARFs is the rating factor for the subscriber(s) (based on
family size/composition), and
Ms is the number of billed person-months that are counted
in determining the subscriber(s) premium.
We noted that, apart from the changes to the billable member months
definition and the ARF formula discussed above, payment transfers in
family tiering States will be calculated using the formulas provided in
the 2014 Payment Notice (78 FR at 15431-34). The changes to the
billable member month definition and the ARF formula would not apply to
States that do not implement family tiering rating factors.
Comment: Several commenters supported the proposed modification to
the payment transfer formula for a family tiering State, agreeing with
the proposal to base billable members on the number of children that
implicitly count towards the premium under the State's family rating
factors. These commenters also supported modifying the ARF formula to
address rating limitations based on the family tiering factors instead
of the age rating factors. However, these commenters asked that the ARF
formula be modified to make the numerator a summation over all
subscribers of the product of the family tiering factor and the
subscriber member months, and the denominator the sum of billable
member months.
Response: We agree with the commenters that the ARF formula should
be modified so that the numerator is a summation over all subscribers
of the product of the family tiering factor and the subscriber member
months, and the denominator the sum of billable member months. We are
making this technical correction so that the ARF formula accurately
reflects a member month weighted average of the family tiering factor,
as described in the preamble to the proposed rule (78 FR at 37039-040).
Because of a typographical error, the formula did not align with this
proposal. We are correcting the formula to align with our proposal,
which we are finalizing in this final rule. Therefore, the ARF for
family tiering States would be calculated at the level of the
subscriber, as follows:
[GRAPHIC] [TIFF OMITTED] TR30OC13.001
Where:
ARFs is the rating factor for the subscriber(s) (based on
family size/composition), and
Ms is the number of billed person-months that are counted
in determining the premium(s) for the subscriber(s).
Summary of Regulatory Changes
We are finalizing the two proposed modifications to the risk
adjustment payment transfer formula as proposed, with one technical
correction. We are modifying the ARF formula by making the numerator a
summation over all subscribers of the product of the family tiering
factor and the subscriber member months, and the denominator the sum of
billable member months.
5. Subpart E--Health Insurance Issuer and Group Health Plan Standards
Related to the Reinsurance Program
a. Reinsurance Contribution Funds (Sec. 153.400)
In some health coverage arrangements, an insured group health plan
may provide benefits through more than one policy to the same covered
lives, where each policy standing alone does not constitute major
medical coverage, but the total benefits do.\15\ To clarify the
application of the rules (solely for the purpose of reinsurance
contributions), we proposed to amend paragraph (a)(1)(i) of 45 CFR
153.400(a) and add a new paragraph (a)(3) that would address liability
for reinsurance contributions in the foregoing fact pattern. This
paragraph (a)(3) would be an exception to the rule under paragraph
(a)(1)(i), which provides that an issuer of health insurance coverage
is not required to make reinsurance contributions for coverage to the
extent the coverage is not major medical coverage.
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\15\ We note that, after 2014, such arrangements generally would
only be permissible in the large employer group context, because
issuers of small employer group market insurance coverage are
required to provide all EHB under any policy they offer that does
not qualify as ``excepted benefits.''
---------------------------------------------------------------------------
Under the proposed paragraph (a)(3), a health insurance issuer
providing coverage under a group health plan would make reinsurance
contributions for lives under its health insurance coverage even if the
insurance coverage does not constitute major medical coverage, if: (i)
The group health plan provides health insurance coverage for the same
covered lives through more than one insurance policy that in
combination constitute major medical coverage but individually do not;
(ii) the lives are not covered by self-insured coverage of the group
health plan (except for self-insured coverage limited to excepted
benefits); and (iii) the health insurance coverage under the policy
offered by the health insurance issuer represents a percentage of the
total health insurance coverage offered in combination by the group
health plan greater than the percentage offered under any of the other
policies. We further proposed that for purposes of paragraph (a)(3),
the percentage of coverage offered under various policies would be
determined based on the average premium per covered life for these
policies. In the event that the percentage of coverage is equal, the
issuer of the policy that provides the greatest portion of in-network
hospitalization benefits would be responsible for reinsurance
contributions.
Because an issuer of group health insurance coverage that does not,
by itself, constitute major medical coverage may not be aware of the
existence of, or premium for, other health insurance coverage obtained
by a plan sponsor covering the same lives under a group health plan, we
sought comment on whether and in what circumstances an
[[Page 65057]]
issuer should be entitled to rely upon representations from a plan
sponsor regarding the relative percentage of coverage offered by the
issuer. We also sought comment on what other means we should consider
for ensuring that the relevant issuer knows of its obligation to make
the reinsurance contributions, including any role that the employer
should have in ensuring that issuers have the information necessary to
determine which issuer is responsible for reinsurance contributions, as
well as alternative approaches that should be considered for
determining responsibility for reinsurance contributions in such
circumstances.
Finally, we addressed in the proposed rule certain inquiries as to
how reinsurance contribution obligations would be allocated in the case
of a group health plan under which some benefit options for employees
are insured by an issuer, and some options offer benefits without the
involvement of an issuer in insuring the benefits (because either the
group health plan or some non-issuer entity assumes the risk for that
coverage option). We proposed that in such a case, if a coverage option
is insured by an issuer, the issuer would be responsible for the
reinsurance contribution associated with that coverage option. If an
employee coverage option under such a group health plan is not insured
(because either the group health plan or other non-issuer assumes the
risk), we proposed that the group health plan would be responsible for
the reinsurance contribution associated with that coverage option.
After considering the comments received, we are modifying the proposed
provisions by amending the ``percentage of benefits'' provision to
state that the issuer of the plan that provides the greatest portion of
the inpatient hospitalization benefits would be responsible for
reinsurance contributions. We also are making two minor revisions to
the language in proposed paragraph (a)(3) to clarify its scope.
Comment: Several commenters suggested that the ``higher percentage
of benefits'' approach in proposed Sec. 153.400(a)(3) is
administratively burdensome and presents significant operational
problems. A number of commenters suggested an alternative approach that
would require the issuer that covers hospitalizations to be responsible
for reinsurance contributions.
One commenter agreed with HHS's statement in the preamble to the
proposed rule that issuers may not know about other coverage purchased
by a plan sponsor, so directing issuers to seek representations from
plan sponsors concerning the relative percentage of coverage offered by
the issuer was reasonable. The commenter suggested that issuers be able
to rely on employer representations regarding other coverage, and that
issuers be held harmless from compliance actions if they do not receive
such information from employers, or if the information is inaccurate.
However, another commenter stated that plans or plan sponsors should
not be required to provide information to issuers and that a rule that
``looks to the types of coverage provided'' is appropriate. One
commenter requested clarification on which entity would be liable for
reinsurance contributions where a group health plan has two insured
major medical components offered by different issuers. The commenter
stated that some States prohibit HMOs from providing out-of-network
coverage for non-emergency services. HMOs in those States package their
in-network coverage with out-of-network coverage issued by a non-HMO
health insurance issuer, so that enrollees in the HMO have simultaneous
coverage under both products. The commenter suggested that the rule
should provide the issuer of the in-network coverage (the HMO, which
would be expected to account for the majority of the total health
coverage under the group health plan) is responsible for reinsurance
contributions.
Response: We are revising proposed Sec. 153.400(a)(3) to state
that the issuer of the plan that provides the greatest portion of
inpatient hospitalization coverage will be responsible for reinsurance
contributions, and note that the issuer should be the issuer that
provides the majority of the dollar value of the benefits in most
situations. We believe this option will mitigate the operational
difficulties discussed by the commenters, and will significantly reduce
the need for plan sponsors to provide information to issuers. Because
we recognize that there may be circumstances in which an issuer is
unsure whether its coverage provides the greatest portion of inpatient
hospitalization benefits, we intend to hold an issuer harmless from
non-compliance actions for failure to pay reinsurance contributions if
the issuer relies in good faith upon a written representation by the
plan sponsor that the issuer's coverage does not provide the greatest
portion of inpatient hospitalization benefits.
Comment: One commenter asked HHS to clarify the type of group
health plan coverage intended to be addressed by the proposed addition
of paragraph (a)(3) to Sec. 153.400.
Response: Section 153.400(a)(3) applies to fully insured group
health plans that offer health insurance coverage through more than one
policy. For example, a fully insured group health plan with two
insurance policies, one of which covers inpatient hospitalization and
another that covers doctors' office visits, prescriptions, vision and
dental benefits, or other similar arrangements, would be covered by
this paragraph.
Comment: One commenter requested a clarification on the proposed
approach to allocating responsibility for reinsurance contributions, in
the case of a group health plan where some options offered under a plan
are insured and some options offer benefits without the involvement of
an issuer (because either the group health plan or a non-issuer entity
assumes the risk for that coverage option). The commenter requested
that HHS clarify that the reinsurance contribution will not be imposed
with respect to the same covered life more than once.
Response: Under the proposed approach, in such a group health plan,
the issuer would be liable for reinsurance contributions with respect
to an insured coverage option, and the group health plan would be
liable for reinsurance contributions with respect to a coverage option
that is not insured. Consequently, reinsurance contributions would not
be required more than once for the same covered life.
In general, it is our intent not to require payment of reinsurance
contributions more than once for the same covered life. We recognize
that certain complex group health plan arrangements can lead to
situations in which lives are covered multiple arrangements and where
it is unclear whether more than one health plan or issuer must make
reinsurance contributions on the same covered life.
To provide clarity on the matter, we intend to clarify in future
rulemaking the principle that reinsurance contributions are required
only once with respect to the same covered life. We also intend to
propose that no reinsurance contributions are required under a group
health plan where the group health plan coverage applies to lives that
are also covered by individual market health insurance coverage for
which reinsurance contributions are required, or where the coverage is
supplemental or secondary to group health coverage for which
reinsurance contributions must be made for the same covered lives.
[[Page 65058]]
Summary of Regulatory Changes
We are finalizing the reinsurance contribution provision discussed
above as proposed, with the following modifications. We are modifying
the ``percentage of benefits'' provision to state that the issuer of
the plan that provides the greatest portion of the inpatient
hospitalization benefits will be responsible for reinsurance
contributions. We also are making two minor revisions to language in
proposed paragraph (a)(3) to clarify its scope.
b. Maintenance of Records (Sec. 153.405(h) and Sec. 153.410(c))
To meet our obligation to safeguard Federal funds, we proposed to
amend Sec. 153.405 by adding paragraph (h), which would require a
contributing entity to maintain documents and records, whether paper,
electronic, or in other media, that are sufficient to substantiate the
enrollment count submitted under Sec. 153.405 for at least 10 years,
and would direct the contributing entity to make that evidence
available upon request from HHS, the OIG, the Comptroller General, or
their designees, for the purpose of verifying reinsurance contribution
amounts. We also proposed to amend Sec. 153.410 by adding paragraph
(c), which would direct an issuer of a reinsurance-eligible plan in a
State where HHS operates reinsurance to maintain documents and records,
whether paper, electronic, or in other media, sufficient to
substantiate the requests for reinsurance payments made pursuant to
Sec. 153.410 for at least 10 years, and would require the issuer to
make that evidence available upon request from HHS, the OIG, the
Comptroller General, or their designees, (or, in a State where the
State is operating reinsurance, the State or its designee) for the
purpose of verifying reinsurance payment requests. We note that these
standards could be satisfied if the contributing entity or issuer of a
reinsurance-eligible plan archived the documents and records and
ensured that they were accessible in the event of an investigation,
audit, or other review. We note that the 10-year obligation to retain
records begins when the record is created.
We addressed the comments received on the proposed maintenance of
records provisions in the preamble discussion related to Sec.
153.240(c) above.
Summary of Regulatory Changes
We are finalizing these provisions as proposed, with one
clarification in each provision to conform with the other record
retention standards in this rule. We are clarifying that in each
provision it is the ``documents and records'' that must be made
available upon request.
6. Subpart F--Health Insurance Issuer Standards Related to the Risk
Corridors Program
a. Definitions (Sec. 153.500 and Sec. 153.510)
Section 1342(a) of the Affordable Care Act provides that ``a
qualified health plan offered in the individual or small group market''
is to participate in the risk corridors program. In the Exchange
Establishment Rule, we stated that a stand-alone dental plan is ``a
type of qualified health plan.'' However, we did not intend for all
requirements applicable to a QHP to apply to stand-alone dental plans.
For example, under 45 CFR 155.1065(a)(3), certain QHP standards are not
applicable to a stand-alone dental plan if they cannot be met, given
the limited benefit package offered by the plan. We believe that it
would not be appropriate to subject stand-alone dental plans to the
risk corridors program because such plans are considered excepted
benefits plans under section 2791(c) of the PHS Act, and are therefore
not subject to the rating rules--that is, the Federal prohibition on
underwriting premiums, the requirement to base premium rating using the
single risk pool, and the fair health insurance premiums limitations.
Thus, although States have the option to prohibit underwriting for
excepted benefits plans, and issuers of stand-alone dental plans may
voluntarily choose not to underwrite these plans, we believe that, in
general, an issuer of a stand-alone dental plan will not be subject to
the same rate-setting uncertainty in 2014 as the issuer of a major
medical plan, and will not need the risk-sharing protections of risk
corridors.\16\ In the proposed rule, we noted that stand-alone dental
plans are similarly excluded from participation in the two other
premium stabilization programs--reinsurance and risk adjustment. We
also noted that, consistent with the exclusion of excepted benefits
plans from the medical loss ratio (MLR) requirements, stand-alone
dental claims would not be pooled along with an issuer's other claims
for the purposes of determining ``allowable costs'' in the risk
corridors calculation, as defined at 45 CFR 153.500. We received
several comments, all of which were supportive of this approach.
---------------------------------------------------------------------------
\16\ In the preamble to the Exchange Establishment Rule, we note
that each Exchange has the authority to require, as a condition of
certification, comprehensive medical QHPs to offer and price the
pediatric dental EHB (if covered) separately, if doing so would be
in the best interest of consumers. For the 2014 benefit year, an FFE
will not require comprehensive medical QHP issuers that provide
pediatric dental coverage to do so. We have provided this guidance
in Chapter 4 of the 2014 Letter to Issuers on Federal and
Partnership Marketplaces (April 5, 2013).
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Summary of Regulatory Changes
We are finalizing this policy as proposed, and are adding a new
paragraph (e) to Sec. 153.510, which provides that a QHP issuer is not
subject to the provisions under subpart F of part 153 with respect to a
stand-alone dental plan.
b. Calculation of Allowable Costs, Attribution and Allocation of
Revenue and Expense Items, and Risk Corridors Data Requirements (Sec.
153.500, Sec. 153.520, and Sec. 153.530)
In the interim final rule (78 FR 15541), we noted that, consistent
with the single risk pool provision at 45 CFR 156.80, which directs an
issuer to pool claims costs across all of its non-grandfathered health
plans in a market within a State, a QHP issuer must pool allowable
costs across all its non-grandfathered plans in the relevant market for
the purposes of risk corridors calculation. We therefore amended the
regulatory definition of ``allowable costs'' for purposes of the risk
corridors program so that allowable costs for a QHP are equal to the
pro rata portion of the QHP issuer's incurred claims. We also modified
the provision related to attribution and allocation of revenue and
expense items in 45 CFR 153.520 to conform to the changes for the risk
corridors calculation described above.
We are finalizing the policy set forth in the interim final rule
with respect to the definition of ``allowable costs,'' and are making a
number of modifications to maintain consistency with this policy in
response to comment, as described below.
Comment: Several commenters recommended that we exclude the
experience of non-QHPs from the risk corridors calculation, and include
only the experience of an issuer's QHPs in our definition of allowable
costs. These commenters were concerned that tying allowable costs to
the experience of all of a QHP issuer's non-grandfathered health plans
would have the effect of diluting the pricing protections afforded to
QHPs through the risk corridors program. One commenter believed that it
would be inconsistent to disconnect the premiums used for the risk
corridors target amount from the claims used to develop the allowable
costs, and suggested an alternate approach that would direct issuers to
aggregate incurred claims for all QHPs and then allocate these incurred
claims to each QHP pro rata based on the earned
[[Page 65059]]
premium of each QHP as a percentage of total earned premium for all
QHPs. The commenter believed that, while this proposal would not affect
the risk corridors calculation, it would require issuers to separate
QHP and non-QHP claims and risk adjustment payments and charges.
Response: We are finalizing the definition of allowable costs as
set forth in the interim final rule without change. As discussed in the
preamble to the interim final rule, this approach is consistent with
how issuers will determine premiums pursuant to the single risk pool
requirement at 45 CFR 156.80. As stated in the interim final rule,
allowable costs will be calculated based on an issuer's experience for
all non-grandfathered plans in a State market, such that the actual
risk corridors payment or charge will be calculated based on a QHP's
pro rata share (based on premiums) of the QHP issuer's market-wide
allowable costs and premiums. This approach ensures that the incurred
claims used to develop the allowable costs in the numerator of the risk
corridors calculation are consistent with the projected claims used to
develop the premiums used to calculate the target amount in the
denominator of the risk corridors calculation. We also note that this
approach aligns with existing processes for the MLR program, and helps
to maintain overall consistency between the MLR and risk corridors
programs.
We agree with the comment that it is inconsistent to disconnect the
projected claims used to develop premiums used to calculate the risk
corridor target amount from the incurred claims used to develop the
allowable costs, and are therefore modifying our risk corridors expense
allocation rules at 45 CFR 153.520 to ensure that the numerator and the
denominator of the risk corridors calculation are calculated in a fully
consistent manner. We are revising the risk corridors allocation rules
in Sec. 153.520 to clarify that administrative expenses in the target
amount, like allowable costs, should be calculated based on expenses
across all non-grandfathered health plans in the market, and allocated
pro rata to a QHP based on the QHP's premiums. Because certain
administrative expenses, such as Exchange user fees are, like incurred
claims costs, required to be spread across the relevant risk pool,
their treatment should conform with the market-wide risk corridors
calculation for allowable costs and premiums. Thus, we are clarifying
that administrative expenses should be similarly allocated. We note
that this change is consistent with our intention to align the risk
corridors calculation with the single risk pool provision, will further
align the calculations for the MLR and risk corridors programs, and
will reduce the burden on issuers of allocating expenses on a plan-by-
plan basis.
Finally, we are also making conforming corrections to the risk
corridors data requirements in Sec. 153.530(b) and (c) to specify that
issuers must submit risk corridors data in a manner that is consistent
with the calculation of allowable costs and allowable administrative
costs, as defined at Sec. 153.500. We provide that a QHP issuer must
submit to HHS data on allowable costs and allowable administrative
costs incurred for all of its non-grandfathered plans in a market
within a State. Without these corrections, issuers would be required to
make plan-specific allocations and submit plan-specific amounts that
are not necessary for the risk corridors calculation, while not
providing the QHP aggregate premium data required for the risk
corridors calculation as amended. We believe that these corrections
will alleviate potential confusion among issuers with regard to
submission of pooled risk corridors data.
Comment: One commenter noted that the risk corridors calculation
compares allowable costs for QHPs and non-QHPs in the numerator of the
calculation to target amounts for only QHPs in the denominator. The
commenter recommended that the numerator of the calculation should only
pool incurred claims across an issuer's QHPs to ensure a consistent
comparison. One commenter noted that the single risk pool provision at
45 CFR 156.80 permits specific plan level premium adjustments, such
that QHP premiums would reflect certain factors that relate
particularly to QHPs, in addition to market-wide factors. Consequently,
the commenter believed that an approach that limited the risk corridors
calculation to the experience of only an issuer's QHPs would still be
consistent with the single risk pool provision. However, another
commenter supported the modification to the calculation of allowable
costs that was set forth in the interim final rule, and believed that
our policy was consistent with the single risk pool provision.
Response: Because a QHP's target amount is based on the QHP's
premiums, which are principally set based on the index rate for QHPs
and non-QHPs in the relevant market, we believe it is more consistent
to set allowable costs based on the pooled claims costs of both QHPs
and non-QHPs. We believe the allocation of the allowable costs by plan
premiums addresses the plan-specific premium variation.
Comment: All commenters supported the modification to the risk
corridors formula to calculate allowable costs based on incurred claims
at an aggregate level, rather than using incurred claims specific to
each QHP.
Response: We are finalizing our definition of allowable costs to
calculate allowable costs based on aggregate incurred claims as set
forth in the interim final rule.
Summary of Regulatory Changes
We are finalizing the definition of ``allowable costs'' in Sec.
153.500 without change. We are modifying Sec. 153.520(a) and (b) to
provide that expenses in the target amount of the risk corridors
calculation should be based on market-wide expenses, and must be
allocated across a QHP issuer's plans in proportion to the plans'
premiums. Finally, we are making conforming modifications to the risk
corridors data requirements in Sec. 153.530(b) and (c) to require a
QHP issuer to submit data on allowable costs and allowable
administrative costs for its non-grandfathered health plans in a market
within a State.
7. Subpart G--Health Insurance Issuer Standards Related to the Risk
Adjustment Program
We proposed to amend Sec. 153.620(b) to add a standard that would
direct an issuer that offers risk adjustment covered plans to maintain
documents and records, whether paper, electronic, or in other media,
sufficient to enable the evaluation of the issuer's compliance with
applicable risk adjustment standards, and to make that evidence
available upon request from HHS, the OIG, the Comptroller General, or
their designees (or in a State where the State is operating risk
adjustment, the State or its designee), to any such entity. This
standard, which is consistent with other records maintenance standards
in this rule, would direct an issuer of a risk adjustment covered plan
to retain additional records--not only those pertaining to data
validation--to substantiate its compliance with risk adjustment
standards, whether risk adjustment is operated by HHS or a State.
We addressed the comments received on the proposed maintenance of
records provisions in the preamble discussion of Sec. 153.240(c)
above.
Comment: Several commenters asked HHS to clarify the record
retention timeframe for this proposed provision.
[[Page 65060]]
Response: We are amending this proposed provision to specify the
record retention timeframe for this proposed provision. We clarify that
an issuer that offers risk adjustment covered plans must maintain
documents and records, whether paper, electronic, or in other media,
sufficient to enable the evaluation of the issuer's compliance with
applicable risk adjustment standards for each benefit year, for at
least 10 years, and make those documents and records available upon
request from HHS, the OIG, the Comptroller General, or their designees
(or in a State where the State is operating risk adjustment, the State
or its designee), to any such entity. We note that the 10-year
obligation to retain records begins when the record is created.
Comment: One commenter encouraged HHS to prohibit QHP issuers from
demanding documentation or paperwork from physician practices or
independently auditing physician practices in order to comply with
HHS's proposed oversight requirements.
Response: This regulation does not seek to regulate the
relationships between issuers of risk adjustment covered plans and
health care providers. Rather, we expect that risk adjustment covered
plans will make appropriate arrangements with providers to ensure
compliance with this regulation.
Comment: One commenter asked HHS to amend this standard to provide
that these documents and records be made available to the issuer's data
validation auditor as well as HHS, the OIG, the Comptroller General, or
their designees.
Response: We are not extending this provision to require an issuer
of a risk adjustment covered plan to make available its documents and
records to its data validation auditor. A data validation auditor's
authority to review an issuer's relevant documents will be addressed
under the risk adjustment data validation regulations in 45 CFR
153.630.
Summary of Regulatory Changes
We are making two corrections to this provision, to conform with
our other record retention provisions throughout this rule. We are
clarifying that it is the ``documents and records'' that must be made
available upon request. We are also clarifying that documents and
records must be maintained for each benefit year, for at least 10
years.
8. Subpart H--Distributed Data Collection for HHS-Operated Programs
a. Failure To Comply With HHS-Operated Risk Adjustment and Reinsurance
Data Requirements (Sec. 153.740(a))
In Sec. 153.740(a), we proposed that HHS may pursue an enforcement
action for CMPs against an issuer in a State where HHS operates the
reinsurance or risk adjustment program, if the issuer fails to: (a)
Establish a secure, dedicated distributed data environment pursuant to
45 CFR 153.700(a); (b) provide HHS with access to enrollee-level plan
enrollment information, enrollee claims data, or enrollee encounter
data through its dedicated distributed data environment pursuant to 45
CFR 153.710(a); (c) otherwise comply with the requirements of 45 CFR
153.700 through 153.730; (d) adhere to the reinsurance data submission
requirements set forth in 45 CFR 153.420; or (e) adhere to the risk
adjustment data submission and data storage requirements set forth in
45 CFR 153.610 through 153.630. As discussed above, under the data
collection approach that we are implementing when we operate risk
adjustment or reinsurance on behalf of a State, an issuer must use
masked enrollee identification numbers when making data accessible
through the dedicated distributed data environment. In addition, we
will not store any personally identifiable enrollee information or
individual claim-level information from the data that issuers make
accessible to HHS through the dedicated distributed data environment
except when conducting data validation or audits.
Risk Adjustment: Risk adjustment covered plans must provide access
to the risk adjustment enrollee-level plan enrollment information,
enrollee claims data, or enrollee encounter data from the issuer by
April 30 of the year following the applicable benefit year in order for
HHS to calculate payment transfers based on claims experience and
premiums as set forth in 45 CFR 153.730. In order to enforce risk
adjustment standards when operating risk adjustment on behalf of a
State pursuant to our authority under section 1321(c)(2) of the
Affordable Care Act, we proposed establishing HHS authority to impose
CMPs, and applying the related enforcement standards set forth in Sec.
156.805 to non-compliant issuers. If a risk adjustment covered plan
does not comply with the requirements set forth in 45 CFR 153.610
through 153.630 and 45 CFR 153.700 through 153.730, we proposed to
apply a sanction so that the level of the enforcement action would be
proportional to the level of the violation. While we would reserve the
right to impose penalties up to the maximum amounts set forth in Sec.
156.805(c), as a general principle, we stated our intent to work
collaboratively with issuers to address problems in establishing
dedicated distributed data environments in 2014. We noted that HHS
would reserve the right to impose, or not impose, CMPs as appropriate.
We proposed that in our application of CMPs, we would take into account
the totality of the issuer's circumstances, including such factors as
an issuer's previous record of non-compliance (if any), the frequency
and level of the violation, and any aggravating or mitigating
circumstances. Our intent is to encourage issuers to address non-
compliance and not to severely affect their financial condition,
especially where the issuer demonstrates good faith in monitoring
compliance with applicable standards, identifies any suspected
occurrences of non-compliance, and attempts to remedy any non-
compliance. For instance, if an issuer of a risk adjustment covered
plan did not establish a dedicated distributed data environment or
provide access to the necessary risk adjustment data to permit HHS to
timely calculate the applicable risk adjustment transfer amounts, HHS
would assess a default risk adjustment charge as described below. HHS
might also elect to impose CMPs in conjunction with the imposition of
the default risk adjustment charge if an issuer failed to comply with
applicable data security or privacy standards placing the interests of
third-parties at risk.
Reinsurance: We proposed that an issuer of a reinsurance-eligible
plan may be subject to CMPs for failure to comply with 45 CFR 153.420,
or 45 CFR 153.700 through 153.730. Under this proposal, HHS would take
into account the totality of the issuer's circumstances, including such
factors as an issuer's previous record of non-compliance (if any), the
frequency and level of the violation, and any aggravating or mitigating
circumstances when determining how to apply CMPs. In the proposed rule,
we indicated that we might not impose CMPs in certain cases. For
example, HHS might not impose CMPs on an issuer of a reinsurance-
eligible plan if it fails to set up a dedicated distributed data
environment or meet certain data requirements stated above if, as a
consequence, HHS simply does not have the necessary claims data from
the dedicated distributed data environment to calculate or distribute
[[Page 65061]]
reinsurance payments for the reinsurance-eligible plan, and as a
result, the reinsurance-eligible plan would forgo significant
reinsurance payments that it otherwise might have received. Regardless,
HHS reserves the right to impose CMPs irrespective of whether an issuer
becomes ineligible for reinsurance payments as a result of failing to
comply with 45 CFR 153.420, or 45 CFR 153.700 through 153.730. After
considering the comments received, we are finalizing Sec. 153.740(a)
with one modification. We are including a compliance standard, parallel
to that set forth in 45 CFR 156.800(c), providing that CMPs will not be
imposed under this provision during the 2014 calendar year, if the
issuer has made good faith efforts to comply with the applicable
requirements.
Comment: Several commenters supported HHS's proposed flexibility
and cooperation with issuers when imposing CMPs on issuers that fail to
establish a dedicated distributed data environment or provide HHS
access to all necessary data. Commenters supported taking into account
an issuer's good faith attempts to comply with the data requirements.
One commenter suggested that HHS provide standards that would allow
issuers to demonstrate that they have complied with the data
requirements. Another commenter asked HHS to adopt a ``safe harbor''
that would defer the imposition of any CMPs for two years, and to
require only good faith compliance. One commenter specifically
suggested that issuers be subject to CMPs if they are out of compliance
with risk adjustment and reinsurance data requirements for two or more
consecutive benefit years, or if they fail to correct significant
deficiencies discovered during the risk adjustment initial and
secondary validation audit processes that result in substantially
inaccurate data or produce upcoding trends significantly greater than
those found among other issuers in the State.
Response: As we described in the proposed rule, HHS will take into
account the totality of an issuer's circumstances, including such
factors as the issuer's previous record of non-compliance (if any), the
frequency and level of the violation, and any aggravating or mitigating
circumstances, including the issuer's good faith in monitoring
compliance with applicable standards and attempts to remedy any non-
compliance. In addition, consistent with our policy and standards with
respect to sanctions for non-compliance with FFE standards set forth in
45 CFR 156.800, 45 CFR 156.805, and 45 CFR 156.810, we are clarifying
that if HHS is able to determine that an issuer of a risk adjustment
covered plan or reinsurance-eligible plan, as applicable, is making
good faith efforts to comply with the standards set forth in Sec.
153.740(a), we will not seek to impose CMPs for non-compliance with
those standards during 2014. Based on the comments received in
connection with the proposed rule, in 45 CFR 156.800(c), we provided
that for 2014, sanctions under that subpart will not be imposed if the
QHP issuer has made good faith efforts to comply with applicable
requirements. We are adopting a similar CMP enforcement strategy here.
However, we note that nothing in this provision prohibits HHS from
imposing CMPs in 2015 for non-compliance that occurred in 2014. At the
appropriate time, we will consider extending this good faith compliance
policy through 2015. We also note that this good faith compliance
policy does not apply to the imposition of the default risk adjustment
charge described in Sec. 153.740(b), which is intended as an
administrative measure to ensure that HHS may properly calculate risk
adjustment payments and charges for the entire market. Finally, we note
that HHS's determination of good faith may require issuers of risk
adjustment covered plans and reinsurance-eligible plans to allow HHS to
conduct reviews of the issuer's risk adjustment and reinsurance
materials and to review the issuer's good faith efforts to comply with
corrective action plans.
Comment: One commenter asked whether the enforcement authority
proposed in Sec. 153.740 will apply to issuers in States where HHS
operates reinsurance but the State operates the risk adjustment
program.
Response: The enforcement actions set forth in Sec. 153.740 apply
to issuers that fail to comply with HHS-operated risk adjustment and
reinsurance data requirements. As such, in States where HHS operates
reinsurance but the State operates the risk adjustment program, the
enforcement authority proposed in Sec. 153.740 would apply with
respect to non-compliance with reinsurance-related standards to issuers
of reinsurance-eligible plans, but not to non-compliance with respect
to risk adjustment-related standards to issuers of risk adjustment
covered plans.
Comment: One commenter asked that HHS permit issuers to appeal any
HHS enforcement actions.
Response: As noted in the proposed rule, HHS may impose CMPs in
accordance with the procedures set forth in Sec. 156.805 of this
subchapter. Sections 156.805(d) and (e) provide a process for issuers
that are assessed a CMP to request a hearing. We intend to propose an
administrative process in the HHS Notice of Benefit and Payment
Parameters for 2015 through which an issuer may appeal the assessment
of a default risk adjustment charge.
Summary of Regulatory Changes
To clarify our 2014 policy of nonenforcement of CMPs for good
faith, we are adding a new sentence to Sec. 153.740(a).
b. Default Risk Adjustment Charge (Sec. 153.740(b))
As described in the Premium Stabilization Rule (77 FR 17220) and
the 2014 Payment Notice (78 FR 15410), HHS will employ a distributed
data collection approach when it operates a risk adjustment program on
behalf of a State. Under this approach, issuers in States where HHS
operates a risk adjustment program will be required to establish
dedicated, secure data environments, and provide HHS with access to
``masked'' \17\ enrollee-level plan enrollment information, enrollee
claims data, and enrollee encounter data pursuant to 45 CFR 153.710 and
45 CFR 153.720. Pursuant to 45 CFR 153.730, issuers must provide access
to required risk adjustment data by April 30 of the year following the
applicable benefit year in order for HHS to calculate risk adjustment
payment transfer amounts. As discussed above, under the data collection
approach we are implementing when we operate risk adjustment or
reinsurance on behalf of a State, we will not store any personally
identifiable enrollee information or individual claim-level information
from the data that issuers make accessible to HHS through the dedicated
distributed data environment except for purposes of data validation and
audit.
---------------------------------------------------------------------------
\17\ As described at 45 CFR 153.720(b), masked data means data
associated with a unique identifier, where the unique identifier
does not include the enrollee's personally identifiable information.
---------------------------------------------------------------------------
As discussed in the proposed rule, if an issuer does not set up a
dedicated distributed data environment or submits inadequate risk
adjustment data, HHS would not have the required risk adjustment data
from the issuer to calculate risk scores or payment transfers. This
data is necessary to properly calculate risk adjustment payments and
charges for the entire applicable market for the State. If HHS cannot
perform this calculation for a particular issuer, risk adjustment
payment transfers would be affected for all other issuers in the State
market because payment transfers are determined within a market within
a State such that they will net to zero. In the proposed rule, we
invoked our
[[Page 65062]]
authority pursuant to section 1343(b) of the Affordable Care Act to
develop and apply criteria and methods for carrying out risk adjustment
activities to apply a default risk adjustment charge to issuers in the
individual or small group market that fail to provide the risk
adjustment data necessary for HHS to calculate payments and charges for
the market in the State.
In Sec. 153.740(b), we proposed that if an issuer of a risk
adjustment covered plan fails to establish a dedicated distributed data
environment or fails to provide HHS with access to risk adjustment data
in such environment by April 30 of the year following the applicable
benefit year in accordance with Sec. Sec. 153.610(a), 153.700,
153.710, or 153.730, such that HHS cannot apply its Federally certified
risk adjustment methodology to calculate the plan's risk adjustment
payment transfer amount in a timely fashion, HHS would assess a default
risk adjustment charge.
We proposed two different methods for determining the per member
per month amount used to calculate the default risk adjustment charge.
One option would be to use the highest per member per month charge
among risk adjustment covered plans in a risk pool in the market in the
plan's geographic rating area. A second option would be to use a per
member per month amount that is two standard deviations above the mean
charge in the market in the plan's geographic rating area.
We noted in the proposed rule that in order to calculate a plan's
risk adjustment default charge, we must multiply the per member per
month amount by an enrollment count. We proposed to base the default
charge on the average enrollment in the State market. If enrollment
data is provided, we proposed that the default charge would be based on
average annual enrollment for the plan in a risk pool in the State
market. We sought comment on these methods, other appropriate methods
for calculating a default risk adjustment charge, and other sources of
data HHS could use to determine enrollment data for the issuers in
question. We also sought comment on whether to allocate an issuer's
default charge to other issuers in the market as part of payments and
charges in the concurrent benefit year, during a subsequent benefit
year, or sometime between annual payments and charges processes.
We received a number of comments strongly supporting our proposal
to impose a default risk adjustment charge if an issuer of a risk
adjustment covered plan fails to establish a dedicated distributed data
environment or fails to provide HHS with access to the required data.
We are finalizing that regulation text as proposed.
Comment: Several commenters suggested that we tie the default
charge to the issuer's actual enrollment based on an appropriate public
filing by the issuer, such as MLR or NAIC filings, or information
supplied by a State Department of Insurance (DOI), rather than average
enrollment in the State.
Response: We agree with the comments, and are finalizing an
approach based on the issuer's actual enrollment. Because the total
risk adjustment default charge is a function of both a per member per
month amount as well as a total enrollment amount, we recognize that
actual enrollment would better align the risk adjustment default charge
with the overall goal of market stabilization. Thus, if an issuer of a
risk adjustment covered plan does not provide access to required risk
adjustment data by April 30 of the year following the applicable
benefit year, then we will seek from the issuer an attestation of total
billable member months, which we would use to calculate the total risk
adjustment default charge. That attestation would be subject to later
HHS validation processes, which we will describe in future rulemaking
and guidance, along with compliance with other risk adjustment-related
requirements. If an issuer does not submit enrollment data, HHS will
seek enrollment data from the issuer's MLR and risk corridors filings
for the applicable benefit year, or, if unavailable, other reliable
data sources, such as the State DOI.
Comment: We received several comments suggesting that HHS allocate
an issuer's default charge to other issuers in the market as part of
the payments and charges calculation in the concurrent benefit year.
Response: We agree that the default risk adjustment charge should
be part of the concurrent benefit year payment and charges calculation.
However, our ability to apply that charge to the current year will
depend upon when we are able to obtain the enrollment data for the plan
in question. As discussed above, HHS will assess the risk adjustment
default charge once HHS receives actual enrollment data. Once
calculated, we would transfer the risk adjustment default charge on a
per member per month basis to all compliant risk adjustment covered
plans in the plan's risk pool in the market in the State in the
earliest possible payment and charges cycle. We further note that we
would not include the non-compliant risk adjustment covered plan in the
risk adjustment transfer formula calculations because of the complexity
of doing so. We intend to establish a methodology for allocating the
default risk adjustment charge among plans in the risk pool in future
rulemaking.
Comment: A number of commenters made suggestions on the specific
methodology to be used to determine the per member per month amount for
calculating the default risk adjustment charge. One commenter supported
the second option for calculating the per member per month amount--
assessing a per member per month amount two standard deviations above
the mean per member per month charge. One commenter supported the use
of the second option for calculating the per member per month amount
for the first occurrence of non-compliance, but stated that setting a
higher amount, such as the highest per member per month charge among
risk adjustment covered plans in the market, would be appropriate for
repeated violations. Other commenters asked that HHS adopt a third
methodology for calculating the per member per month amount--
specifically, a fixed percentage of State-wide average premium. They
stated that this methodology could be more appropriate if a market has
a limited number of issuers that submit risk adjustment data.
Response: In light of the comments received, we will not finalize a
methodology to calculate the per member per month amount used in the
default risk adjustment charge. We intend to establish that methodology
in future rulemaking.
Summary of Regulatory Changes
We are finalizing our regulation text providing the authority to
impose a default risk adjustment charge as proposed. We are finalizing
aspects of the methodology for calculating the default risk adjustment
charge--our use of the plan's actual enrollment and our application of
the default risk charge to adjust payments to other plans in the market
in the State on a per member per month basis in the earliest available
payment and charges cycle. We are not finalizing our approach to
determining the per member per month amount used to calculate the
default risk charge at this time, and will propose that methodology in
future rulemaking.
[[Page 65063]]
D. Part 155--Exchange Establishment Standards and Other Related
Standards Under the Affordable Care Act
1. Subpart D--Exchange Functions in the Individual Market: Eligibility
Determinations for Exchange Participation and Insurance Affordability
Programs
a. Administration of Advance Payments of the Premium Tax Credit and
Cost-Sharing Reductions (Sec. 155.340)
We proposed to amend Sec. 155.340 by adding paragraph (h), which
sets forth additional requirements applicable when an Exchange is
facilitating the collection and payment of premiums to QHP issuers and
stand-alone dental plans. Specifically, we proposed that if the
Exchange did not reduce an enrollee's premium by the amount of the
advance payment of the premium tax credit in accordance with 45 CFR
155.340(g), the Exchange would be required to refund to the enrollee
any excess premium paid by or for the enrollee. The Exchange would also
be required to notify the enrollee of the improper application of the
advance payment of the premium tax credit no later than 30 calendar
days after the Exchange discovers the error. We noted that an Exchange
may provide the refund to the enrollee by reducing the enrollee's
portion of the premium in the following month, as long as the reduction
is provided no later than 30 calendar days after the Exchange discovers
the improper application of the advance payment of the premium tax
credit. We proposed that if the Exchange elects to provide the refund
by reducing the enrollee's portion of the premium for following month,
and the refund exceeds the enrollee's portion of the premium for the
following month, then the Exchange would need to refund to the enrollee
the excess, no later than 30 calendar days after the Exchange discovers
the improper application of the advance payment of the premium tax
credit. These provisions are similar to the policy we proposed in Sec.
156.460, when a QHP issuer is collecting premiums directly from
enrollees. We also noted that we were considering requiring the
Exchange to provide to HHS for each quarter, a report detailing the
occurrence of any improper application of the advance payments of the
premium tax credit beginning in the 2015 benefit year. We sought
comment on whether HHS should establish a minimum error rate or
threshold before an Exchange is required to inform HHS of such improper
applications of the advance payment of the premium tax credit in a
quarterly report, as well as what an appropriate error rate or
threshold should be. For example, we noted that we were considering
requiring issuers to report the number of enrollees for whom the
Exchange improperly applied the advance payment of the premium tax
credit compared to the total number of enrollees in the Exchange
receiving Federal premium subsidies. We also sought comment on whether
such reports should be provided to HHS less frequently than quarterly.
Comment: Several commenters supported the proposed policy and some
commenters suggested that the enrollee should have the option of
receiving the refund directly, especially upon termination of coverage.
One commenter expressed concern that Exchanges would not have money to
refund enrollees, since premiums and subsidies are paid to issuers, and
asked HHS to clarify that plans are not responsible for sending the
Exchange or consumers money to correct mistakes made by the Exchange.
Response: In Sec. 156.460 of the proposed rule we sought comment
on the timeframe for QHP issuers to refund any excess premiums to
enrollees. We also noted that the policy proposed in Sec. 155.340(h)
is similar to the policy proposed in Sec. 156.460(c), when a QHP
issuer is collecting premiums directly from enrollees and fails to
apply the advance payment of the premium tax credit to the enrollee's
portion of the premiums, and that these parallel requirements are
designed to ensure that all enrollees, regardless of whether a QHP
issuer or the Exchange is collecting premiums, are afforded the same
level of protection. As discussed further in section II.E.4.d, we
received a number of comments to the policy proposed in Sec.
156.460(c) requesting that the timeframe for QHP issuers to refund any
excess premiums to enrollees be extended. In response to comments to
the policies proposed in this section and Sec. 156.460(c), and in
order to align with parallel modifications in this final rule in Sec.
156.460(c), we are modifying the proposed policy. We are finalizing a
policy such that if an Exchange discovers that it did not reduce an
enrollee's premium by the amount of the advance payment of the premium
tax credit, then, if requested by or for the enrollee, the Exchange
must refund any excess premium paid by or for the enrollee within 45
calendar days of the request. However, if the enrollee does not request
a refund, the Exchange may refund the excess premium paid by applying
the excess to the enrollee's portion of the premium each month for the
remainder of the period of enrollment or benefit year until the excess
premium is fully refunded. Any excess amounts not refunded at the end
of the period of enrollment or benefit year would have to be refunded
within 45 days of the end of such period.
As a discussed above, this provision applies when an Exchange
facilitates collection and payment of the premiums to QHP issuers and
stand-alone dental plans on behalf of an enrollee and collects a
greater premium from the enrollee than required by the issuer, taking
into account the advance payment of the premium tax credit. As an
intermediary in this process, if the Exchange collects excess premiums
from the enrollee on behalf of the issuer, it should be responsible for
recouping the overpayments from the issuer and returning the funds to
the enrollee. This standard would not prevent an Exchange for recouping
excess funds, in the event the Exchange reduced the enrollee's portion
of the premium by more than the advance payment of the premium tax
credit. We also note that State Exchanges may not use funding for
States establishing an Exchange provided under Section 1311 of the
Affordable Care Act for such refunds.
Comment: One commenter asked HHS to limit Exchange errors that must
be refunded to the current tax year, since income tax reconciliation
should resolve any errors from the previous tax year. Another commenter
asked that the enrollee be able to reduce the advance payment of the
premium tax credit portion of premium for the remainder of the year, if
the refund would result in the enrollee owing $600 more than would
otherwise be available to the enrollee in premium tax credits.
Response: This provision is intended to remedy instances when an
Exchange overbills an enrollee for his or her portion of the monthly
premium based on the eligibility determination that was made by the
Exchange. This standard does not address the reconciliation of the tax
credit, eligibility redeterminations, or Exchange errors regarding
eligibility and enrollment.
Comment: Several commenters supported a requirement for quarterly
reporting. One commenter suggested that such reports should be publicly
available and required for all Exchanges, including an FFE, and that
Exchanges should have the ability to refute and correct these reports.
Another commenter asked HHS to set a minimum threshold for reporting
errors, while another commenter opposed a minimum threshold.
Response: We believe that it is important to monitor the
appropriate application of these advance payments
[[Page 65064]]
of the premium tax credits, regardless of whether an Exchange or the
QHP issuer is facilitating the collection and payment of premiums.
However, following review of the comments, we are no longer considering
a quarterly reporting requirement. In parallel with the standards being
finalized under Sec. 156.480 of this final rule applicable to QHP
issuers, when a State Exchange is facilitating the collection of
premiums, the Exchange will be required to report on an annual basis if
it did not reduce an enrollee's premium by the amount of the advance
payment of the premium tax credit in accordance with 45 CFR
155.340(g)(1)-(2). We have modified Sec. 155.1200 to incorporate this
provision because Sec. 155.1200 includes other annual reporting
requirements applicable to State Exchanges (see section II.D.1.a
below). We note that since issuers in an FFE are responsible for
collecting premiums directly from enrollees, such errors will be
reported to HHS by the QHP issuers.
Summary of Regulatory Changes
We are finalizing the proposed provisions with the following
modifications. We are increasing the time period for notifying the
enrollee of the improper application of the advance payment of the
premium tax credit and issuing refunds from 30 days to 45 days. We are
also providing that the Exchange may issue the refund by applying the
total excess premium paid by or for the enrollee to the enrollee's
portion of the premium each month for the remainder of the period of
enrollment or benefit year until the excess premium is fully refunded,
except that the Exchange must refund any remaining excess premium,
within 45 days of a request by or for the enrollee for the refund or
within 45 days of the end of the period of enrollment or benefit year.
2. Subpart E--Exchange Functions in the Individual Market: Enrollment
in Qualified Health Plans
a. Special Enrollment Periods (Sec. 155.420)
In Sec. 155.420 we proposed to amend Sec. 155.420(d) to provide
that a special enrollment period will be available when the Exchange
determines that a consumer has been incorrectly or inappropriately
enrolled in coverage due to misconduct on the part of a non-Exchange
entity. Specifically we proposed to add a new paragraph Sec.
155.420(d)(10) to create this new special enrollment period for
qualified individuals. This amendment would extend a special enrollment
period to a qualified individual when, in the determination of the
Exchange, misconduct on the part of a non-Exchange entity has caused
the qualified individual to be enrolled incorrectly or inappropriately
in coverage such that they are not enrolled in QHP coverage as desired,
are not enrolled in their selected QHP, or have been determined
eligible for but are not receiving advance payments of the premium tax
credit or cost-sharing reductions. We proposed to limit this special
enrollment opportunity to the individual market Exchange and not extend
it to the SHOPs.
We proposed that a non-Exchange entity providing enrollment
assistance or conducting enrollment activities would include, but not
be limited to, those individuals and entities that are authorized by
the Exchange to assist with enrollment in QHP, such as a Navigator, as
described in Sec. 155.210; non-Navigator assistance personnel, as
authorized by Sec. 155.205(d) and (e); a certified application
counselor, as described in Sec. 155.225; an agent or broker assisting
consumers in an Exchange under Sec. 155.220; issuer application
assisters under Sec. 155.415; or a QHP conducting direct enrollment
under Sec. 156.1230.
Comment: We received several comments supporting this proposed
amendment to Sec. 155.420(d) to ensure that consumers have an
available remedy if misconduct on the part of a non-Exchange entity
results in harm.
Response: We are finalizing the rule as proposed to ensure that
consumers will have a special enrollment period if harmed by misconduct
on the part of non-Exchange entities. We further clarify here that for
purposes of Sec. 155.420(d)(10) only, a non-Exchange entity includes
an individual or entity fraudulently claiming to be an authorized
entity approved by an Exchange, such as a Navigator, non-Navigator
assister, or Exchange-approved agent or broker.
Comment: We received a comment recommending that the special
enrollment period be available to consumers if a non-Exchange entity
provides erroneous information to a consumer, regardless of whether the
consumer can demonstrate harm.
Response: We believe that creating a special enrollment period for
consumers who have been harmed by non-Exchange entity misconduct will
help ensure that consumers have a remedy to address enrollment harms
while limiting uncertainty for QHP issuers. We believe that this remedy
is necessary for consumers who have been harmed, to allow them to
mitigate the harm caused. However, we do not believe this remedy would
be necessary for consumers who have not suffered any harm resulting
from misconduct. In addition, as stated in the preamble to the proposed
rule, a qualified individual may also seek to demonstrate the existence
of exceptional circumstances to the Exchange under Sec. 155.420(d)(9)
if the qualified individual is harmed due to error or inaction on the
part of a non-Exchange entity. We intend to provide future guidance on
the process for demonstrating harm as necessary.
Comment: We received several comments recommending that this
special enrollment period be extended to the SHOPs, stating that SHOP
consumers may be exposed to the same risk as consumers purchasing
coverage in an Exchange.
Response: We believe that it is less likely for an employee
enrolled in coverage through a SHOP to be harmed in the ways the new
special enrollment period is intended to address than is the case for a
qualified individual enrolled in coverage through the individual market
Exchange. For example, advance payments of the premium tax credit and
cost-sharing reductions are not available to employees enrolled in
coverage through a SHOP, such that it would not be possible for them to
be determined eligible for but not receive advance payments of the
premium tax credit or cost-sharing reductions, one of the harms the
special enrollment period was specifically designed to address.
However, we are persuaded by the comments that some risk of harm does
exist for employees enrolled in coverage through a SHOP, and are
therefore extending the special enrollment period to SHOPs. We intend
to monitor whether employees avail themselves of the special enrollment
period and the circumstances surrounding each such election. We are
making minor changes to the proposed rule text to clarify that the
special enrollment period would be extended to employees enrolled in
coverage through a SHOP and their dependents, and are also making a
conforming change to 45 CFR 155.725(j) to clarify that this special
enrollment period applies in the SHOPs.
Comment: We received several comments recommending that misconduct
on the part of a non-Exchange entity should also result in a special
enrollment period for enrollment into public programs the consumer may
otherwise be eligible for, such as Medicaid or CHIP.
Response: Medicaid and CHIP have year round enrollment, so
individuals eligible for these programs do not need a special
enrollment period to enroll in these programs if they have been
[[Page 65065]]
incorrectly enrolled in private health insurance coverage.
Comment: We received one comment requesting clarification about
what actions might be considered misconduct.
Response: As stated in the preamble of the proposed rule,
misconduct includes the failure of a non-Exchange entity to comply with
applicable requirements set forth in Exchange regulations, or other
applicable Federal or State laws. For example, this might include a
Navigator's failure to comply with the requirements set forth in 45 CFR
155.210.
Comment: We received comments stating that the special enrollment
period, as proposed, might result in adverse selection or gaming by
consumers. One commenter requested that this provision not be codified
to eliminate the risk of adverse selection and another commenter
requested that the duration of this special enrollment period be
limited to 30-days, rather than the 60-days from the date of the
triggering event, as proposed.
Response: We believe that any risk that this special enrollment
period might result in adverse selection is mitigated by the fact that
consumers will need to demonstrate to the Exchange that they have been
harmed in order to receive this special enrollment period. We believe
that this special enrollment period is important to protect consumers
from certain kinds of misconduct on the part of non-Exchange entities.
In addition, the 60-day time period for the new special enrollment
period in the individual market Exchanges is consistent with special
enrollment periods otherwise available to Exchange consumers in the
individual market and we believe provides consumers with adequate time
to review available plan options and make informed decisions to correct
the harm. Consistent with other special enrollment periods available in
the SHOPs, this special enrollment period will be for 30 days, not 60
days, in the SHOPs.
Summary of Regulatory Changes
We are finalizing the provision proposed in Sec. 155.420(d)(10)
with amendments reflecting our decision to extend the special
enrollment period to SHOPs, and with a minor correction to remove ``of
this subchapter'' following ``part 156'' from the proposed regulation
text.
3. Subpart H--Exchange Functions: Small Business Health Options Program
(SHOP)
a. Enrollment Periods Under SHOP (Sec. 155.725)
In section II.D.2 of this final rule, we describe our decision,
made in response to comment, to extend to SHOPs the new special
enrollment period that will be available when the Exchange determines
that a consumer has been incorrectly or inappropriately enrolled in
coverage due to misconduct on the part of a non-Exchange entity.
Accordingly, we are making a conforming amendment to Sec.
155.725(j)(2)(i) to add a cross-reference to Sec. 155.420(d)(10), the
new special enrollment period.
4. Subpart M--Oversight and Program Integrity Standards for State
Exchanges
a. General Program Integrity and Oversight Requirements (Sec.
155.1200)
We proposed that the State Exchange maintain an accounting of all
its receipts and expenditures, in accordance with GAAP. We also
proposed that the State Exchange develop and implement a process for
monitoring all Exchange-related activities for effectiveness,
efficiency, integrity, transparency, and accountability. We stated our
belief that these activities would help to ensure State Exchange
compliance with Federal requirements as set forth in Part 155 and
ensure the appropriate administration of Federal funds, including
advance payment of the premium tax credit and cost-sharing reductions.
In Sec. 155.1200(b), we proposed that the State Exchange submit
several types of reports to HHS. The State Exchange would submit at
least annually a report to allow for transparency of State Exchange
activities. The report must include a financial statement presented in
accordance with GAAP. The report is due to HHS by April 1 of each year.
Additionally, the State Exchange must submit reports in a form and
manner to be specified by HHS regarding eligibility and enrollment.
These reports will focus on eligibility determination errors, non-
discrimination safeguards, accessibility of information, and fraud and
abuse incidences. The State Exchange must also submit performance
monitoring data that includes financial sustainability, operational
efficiency, and consumer satisfaction. We sought comments on our
approach, including comments on the content, format, and timing of such
reports.
In Sec. 155.1200(c) we proposed that the State Exchange engage an
independent qualified auditing entity, whether governmental or private,
which meets accepted professional and business standards and follows
generally accepted governmental auditing standards (GAGAS) to perform
an independent external financial and programmatic audit of the State
Exchange. This entity should be selected to avoid any real or potential
perception of conflict of interest, including being free from personal,
external and organizational impairments to independence or the
appearance of such impairments of independence. We stated that an
external audit will help ensure the consistency and accuracy of State
Exchange financial reporting and program activities. We proposed that
this requirement may be satisfied through an audit by an independent
State-government entity. We proposed that the State Exchange will
submit to HHS, concurrent with the annual report, the results on the
audit along with proposals on how it will remedy any material weakness
or significant deficiency (the terms ``material weakness'' and
``significant deficiency'' are defined in OMB Circular A-133, Audits of
States, Local Governments and Non-Profit Organizations).
In Sec. 155.1200(d) we proposed that independent audits address
specific processes and activities of State Exchanges including
financial and programmatic activities and those related to the
verification and determination of applicants' eligibility for
enrollment in the State Exchanges and the subsequent enrollments. We
also proposed that the external audit address whether the Exchange is
complying with Sec. 155.1200(a)(1) by keeping an accurate accounting
of Exchange receipts and expenditures in accordance with generally
accepted accounting principles (GAAP). We also proposed that external
audits and annual reports required under paragraphs (b) and (c) address
State Exchange processes and procedures to comply with the standards
for Exchanges under Part 155 related to advance payments of the premium
tax credits and cost-sharing reductions. These standards include the
requirements under subpart D regarding eligibility determinations,
including the requirements regarding the confidentiality, disclosure,
maintenance, and use of information as set forth in 45 CFR
155.302(d)(3); subpart E regarding individual market enrollment in
QHPs; and subpart K regarding QHP certification. We also proposed that
such audits and annual reports assess whether a State Exchange has
processes and procedures in place
[[Page 65066]]
to prevent improper eligibility determinations and enrollment
transactions. We sought comment on the proposed annual audits, and
other activities that State Exchanges should specifically be required
to audit annually or on an interim basis. Comment: We received comments
on the timing of the annual financial statement. We also received
comments requesting additional reporting requirements including
reporting for fraud and abuse incidences and suggesting that we specify
in regulation text the types of reporting requirements we described in
the preamble. Additionally, commenters suggested that we make reports
publicly available.
Response: We do not believe any additional reporting requirements
are needed because the financial statement is intended to ensure the
transparency of State Exchange activity and the eligibility and
enrollment reporting is intended to ensure that processes and
procedures are appropriately in place to ensure that Federal
requirements are being met.
The performance monitoring data provide insight into the
performance and impact of State Exchanges, including the cost of
insurance, the scope of coverage, and access issues. This limited set
of standardized metrics also ensures basic transparency and allows
consistent cross-state comparisons of the impacts of varying approaches
to State Exchange implementation. We anticipate providing further
guidance on the format and timing of the reports, as well as, whether
the public will have access to them.
Comment: One commenter suggested that we make these independent
annual audits available to the public and increase the scope of the
independent audit.
Response: We accept the commenter's suggestion regarding public
availability and we will require the State to make public a summary of
the results of the independent annual audit. Publicizing the audit
summary will increase the transparency and accountability of State
Exchange activities. We are finalizing our proposal that the
independent audit address the elements in Sec. 155.1200(d) as
described above, as well as all subparts of Part 155. While we are not
accepting the commenter's suggestion that independent audits include
incomplete applications or application questions most commonly left
unanswered, we believe that the criteria in Part 155 and in Sec.
155.1200(d) adequately address areas of compliance including
eligibility denials and information to improve the eligibility process.
We anticipate issuing further guidance on the elements of financial and
programmatic activities that should be included in the external
financial audit.
Summary of Regulatory Changes
We are finalizing the provisions proposed in Sec. 155.1200 with
the following modification. As discussed in II.D.1.a of this final
rule, if the Exchange is collecting premiums under 45 CFR 155.240, we
are adding subparagraph (b)(4) to require the Exchange to annually
report if it did not reduce an enrollee's premium by the amount of the
advance payment of the premium tax credit in accordance with 45 CFR
155.340(g)(1)-(2). In paragraph (c) we are adding a requirement that
the State make public a summary of the results of external financial
audit.
b. Maintenance of Records (Sec. 155.1210)
We proposed that State Exchanges and its contractors,
subcontractors, and agents maintain records for 10 years, including
documents and records (whether paper, electronic, or other media) and
other evidence of accounting procedures and practices of the State
Exchanges to prepare for targeted audits. We stated that these records
must be sufficient and appropriate to respond to any periodic auditing,
inspection, or investigation of the State Exchange's financial records
or to enable HHS or its designee to appropriately evaluate the State
Exchange's compliance with Federal requirements. We anticipate that
targeted audits will be conducted based on information from the
external audit, annual report, prospective measurement programs of
improper payments, consumer complaints, or other data sources. In
addition, we proposed that the State Exchange must make all records of
this section available to HHS, the OIG, the Comptroller General, or
their designees, upon request.
Comment: Commenters suggested that the proposed maintenance of
records requirements for State Exchanges and their contractors,
subcontractors, and agents should specifically outline additional
records to be kept, which could include data related not only to
appeals but to the outcome of the appeals. In addition, commenters
suggested that the requirement apply only to those eligible entities
contracted with the State Exchanges to carry out one or more
responsibilities of the Exchange (see 45 CFR 155.110), and should not
apply to QHP issuers.
Response: The maintenance of records provision we are finalizing in
Sec. 155.1210 (b) sufficiently addresses the minimum types of records
that we would require State Exchanges to retain. The maintenance of
records provision in Sec. 155.1210 only applies to entities that are
carrying out one or more responsibilities of the Exchange in the
capacity of a contractor, subcontractor, or agent, and does not apply
to QHP issuers because these entities do not provide services or carry
out one or more responsibilities of the Exchange. Furthermore, the
oversight standards with respect to cost-sharing reductions and advance
payments of the premium tax credit finalized in 45 CFR 156.480 of this
final rule ensure that CMS can sufficiently monitor compliance with
federal standards with respect to the federal funds distributed to QHP
issuers through these programs. Therefore, requiring QHP issuers to
maintain records is not necessary.
Comment: One commenter suggested that HHS articulate how consumers,
advocates, Navigators, and other entities will be able to file
complaints with HHS in a meaningful way such as triggering a targeted
audit.
Response: We expect that the consumer satisfaction section of the
performance monitoring data will include reporting on consumer
complaints that will be used in determining whether we will conduct a
targeted audit.
Summary of Regulatory Changes
We are finalizing the provisions proposed in Sec. 155.1210, and
note that the 10 year record retention requirement begins when the
record is created.
E. Part 156--Health Insurance Issuer Standards Under the Affordable
Care Act, Including Standards Related To Exchanges
1. Subpart A--General Provisions
a. Definitions (Sec. 156.20)
We proposed amending 45 CFR 156.20 by adding the definition for
``Enrollee satisfaction survey vendor'' and ``Registered user of the
enrollee satisfaction survey data warehouse.''
We are making a technical correction to our regulation text, which
inadvertently left out the word ``that'' from the definition. The
definition for ``enrollee satisfaction survey vendor'' should begin,
``an organization that has . . .''
We received no comments in regards to these definitions, and
finalize these definitions as proposed, but with the technical
corrections as mentioned above.
Summary of Regulatory Changes
We are finalizing this provision as proposed.
[[Page 65067]]
b. Single Risk Pool (Sec. 156.80)
To ensure consistency with rate setting schedules in the Exchanges
and thus reduce the risk of adverse selection, we proposed in Sec.
156.80 to add paragraph (d)(3) to clarify when issuers may establish
and update premium rates under the single risk pool requirements.
Specifically, in paragraph (d)(3)(i), we proposed that issuers in the
individual market or in a market in which the individual and small
group risk pools were merged by the State would be permitted to make
changes to their market-wide adjusted index rate and plan-specific
pricing on an annual basis. In paragraph (d)(3)(ii), we proposed that
issuers in the small group market would be permitted to make such
changes on a quarterly basis once the Federally-Facilitated Small
Business Health Options Program's (FF-SHOP) capability to process
quarterly rate updates is established. Until that time, we proposed
that issuers in the small group market may make changes to rates no
more frequently than annually.
Comment: Commenters generally acknowledged the reasons for the
proposal to prohibit quarterly index rate and plan-level adjustments
for issuers in FF-SHOPs until the issues are resolved, but asserted
this policy should not apply in States with SHOPs that have the
capability to accept quarterly rate adjustments, nor should they apply
to issuers offering coverage in the small group market solely outside
of the SHOPs.
Response: HHS, in operating both the FF-SHOPs as well as the
market-wide rate review program under section 2794 of the PHS Act,
cannot accept quarterly rate changes at this time. Accordingly, we are
finalizing our proposal that issuers offering coverage in the small
group market through the SHOPs or outside of the SHOPs must refrain
from making index rate and plan-level adjustments more frequently than
annually, until notified of the system capability to process quarterly
rate changes. We expect to establish this capability by the third
quarter of 2014.
Comment: One commenter requested clarification as to whether States
could require less frequent index rate and plan-level adjustments in
the small group market than those specified in the regulation.
Response: Nothing in this final rule prevents a State from
requiring less frequent rate changes in the small group market than the
quarterly changes permitted under this final rule. At a minimum,
however, an issuer in small group or individual market must establish
an index rate each calendar year with an effective date of January 1,
and, in the small group market, ensure that any rate changes at other
times during the year are effective only on April 1, July 1, or October
1, the only dates for which Federal systems will be in place for
processing rate updates. We believe Sec. 156.80(d)(1) already provides
for the establishment of an index rate by January 1 of each calendar
year, and that the proposed rule contemplates small group market rate
changes that correspond to the calendar quarters. Nonetheless, for
precision and clarity, we are revising the regulation text to include
these clarifications. We note that any new rates set by an issuer would
apply for new or renewing coverage on or after the rate effective date,
and would apply for the entire the plan year.
Comment: Some commenters sought assurance that the single risk pool
requirements would not prevent issuers from filing new products for
sale outside of Exchanges nor prevent issuers from entering a market
until January 1 of each year.
Response: As described above, under the guaranteed availability
standard, all non-grandfathered plans in the individual or merged
market must be offered on a calendar year basis starting January 1,
2014. Furthermore, under the single risk pool standard, an index rate
must be established and adjusted only once annually in the individual
and merged markets. The interaction of these provisions is such that an
issuer cannot introduce new products throughout the year without
affecting the pricing of all of the issuer's other products in the risk
pool, in violation of the single risk pool provision. We note that
issuers will have greater flexibility to introduce new products in the
small group market, where coverage may be issued on a rolling basis
throughout the year and rates generally will be able to be updated on a
quarterly basis.
Summary of Regulatory Changes
We are finalizing the provisions proposed in Sec. 156.80 of the
proposed rule with the following modifications. We are revising
existing paragraph (d)(1) to provide that an index rate must be
established and effective for a State market (individual, small group,
or merged market) by January 1 of each calendar year. We are also
restructuring proposed paragraph (d)(3) to clearly state that an issuer
is prohibited for making index rate and plan-level adjustments on any
basis other than annually, except in the small group market once
quarterly rate changes are permitted. We also now clearly state the
effective dates of quarterly rate updates in the small group market.
2. Subpart B--Standards for Essential Health Benefits, Actuarial Value,
and Cost Sharing
a. Enrollment in Catastrophic Plans (Sec. 156.155)
We are making a technical correction to our regulation text in
Sec. 156.155, which inadvertently omitted the statutory language in
section 1302(e) of the Affordable Care Act indicating that a
catastrophic plan provides ``no benefits'' for any plan year (except
for providing coverage for at least 3 primary care visits and
preventive health services in accordance with section 2713 of the PHS
Act) until the individual has incurred cost-sharing expenses in an
amount equal to the annual limitation on cost sharing in effect under
section 1302(c)(1) of the Affordable Care Act. Although this provision
was not addressed in the proposed rule, it is part of the law governing
benefits under catastrophic plans, and we believe it is appropriate to
revise the regulation text in this final rule to reflect this fact.
3. Subpart D--Qualified Health Plan Minimum Certification Standards
a. Changes of Ownership of Issuers of Qualified Health Plans in
Federally-Facilitated Exchanges (Sec. 156.330)
In Sec. 156.330, we proposed that when a QHP issuer in the FFE
undergoes a change in ownership, it notify HHS of the change at least
30 days prior to the date of the change and provide the legal name and
taxpayer identification number (TIN) of the new owner, as well as the
effective date of the change. We also proposed that the new owner must
agree to adhere to applicable statutes and regulations.
Comment: One commenter expressed support for the proposed standard
and urged HHS to examine any relevant compliance and other issues
impacted by the change of ownership at the time notified, such as
accreditation status.
Response: HHS intends to examine possible compliance issues related
to the change of ownership, including impact on accreditation status,
as part of its overall oversight framework.
Comment: One commenter urged flexibility in assessing what
constitutes a change in ownership and expressed concern that the
standard in Sec. 156.330 could be triggered when transferring blocks
of business from one affiliated entity to another.
Response: HHS believes that the notice requirement is minimally
burdensome. Further, we believe that it
[[Page 65068]]
will be apparent to issuers when the standard is triggered--if
recognized by the applicable State, then an issuer would need to comply
with Sec. 156.330.
Comment: One commenter asked HHS to exempt changes of ownership
within the same holding company from the notice provision and requested
additional flexibility in implementing this provision for the 2014 plan
year.
Response: We believe that the standard, which would only require
notification if the change of ownership is recognized at the State
level, is clear. If a change of ownership within the same holding
company is required by a State at the State level, then the issuer
would need to report it pursuant to Sec. 156.330. We believe that the
notice standard is the most minimally burdensome way for HHS to be
aware of these important changes, particularly as compared to standards
that may be required under State law. Therefore, we do not believe that
a transition period is necessary.
Summary of Regulatory Changes
We are finalizing this section as proposed.
4. Subpart E--Health Insurance Issuer Responsibilities With Respect to
Advance Payments of the Premium Tax Credit and Cost-Sharing Reductions
a. Definitions (Sec. 156.400)
Section 156.400 of this subpart includes definitions of a ``most
generous,'' and a ``more generous,'' plan variation. We proposed to
supplement those definitions by clarifying that the definitions of a
``least generous,'' and a ``less generous,'' plan variation have the
opposite meanings of the existing definitions of a ``most generous,''
or a ``more generous'' plan variation. Specifically, we proposed that,
as between two plan variations (or a plan variation and a standard plan
without cost-sharing reductions), the plan variation or standard plan
without cost-sharing reductions designed for the category of
individuals first listed in 45 CFR 155.305(g)(3) would be deemed the
less generous one. The term less generous was used in the proposed rule
to address circumstances in which a QHP issuer would reassign an
enrollee from a more generous plan variation to a less generous plan
variation (or standard plan without cost-sharing reductions), as
discussed in greater detail below. We also proposed a technical
modification to change ``QHP or plan variation'' to ``standard plan or
plan variation'' to clarify that a plan variation is not distinct from
a QHP. We received no comments on these proposed provisions and are
finalizing these provisions as proposed.
b. Improper Plan Assignment and Application of Cost-Sharing Reductions
(Sec. 156.410(c) Through (d))
In Sec. 156.410, we proposed to add new paragraphs (c) and (d) to
specify the actions a QHP issuer would take if it does not provide the
appropriate cost-sharing reductions to an individual, or if it does not
assign an individual to the appropriate plan variation (or standard
plan without cost-sharing reductions) in accordance with Sec.
156.410(a) through (b) or Sec. 156.425(a) through (b) of this subpart.
Specifically, in paragraph (c)(1), we proposed that if a QHP issuer
fails to ensure that an individual assigned to a QHP plan variation
receives the cost-sharing reductions required under the applicable plan
variation (taking into account the requirement regarding cost sharing
previously paid under other plan variations of the same QHP under Sec.
156.425(b) if applicable), the QHP would notify the enrollee of the
improper application of the cost-sharing reductions and refund any
excess cost sharing paid by or for the enrollee during such period no
later than 30 calendar days after discovery of the improper application
of the cost-sharing reductions. This refund would be paid to the person
or entity that paid the excess cost sharing, whether the enrollee or
the provider.
In paragraph (c)(2), we proposed that if a QHP issuer provides an
enrollee assigned to a plan variation with greater cost-sharing
reductions than required under the applicable plan variation (taking
into account Sec. 156.425(b) concerning continuity of deductibles and
out-of-pocket amounts if applicable) then the QHP issuer will not be
eligible for reimbursement of any excess cost-sharing reductions
provided to the enrollee, and may not seek reimbursement from the
enrollee or the provider for any of the excess cost-sharing reductions.
Because the QHP issuer is responsible for ensuring the cost-sharing
reduction is provided appropriately, we noted that we do not believe
that the QHP issuer should be able to recoup overpayments of cost-
sharing reductions that resulted from the QHP issuer's own errors.
In paragraph (d), we proposed that if a QHP issuer improperly
assigns an enrollee to a plan variation (or standard plan without cost-
sharing reductions), or does not change the enrollee's assignment due
to a change in eligibility in accordance with Sec. 156.425(a), in each
case, based on the eligibility and enrollment information or
notification provided by the Exchange, then the QHP issuer would, no
later than 30 calendar days after discovery of the improper assignment,
reassign the enrollee to the applicable plan variation (or standard
plan without cost-sharing reductions) and notify the enrollee of the
improper assignment.
Conversely, paragraph (d)(2) proposed that, if a QHP issuer
reassigns an enrollee from a less generous plan variation (or a
standard plan without cost-sharing reductions) to a more generous plan
variation of a QHP to correct an improper assignment on the part of the
issuer, the QHP issuer would recalculate the individual's liability for
cost sharing paid between the effective date of eligibility required by
the Exchange and the date on which the issuer effectuated the change.
The QHP issuer would refund any excess cost sharing paid by or for the
enrollee during such period, no later than 30 calendar days after
discovery of the incorrect assignment. This refund would be paid to the
person or entity that paid the excess cost sharing, whether the
enrollee or the provider. We sought comment on the proposed approach,
including the 30-calendar-day timeframe for QHP issuers to reassign an
individual to the correct plan variation and refund any excess cost
sharing paid by or for the enrollee. We also sought comment on whether
the timeframe should depend on the point in the month the issuer
discovers the improper assignment, considering the amount of time
issuers may require to effectuate the reassignment, as well as the
impact on enrollees due to a delay in reassignment. We noted that the
date of the reassignment would not affect the initial effective date of
eligibility, and that the enrollee would still be refunded any excess
cost sharing paid by or for the enrollee between the effective date of
eligibility and the date of the reassignment.
We also noted that we were considering requiring that, for each
quarter, a QHP issuer provide to HHS and the Exchange a report
beginning in the 2015 benefit year detailing the occurrence of any
improper applications of cost-sharing reductions in violation of the
standards finalized and proposed in Sec. 156.410(a) and (c) and Sec.
156.425(b), as well as instances when it did not refund any excess cost
sharing paid by or for an enrollee in accordance with proposed Sec.
156.410(c)(1) and Sec. 156.410(d)(2), or was reimbursed for excess
cost sharing provided in violation of proposed Sec. 156.410(d)(1).
Comment: Several commenters supported holding enrollees harmless
for issuer mistakes. A number of
[[Page 65069]]
commenters requested clarification that issuers will not be penalized
for errors made by Exchanges or enrollee income misrepresentations, and
asked HHS to institute policies or procedures that would make it easy
for issuers to identify enrollment errors. One commenter suggested that
restitution should only occur when the agencies can prove a pattern of
willful misconduct, while another commenter suggested that HHS request
compensation from an Exchange for errors by the Exchange.
Response: We are clarifying that QHP issuers may rely on the
validity of an eligibility determination sent to the QHP issuer by the
Exchange, and are not responsible for providing refunds under this
provision resulting from an Exchange or enrollee error. However, as
noted in the proposed rule, because of the reliance interests of an
enrollee in the application of cost-sharing reductions when purchasing
particular services, we believe that the QHP issuer should not be able
to recover excess funds resulting from issuer error with respect to the
application of cost-sharing reductions. We note that this is a
different standard from the one we are finalizing for misapplications
of the advance payments of the premium tax credit because we believe
that an enrollee has lesser reliance interest in miscalculated premiums
because the enrollee would have been clearly notified of both the
monthly premium and advance payment of the premium tax credit when they
enroll in the plan. In contrast, an enrollee may not be aware of the
cost-sharing amount for a specific service and might not be able to
determine whether the cost-sharing reduction was correctly applied for
that particular service at the point the cost sharing is collected.
Comment: Several commenters noted that requiring issuers to provide
refunds of cost-sharing reductions to enrollees is inconsistent with
standard billing practices in which an issuer bills or credits the
enrollee, noting that issuing refunds would require additional
resources. Another commenter noted that consistent with current
practices and procedures applicable to non-subsidized enrollees,
issuers should be able to reprocess claims under the correct plan
variation and recoup any excess payment.
Response: In consideration of standard issuer billing practices,
the final rule provides that a QHP issuer may apply any excess cost
sharing paid by or for an enrollee (except by a provider) to the
enrollee's portion of the premium for the remainder of the period of
enrollment or benefit year until the excess is fully applied unless the
enrollee requests the refund. (The issuer may also elect to directly
refund the enrollee, regardless of whether the enrollee requests the
refund.) However, if requested by the enrollee, the QHP issuer would be
required to directly refund the enrollee any excess cost sharing paid
by or for the enrollee within 45 calendar days of the request. The QHP
issuer would refund the enrollee any remaining excess cost-sharing paid
by the individual at the end of the period of enrollment or benefit
year, and if the excess cost sharing amount was paid by the provider,
the QHP issuer would refund to the provider any excess cost sharing
paid by provider within 45 calendar days of discovery of the error. We
believe that this standard will allow issuers to reimburse enrollees
without incurring additional operational costs outside the standard
billing practice, while still providing the option for direct refund to
the enrollee.
Comment: One commenter asked HHS to clarify that consumer
protections also apply to enrollees who are not eligible for a cost-
sharing reduction but who are mistakenly enrolled in a silver plan
variation by the issuer.
Response: We clarify that the standards in Sec. 156.410(c) and (d)
would apply when an enrollee should not be eligible for cost-sharing
reductions but is erroneously assigned to a silver plan variation by
the QHP issuer.
Comment: One commenter suggested HHS set a threshold date such
that, if a QHP issuer discovers an enrollee was assigned to an
incorrect plan variation before the 15th of a month, the enrollee would
be reassigned to the proper plan variation by the 1st day of the
following month, and errors discovered afterwards would be corrected in
the following month. Another recommended that consumers be provided
advance notice of plan reassignment, and that plans ensure that
enrollees have full access to services while the errors are being
corrected.
Response: In response to comments, we are modifying the proposed
policy to align with existing Exchange regulations regarding the
effective date of coverage with respect to special enrollment periods
under 45 CFR 155.420(b)(i) and (ii). Section 156.410(d)(1) and (2) now
provide that if the QHP issuer discovered the error between the first
and fifteenth day of the month, the QHP must reassign the enrollee to
the correct plan variation (or standard plan without cost-sharing
reductions) by the first day of the following month. If the QHP issuer
discovers the error between the sixteen and the last day of the month,
the QHP issuer must reassign the individual to correct plan variation
by the first day of the second following month. We note that as with
reassignment, we expect issuers to notify enrollees prior to the
effective date of the reassignment to prevent enrollee confusion.
Comment: While some commenters supported the 30-day timeframe for
refunds, a number of commenters felt that this timeframe is not
feasible, given enrollment reconciliation and payment discrepancy
processes. One commenter suggested that the final rule adopt a 45-day
timeframe, in line with Medicare Part D. Other commenters recommended
increasing the timeframe to 60 or 90 days. One commenter suggested that
issuers in State Exchanges have the flexibility to work with the
Exchange to establish appropriate timelines.
Response: Because cost sharing-reductions are Federal outlays, we
believe that it is appropriate to set uniform timeframes for correcting
errors related to the underpayment of cost-sharing reductions,
regardless of whether the individual receives coverage through a QHP
issuer participating in a State Exchange or an FFE. However, taking
into consideration current industry practice and the monthly enrollment
reconciliation process, as well as the refunds standards specified
under 42 CFR 423.800(e) and 42 CFR 423.466(a) with respect to the
Medicare Part D low-income subsidy program, we are modifying the
proposed policy and are requiring issuers to provide refunds to
enrollees within 45 days of the discovery of the error. We believe that
this will permit issuers to rectify errors in a timely manner
consistent with their current monthly operational cycles, without
significantly delaying the reimbursement to the enrollee or provider as
applicable.
Comment: Some commenters suggested a de minimis threshold for
required refunds, similar to the threshold for the medical loss ratio
program.
Response: Unlike the minimum threshold for medical loss ratio
rebates under 45 CFR 158.243, the standards proposed under this section
were intended to ensure that Federal funds are being used to
appropriately subsidize enrollee cost sharing, so that individuals
receive the full cost-sharing reductions for which they were determined
eligible. Because these refund standards are designed protect low-
income individuals from unforeseen costs, we do not believe there
should be a de minimis threshold for refunds of cost-sharing
reductions.
[[Page 65070]]
Comment: Several commenters supported a standard under which an
issuer is not required to report on misapplication of cost-sharing
reductions unless a minimum error rate occurs, while other commenters
stated that all issuers should submit these reports without respect to
such a threshold. Other commenters stated that a semi-annual or annual
report should be required for the initial years. One commenter believed
that such quarterly reports would duplicate the information provided
via enrollment reconciliation and the payment discrepancy reporting
process. The same commenter was also concerned about the implications
of such self-reporting under Federal laws, and recommended a safe
harbor from enforcement remedies for any good faith reporting. Another
commenter suggested that HHS give State Exchanges flexibility to decide
the timing of such reports.
Response: In response to comments, we are not establishing a
quarterly reporting standard with respect to the improper application
of cost-sharing reductions or improper assignments to plan variations
(or standard plans without cost-sharing reductions). However, we
require this reporting as part of the annual reporting requirement set
forth under Sec. 156.480(b). We believe that annual reporting of these
errors will allow HHS to track the occurrence of these errors and
identify any problems that affect multiple issuers without duplicating
any existing interim reporting requirements. We do not intend to create
a safe harbor for misreported information, and expect that issuers will
make a good faith effort to accurately report these errors.\18\
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\18\ We note that many of the errors that will be the subject of
the first annual report and to our 2014 policy of nonenforcement of
CMPs for good faith, which we codified at 45 CFR 156.800(c).
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Comment: One commenter asked how claims submitted for premium
stabilization programs would be affected by erroneous cost-sharing
reduction amounts.
Response: As noted in 45 CFR 156.430(d), HHS will perform periodic
reconciliations of any advance payments of cost-sharing reductions
provided to the QHP issuer with the actual amount of cost-sharing
reductions provided to enrollees and reimbursed to providers by the QHP
issuers. This calculation is not required for the risk adjustment or
reinsurance programs, and will be completed prior to the deadline for
the risk corridors program.
Summary of Regulatory Changes
We are finalizing these provisions with the following
modifications. We are amending paragraphs (c) and (d) to increase the
time period for issuing refunds from 30 days to 45 days of discovery of
the error. We are also modifying these paragraphs to provide that the
QHP issuer may provide the refund by applying the total excess cost
sharing paid by or for the enrollee to the enrollee's portion of the
premium for the remainder of the period of enrollment or benefit year
until the excess is fully applied, except that the QHP issuer must
refund the enrollee the excess cost sharing within 45 days of the
enrollee's request or the end of the period of enrollment or benefit
year. (Any cost-sharing paid by the provider will still be refunded to
the provider within 45 days of discovery of the error.) Additionally,
we are re-designating subparagraphs (d)(1) and (d)(2) as (d)(3) and
(4), and adding two new subparagraphs (d)(1) and (d)(2), which set
forth a timeframe for effectuating a reassignment to the correct plan
variation.
c. Payment for Cost-Sharing Reductions (Sec. 156.430)
In the 2014 Payment Notice, we established a payment approach under
which monthly advance payments will be made to QHP issuers to cover
projected cost-sharing reduction amounts, and then, after the close of
the benefit year, the advance payments and the actual cost-sharing
reduction amounts provided during the benefit year will be reconciled.
In 45 CFR 156.430(c)(1), we established standards for QHP issuers to
submit data to HHS detailing the amount of cost sharing the enrollees
in each plan variation paid, as well as the amount of cost sharing the
enrollees would have paid under the standard plan. The value of the
cost-sharing reductions provided is the difference of these two
amounts. We also finalized at 45 CFR 156.430(c)(2) a methodology
(referred to as the ``standard methodology'') for calculating the
amount of cost sharing that the enrollees would have paid under the
standard plan, but for the cost-sharing reductions. Under the standard
methodology, QHP issuers apply the cost-sharing requirements for the
standard plan to the allowed costs for each plan variation policy; in
effect, each claim would be processed twice: once using the cost-
sharing structure that would have been in place if the individual were
ineligible for cost-sharing reductions, and once using the reduced
cost-sharing structure in the applicable plan variation for which the
individual is eligible.
In the Amendments to the HHS Notice of Benefit and Payment
Parameters for 2014 interim final rule, we established in Sec.
156.430(c)(4) an alternate methodology for calculating the amount of
cost sharing that the enrollees would have paid under the standard plan
for the purpose of reconciliation of the advance payments of the cost-
sharing reductions. Under this alternate methodology (referred to as
the ``simplified methodology''), QHP issuers calculate the amount of
cost sharing that the enrollees would have paid under the standard plan
by using formulas based on certain summary cost-sharing parameters of
the standard plan, applied to the total allowed costs for each policy.
With this approach, we sought to balance the need to safeguard Federal
funds with the goal of lessening the administrative burden on QHP
issuers. We stated that we anticipated that after an appropriate
transition period, all QHP issuers would be required to use the
standard methodology, and sought comments on how long the transition
period should be. We also noted that in later years, we would consider
alternative approaches for reimbursing QHP issuers. For example, once
more data is available, we could change to a capitated payment system
as permitted in section 1402(c)(3)(B) of the Affordable Care Act.
However, such a change would require access to data on the utilization
and cost-sharing patterns of individuals eligible for cost-sharing
reductions.
In Sec. 156.430(c)(3)(i) of the interim final rule, we provided
that a QHP issuer must notify HHS prior to the start of each benefit
year whether or not it is selecting the simplified methodology for the
benefit year. In paragraph (c)(3)(ii), we specified that if the QHP
issuer selects the simplified methodology, it must apply the simplified
methodology to all plan variations it offers on the Exchange for a
benefit year. Since the simplified methodology is intended for issuers
whose systems are not yet capable of implementing the standard
methodology, in paragraph (c)(3)(iii) we specified that the QHP issuer
may not select the simplified methodology if it did not select the
simplified methodology for the prior benefit year. We also set forth
standards governing the selection of a methodology if a QHP issuer
merges with or acquires another QHP issuer on the Exchange, or acquires
a QHP offered on the Exchange from another issuer. In paragraph
(c)(3)(iv), we provided that if each of the affected parties had
selected a different methodology for the benefit year, then
[[Page 65071]]
notwithstanding paragraphs (c)(3)(ii) and (iii), for the benefit year
in which the merger or acquisition took place, the QHP issuer must
continue to use the methodology selected prior to the start of the
benefit year for each plan variation (whether or not the selection was
made by that issuer), and for the next benefit year, the QHP issuer may
select either methodology, subject to the requirement in paragraph
(c)(3)(ii) that a QHP issuer select the same methodology for all plan
variations it offers on the Exchange for the benefit year.
In this final rule, we are generally finalizing the standards
related to the simplified methodology as established in the interim
final rule, with minor clarifying edits to paragraph (c)(3)(iii) and
(iv), and we are modifying paragraph (c)(3) to specify that QHP issuers
may only choose to use the simplified methodology for benefit years
2014 through 2016. For the 2014 benefit year, HHS intends to contact
each QHP offering individual market coverage through an Exchange in
November, which will prompt the issuer to notify HHS prior to the start
of the benefit year whether or not it selects the simplified
methodology for the benefit year. We received a number of comments on
the selection of the methodology and the transition period.
Comment: The majority of commenters supported the simplified
methodology. Many noted that the simplified methodology will likely
reduce QHP issuers' short-term costs and administrative burden. Two
commenters argued that issuers should be permitted to choose between
the simplified and standard methodologies indefinitely because of the
many new functions that issuers will be performing in Exchanges and
because the simplified methodology should produce results that are
similar to the standard methodology. However, one commenter argued that
the choice of methodologies could inflate Federal costs because QHP
issuers will likely choose whichever methodology results in the largest
payments. That commenter suggested that QHP issuers should only be
permitted to choose between the simplified and standard methodologies
for the first two years. Other commenters argued that the standards in
Sec. 156.430(c)(3) on selecting a methodology should adequately
safeguard against potential gaming. In addition, commenters noted that
it could take QHP issuers up to 18 months to develop the systems
necessary to support the standard methodology, and that therefore HHS
should provide at least one year's notice before requiring a transition
to the standard methodology. Several commenters also supported a shift
to a capitated payment system in future years, though one noted that it
will be important to require QHP issuers to use the standard
methodology for at least two years so that adequate data can be
collected on the value of the cost-sharing reductions, which may vary
significantly between plan variations and enrollees. The same commenter
suggested that HHS should ensure that QHP issuers are adequately
compensated so that issuers provide cost-sharing reductions as
required, including cost-sharing reductions for American Indians and
Alaska Natives.
Response: To allow QHP issuers adequate time to develop their
systems to support the standard methodology, we are establishing a
three-year transition period during which QHP issuers may use the
simplified methodology, provided that they choose the simplified
methodology prior to the start of benefit year 2014. We are modifying
Sec. 156.430(c)(3) to specify that the option to use the simplified
methodology will extend only through benefit year 2016. As a result,
all QHP issuers offering coverage through the individual market of an
Exchange must use the standard methodology to submit the data described
in 45 CFR 156.430(c)(1) for cost-sharing reductions provided for
benefit year 2017. We will continue to consider alternative approaches
for reimbursing QHP issuers for the future, including a capitated
payment system. We believe that both methods of calculating the value
of cost-sharing reductions provided will be accurate so that QHP
issuers are adequately compensated for providing cost-sharing
reductions to all populations.
In Sec. 156.430(c)(4) of the interim final rule we set forth a
simplified methodology for calculating the amount of cost sharing that
enrollees would have paid under the standard plan without cost-sharing
reductions. We established that a QHP issuer selecting the simplified
methodology must calculate the amount that the enrollees would have
paid under the standard plan by applying four summary, or ``effective
cost-sharing parameters'' for the standard plan--the effective
deductible, the effective pre-deductible coinsurance rate, the
effective post-deductible coinsurance rate, and the effective claims
ceiling--to the total allowed costs paid for EHB under the policy (that
is, the policy with cost-sharing reductions) for the benefit year. This
simplified methodology allows QHP issuers to calculate enrollee
liability under the standard plan using a standardized methodology that
does not require complex readjudication of claims. Specifically, in
Sec. 156.430(c)(4)(i), we detailed the process for calculating the
amount that enrollees would have paid under the standard plan under the
simplified methodology, depending on the utilization pattern under the
policy. We described these calculations using Formulas A, B, and C,
detailed in Sec. 156.430(c)(4)(i)(A), (B) and (C). In Sec.
156.430(c)(4)(ii) (renumbered as (c)(4)(iii) in this final rule), we
defined the effective cost-sharing parameters for the standard plan,
and established that these parameters must be calculated separately for
self-only coverage and other than self-only coverage. We also noted
that if a QHP issuer has entirely separate cost-sharing parameters for
pharmaceutical and medical services, the QHP issuer may elect to
develop separate sets of effective cost-sharing parameters for
pharmaceutical and medical services.
We sought comments on these effective cost-sharing parameters and
formulas for calculating the amount that enrollees would have paid
under the standard plan, and whether this methodology appropriately
categorizes policies based on utilization patterns. We also sought
suggestions for alternative methodologies that might provide more
accurate estimates of the amount that enrollees would have paid under
the standard plan, while preserving the administrative efficiency of
the simplified methodology. In response to comments, we are generally
finalizing the simplified methodology as established in the interim
final rule, with some modifications to address unique benefit
structures and to reduce potential biases in the formulas identified by
commenters. We are also clarifying how QHP issuers should calculate the
effective cost-sharing parameters for self-only coverage, other than
self-only coverage, medical coverage, and pharmaceutical coverage.
Lastly, we are clarifying how the simplified methodology should apply
when an enrollee is assigned to a different plan variation or is
assigned from a plan variation to the standard plan (or vice versa)
during the course of the benefit year.
Comment: In general, commenters supported the simplified
methodology, and no commenters suggested any significantly different
methodology. Some commenters stated that the simplified methodology
will produce results that are not substantially different from the
standard methodology, but others proposed certain modifications that
they said would improve the accuracy of the
[[Page 65072]]
methodology, particularly when applied to certain types of plan
designs.
Specifically, three commenters noted that the effective deductible
and effective claims ceiling parameters, as established in the interim
final rule, may result in the overestimation or underestimation of
enrollee liability under a standard plan with certain benefit
structures. For example, because the effective deductible was defined
as the weighted average of the deductibles for the standard plan,
excluding services not subject to the deductible, Formula B (described
in Sec. 156.430(c)(4)(i)(B)) may overestimate the cost sharing under
the standard plan for those enrollees who incur claims costs greater
than the effective deductible, because they receive services that are
not subject to the deductible. In addition, because the effective
claims ceiling was calculated based on the annual limitation on cost
sharing, which may only apply to in-network benefits (as described in
45 CFR 156.130(c)), Formula C (described in Sec. 156.430(c)(4)(i)(C))
may underestimate cost sharing under the standard plan for enrollees
who incur large out-of-network claims. In light of these potential
biases, one commenter suggested that in-network cost sharing should be
calculated separately from out-of-network cost sharing. Other
commenters suggested that the QHP issuer's actuary should be allowed
greater flexibility in the calculation of an average deductible and an
average claims ceiling, based on the actual claims experience of
enrollees in the standard plan. One commenter suggested that the
issuer's actuary should be required to submit an actuarial memorandum
with a justification of any modifications to the effective cost-sharing
parameters, demonstrating that the modifications were necessary due to
the benefit design and result in a more accurate replication of the
standard plan's cost sharing.
We also received a comment asking how mid-year changes in enrollee
eligibility for cost-sharing reductions would affect the application of
the simplified methodology.
Response: Overall, we believe the simplified methodology will yield
results that are substantially similar to the results that would be
produced using the standard methodology. In addition, we believe it is
important that issuers choosing the simplified methodology use standard
formulas and parameters to reduce the analytical burden on issuers,
ensure the transparency of the calculations, and reduce the potential
for gaming. Nevertheless, in response to these comments, we are
finalizing several modifications to the simplified methodology to
improve the accuracy of the calculations.
First, we are making several minor edits to clarify the standards
originally established. We are reordering some of the text in the
definitions of the effective pre-deductible and effective post-
deductible coinsurance rates to mirror the structure of the other
definitions. Also, in response to the comment asking about mid-year
changes in eligibility for cost-sharing reductions, we are clarifying
in Sec. 156.430(c)(4) that the effective cost-sharing parameters, or
one minus the actuarial value of the standard plan, as appropriate,
should be applied to the total allowed costs for EHB for the benefit
year under each policy that was assigned to a plan variation for any
portion of the benefit year. We note that a similar standard would
apply to the standard methodology. This will ensure that QHP issuers
are reimbursed for cost-sharing reductions provided to enrollees that
are only assigned to a plan variation for a portion of the year. We are
also clarifying in paragraphs (c)(4)(ii) and (iii) that the effective
cost-sharing parameters should be calculated based on policies assigned
to the standard plan without cost-sharing reductions for the entire
benefit year. If a particular enrollee cancels his or her standard plan
policy mid-year, or is re-assigned to a plan variation, the costs
incurred by that enrollee should not be included in the calculation of
the effective cost-sharing parameters for the standard plan because
partial-year data could reduce the accuracy of the parameters. We also
considered requiring QHP issuers to separate costs by month based on
the assignment of an enrollee to a particular plan variation or
standard plan, or requiring QHP issuers to annualize costs across the
benefit year. However, these approaches would have significantly
complicated the methodology and potentially reduced its accuracy.
Second, in response to comments that Formula B (described in Sec.
156.430(c)(4)(i)(B)) may overestimate the cost sharing under the
standard plan if the enrollees receive services that are not subject to
a deductible, we are modifying several of the formulas and effective
cost-sharing parameters to more accurately estimate cost sharing for
services that are subject to a deductible and services that are not
subject to a deductible. Specifically, in paragraph (c)(4)(iii)(A), we
are defining the average deductible to be the weighted average
deductible for the standard plan (weighted by allowed costs for EHB
under the standard plan for the benefit year that are subject to each
separate deductible, and excluding services that are not subject to any
deductible). Conversely, in paragraph (c)(4)(iii)(B), we are defining
effective non-deductible cost sharing to be calculated based only on
standard plan policies with total allowed costs for EHB for the benefit
year that are above the effective deductible but for which associated
cost sharing for EHB is less than the annual limitation on cost
sharing, and equal to the average portion of total allowed costs for
EHB that are not subject to any deductible for the standard plan for
the benefit year incurred for standard plan enrollees and payable by
the enrollees as cost sharing. We are also modifying the definition of
effective deductible (which was initially set forth in paragraph
(c)(4)(ii)(A), but has been renumbered in this final rule to be
paragraph (c)(4)(iii)(C)), to be the sum of the average deductible and
the average total allowed costs for EHB that are not subject to any
deductible for the standard plan for the benefit year. The average
total allowed costs for EHB that are not subject to any deductible for
the standard plan for the benefit year must be calculated based only on
standard plan policies with total allowed costs for EHB for the benefit
year that are above the average deductible but for which associated
cost sharing for EHB is less than the annual limitation on cost
sharing. Lastly, we are making conforming modifications to the
definition of effective claims ceiling (which was initially set forth
in paragraph (c)(4)(ii)(D), but has been renumbered in this final rule
to be paragraph (c)(4)(iii)(F)), to be calculated as follows:
ECC = ED + ((AL - AD - NDCS)/PostD)
Where,
ECC = the effective claims ceiling;
ED = the effective deductible;
AL = the annual limitation on cost sharing;
AD = the average deductible;
NDCS = the effective non-deductible cost sharing; and
PostD = the effective post-deductible coinsurance rate.
Building off of these new definitions, we are modifying the
definition of effective post-deductible coinsurance rate (initially set
forth in paragraph (c)(4)(ii)(C), but renumbered as paragraph
(c)(4)(iii)(E)) to be calculated as follows:
PostD = (CSDp)/(TACDp - AD)
Where,
PostD = the effective post-deductible coinsurance rate;
CSDp = the portion of average allowed costs for EHB
subject to a deductible incurred for enrollees for the benefit year,
and
[[Page 65073]]
payable by the enrollees as cost sharing other than through a
deductible;
AD = the average deductible; and
TACDp = the average total allowed costs for EHB subject
to a deductible incurred for those enrollees for the benefit year
(we distinguish TACDp from the TACDi;
TACDp refers to average total allowed costs for EHB
subject to a deductible for all the policies that are part of the
calculation--which in this case, are standard plan policies with
total allowed costs for EHB for the benefit year that are above the
effective deductible but for which associated cost sharing for EHB
is less than the annual limitation on cost sharing (that is,
policies that do not incur enough cost sharing for the annual
limitation on cost sharing to affect the cost sharing), while
TACDi refers to the total allowed costs for EHB subject
to a deductible for a particular policy).
These terms are then used in a modified Formula B (described in
Sec. 156.430(c)(4)(i)(B)), and detailed below, for plan variation
policies with total allowed costs for EHB for the benefit year that are
greater than the effective deductible but less than the effective
claims ceiling, to calculate the amount that enrollees would have paid
under the standard plan without cost-sharing reductions.
Formula B: C = AD + NDCS + ((TACDi - AD) * PostD)
Where,
C = the amount that the enrollees in a particular policy would have
paid under the standard plan without cost-sharing reductions;
AD = the average deductible;
NDCS = the effective non-deductible cost sharing;
TACDi = the total allowed costs under the policy for the
benefit year for EHB that are subject to a deductible;
PostD = the effective post-deductible coinsurance rate; and
((TACDi - AD) * PostD) is calculated only if positive.
We believe this formula will more accurately capture cost sharing in
plans that subject certain services to deductibles but exempt others
(while imposing other forms of cost sharing).
In addition, we note that the new definition of effective
deductible will likely cause some plan variation policies that
previously would have been subject to calculation under Formula B to
become subject to Formula A, which we are finalizing as established in
the interim final rule. As described in paragraph (c)(4)(i)(A), Formula
A applies to plan variation policies with total allowed costs for EHB
for the benefit year that are less than or equal to the effective
deductible, and calculates the amount that the enrollees would have
paid under the standard plan as the total allowed costs for EHB under
the policy for the benefit year, multiplied by the effective pre-
deductible coinsurance rate.
We are also adding a paragraph to clarify how the simplified
methodology should be applied to HMO-like plans (or plans with HMO-like
characteristics in certain subgroups) with no costs or few costs that
are subject to a deductible. Specifically, in paragraph (c)(4)(vi) we
provide that if more than eighty percent of the total allowed costs for
EHB for the benefit year under a standard plan for a subgroup that
requires a separate set of effective cost-sharing parameters pursuant
to paragraph (c)(4)(ii) are not subject to a deductible, then (i) The
average deductible, the effective non-deductible cost sharing, and the
effective deductible for the subgroup equal zero; (ii) the effective
pre-deductible coinsurance rate for the subgroup is equal to the
effective post-deductible coinsurance rate for the subgroup, which is
determined based on all standard plan policies for the applicable
subgroup for which associated cost sharing for EHB is less than the
annual limitation on cost sharing, and calculated for the applicable
subgroup as the proportion of the total allowed costs for EHB under the
standard plan for the benefit year incurred for standard plan enrollees
and payable as cost sharing (including cost sharing payable through a
deductible); and (iii) the amount that enrollees in the applicable
subgroup in plan variation policies with total allowed costs for EHB
for the benefit year that are less than the effective claims ceiling
would have paid under the standard plan must be calculated using the
formula in Sec. 156.430(c)(4)(i)(A). In effect, we are merging
Formulas A and B for these plans (or these subgroups), and are removing
the distinction between the calculation of cost sharing for costs
incurred before the deductible is met versus the calculation after the
deductible is met. This modification should simplify calculations for
issuers of these plans (or these subgroups), and improve the accuracy
of the simplified methodology we are finalizing here for these plans
(or these subgroups).
Lastly, in response to comments, we are modifying Formula C
(described in Sec. 156.430(c)(4)(i)(C)), which applies to plan
variation policies with total allowed costs for EHB for the benefit
year that are greater than or equal to the effective claims ceiling,
and is used to calculate the amount of cost sharing that those
enrollees would have paid under the standard plan. First, we are
simplifying the formula established in the interim final rule. Second,
because the annual limitation on cost sharing may not apply to benefits
provided out-of-network (as allowed under 45 CFR 156.130(c)), we are
allowing issuers to elect to use, on a policy-by-policy basis, the
standard methodology to calculate the amount of cost sharing that such
enrollees would have paid under the standard plan. This modification
will allow QHP issuers to capture the value of cost-sharing reductions
for enrollees who incur large claim amounts for services from out-of-
network providers.
Comment: Commenters noted that due to statistical aberrations under
the simplified methodology, it is possible--though unlikely--that the
calculated amount of cost sharing that enrollees would have paid under
the standard plan could be less than what they actually paid under the
plan variation. The commenter suggested that the amount that the
enrollees would have paid in cost sharing under the standard plan be
set at no less than what they paid under the plan variation.
Response: Although we acknowledge that in certain cases, the
calculated amount of cost sharing that enrollees would have paid under
the standard plan could be less than what the enrollees in a particular
policy actually paid under the plan variation, any such results would
likely be balanced by results for other policies that overestimate the
cost sharing that the enrollees would have paid under the standard
plan. As a result, we do not believe it is necessary to modify the
simplified methodology. However, we note that we do not intend to
charge a QHP issuer for cost-sharing reductions across all enrollees in
a plan variation in the very unlikely event that the simplified
methodology suggests that a negative amount of cost-sharing reductions
were provided to all such enrollees in the aggregate during the benefit
year.
Comment: We received comments on Sec. 156.430(c)(4)(ii) of the
interim final rule, which directs issuers to calculate the effective
cost-sharing parameters separately for self-only coverage and other
than self-only coverage, and provides the option to calculate separate
parameters for pharmaceutical and medical services if the QHP has
entirely separate cost-sharing parameters for each of these types of
services. Two commenters suggested that issuers should be allowed to
calculate a single set of effective cost-sharing parameters if the
cost-sharing parameters of the other than self-only coverage are better
replicated at the individual level (for example, for plan designs
applying individual level deductibles first). The same commenters also
suggested that issuers should be allowed to calculate
[[Page 65074]]
separate parameters for pharmaceutical and medical services even when
the costs are not adjudicated by a separate vendor. Similarly, for QHPs
in which a large portion of allowed charges are subject to co-pays but
not deductibles, the commenters suggested that issuers should be
allowed to calculate separate effective cost-sharing parameters for
those services. Another commenter suggested that QHP issuers should
calculate separate effective cost-sharing parameters for benefits
provided in-network versus benefits provided out-of-network because
enrollee liability often differs significantly for these benefits. The
commenter also suggested that if the QHP issuer made no reductions in
cost sharing for benefits provided out-of-network (that is, the out-of-
network cost-sharing parameters for the standard plan match the out-of-
network cost-sharing parameters for the plan variation), the QHP issuer
should be able to exclude costs for benefits provided out-of-network
and the applicable cost-sharing parameters from the simplified
methodology calculations. Similarly, the QHP issuer should be allowed
to exclude costs for benefits paid in full by the issuer for both the
standard plan and plan variations, with no enrollee liability, since
there are no cost-sharing reductions for these benefits. Lastly, one
commenter requested clarification on whether the effective cost-sharing
parameters for a QHP should be calculated separately for each rating
area, or across an entire State.
Response: In response to comments, we are adding a new paragraph
(c)(4)(ii) and making conforming edits to paragraphs (c)(4)(i) through
(v) of this section to clarify which subgroups of costs require a
unique set of effective cost-sharing parameters. In paragraph
(c)(4)(ii)(A), we state that if the standard plan has separate cost-
sharing parameters for self-only coverage and other than self-only
coverage, but does not have separate cost-sharing parameters for
pharmaceutical and medical services, the QHP issuer must calculate and
apply separate sets of effective cost-sharing parameters based on the
costs of enrollees in the standard plan with self-only coverage, and
the costs of enrollees in the standard plan with other than self-only
coverage. We clarify that if the cost-sharing parameters for other than
self-only coverage accumulate at the enrollee-level and match the
parameters for self-only coverage, then the standard plan would not be
subject to subparagraph (c)(4)(ii)(A) or (C).
In paragraph (c)(4)(ii)(B), we clarify that if the standard plan
has separate cost-sharing parameters for pharmaceutical and medical
services, but does not have separate cost-sharing parameters for self-
only coverage and other than self-only coverage, the QHP issuer must
calculate and apply separate sets of effective cost-sharing parameters
based on the medical costs of the enrollees in the standard plan, and
the pharmaceutical costs of the enrollees in the standard plan. This
standard is not tied to whether or not the pharmaceutical costs are
adjudicated separately by a vendor, but depends on whether or not the
cost sharing accumulates to separate deductibles and annual limitations
on cost sharing.
Lastly, in paragraph (c)(4)(ii)(C), we state that if the standard
plan has separate cost-sharing parameters for self-only coverage and
other than self-only coverage, and also has separate cost-sharing
parameters for pharmaceutical and medical services, the QHP issuer must
calculate and apply separate sets of effective cost-sharing parameters
based on the medical costs of enrollees in the standard plan with self-
only coverage, the pharmaceutical costs of enrollees in the standard
plan with self-only coverage, the medical costs of enrollees in the
standard plan with other than self-only coverage, and the
pharmaceutical costs of enrollees in the standard plan with other than
self-only coverage. While these new standards in paragraph (c)(4)(ii)
may require additional calculations, enrollee liability can vary
significantly between these subgroups, as noted by commenters, and as a
result, we believe that separate effective cost-sharing parameters for
each subgroup of costs will often lead to more accurate results.
For example, if a QHP is subject to the standards in paragraph
(c)(4)(ii)(C), the QHP issuer must create four sets of effective cost-
sharing parameters. One of the sets of effective cost-sharing
parameters would be calculated based on self-only coverage of medical
services (for example, the average deductible would be the medical
deductible for self-only coverage). The effective cost-sharing
parameters for the subgroup would then be applied to the total allowed
medical costs for EHB of enrollees with self-only coverage under a plan
variation policy, as described in paragraph (c)(4)(i). To determine the
total amount that enrollees in the plan variation policy with self-only
coverage would have paid under the standard plan without cost-sharing
reductions, the QHP issuer would add the amounts calculated pursuant to
paragraph (c)(4)(i) for each subgroup of costs (self-only medical costs
and self-only pharmaceutical costs).
In relation to in-network and out-of-network costs, we clarify that
although QHP issuers are not required to reduce out-of-network cost
sharing to meet the actuarial value requirements for the silver plan
variations, as described on page 15481 of the 2014 Payment Notice, if a
QHP issuer chooses to reduce out-of-network cost sharing, they will
receive reimbursement for those reductions. In addition, QHP issuers
must eliminate cost sharing for both in-network and out-of-network
covered EHB for the zero cost sharing plan variation, as well as for
the limited cost sharing plan variation when the service is furnished
by the Indian Health Service, an Indian Tribe, Tribal Organization, or
Urban Indian Organization, or through referral under contract health
services, as described in 45 CFR 156.420(b). Nevertheless, we are not
requiring, nor allowing, QHP issuers to calculate separate effective
cost-sharing parameters for in-network and out-of-network costs. We
believe that the modifications to Formula C should address much of the
bias in the simplified methodology that could be caused by differences
in cost-sharing parameters for in-network and out-of-network services.
In addition, we hope to limit the number of plans that do not meet the
minimum credibility standard, which as described below and in paragraph
(c)(4)(v), requires QHP issuers to use an actuarial value methodology
to calculate the amount that enrollees would have paid under the
standard plan, if a standard plan has enrollment of fewer than 12,000
member months for a particular subgroup. We believe that it is possible
that a large number of standard plans would not have 12,000 member
months for enrollees with out-of-network claims costs above the
applicable effective deductible. Therefore, we will not provide for
separate calculations for in-network and out-of-network costs.
In response to the comments suggesting that QHP issuers should be
allowed to exclude costs for benefits without cost-sharing reductions,
we note that in many cases, these costs would accumulate towards
certain cost-sharing parameters, such as a deductible or the annual
limitation on cost sharing. Therefore, we are not finalizing any change
permitting an issuer to exclude such claims. As discussed above, to
address plans with cost-sharing structures where a large proportion of
costs are not subject to a deductible, we have provided for a
simplified, coinsurance-based calculation in paragraph (c)(4)(vi).
Finally, we note
[[Page 65075]]
that QHP issuers cannot create separate effective cost-sharing
parameters for each rating area.
In Sec. 156.430(c)(4)(iii) of the interim final rule, we
established reporting standards for QHP issuers that elect to use the
simplified methodology. We specified that QHP issuers must submit to
HHS, in the manner and timeframe established by HHS: The effective
deductible; the effective pre-deductible coinsurance rate; the
effective post-deductible coinsurance rate; the effective claims
ceiling; and a memorandum developed by a member of the American Academy
of Actuaries in accordance with generally accepted actuarial principles
and methodologies that describes how the QHP issuer calculated the
effective cost-sharing parameters for the standard plan. This
information will allow HHS to ensure that QHP issuers are calculating
the effective cost-sharing parameters correctly. We sought comments on
whether HHS should require any other data submissions or establish any
additional standards to oversee these provisions.
Comment: One commenter recommended that HHS put in place robust
processes to monitor QHP issuers using the simplified methodology to
limit the potential for overpayments. The commenter suggested that HHS
reserve the authority to review and approve all QHP issuer submissions
for the simplified methodology and the resulting reconciliation
amount--particularly if such amounts are substantially different from
the advance payment amounts. Another commenter suggested that HHS
collect detailed data on the payments made by QHP issuers to providers
to ensure that providers are reimbursed, particularly providers
associated with the Indian Health Service, an Indian Tribe, Tribal
Organization, or Urban Indian Organization.
Response: To ensure that QHP issuers using either the standard or
simplified methodology submit accurate information for cost-sharing
reduction payment reconciliation, we are finalizing cost-sharing
reduction oversight standards in Sec. 156.480 of this final rule.
Specifically, Sec. 156.480(c) provides HHS with the authority to audit
an issuer to assess compliance with the cost-sharing reduction
standards, including standards related to reconciliation and provider
reimbursement, detailed in 45 CFR 156.430(c).
We are also clarifying in this final rule the standards for
reporting information on the effective cost-sharing parameters.
Specifically, we are renumbering the paragraph on reporting as
paragraph (c)(4)(iv), and specifying that a QHP issuer using the
simplified methodology must submit to HHS, in the manner and timeframe
established by HHS, the effective cost-sharing parameters, calculated
pursuant to paragraph (c)(4)(iii), for each standard plan offered by
the QHP issuer in the individual market through the Exchange for each
set of circumstances described in paragraph (c)(4)(ii). Therefore, if a
QHP issuer must calculate multiple sets of effective cost-sharing
parameters as described in paragraph (c)(4)(ii), the QHP issuer must
submit each set of parameters to HHS. A QHP issuer may submit one
actuarial memorandum as long as it describes how the QHP issuer
calculated each set of effective cost-sharing parameters for each
standard plan. We will provide guidance on the manner and timeframe of
this submission in the future.
As discussed in the interim final rule, we recognize that because
the effective pre- and post-deductible coinsurance rates are calculated
based on the average experience of the enrollees in the standard plan,
low enrollment in the standard plan could lead to inaccurate effective
coinsurance rates. Therefore, we provided additional standards related
to the simplified methodology in Sec. 156.430(c)(4)(iv) to address
credibility concerns that may result from low enrollment in the
standard plan. We established that if a standard plan has an enrollment
during the benefit year of fewer than 12,000 member months (that is,
the sum of the months that each enrollee is covered by the plan) in any
of four subgroups, and the QHP issuer has selected the simplified
methodology, then the QHP issuer must calculate the amount that all
enrollees in the plan variation (in all subgroups) would have paid
under the standard plan by applying the standard plan's actuarial
value, as calculated under Sec. 156.135, to the allowed costs for EHB
for the enrollees for the benefit year. The credibility standard of
12,000 member months aligns with a similar standard used by the
Medicare Part D program; however, we sought comments on the appropriate
number of member months to achieve credible use of the simplified
methodology. We also sought comments on whether the standard plan's
actuarial value applied to the allowed costs for EHB for enrollees for
the benefit year would provide an appropriate estimate of the amount of
cost sharing that enrollees would have paid under the standard plan
without cost-sharing reductions, or whether an alternative approach
would be more appropriate. Last, we requested comments on the
composition of the subgroups, whether they appropriately divide
enrollees based on their utilization patterns, whether any subgroups
are required, and whether low enrollment in one subgroup should prompt
the QHP issuer to use the actuarial value for enrollees in all
subgroups or just the subgroup with low enrollment.
Comment: We received one comment on this section, suggesting that
the credibility standard should apply to both the standard plan and the
plan variations because even if the effective cost-sharing parameters
are based on at least 12,000 member months, applying them to a small
number of plan variation policies could produce unusual results. The
same commenter noted that because actuarial value is a measure of the
issuer's liability, one minus the actuarial value should be applied to
the total allowed costs for EHB for each policy offered under the plan
variation for the benefit year in order to determine the cost sharing
that enrollees would have paid under the standard plan.
Response: In response to these comments, we are correcting the
instructions for calculating enrollee cost sharing based on actuarial
value in the renumbered paragraph (c)(4)(v). We are not expanding the
credibility standard to apply to enrollment in each plan variation
since this would likely require many more QHP issuers to use the
standard or actuarial value methodology, rather than the simplified
methodology. However, we are adding a ``cap'' to the actuarial
methodology, such that QHP issuers whose standard plan does not meet
the credibility standard must calculate the amount that enrollees would
have paid under the standard plan as the lesser of the annual
limitation on cost sharing for the standard plan or the amount derived
through the actuarial value methodology. This approach will reduce the
likelihood that plan variations with small enrollment will report
amounts that are materially inaccurate.
We are also modifying paragraph (c)(4)(v) to align with the
standards established in paragraph (c)(4)(ii) and to clarify how the
minimum credibility standard should be applied to each subgroup. In
addition, we are removing the minimum credibility standard described in
the interim final rule in subparagraphs (c)(4)(iv)(A) and (C), related
to enrollees with total allowed costs for EHB for the benefit year that
are less than or equal to the effective deductible. This change should
simplify the credibility analysis, with little
[[Page 65076]]
impact on the ultimate credibility of the effective cost-sharing
parameters because it is unlikely that a standard plan would have
adequate enrollment with costs above the effective deductible, but low
enrollment with costs below the effective deductible. As discussed in
the interim final rule, a subgroup is not necessary for enrollees with
cost sharing for EHB above the annual limitation on cost sharing
because the experience of this population is not used to calculate the
effective cost-sharing parameters.
Therefore, in Sec. 156.430(c)(4)(v) of this final rule, we
establish that if a QHP issuer's standard plan meets certain criteria,
and the QHP issuer has selected the simplified methodology described in
this paragraph (c)(4), then the QHP issuer must calculate the amount
that enrollees in the plan variation would have paid under the standard
plan without cost-sharing reductions as the lesser of the annual
limitation on cost sharing for the standard plan or the amount equal to
the product of, (x) one minus the standard plan's actuarial value, as
calculated under 45 CFR 156.135, and (y) the total allowed costs for
EHB for the benefit year under each policy that was assigned to a plan
variation for any portion of the benefit year.
In subparagraphs (A) through (D) of Sec. 156.430(c)(4)(v), we
detail the minimum credibility criteria that prompt a QHP issuer to use
the actuarial value methodology:
(A) The standard plan has separate cost-sharing parameters for
self-only coverage and other than self-only coverage, does not have
separate cost-sharing parameters for pharmaceutical and medical
services, and has an enrollment during the benefit year of fewer than
12,000 member months for coverage with total allowed costs for EHB for
the benefit year that are greater than the effective deductible, but
for which associated cost sharing for EHB is less than the annual
limitation on cost sharing, in either of the following categories: (i)
Self-only coverage, or (ii) other than self-only coverage.
(B) The standard plan has separate cost-sharing parameters for
pharmaceutical and medical services, does not have separate cost-
sharing parameters for self-only coverage and other than self-only
coverage, and has an enrollment during the benefit year of fewer than
12,000 member months for coverage with total allowed costs for EHB for
the benefit year that are greater than the effective deductible, but
for which associated cost sharing for EHB is less than the annual
limitation on cost sharing, in either of the following categories: (i)
Coverage of medical services, or (ii) coverage of pharmaceutical
services.
(C) The standard plan has separate cost-sharing parameters for
self-only coverage and other than self-only coverage, has separate
cost-sharing parameters for pharmaceutical and medical services, and
has an enrollment during the benefit year of fewer than 12,000 member
months for coverage with total allowed costs for EHB for the benefit
year that are greater than the effective deductible, but for which
associated cost sharing for EHB is less than the annual limitation on
cost sharing, in any of the following categories: (i) Self-only
coverage of medical services, (ii) self-only coverage of pharmaceutical
services, (iii) other than self-only coverage of medical services, or
(iv) other than self-only coverage of pharmaceutical services.
(D) The standard plan does not have separate cost-sharing
parameters for pharmaceutical and medical services, does not have
separate cost-sharing parameters for self-only coverage and other than
self-only coverage, and has an enrollment during the benefit year of
fewer than 12,000 member months with total allowed costs for EHB for
the benefit year that are greater than the effective deductible, but
for which associated cost sharing for EHB is less than the annual
limitation on cost sharing.
In the interim final rule, we noted the possibility that for a very
small number of plans with unique cost-sharing structures, the amounts
that enrollees would have been paid under the plan might not be fairly
estimated using the simplified methodology. We considered a process in
which a QHP issuer of such a plan may notify HHS if it believes that
this is the case for one or more of its plans. We considered requiring
such a notification within ninety days of the beginning of the
applicable benefit year, and we considered requiring the QHP issuer to
provide information on the unique plan design supporting the QHP
issuer's assessment.
Under this approach, if HHS were to agree with the assessment, we
considered requiring the QHP issuer to calculate the amount that
enrollees would have paid under the standard plan without cost-sharing
reductions by applying the standard plan's actuarial value, as
calculated pursuant to 45 CFR156.135, to the allowed costs for EHB for
the enrollees for the benefit year. If HHS were to disagree with the
issuer's assessment, the QHP issuer would calculate such amounts using
the effective cost-sharing parameters under the approach described in
paragraphs (4)(i) through (4)(iii) of the interim final rule (or
paragraph (4)(iv), if applicable).
We sought comments on whether we should adopt such an approach, and
on the specifics outlined above. In particular, we sought comments on
the types of plans, if any, for which it would be difficult to fairly
calculate the amount that enrollees would have paid under the standard
plan without cost-sharing reductions using the simplified methodology,
and their prevalence. We sought comments on the standard that should
apply for determining whether the plan will be exempted from using the
simplified methodology, and how HHS should make that determination.
Finally, we requested comments on what estimation methodology should be
used if the plan is determined to be exempt, and if it is not.
We did not receive any specific comments on this proposal, though
as noted above, some commenters suggested that for certain plan
designs, the simplified methodology may result in the overestimation or
underestimation of enrollee liability, and as a result, the QHP
issuer's actuary should be allowed greater flexibility in the
calculation of an average deductible and an average claims ceiling, as
long as the calculations are justified in the actuarial memorandum.
Because we did not receive any comments supporting this proposal,
or any examples of plans for which the simplified methodology would not
adequately approximate cost sharing, we are not finalizing this
approach.
Comment: We received a comment that relates generally to the
reconciliation of cost-sharing reduction payments. The commenter asked
whether a QHP issuer that is using the standard methodology must re-
adjudicate the claims sequentially as if the enrollees were in the
standard plan.
Response: QHP issuers using the standard methodology should
adjudicate the claims in a manner that will yield an accurate
calculation of the amount of cost sharing that enrollees would have
paid under the standard plan. If sequential adjudication of claims is
not necessary to do so, the issuer is not required to engage in
sequential adjudication.
Summary of Regulatory Changes
We are modifying Sec. 156.430(c)(3) to specify that QHP issuers
may only choose the simplified methodology for calculating the amounts
that would have been paid under the standard plan without cost-sharing
reductions for benefit years 2014 through 2016. We also are modifying
Sec. 156.430(c)(4) to address unique benefit structures and
[[Page 65077]]
reduce potential biases in the formulas. We are clarifying how QHP
issuers should calculate the effective cost-sharing parameters for
self-only coverage, other than self-only coverage, medical services,
and pharmaceutical services.
d. Failure To Reduce an Enrollee's Premium To Account for Advance
Payments of the Premium Tax Credit (Sec. 156.460(c))
We also proposed to add new paragraph (c) to Sec. 156.460,
providing that if a QHP issuer discovers that it did not reduce the
portion of the premium charged to or for the enrollee for the
applicable month(s) by the amount of the advance payment of the premium
tax credit as required in Sec. 156.460(a)(1), the QHP issuer would be
required to refund to the enrollee any excess premium paid by or for
the enrollee and notify the enrollee of the improper application no
later than 30 calendar days after the QHP issuer discovers the error.
We noted that a QHP issuer may provide the refund to the enrollee by
reducing the enrollee's portion of the premium in the following month,
as long as the reduction is provided no later than 30 calendar days
after the QHP issuer discovers the improper reduction. If the QHP
issuer elects to provide the refund by reducing the enrollee's portion
of the premium for the following month, and the refund exceeds the
enrollee's portion of the premium for the following month, then the QHP
issuer would need to refund to the enrollee the excess no later than 30
calendar days after the QHP issuer discovers the improper reduction. We
also noted that we were also considering that for each quarter
beginning in 2015, a QHP issuer would be required to provide a report
to HHS and the Exchange, in a manner and timeframe specified by HHS,
detailing the occurrence of instances of improper applications of the
requirements of Sec. 156.460.
Comment: Several commenters supported a 30-day timeframe for
issuers to refund excess advance payment of the premium tax credit to
enrollees, while other commenters stated that a 60-day timeframe is
more realistic. Another recommended a 90-day timeframe given the
challenges of enrollment reconciliation and resolution of
discrepancies. One commenter noted that associated refunds are commonly
performed through batch processing which could take more than 30
calendar days to correct, and suggested that HHS allow a longer
timeframe to account for such administrative processes.
Response: In consideration of the timeframes for enrollment
reconciliation and resolution processes we are extending the timeframe
for QHP issuers to provide refunds in such cases to within 45 days of
discovery of the error. This timeframe aligns with the timeframe
established under Sec. 156.410 with respect to misapplication of cost-
sharing reductions.
Comment: Several commenters suggested that issuers be allowed to
apply such refundable amounts to the premium due in subsequent months
through the end of the benefit year, and that a refund be provided only
at the request of the enrollee. One commenter noted that issuing a
partial refund and partial credit in a given month may be confusing to
consumers, and does not align with standard practice today. Another
commenter recommended that consumers should have the option of
receiving a refund directly.
Response: In response to comments, we are modifying the proposed
policy in this final rule. In particular, if a QHP issuer discovers
that it did not reduce an enrollee's premium by the amount of the
advance payment of the premium tax credit, then, upon request by or for
the enrollee, the QHP issuer must refund to the enrollee any excess
premium paid by or for the enrollee within 45 calendar days of
discovery of the improper reduction. However, if a direct refund is not
requested, the QHP issuer may apply the total remaining excess premium
paid by or for the enrollee to the enrollee's portion of the premium
each month for the remainder of the period of enrollment or benefit
year, until the excess is fully applied. If any excess premium paid by
or for the enrollee remains at the end of the period of enrollment or
benefit year, the QHP issuer would be required to refund the excess
within 45 calendar days of discovery or the error.
Additionally, we clarify that this provision would not prevent a
QHP issuer from recouping excess funds from the enrollee, if the QHP
reduced the enrollee's portion of the premium by more than the advance
payment of the premium tax credit.
Comment: Two commenters supported a standard requiring quarterly
error reports, although one suggested that such reports be delayed
until 2016. One commenter recommended a semi-annual report. Another
commenter stated that such reports duplicate information in the monthly
enrollment reconciliation reports.
Response: Taking into consideration the comments received and to
align with the policy finalized in Sec. 156.410, we are not
establishing a quarterly reporting standard. We require issuers to
report if they did not reduce the portion of the premium charged to or
for the enrollee for the applicable month(s) by the amount of the
advance payment of the premium tax credit as part of the annual
reporting requirements set forth in Sec. 156.480(b) of this final
rule.
Summary of Regulatory Changes
We are finalizing these provisions as proposed with the following
modifications. We are increasing the time period for issuing refunds
from 30 to 45 days. We are also permitting the QHP issuer to apply the
total excess premium paid by or for the enrollee to the enrollee's
portion of the premium each month for the remainder of the period of
enrollment or benefit year, except that the QHP issuer must refund the
excess premium within 45 days of a request for the refund by or for the
enrollee or within 45 days following the end of the period of
enrollment or benefit year.
e. Oversight of the Administration of Cost-Sharing Reductions and
Advance Payments of the Premium Tax Credit Programs (Sec. 156.480)
In Sec. 156.480, we proposed general provisions related to the
oversight of QHP issuers in relation to cost-sharing reductions and
advance payments of the premium tax credit. We proposed to apply
certain standards proposed in Part 156, subpart H for QHP issuers
participating in FFEs to QHP issuers participating in the individual
market on a State Exchange. In paragraph (a), we proposed to extend the
standards set forth in proposed Sec. 156.705 concerning maintenance of
records to a QHP issuer in the individual market on a State Exchange in
relation to cost-sharing reductions and advance payments of the premium
tax credit. We also proposed that QHP issuers ensure that any delegated
and downstream entities adhere to these requirements. We noted that a
QHP issuer and its delegated and downstream entities may satisfy this
standard by maintaining the relevant records for a period of 10 years
and ensuring that they are accessible if needed in the event of an
investigation or audit.
We also proposed that QHP issuers participating in State Exchanges
and FFEs be subject to reporting and oversight requirements. In
particular, in paragraph (b), we proposed that an issuer that offers a
QHP in the individual market through a State Exchange or an FFE report
to HHS annually, in a timeframe and manner required by HHS, summary
statistics with respect to administration of cost-
[[Page 65078]]
sharing reductions and advance payments of the premium tax credit.
Additionally, in paragraph (c) we proposed that HHS or its designee may
audit an issuer that offers a QHP in the individual market through a
State Exchange or an FFE to assess compliance with the requirements of
this subpart and ensure appropriate use of Federal funds.
Comment: In response to proposed Sec. 156.480(b), several
commenters stated that the annual reports will be critical to
protecting consumer rights, while others argued that this information
will already be in HHS's possession. Another commenter recommended that
HHS rely on market conduct examinations to conduct oversight. One
commenter asked for more information on the rationale for and content
of these reports.
Response: As discussed in the proposed rule, the annual reports
will permit HHS to obtain summary information regarding cost-sharing
reductions and advance payments of the premium tax credit across a
broad range of issuers and identify any systemic issues and errors,
without requiring annual audits. These reports will contain information
not available to HHS through other channels, such as data on
misapplications of cost-sharing reductions and advance payments of the
premium tax credit. We believe that a consolidated report from all
applicable issuers with respect to these programs will assist HHS in
effectively targeting oversight activities and identifying problems
that affect multiple issuers.
Comment: One commenter asked HHS to clarify the meaning of
``delegated entities'' and ``downstream entities'' that are subject to
the requirement, and noted that the requirement should only apply to
entities responsible for keeping records associated with advance
payments of the premium tax credit or cost-sharing reductions.
Response: The terms ``delegated entity'' and ``downstream entity''
are defined at Sec. 156.20. Furthermore, as noted in Sec. 156.480(a),
the maintenance of records standard applies to relevant delegated
entities and downstream entities only in connection with cost-sharing
reductions and advance payments of the premium tax credit.
Comment: We received a comment asking for further guidance on how
Navigators, consumers, and other entities can report instances of non-
compliance to HHS.
Response: We note that consumers, Navigators, and other entities
can report issuer non-compliance to HHS through communication channels
offered to consumers, such as the Health Insurance Marketplace Call
Center, where such reports will be entered into the casework tracking
system and addressed by CMS.
Comment: One commenter asked HHS to clarify that any self-reported
error rates will not be used as a basis for civil money penalties or
decertification, since both penalties may be imposed for non-compliance
with cost-sharing reduction and advance payment of the premium tax
credit requirements. Another commenter asked HHS to provide guidance on
how it will collect and respond to reports of non-compliance by QHP
issuers and others.
Response: HHS will collect information from QHP issuers on the
administration of cost-sharing reductions and advance payments of the
premium tax credit, including error rates, through the annual reports
described in Sec. 156.480(b). We anticipate that this information will
be used to inform an oversight and audit strategy with respect to these
programs, and will be provided to the State Exchanges and utilized by
the FFE as applicable for oversight and enforcement activities such as
decertification and CMPs. We note that the 2014 policy of
nonenforcement of CMPs in instances of good faith established in Sec.
156.800 would apply in 2014 with respect to such errors.
Comment: One commenter suggested limiting the record retention
requirement to 6 years, while another supported the proposed timeframe.
Response: As previously noted in this final rule, we are finalizing
the maintenance of records provisions retention standard as proposed,
in alignment with the statute of limitations for the False Claims Act
and existing Exchange regulations.
Comment: One commenter requested that HHS provide further
information on the timeframe and procedure of proposed audits,
suggested that audits should be limited to three years after the
completion of a benefit year, and recommended that HHS specify a
mechanism by which issuers can challenge the audit findings.
Response: We intend to provide detailed guidance in the future and
will seek comment on our audit process prior to finalization in order
to ensure a transparent program and consistent audits. We are
considering conducting audits in a manner that is coordinated across
all programs and FFE compliance reviews to limit the number of
potential audits that an organization would experience.
Summary of Regulatory Changes
We are finalizing these provisions and modifying paragraph (b) to
specify that the annual reports must contain summary statistics with
respect to the application of cost-sharing reductions and advance
payments of the premium tax credit, including any failure to adhere to
the standards set forth under Sec. 156.410(a) through (d), Sec.
156.425(a) through (b), and Sec. 156.460(a) through (c) of this Part.
5. Subpart H--Oversight & Financial Integrity Requirements for Issuers
of Qualified Health Plans in Federally-Facilitated Exchanges
a. Maintenance of Records for Federally-Facilitated Exchanges (Sec.
156.705)
We proposed in Sec. 156.705(a) that issuers offering QHPs in an
FFE maintain all documents and records (whether paper, electronic, or
other media) and other evidence of accounting procedures and practices,
which are critical for HHS to conduct activities necessary to safeguard
the financial and programmatic integrity of the FFEs. We proposed that
such activities include: (1) Periodic auditing of the QHP issuer's
financial records related to the QHP issuer's participation in an FFE,
and to evaluate the ability of the QHP issuer to bear the risk of
potential financial losses; and (2) compliance reviews and other
monitoring of a QHP issuer's compliance with all Exchange standards
applicable to issuers offering QHPs in the FFE listed in part 156. We
proposed limiting the scope of this requirement to Exchange-specific
records as applicable to the FFEs. In Sec. 156.705(b), we proposed
that the records described in proposed paragraph (a) of this section
include the sources listed in proposed Sec. 155.1210(b)(2), (b)(3),
and (b)(5) in order to align the record maintenance standards of the
FFEs and State Exchanges to the extent possible. In Sec. 156.705(c),
we proposed that issuers offering QHPs in an FFE must maintain the
records described in this section, as well as records required by Sec.
155.710 (to determine SHOP eligibility), for 10 years. Proposed Sec.
156.705(d) explained that the records referenced in paragraph (a) must
be made available to HHS, the OIG, the Comptroller General, or their
designees, upon request. We stated that the proposed standards pertain
only to Exchange-specific areas of concern (for example, matters
pertaining to advance payments of premium tax credits or cost-sharing
reductions) within the FFEs, as HHS would expect the State DOI to
oversee the maintenance of records pertaining to other aspects of
[[Page 65079]]
QHP issuer operations as required under State law.
Comment: Several commenters requested that HHS require maintenance
and review of records related to particular standards in part 156,
including QHP provider network adequacy, and the availability of
essential community providers. Commenters also requested that HHS
review documentation related to wellness programs, rating rules,
essential health benefit requirements, and other applicable market
reforms included in the Affordable Care Act, particularly in direct
enforcement States.
Response: Under Sec. 156.715, which we are finalizing in this
final rule, HHS will be conducting compliance reviews to ensure that
issuers offering QHPs in the FFE comply with Exchange standards as
applicable to them. These include the standards related to network
adequacy under Sec. 156.230 and the standards related to essential
community providers under Sec. 156.235. Section 156.705 only applies
to maintenance of records pertaining to FFEs, as we expect that QHP
issuers will also have to comply with other aspects of issuer
operations as required under state law.
Comment: Several commenters recommended the 10-year record
maintenance standards be reduced to 6 or 7 years.
Response: We are finalizing the maintenance of records provisions
as proposed, in alignment with the statute of limitations for the False
Claims Act and existing related regulations. A civil action may be
brought under the False Claims Act ``no more than 10 years after the
date on which the violation is committed.'' Additionally, similar 10-
year record retention standards were previously finalized in the
Exchange Establishment Rule and the Premium Stabilization Rule. We
believe that maintaining consistency in our record retention standards
will help ensure that entities maintain records across programs in a
consistent manner, allowing HHS and States to coordinate oversight
efforts across those program areas and reduce the burden on
stakeholders. QHP issuers have the choice to maintain records in either
paper or electronic format. We note that the 10-year obligation to
retain records begins when the record is created.
Summary of Regulatory Changes
We are finalizing the provisions proposed in Sec. 156.705 without
modification.
b. Compliance Reviews of QHP Issuers in Federally-Facilitated Exchanges
(Sec. 156.715)
In Sec. 156.715 we proposed that QHP issuers will be subject to
compliance review by HHS to ensure ongoing compliance with Exchange
standards applicable to issuers offering QHPs in FFEs. We proposed the
scope of the compliance reviews and the window of time that such
compliance reviews could be conducted.
Comment: We received comments supporting HHS's authority to conduct
compliance reviews of QHP issuers in the FFEs and no comments opposing
this provision.
Response: We are finalizing our policy as proposed.
Summary of Regulatory Changes
We are finalizing this provision with the correction of a
typographical error in paragraph (c).
6. Subpart J--Administrative Review of QHP Issuer Sanctions in a
Federally-Facilitated Exchange
a. Administrative Review in a Federally-Facilitated Exchange
(Sec. Sec. 156.901 Through 156.963)
In Subpart J, we proposed the administrative hearing process for
issuers of QHPs in an FFE against which an enforcement action has been
taken. The process is intended to provide the issuer an opportunity to
submit evidence to be considered by the administrative law judge (ALJ)
in determining whether a basis exists to assess a CMP against or
decertify a QHP offered by the respondent, and whether the amount of
the assessed CMP is reasonable, if applicable. Our proposed process is
modeled after the appeals process for individuals and entities against
which a CMP has been imposed in the individual and group health
coverage markets. We did not receive any comments on our proposed
regulations in this Subpart J.
In Sec. 156.805(d), we proposed that, if HHS proposes to assess a
CMP under subpart I, HHS will send written notice of intent to issue a
CMP to the QHP issuer concerned. Similarly, in Sec. 156.810(c) and
(d), we proposed that, for standard and expedited decertifications, HHS
will notify the QHP issuer, enrollees in the QHP, and the State DOI in
the State in which the QHP is being decertified of HHS's intent
decertify a QHP offered by the issuer. We note that the notice under 45
CFR 156.805(d) and 156.810(c) and (d) is different from, and in
addition to, the notice required under 45 CFR 155.1080. In Sec.
156.805 and Sec. 156.810, we set forth the process by which QHP
issuers will be notified formally of HHS's intent to issue a CMP or
decertify one or more of their QHPs, the grounds for the enforcement
action, and other specified information, including information about
the process for requesting an appeal. The 30-day clock for requesting
an appeal under 45 CFR 156.905(a) starts on the date of issuance of
HHS's notice of intent to issue a CMP under Sec. 156.805 or notice of
decertification of a QHP under Sec. 156.810(c) or (d). By contrast, 45
CFR 155.1080 requires that notice be sent to the QHP issuer, enrollees
in the QHP, and the State DOI when the decertification is final and no
longer appealable. Furthermore, 45 CFR 155.1080 does not apply in the
case of a CMP. We are finalizing 45 CFR part 156, subpart J as
proposed, except for a minor change to Sec. 156.963, described below.
Summary of Regulatory Changes
We are finalizing these provisions of 45 CFR part 156, subpart J as
proposed, with two exceptions. We are not finalizing Sec. 156.949, and
we are making a minor change to correct the reference to the ``final
order'' in Sec. 156.963. We are replacing ``the final order described
in Sec. 156.945'' with ``the final order imposing a civil money
penalty.''
7. Subpart L--Quality Standards
a. Establishment of Standards for HHS-Approved Enrollee Satisfaction
Survey Vendors for Use by QHP Issuers in Exchanges (Sec. 156.1105)
In Sec. 156.1105, we proposed processes by which HHS would approve
and oversee enrollee satisfaction survey vendors that will administer
enrollee satisfaction surveys on behalf of QHP issuers. We proposed
that enrollee satisfaction survey vendors be approved for one year
terms and would be required to submit an annual application
demonstrating that they meet all of the application and approval
standards. We also proposed listing HHS-approved enrollee satisfaction
survey vendors on an HHS Web site. We received several comments and our
responses to Sec. 156.1105 are set forth below.
Comment: Commenters generally supported the proposal to establish
an application and review process for enrollee satisfaction survey
vendors. Commenters supported the proposed requirements that will
ensure that enrollee satisfaction survey vendors abide by standards for
integrity, including privacy and security standards. Commenters also
supported establishing standards for QHP issuers
[[Page 65080]]
to use only HHS-approved vendors to ensure consistency and integrity in
enrollee satisfaction survey administration.
Response: We are adopting the regulation as proposed to have HHS
approve and oversee enrollee satisfaction survey vendors that meet
certain standards. As stated in the proposed rule, we intend to
promulgate future rulemaking requiring QHP issuers to contract with
HHS-approved survey vendors to administer enrollee satisfaction
surveys. By finalizing as proposed, we are ensuring that enrollee
satisfaction survey vendors will be approved by mid-2014. We believe
that this will allow QHP issuers adequate time to contract with these
vendors by late 2014, prior to the implementation of any relevant
quality reporting standards.
Comment: Commenters suggested that HHS utilize one enrollee
satisfaction survey vendor on behalf of all QHPs. Commenters also
suggested that issuers have a role in the survey vendor application
process.
Response: We believe that allowing multiple enrollee satisfaction
survey vendors the opportunity to apply for approval will encourage a
competitive market of qualified enrollee satisfaction survey vendors.
Therefore, HHS is finalizing the proposal to establish a standardized
process to review and approve multiple enrollee satisfaction survey
vendors. We intend for QHP issuers, along with the public, to have an
opportunity to provide comments on other draft documents related to the
enrollee satisfaction survey vendor application and approval process.
Further, while QHP issuers will not have a direct role in HHS review
and approval of enrollee satisfaction survey vendors, QHP issuers are
expected to have a choice of enrollee satisfaction survey vendors with
which to contract, including those with which the issuers may already
have a business relationship, for example, to administer other surveys
like the Consumer Assessment of Healthcare Providers and Systems
(CAHPS[supreg]) survey on behalf of the issuer. Additionally, QHP
issuers will have the opportunity to provide to HHS comment and
feedback related to the work of approved enrollee satisfaction survey
vendors.
Comment: Commenters requested affirmation that enrollee
satisfaction survey vendors would be required to adhere to non-
discrimination standards.
Response: Enrollee satisfaction survey vendors, as ``delegated
entities'' of QHP issuers defined in 45 CFR 156.20 and set forth in 45
CFR 156.340, would be required to meet any non-discrimination standards
required of QHP issuers, as specified in 45 CFR 156.200(e).
Comment: Commenters requested that enrollee satisfaction survey
vendors translate the enrollee satisfaction survey into different
languages for populations representing a certain enrollment threshold,
for example any language for which a QHP issuer's enrollment meets a
threshold of 5 percent or 1000 primary speakers.
Response: Enrollee satisfaction survey vendors will not be
responsible for translating the enrollee satisfaction survey. HHS is
developing the enrollee satisfaction survey system as required by
section 1311(c)(4) of the Affordable Care Act and will provide
translated versions of the survey to ensure consistency across all
surveys. HHS will provide enrollee satisfaction survey vendors with
versions in English, Spanish, and Chinese, which align with current
translation standards for the Medicare Advantage CAHPS[supreg] Health
Plan surveys.
Comment: Commenters supported the recommendation that HHS utilize
the CAHPS[supreg] Health Plan survey as a model for the enrollee
satisfaction survey to assess patient experience with QHP issuers.
Another commenter suggested using the existing CAHPS[supreg] Health
Plan survey without modification.
Response: As stated in the proposed rule, we intend to establish in
future rulemaking that the enrollee satisfaction survey will be modeled
on the CAHPS[supreg] 5.0 Health Plan survey, which assesses patients'
satisfaction and experience with their health care, personal doctors,
and health plans. In a Federal Register Notice published June 28,
2013,\19\ we sought public comment on the Enrollee Satisfaction Survey
Data Collection, including the draft surveys. Commenters may wish to
review the draft enrollee satisfaction surveys.
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\19\ Agency Information Collection Activities: Proposed
Collection; Comment Request, 78 FR 38986 (June 28, 2013).
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Comment: Commenters requested that CMS articulate detailed
implementation standards for the enrollee satisfaction survey.
Commenters also requested that results of the survey be shared with
State Exchanges.
Response: As indicated in the proposed rule, we are planning to
issue future regulations that will include detailed implementation
standards for the enrollee satisfaction surveys as they relate to QHP
issuers and Exchanges. Further, 45 CFR 155.205(a)(iv) requires
Exchanges to display the enrollee satisfaction results on their Web
sites.
Comment: Several commenters made remarks about the content of the
enrollee satisfaction survey, including requests that the survey
assess: Provider satisfaction with QHP issuers and the experience of
families and pediatricians that interact with the Exchange for their
children's coverage, and satisfaction with Exchanges overall, including
the eligibility determination processes, plan selection, and in-person
and telephonic assistance. Other commenters requested that HHS ensure
experience of the Exchange is not attributed to QHP issuer performance.
Finally, commenters cited their previously submitted comments in
response to an HHS solicitation for comments on enrollee satisfaction
measures and asked that their comments be considered.\20\
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\20\ Request for Domains, Instruments, and Measures for
Development of a Standardized Instrument for Use in Public Reporting
of Enrollee Satisfaction With Their Qualified Health Plan and
Exchange 77 FR 37409 (June 21, 2012).
---------------------------------------------------------------------------
Response: Comments with regard to the content of the surveys are
outside the scope of this final rule, which includes standards for the
application and approval process for enrollee satisfaction survey
vendors. However, as previously mentioned, commenters can review the
draft surveys as part of the Enrollee Satisfaction Survey Data
Collection, including the QHP Survey and the Marketplace Survey.
Comments submitted in response to the June 21, 2013 call for measures
will be considered in the development of the enrollee satisfaction
survey.
Summary of Regulatory Changes
We are finalizing the provisions proposed in Sec. 156.1105 without
modification.
8. Subpart M--Qualified Health Plan Issuer Responsibilities
a. Confirmation of HHS Payment and Collections Reports (Sec. 156.1210)
We noted in the proposed rule that we anticipate sending each
applicable issuer a monthly payment and collections report. This report
will show, with respect to certain provisions under Title I of the
Affordable Care Act, payments the Federal government owes to the
issuer, as well as those the issuer owes the Federal government. For
the 2014 benefit year, we anticipate issuing a detailed monthly report,
also known as the HIX 820, that will describe the advance payments of
the premium tax credit and advance payments of cost-sharing reductions
that the Federal government is paying to the issuer for each policy
listed on the payment report, any amounts owed by the issuer for FFE
user fees, as well as any adjustments from previous payments
[[Page 65081]]
under those programs. The issuer will need to review this detailed
payment and collections report against the payments it expects for each
policy based on the eligibility and enrollment information transmitted
by the Exchange, and any amounts it expects the Federal government to
collect for FFE user fees.\21\ In Sec. 156.1210 we proposed that,
within 15 calendar days of the date of a payment and collections
report, the issuer would either confirm to HHS that the payment and
collections report accurately lists payments owed by and to the issuer
for the timeframe specified in the payment and collections report, or
would describe to HHS any inaccuracy it identifies in these amounts
(including incorrect payment amounts, or extra or missing policies in
the report). These notifications would be provided in a format
specified by HHS. We stated that HHS will work with issuers to resolve
any discrepancies between the amounts listed in the HIX 820 payment and
collections report and the amounts the issuer believes it should
receive for the time period specified in the report. This proposed
provision's verification timeframe helps align enrollment and
eligibility data transmitted by the Exchange, payments provided by and
collected by the Federal government, and the issuer's own records of
payments due. This provision will also help ensure that the correct
amounts of advance payments of the premium tax credit and cost-sharing
reductions are paid to issuers on behalf of eligible individuals in a
timely manner. The ability of HHS to identify and correct these errors
promptly protects enrollees from unanticipated tax liability that could
result if the advance payments of the premium tax credit they receive
are greater than the amounts of premium tax credit authorized by the
Exchange and accepted by the enrollee.
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\21\ We note that in order to provide issuers with more lead
time to review the payment and collections report, HHS also
anticipates providing an initial statement listing anticipated
payments and charges. Issuers will not be under any obligation to
respond to this initial statement.
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Comment: We received several comments seeking further information
about the HIX 820 payment and collections report.
Response: In the fall of 2013, HHS intends to publish a Companion
Guide to the HIX 820 payment and collections report. HHS offered
related issuer training in September.
Comment: Some commenters suggested that issuers would need at least
30 days to analyze and respond to the HIX 820 payment and collections
report. Another commenter suggested that there should be at least a 60-
day lag between the dates covered by the payment and collections report
and the date it is sent to issuers.
Response: We are aware that in some cases, particularly in this
first year of operations, issuers may find it difficult to perform a
full analysis of the payment and collections report and provide a
response. However, it is largely due to the challenges of the first
year of operations that we proposed a 15-day verification period--this
short time lag will help HHS adjust any discrepancies as soon as
possible. As we discuss below, if an issuer is unable to meet the 15-
day timeline, it will have later opportunities to note discrepancies.
Comment: Several commenters expressed concern about the potential
consequences of failing to report a discrepancy. Other commenters
suggested that there should be a retroactive payment correction
process, or an appeals process, to update eligibility and enrollment
determinations based upon information received late.
Response: We recognize that there are legitimate circumstances in
which an issuer might not discover an inaccuracy within the 15-day
timeline set forth in Sec. 156.1210, and we do not wish to penalize an
issuer in such circumstances. Therefore, we are adding a new paragraph
(b) to Sec. 156.1210 stating that HHS will work with issuers to
resolve discrepancies reported by an issuer after the 15-day deadline,
as long as the late discovery of the discrepancy was not due to
misconduct on the part of the issuer. We are also considering
establishing in future rulemaking a final deadline after which
discrepancies cannot be reported, as well as an administrative appeals
process that would be available to issuers that are not satisfied with
the result of that process.
Summary of Regulatory Changes
We are finalizing Sec. 156.1210, with the following modifications.
We are redesignating paragraphs (a) and (b) as paragraphs (a)(1) and
(a)(2) and are adding a new paragraph (b) to state that if an issuer
reports a discrepancy in a payment and collections report later than 15
calendar days after the date of the report, HHS will work with the
issuer to resolve the discrepancy as long the late reporting by the
issuer was not due to misconduct on the part of the issuer. And because
HHS's payments will technically be made by the U.S. Treasury, we are
modifying Sec. 155.1210(a)(1) to clarify that the payments owed by and
to the issuer listed on the payment and collections report are payments
to and from the Federal government.
III. Collection of Information Requirements
Under the Paperwork Reduction Act of 1995, we are required to
provide 30-day notice in the Federal Register and solicit public
comment before a collection of information requirement is submitted to
the Office of Management and Budget (OMB) for review and approval. In
order to fairly evaluate whether an information collection should be
approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act
of 1995 requires that we solicit comment on the following issues:
The need for the information collection and its usefulness
in carrying out the proper functions of our agency.
The accuracy of our estimate of the information collection
burden.
The quality, utility, and clarity of the information to be
collected.
Recommendations to minimize the information collection
burden on the affected public, including automated collection
techniques.
The following sections of this document contain estimates of burden
imposed by the associated information collection requirements (ICRs);
however, not all of these estimates are subject to the ICRs under the
PRA for the reasons noted. Estimated salaries for the positions cited
were mainly taken from the Bureau of Labor Statistics (BLS) Web site
(http://www.bls.gov/oco/ooh_index.htm). The estimated salaries for the
health policy analyst and the senior manager were taken from the Office
of Personnel Management Web site. Fringe Benefits estimates were taken
from the BLS March 2013 Employer Costs for Employee Compensation
Report.\22\
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\22\ BLS March 2013 Employer Costs for Employee Compensation
Report (March 12, 2013). Available at: http://www.bls.gov/news.release/ecec.toc.htm.
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We are soliciting public comment on each of these issues for the
following sections of this document that contain information collection
requirements (ICRs):
A. ICRs Regarding Program Integrity Provisions Related to State
Operation of the Reinsurance Program (Sec. 153.260)
In Sec. 153.260, we direct a State-operated reinsurance program
to: (1) Keep an accurate accounting of reinsurance contributions,
payments, and administrative expenses; (2) submit to HHS and make
public a summary report on program operations; and (3) engage an
independent qualified auditing entity to perform a financial
[[Page 65082]]
and programmatic audit for each benefit year, provide the audit results
to HHS, and make public a summary of the audit results. Fewer than 10
States have informed HHS that they will operate reinsurance for the
2014 benefit year. While these reinsurance records requirements are
subject to the PRA, we believe the associated burden is exempt under 5
CFR 1320.3(c)(4) and 44 U.S.C. 3502(3)(A)(i), since fewer than 10
entities would be affected. Therefore, we are not seeking approval from
OMB for these information collection requirements.
B. ICRs Regarding Program Integrity Provisions Related to State
Operation of the Risk Adjustment Program (Sec. 153.310(c)(4) and Sec.
153.310(d)(3)-(4), and Sec. 153.365)
In Sec. 153.310(c)(4), Sec. 153.310(d)(3)-(4), and Sec. 153.365,
we require a State operating risk adjustment to: (1) Retain records for
a 10-year period; (2) submit an interim report in its first year of
operation; (3) submit to HHS and make public a summary report on
program operations for each benefit year; and (4) keep an accurate
accounting for each benefit year of all receipts and expenditures
related to risk adjustment payments, charges, and administrative
expenses. Fewer than 10 States have informed HHS that they will operate
risk adjustment for the 2014 benefit year. Since the burden associated
with collections from fewer than 10 entities is exempt from the PRA
under 5 CFR 1320.3(c)(4) and 44 U.S.C. 3502(3)(A)(i), we are not
seeking approval from OMB for the risk adjustment information
collection requirements. However, if more than nine States elect to
operate risk adjustment in the future, we will seek approval from OMB
for these information collections.
C. ICRs Regarding Maintenance of Records for Contributing Entities and
Issuers of Reinsurance-Eligible Plans (Sec. 153.405(h) and Sec.
153.410(c))
In Sec. 153.405(h) and Sec. 153.410(c), we included record
retention standards for contributing entities and issuers of
reinsurance-eligible plans. In Sec. 153.405(h), we require
contributing entities to maintain documents and records, whether paper,
electronic, or in other media, sufficient to substantiate the
enrollment count submitted pursuant to Sec. 153.405(b) for a period of
at least 10 years, and to make those documents and records available
upon request to HHS, the OIG, the Comptroller General, or their
designees, for purposes of verification of reinsurance contribution
amounts. This requirement may be satisfied if the contributing entity
archives the documents and records and ensures that they are accessible
if needed in the event of an investigation or audit.
We estimate that 26,200 contributing entities will be subject to
this requirement, based on the Department of Labor's (DOL) estimated
count of self-insured plans and the number of fully insured issuers
that we estimate will make reinsurance contributions.\23\ We believe
that most of these contributing entities will already have the systems
in place for record maintenance, and that the additional burden
associated with this requirement is the time, effort, and additional
labor cost required to maintain the records. On average, we estimate
that it will take each contributing entity approximately 5 hours
annually to maintain records. We estimate that it will take an
insurance operations analyst 5 hours (at $38.49 per hour) to meet the
requirements in Sec. 153.405(h). On average, the cost for each
contributing entity would be approximately $192.45 annually. Therefore,
for 26,200 contributing entities, we estimate an aggregate burden of
$5,042,190.00 and 131,000 hours as a result of this requirement.
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\23\ We use an estimate of self-insured entities published by
the DOL in the March 2013 ``Report to Congress: Annual Report of
Self-insured Group Health Plans,'' which reflects only those self-
insured health plans (including 19,800 self-insured plans and 4,000
plans that mixed self-insurance and insurance) that are required to
file a Form 5500 with the DOL.
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In Sec. 153.410(c), we require issuers of reinsurance-eligible
plans to maintain documents and records, whether paper, electronic, or
in other media, sufficient to substantiate the requests for reinsurance
payments made pursuant to Sec. 153.410(a) for a period of at least 10
years, and must make that evidence available upon request to HHS, the
OIG, the Comptroller General, or their designees, (or, in the case of a
State operating reinsurance, the State or its designees), for purposes
of verification of reinsurance payment requests. We estimate that 1,900
issuers of reinsurance-eligible plans will be subject to this
requirement, based on HHS's most recent estimate of the number of fully
insured issuers that will submit requests for reinsurance payments. On
average, we estimate that it will take each issuer of a reinsurance-
eligible plan approximately 10 hours annually to maintain the records.
We estimate that it will take an insurance operations analyst 10 hours
(at $38.49 per hour) to meet these requirements. On average, the cost
estimate for each issuer is approximately $384.90 annually. Therefore,
for 1,900 issuers, we estimate an aggregate burden of $731,310.00 and
19,000 hours as a result of this requirement.
The burden estimates for these two recordkeeping requirements are
broad estimates that include not only the maintenance of data, but all
records and documents that may be necessary to substantiate the
enrollment count and requests for reinsurance payments made pursuant to
45 CFR 153.405 and 153.410, respectively. Because the scope of these
requirements is substantially narrower than the scope of the
recordkeeping requirement applicable to a State operating reinsurance,
these estimates are lower than those that were set forth for the State-
operated reinsurance programs record maintenance requirement (45 CFR
153.240(c)) in the Premium Stabilization Rule published March 23, 2012
(77 FR 17220), and the associated information collection request
approved under OMB Control Number 0938-1155. We note that we will
account for the additional burden associated with submitting this
information to HHS in a future information collection request that will
go through the requisite notice and comment period and subsequent OMB
review and approval process.
D. ICRs Related to Oversight and Financial Integrity Standards for
State Exchanges (Sec. 155.1200 to Sec. 155.1210)
In subpart M of part 155, we describe the information collection
and third-party disclosure standards related to the oversight and
financial integrity of State Exchanges.
Section 155.1200(a)(1) through (3) requires the State Exchange to
follow GAAP and to monitor and report to HHS all Exchange-related
activities. This includes keeping an accurate accounting of all
Exchange receipts and expenditures. The burden associated with this
reporting requirement is the time and effort needed to develop and
submit reports of Exchange-related activities to HHS. The State
Exchanges will electronically maintain the information as a result of
normal business practices; therefore, the burden does not include the
time and effort needed to maintain the Exchange-related activity
information. State Exchanges most likely will already have accounting
systems in place to store accounting information. The burden associated
with this requirement includes a computer programmer taking 8 hours (at
$48.61 an hour) to modify the system to maintain and monitor the
information required under Sec. 155.1200(a)(1) through (3), an analyst
taking 8 hours (at $58.05 an hour) to pull the necessary data under
[[Page 65083]]
Sec. 155.1200(a)(1) through (3) in the State Exchange accounting
system, and a senior manager taking 2 hours (at $77.00 an hour) to
oversee the development and transmission of the reported data. We
estimate that it will take 18 total hours at a cost of $1,007.28 for
each State Exchange. Therefore, for the 18 State Exchanges, we estimate
an aggregate burden of $18,131.04 and 324 hours as a result of this
requirement.
Section 155.1200(b)(1) requires the State Exchange to submit a
financial statement, in accordance with GAAP to HHS. The information
under Sec. 155.1200(b) must be submitted at least annually by April 1
to HHS and must also be publicly displayed. The burden associated with
this reporting requirement is the time and effort needed to develop and
submit the financial statement to HHS. The State Exchanges will
electronically submit the information. Therefore, the burden is the
time and effort needed to develop and publically display the financial
statement. The State Exchanges will electronically maintain the
information as a result of normal business practices, therefore the
burden does not include the time and effort needed to develop and
maintain the financial information. The burden associated with this
requirement includes a computer programmer taking 40 hours (at $48.61
an hour) to design the financial statement report, an analyst taking 8
hours (at $58.05 an hour) pulling the necessary data and inputting it
into the financial statement report, and a senior manager taking 2
hours (at $77.00 an hour) overseeing the development and transmission
of the reported data. We estimate a burden of 50 total hours for each
State Exchange at a cost of $2,562.80. Therefore, for the 18 State
Exchanges, we estimate an aggregate burden of $45,410.40 and 900 hours
as a result of this requirement.
Section 155.1200(b)(2) requires the State Exchange to submit
eligibility and enrollment reports to HHS. The State Exchanges will
electronically maintain the information as a result of normal business
practices, therefore the burden does not include the time and effort
required to develop and maintain the source information. The burden
associated with this reporting requirement includes the time and effort
necessary for a computer programmer taking 40 hours (at $48.61 an hour)
to design the report template, an analyst taking 8 hours (at $58.05 an
hour) to compile the statistics for the report for submission to HHS, a
privacy officer taking 8 hours (at $64.98 an hour) and senior manager
taking 2 hours (at $77.00 an hour) overseeing the development and
submission of the reported data. The burden also includes the time and
effort necessary to post the data on the State Exchange Web site. We
estimate an initial year burden of 58 hours at a cost of $3,082.64 to
each State Exchange. Therefore, for the 18 State Exchanges, we estimate
an aggregate burden of $55,487.52 and 1,044 hours as a result of this
requirement.
As discussed in Sec. 155.1200(b)(3), the State Exchange will
report performance monitoring data to HHS. The performance monitoring
data includes information on financial sustainability, operational
efficiency, and consumer satisfaction which will be reported on an
annual basis. The State Exchanges will electronically maintain the
information as a result of normal business practices developed under
Establishment Grants from HHS for this purpose. Therefore the burden
does not include the time and effort needed to develop and maintain the
performance data. The burden associated with meeting the reporting
requirement includes the time and effort necessary for a computer
programmer taking 40 hours (at $48.61 an hour) to design the report,
for an analyst taking 12 hours (at $58.05 an hour) to pull data into
the report and prepare for submission to HHS and for a senior manager
taking 2 hours (at $77.00 an hour) to oversee the development and
transmission of the reported data. Section 155.1200(b) requires the
State Exchange to submit to HHS and to display publicly financial,
eligibility and enrollment reports and performance data at least
annually. For those measures reported annually, we estimate that in the
initial year a burden of 54 hours at a cost of $2,795.00 for each State
Exchange. Therefore, for the 18 State Exchanges, we estimate an
aggregate burden of $50,031.00 and 972 hours as a result of this
requirement. For subsequent years, when the Establishment Grant project
period ends we estimate an additional burden of 208 hours necessary for
the computer programmer (at $48.61 an hour) to maintain the performance
data. For the first year, the burden for maintaining the data was
already accounted for in the PRA package for the Exchange Establishment
Grants (OMB Control Number 0938-1119); therefore, we are only including
subsequent years in the ICR. We estimate that the total burden from
year 1 will decrease to $25,016.00 assuming a decreased effort and an
additional burden of $18,1996.00 for maintaining the data, yielding a
total burden of $44,012.00 for subsequent years.
Section 155.1200(b)(4) requires the State Exchange to make public a
summary of the results of the external financial audit. The burden
associated with this requirement is the time and effort for a computer
programmer taking 1 hour (at $48.61 an hour) to design the summary and
for an analyst to take 1 hour (at $58.05 an hour) to pull data into the
summary and prepare for public display. For this requirement we
estimate in the initial year a burden of 2 hours for the State
Exchanges at a cost of $107.00 each and a total burden of $1926.00.
Therefore, for the 18 State Exchanges, we estimate an aggregate burden
of $1926.00 and 36 hours as a result of this requirement.
Section 155.1200(c)(1) through (3) directs the State Exchange to
engage an independent audit/review organization to perform an external
financial and programmatic audit of the State Exchange. The State
Exchange must provide the results of the audit and identify any
material weakness or significant deficiency and any intended corrective
action. The State Exchange must also make public a summary of the audit
results. The burden associated with meeting this third party disclosure
requirement includes the burden for an analyst level employee taking 3
hours (at $48.61 an hour) to pull data into a report, the time and
effort necessary for a health policy analyst taking 2 hours (at $58.05
an hour) to prepare the report of the audit results, and the time for
senior management taking 1 hour (at $77.00 an hour) to review and
submit to HHS. We estimate a burden of 6 hours at a cost of $338.93 for
each State Exchange. Therefore, for the 18 State Exchanges, we estimate
an aggregate burden of $6,100.74 and 108 hours as a result of this
requirement.
As stated in Sec. 155.1210(a), the State Exchange and its
contractors, subcontractors, and agents must maintain for 10 years,
books, records, documents, and other evidence of accounting procedures
and practices. Section 155.1210(b) specifies that the records include
information concerning management and operation of the State Exchange's
financial and other record keeping systems. The records must also
include financial statements, including cash flow statements, and
accounts receivable and matters pertaining to the costs of operation.
Additionally, the records must contain any financial report filed with
other Federal programs or State authorities. Finally, the records must
contain data and records relating to the State Exchange's eligibility
verifications and determinations, enrollment transactions, appeals,
plan variation certifications, QHP contracting data, consumer outreach,
and Navigator grant oversight information. State
[[Page 65084]]
Exchanges most likely already have systems in place to store records.
The burden associated with this record keeping requirement includes the
time and effort necessary for a network administrator taking 16 hours
(at $46.86 an hour) to modify the State systems to maintain the
information required under Sec. 155.1210(b), for a health policy
analyst taking 8 hours (at $58.05 an hour) to enter the data under
Sec. 155.1210(b) into the State Exchange record retention system, and
for senior management taking 2 hours (at $77.00 an hour) to oversee
record collection and retention. We estimate that it will take 26 hours
at a cost of $1,368.16 for each State Exchange. Therefore, for the 18
State Exchanges, we estimate an aggregate burden of $24,626.88 and 468
hours as a result of this requirement.
E. ICRs Related to Change of Ownership (Sec. 156.330)
The QHP issuer must notify HHS of the change in a manner to be
specified by HHS and provide the legal name and tax identification
number of the new owner of the QHP and the effective date of the change
of ownership. The information must be submitted at least 30 days prior
to the effective date of the change of ownership. We estimate fewer
than 10 QHP issuers will report changes of ownership. While this
reporting requirement is subject to the PRA, we believe the associated
burden is exempt under 5 CFR 1320.3(c)(4) and 44 U.S.C. 3502(3)(A)(i),
since fewer than 10 entities would be affected. Therefore, we are not
seeking approval from OMB for these information collection
requirements.
F. ICRs Related to Payment for Cost-Sharing Reductions (Sec. 156.430)
Several of the provisions established in the interim final rule and
finalized in this final rule require the collection of information.
First, under paragraph (c)(3)(i) as established in the interim
final rule, and finalized in this rule, a QHP issuer must notify HHS
prior to the start of each benefit year whether or not it selects the
simplified methodology for the benefit year. Pursuant to the Paperwork
Reduction Act of 1995, we detailed this information collection in a
notice requesting comment in the Federal Register (78 FR 38983), and
estimated the total burden of this request to be $3,600,000 for 2014
through 2016.
In Sec. 156.430(c)(4) of the interim final rule, we established a
simplified methodology for calculating the value of the amount that the
enrollees would have paid under the standard plan without cost-sharing
reductions. To estimate the incremental effect of the simplified
methodology, we compared the burden of the standard methodology to the
simplified methodology for those issuers that we assumed would select
the simplified methodology. As discussed in the Collection of
Information section in the 2014 Payment Notice, we estimated that 1,200
issuers will participate in an Exchange nationally and will incur total
costs of approximately $138 million using the standard methodology. In
contrast, in the interim final rule, we estimated that each issuer
using the simplified methodology would incur labor costs of 40 hours of
work by an actuary (at a wage rate of $56.89) and 20 hours of work by
an insurance manager (at a wage rate of $67.44) to develop the
effective cost-sharing parameters and actuarial memorandum, and
calculate the amount of cost-sharing reductions provided, resulting in
a cost of approximately $3,624 per issuer.\24\
---------------------------------------------------------------------------
\24\ HHS relied on the Bureau of Labor Statistics, U.S.
Department of Labor, National Compensation Survey Occupational
Earnings in the United States, 2011, for estimates of job
descriptions and wages.
---------------------------------------------------------------------------
Because we have modified the simplified methodology in this final
rule, we are updating this estimate to require 42 hours of work by an
actuary and 22 hours of work by an insurance manager, resulting in a
cost of approximately $3,873 per issuer. Although we cannot predict the
precise number of issuers that will select either the standard or
simplified methodology, we estimate that approximately half of QHP
issuers (600 issuers) will implement the simplified methodology.
Therefore, we estimate that the provisions of this rule will result in
an incremental savings of approximately $57,676,164 ($60 million that
would have been incurred by these issuers under the standard
methodology, minus 600 multiplied by $3,873) by reducing the overall
administrative costs that issuers incur.
The information collections associated with these provisions are
subject to the Paperwork Reduction Act; however, the information
collection process and instruments are currently under development. We
will seek OMB approval and solicit public comments upon their
completion.
G. ICRs Related to Oversight of Cost-Sharing Reductions and Advance
Payments of the Premium Tax Credit (Sec. 155.340, Sec. 156.410, Sec.
156.460 and Sec. 156.480)
Section 156.460 requires a QHP issuer to notify the enrollee within
45 calendar days of the QHP issuer's discovery of the error, when the
QHP issuer improperly reduces the premium by the amount of the advance
payment of the premium tax. A parallel provision is established under
Sec. 155.340 when the Exchange is facilitating the collection of
premiums. Additionally, in Sec. 156.410(c) and (d) a QHP issuer must
notify the enrollee within 45 calendar days of the QHP issuer's
discovery of the error of a misapplication of the cost-sharing
reduction or the improper assignment to a plan variation (or standard
plan without cost-sharing reductions) and subsequent reassignment. We
believe that these notifications will be effectuated as part of
standard billing practices and therefore will not create an additional
burden on the Exchange or QHP issuers. Therefore, we do not estimate a
burden for this notification.
In Sec. 156.480(a), we extend the standards set forth in proposed
Sec. 156.705 concerning maintenance of records to a QHP issuer in the
individual market on State Exchange with respect to cost-sharing
reductions and advance payments of the premium tax credit. We believe
that the burden of maintaining records related to cost-sharing
reductions and advance payments of the premium tax credit for QHP
issuers in an FFE is already accounted for in the burden for finalized
Sec. 156.705, described elsewhere in the Collection of Information
section of this final rule. In Sec. 156.480(b), we establish that, for
each benefit year, an issuer that offers a QHP in the individual market
through a State Exchange or an FFE report to HHS annually, in a
timeframe and manner required by HHS, summary statistics with respect
to cost-sharing reductions and advance payments of the premium tax
credit. In the proposed rule we stated that we believed that QHP
issuers would already have the information and data systems in place
necessary to generate a summary report, and that there would only be a
small additional burden as a result of this submission requirement. We
estimated that it would take an insurance operations analyst 16 hours
(at $38.49 an hour) annually and one senior manager 2 hours (at $77.00
an hour) to gather summary information and prepare a report for
submission to HHS. Therefore, we estimated an additional burden of
21,600 hours and total costs of approximately $923,808 for 1,200 QHP
issuers ($769.84, on average, for each QHP issuer) as a result of this
requirement. However, in this final rule, we are adding a requirement
that these summary reports include information on misapplication of
cost-sharing reductions and advance payments of the
[[Page 65085]]
premium tax credit. We estimate that will take an insurance operations
analyst 3 hours (at $38.49 an hour) annually and one senior manager 1
hours (at $77.00 an hour) to gather and prepare this additional
information for the summary report, resulting in an additional burden
of 4,800 hours and total costs of approximately $230,964 for 1,200 QHP
issuers ($192.84, on average, for each issuer). This would increase the
total burden for the summary reports to 26,400 hours and total costs to
approximately $1,154,772.
H. ICRs Related to Oversight and Financial Integrity Standards for
Issuers of Qualified Health Plans in Federally-facilitated Exchanges
(Sec. 156.705 to Sec. 156.715)
The burden estimates for the collections of information in Part
156, Subpart H, of the regulation reflect the assumption that the FFEs
will include 475 QHP issuers. We update the number of issuers in the
FFEs from the estimated number in the proposed rule to reflect more
current information on the number of issuers expected to participate in
the FFEs. The labor categories and salary estimates used to calculate
the cost burden of these collections on issuers are derived from the
Bureau of Labor Statistics' (BLS) May 2012 Occupational Employment
Statistics data for selected occupations. These burden estimates
generally reflect burden for the first year.
Section 156.705 provides that issuers offering QHPs in an FFE must
maintain all documents and records (whether paper, electronic or other
media), and other evidence of accounting procedures and practices
necessary for HHS to conduct activities necessary to safeguard the
financial and programmatic integrity of the FFEs. Such activities
include: (1) periodic auditing of the QHP issuer's financial records,
including data related to the QHP issuer's ability to bear the risk of
potential financial losses; and (2) compliance reviews and other
monitoring of a QHP issuer's compliance with all Exchange standards
applicable to issuers offering QHPs in the FFEs listed in part 156.
These standards are limited to Exchange-specific records as applicable
to the FFEs, and are not enforced by States as primary regulators. This
standard mirrors the maintenance of records standard applicable to
State Exchanges and set forth in Sec. 155.1210. The burden includes
utilizing existing technology and systems to process and maintain this
information. This reflects 60 hours of work by an actuary (at $56.89 an
hour), 15 hours by a network administrator (at $46.86 an hour), 15
hours by a compliance officer (at $53.75 an hour), and 10 hours for a
senior manager to review (at $77.00 an hour). We estimate that it will
take 100 hours total at a cost of $5,693.00 for a QHP issuer to
maintain these records for an aggregate burden of 47,500 hours and
$2,704,175 for all 475 QHP issuers.
Section 156.705(d) provides that QHP issuers must make all records
described in paragraph (a) of this section available to HHS, the OIG,
the Comptroller General, or their designees, upon request. In
estimating the annual hour and cost burden on QHP issuers of making
these records available to such authorities upon request, we assumed
that such requests would normally be made in connection with a formal
audit or compliance review or a similar process. Our burden estimates
for this section address the hour and cost burden of making records
available to HHS, the OIG, the Comptroller General, or their designees,
for audit. Our estimates reflect our assumptions that about 47 QHP
issuers would be subject to a formal audit in a given year and that the
burden on issuers of making the records available would include the
time, effort, and associated cost of compiling the information,
reviewing it for completeness, submitting it to the auditor(s), and
participating in telephone or in-person interviews. We anticipate using
a risk-based approach to selection of the majority of QHP issuers for
compliance review so that burdens to the issuer community would
generally be linked to the QHP issuers' risk. This reflects 75 hours of
work by an actuary (at $56.89 an hour), 10 hours by a compliance
officer (at $53.75 an hour), and 5 hours for a senior manager to review
(at $77.00 an hour).We estimate it will take 90 hours at a cost of
$5,189.25 for an issuer to make its records available for an audit for
a total of 4,230 hours and $243,894.75 across all QHP issuers subject
to this requirement, which we estimate at an upper end as 100 issuers.
Section 156.715 establishes the general standard that QHP issuers
are subject to compliance reviews. Our burden estimates for Sec.
156.715 address the estimated annual hour and cost burden on QHP
issuers of complying with the records disclosure requirements
associated with compliance reviews conducted by an FFE.
Section 156.715 provides standards for compliance reviews in the
FFEs, stating that QHP issuers offering QHPs in the FFEs may be subject
to compliance reviews. This section also describes the categories of
records and information issuers must make available to an FFE in
conducting such reviews.
Compliance reviews evaluate a QHP issuer's compliance with the
Affordable Care Act and applicable regulations. Compliance reviews will
target high-risk QHP issuers and not every issuer will be reviewed each
year. The results of compliance reviews will also provide insight into
trends across the compliance statuses of QHP issuers, enabling HHS to
prioritize areas of oversight and technical assistance.
We assume that HHS will conduct desk reviews of 31 QHP issuers each
year. For each QHP issuer desk review we estimate an average of 40
hours of administrative work to assemble the requested information by a
health policy analyst (at $58.05 an hour), 19.5 hours to review the
information for completeness and an additional 30 minutes for a
compliance officer to submit the information to HHS (at $53.75 an
hour). There will also be an additional 10 hours to spend on phone
interviews conducted by the compliance reviewer and 2 hours to spend
speaking through processes with the compliance reviewer (at $53.75 an
hour). We estimate it will take 72 hours at a cost of $4,042.00 for an
issuer to make information available to HHS for a desk review for a
total of 2,232 hours and $125,302.00 across all issuers that may be
subject to this information collection requirement.
We assume that HHS will conduct onsite reviews of 16 QHP issuers
each year. For each onsite review we estimate it will take an average
of 40 hours for a health policy analyst (at $58.05 an hour) to assemble
the requested information, and 19.5 hours for a compliance officer (at
$53.75 an hour) to review the information for completeness and 30
minutes to submit the information to HHS in preparation for an onsite
review. An onsite review requires an additional 2 hours to schedule the
onsite activities with the compliance officer (at $53.75 an hour), 4
hours for introductory meeting, 8 hours to tour reviewers onsite, 10
hours of interview time, 2 hours to walk through processes with the
reviewer, and 4 hours for concluding meetings. This is a total of
approximately 60 hours of preparation time and an additional 30 hours
for onsite time for each QHP. We estimate it will take 90 hours at a
cost of $5,009.50 for an issuer to make information available to HHS
for an onsite review. We estimate that the burden for all respondents
that may be subject to this information collection will be 1,440 hours
at a cost of $80,152.00
[[Page 65086]]
In cases in which HHS could potentially require clarification
around submitted information, HHS may need to contact QHP issuers
within 30 days of information submission. This would be the case for
approximately 20 issuers. We estimate it will take an issuer 2 hours
(at $53.75 an hour) to respond to questions for a total of 40 hours and
$1,075.00.
I. ICRs Regarding Administrative Review of QHP Issuer Sanctions in a
Federally-facilitated Exchange (Sec. 156.901 to Sec. 156.963)
Subpart J of Part 156 sets forth the administrative process for
issuers subject to a CMP or decertification of a QHP offered by the
issuer to appeal the enforcement action. In this process, an ALJ
decides whether there is a basis for HHS to assess a CMP against the
issuer and whether the amount of an assessed penalty is reasonable, or
whether there is a basis for decertifying a QHP offered by the issuer,
as applicable. Section 156.905 (intended to parallel 45 CFR 150.405)
provides that a party has a right to a hearing before an ALJ if it
files a valid request for a hearing within 30 days after the date of
issuance of HHS's notice of proposed assessment or decertification. An
issuer's request for a hearing must include the information listed in
Sec. 156.907. Under Sec. 156.907, the request for a hearing must
identify any factual or legal bases for the assessment or
decertification with which the issuer disagrees. It must also describe
with reasonable specificity the basis for the disagreement, including
any affirmative facts or legal arguments on which the respondent is
relying. The request must also identify the relevant notice of
assessment or decertification by date and attach a copy of the notice.
The burden associated with this request includes the time and
effort needed by the issuer to create the written request and submit it
to the appropriate entity. The associated costs are labor costs for
gathering the necessary background information described under Sec.
156.907 and then preparing and submitting the written statement.
We base our burden estimate on the assumptions that one issuer will
be subject to a CMP and that one issuer will have a QHP that it offers
in an FFE decertified. We assume that the issuer in each case will
choose to exercise its right to a hearing and will submit a valid
request for hearing. The hours involved in preparing this request may
vary; for the purpose of this burden estimate we estimate an average of
24 hours will be needed: 10 hours for the compliance officer to gather
and assemble the necessary background materials described under Sec.
156.907, and prepare the written request (at $53.75 an hour), 12 hours
for an attorney (at $90.14 an hour) to review the background materials
and written request and provide recommendations to the senior manager,
and 2 hours for the senior manager (at $77.00 an hour) to discuss and
act upon the attorney's recommendations and submit the written request.
We estimate that it will take 24 hours at a cost of $1,773.18 for an
issuer to prepare and submit a request for a hearing for a total of 48
hours and $3546.36 for each issuer subject to an enforcement action
under this scenario. This estimate includes any statement of good cause
under Sec. 156.805(e)(3) or request for extension under Sec.
156.905(b), if applicable. Because we only estimate that one issuer per
year would appeal a CMP and one issuer will have its QHP offered in an
FFE decertified, we do not include this burden estimate in our overall
calculation of burden for this rule.
J. ICRs Related to Quality Standards (Sec. 156.1105)
In subpart L of part 156, we describe the information collection
and disclosure requirements that pertain to the approval of enrollee
satisfaction survey vendors. The burden estimate associated with these
disclosure requirements includes the time and effort required for
enrollee satisfaction survey vendors to develop, compile, and submit
the application information and any documentation necessary to support
oversight in the form and manner required by HHS. HHS is developing a
model enrollee satisfaction survey vendor application that will include
data elements necessary for HHS review and approval. In the near
future, HHS will publish the model application and will solicit public
comment. At that time, and per the requirements outlined in the PRA, we
will estimate the burden on survey vendors for complying with this
provision of the regulation. We solicit comment on the burden for the
application and review process for these entities.
K. ICRs Related to Confirmation of Payment and Collection Reports
(Sec. 156.1210)
In Sec. 156.1210, we establish that, within 15 calendar days of
the date of a HIX 820 payment and collections report from HHS, the
issuer must, in a format specified by HHS, either confirm to HHS that
the HIX 820 payment and collections report accurately lists, for the
timeframe specified in the report, applicable payments owed by the
Federal government and the issuer; or describe to HHS any inaccuracy it
identifies in the payment and collections report. We believe that
issuers will generally be able to perform this confirmation
automatically, and that there will only be a small additional burden as
a result of this requirement. We estimate that it will take an
insurance operations analyst 1 hour (at $38.49 an hour) monthly to make
the comparison and note any discrepancies to HHS (approximately $461.88
for each issuer annually). Based on our most recent estimates, we
believe that 2,400 issuers will be affected by this requirement,
resulting in aggregate burden of approximately $1,108,512.
If you comment on these information collection and recordkeeping
requirements, please do either of the following:
1. Submit your comments electronically as specified in the
ADDRESSES section of this rule; or
2. Submit your comments to the Office of Information and Regulatory
Affairs, Office of Management and Budget, Attention: CMS Desk Officer,
[CMS-9957-F2], Fax: (202) 395-6974; or Email: [email protected].
IV. Regulatory Impact Analysis
In accordance with the provisions of Executive Order 12866, this
rule was reviewed by the OMB.
A. Summary
This final rule sets financial integrity and oversight standards
with respect to Exchanges; QHP issuers in an FFE; and States in regards
to the operation of the risk adjustment and reinsurance programs. It
also provides additional standards for special enrollment periods;
survey vendors that may conduct enrollee satisfaction surveys on behalf
of QHP issuers in Exchanges; and issuer participation in an FFE. In
addition, this final rule amends and adopts as final interim provisions
related to risk corridors and cost-sharing reduction reconciliation.
Finally, it provides additional standards for guaranteed availability
and renewability and makes certain amendments to the definitions and
standards related to the market reform rules.
HHS has crafted this final rule to implement the protections
intended by Congress in an economically efficient manner. We have
examined the effects of this final rule as required by Executive Order
12866 (58 FR 51735, September 1993, Regulatory Planning and Review),
the Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-
354), section 1102(b) of the Social
[[Page 65087]]
Security Act, the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4),
Executive Order 13132 on Federalism, and the Congressional Review Act
(5 U.S.C. 804(2)). In accordance with OMB Circular A-4, HHS has
quantified the benefits and costs where possible, and has also provided
a qualitative discussion of some of the benefits and costs that may
stem from this final rule.
B. Executive Orders 13563 and 12866
Executive Order 12866 (58 FR 51735) directs agencies to assess all
costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects; distributive impacts; and equity). Executive
Order 13563 (76 FR 3821, January 21, 2011) is supplemental to and
reaffirms the principles, structures, and definitions governing
regulatory review as established in Executive Order 12866.
Section 3(f) of Executive Order 12866 defines a ``significant
regulatory action'' as an action that is likely to result in a final
rule--(1) Having an annual effect on the economy of $100 million or
more in any one year, or adversely and materially affecting a sector of
the economy, productivity, competition, jobs, the environment, public
health or safety, or State, local or tribal governments or communities
(also referred to as ``economically significant''); (2) creating a
serious inconsistency or otherwise interfering with an action taken or
planned by another agency; (3) materially altering the budgetary
impacts of entitlement grants, user fees, or loan programs or the
rights and obligations of recipients thereof; or (4) raising novel
legal or policy issues arising out of legal mandates, the President's
priorities, or the principles set forth in the Executive Order.
A regulatory impact analysis (RIA) must be prepared for major rules
with economically significant effects ($100 million or more in any 1
year), and a ``significant'' regulatory action is subject to review by
the OMB. OMB has designated this final rule as a ``significant
regulatory action.'' Even though it is not certain whether it will have
economic impacts of $100 million or more in any one year, HHS has
provided an assessment of the potential costs and benefits associated
with this final regulation.
1. Need for Regulatory Action
Starting in 2014, qualified individuals and qualified employers
will be able to use coverage provided by QHPs--private health insurance
that has been certified as meeting certain standards--through
Exchanges. The premium stabilization programs--the reinsurance, risk
corridors and risk adjustment programs--will be in place to ensure
premium stability for health insurance issuers as enrollment increases
and issuers enroll high-risk individuals. This final rule establishes
general oversight requirements for State-operated reinsurance and risk
adjustment programs; establishes oversight of issuers inside and
outside of the Exchange when HHS operates risk adjustment or
reinsurance on behalf of a State; and establishes oversight and
monitoring of State Exchanges, FFEs, SHOPs (both State Exchanges and
FFEs) and issuers of QHPs, specifically with respect to financial
integrity, and maintenance of records. This final rule also restricts
the use of funds for administrative expenses generated for State
Exchanges and State-operated reinsurance programs; specifies procedures
for oversight of advance payments of the premium tax credit and cost-
sharing reductions; provides procedures to ensure the accuracy of data
collection, calculations, and submissions; establishes requirements for
enrollee satisfaction survey vendors; establishes standards related to
risk corridors and cost-sharing reduction reconciliation; and provides
additional standards for special enrollment periods.
2. Summary of Impacts
In accordance with OMB Circular A-4, Table IV.1 below depicts an
accounting statement summarizing HHS's assessment of the benefits and
costs associated with this regulatory action. The period covered by the
RIA is 2014-2017.
HHS anticipates that the provisions of this final rule will ensure
smooth operation of Exchanges, integrity of the reinsurance, risk
adjustment and risk corridors programs, safeguard the use of Federal
funds, prevent fraud and abuse, and increase access to healthcare
coverage. Affected entities such as States and QHP issuers will incur
costs to maintain records, submit reports to HHS and Exchanges, and
provide records for compliance reviews. In addition, QHP issuers that
adopt the simplified methodology for calculating cost sharing
reductions will incur lower administrative costs during a transitional
period. In accordance with Executive Order 12866, HHS believes that the
benefits of this regulatory action justify the costs.
Table IV.1--Accounting Table
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Benefits:
Qualitative:....................................................................................................
* Ensure integrity of the reinsurance and risk adjustment programs, smooth functioning of State Exchanges
and FFEs.
* Prevent fraud and abuse...................................................................................
* Ensure prompt refund of any excess premium or cost-sharing paid...........................................
* Safeguard the use of Federal funds provided as cost-sharing reductions and advance payments of the premium
tax credit and provide value for taxpayers' dollars.
----------------------------------------------------------------------------------------------------------------
Costs: Estimate Year dollar Discount rate Period covered
percent
----------------------------------------------------------------------------------------------------------------
Annualized Monetized ($/year)......... $15.4 million \1\....... 2013 7 2014-2017
$15.3 million \1\....... 2013 3 2014-2017
----------------------------------------------------------------------------------------------------------------
Annual costs related to financial oversight, maintenance of records and reporting requirements for State
Exchanges and State-operated reinsurance and risk-adjustment programs; record retention requirements for
contributing entities and issuers of reinsurance-eligible plans; audit costs for State Exchanges and State-
operated risk adjustment and reinsurance programs; costs for QHP issuers related to reporting requirements,
record maintenance, audits, and training for customer service representatives..
----------------------------------------------------------------------------------------------------------------
Qualitative:....................................................................................................
* Costs incurred by enrollee satisfaction survey vendors related to annual application and meeting HHS
standards.
[[Page 65088]]
* Reduce administrative costs for QHP issuers by allowing the use of a simplified methodology to calculate
cost-sharing reductions during a transitional period.
* Reduce compliance costs for issuers by allowing a State operating a SHOP-only Exchange to establish and
operate risk adjustment programs for both the small group and individual markets.
----------------------------------------------------------------------------------------------------------------
Note: 1. Approximately $2.7 million of these costs are estimated below in the RIA, including the audit costs in
Table IV.2 and the rest of these costs are estimated in section III.
3. Anticipated Benefits and Costs
Starting in 2014, individuals and small businesses will be able to
use health insurance coverage purchased through Exchanges. The
Congressional Budget Office estimated that the number of people
enrolled in coverage through Exchanges will increase from 7 million in
2014 to 24 million in 2017.\25\ Exchanges will create competitive
marketplaces where qualified individuals and qualified employers can
shop for insurance coverage, and are expected to reduce the unit price
of quality insurance for the average consumer by pooling risk and
promoting competition.
---------------------------------------------------------------------------
\25\ ``Effects on Health Insurance and the Federal Budget for
the Insurance Coverage Provisions in the Affordable Care Act--May
2013 Baseline,'' Congressional Budget Office, May 14, 2013.
---------------------------------------------------------------------------
The final rule specifies the standards and processes for the
oversight and accountability of entities responsible for operations of
the Exchanges and reinsurance and risk adjustment programs. Affected
entities include States that establish and operate Exchanges and
administer reinsurance and risk adjustment programs; FFEs; issuers of
QHPs; health insurance issuers offering coverage both through and
outside of an Exchange when HHS operates risk adjustment or reinsurance
on behalf of the State; and contractors of these organizations.
a. Benefits
This final rule implements oversight, record maintenance, and
enforcement provisions that will ensure integrity of the reinsurance
and risk adjustment programs, State Exchanges and FFE functions, and
prevent fraud and abuse.
This final rule includes provisions that will create a system of
oversight, financial integrity and program integrity in the Exchanges
and the premium stabilization programs. The oversight requirements for
the reinsurance and risk-adjustment programs will ensure that these
programs are effective and efficient, and use program funds
appropriately. The provisions of this final rule will also ensure that
Federal funds are used appropriately by State Exchanges. By monitoring
financial reports and overseeing State Exchange activities, HHS will
safeguard the use of Federal funds provided as cost-sharing reductions
and advance payments of the premium tax credit, and provide value for
taxpayers' dollars.
The provisions of this final rule also ensure that enrollees are
promptly refunded any excess premium paid or any excess cost sharing
they should not have paid. Individuals harmed by misconduct on the part
of non-Exchange entities will also be eligible for a special enrollment
period. A QHP is also required to promptly reassign an enrollee
improperly assigned to a plan variation (or standard plan without cost-
sharing reductions), minimizing consumer harm.
The annual application requirement for enrollee satisfaction survey
vendors allows HHS to ensure that these entities participate in
relevant training and post-training certification, follow protocols
related to quality assurance and the use of HHS data, and adhere to
privacy and security standards when handling data. This will help to
ensure that ultimately the enrollee satisfaction survey data are
reliable and valid and that the information is sufficiently protected.
b. Costs
Affected entities will incur costs to comply with the provisions of
this final rule. Costs related to information collection requirements
subject to PRA are discussed in detail in section III and include
administrative costs incurred by States and issuers related to record
maintenance and reporting requirements; and oversight and financial
integrity standards. In this section we discuss other costs related to
the provisions in this final rule.
States operating reinsurance programs are required to keep an
accurate accounting for each benefit year, of all reinsurance funds
received from HHS for reinsurance payments and for administrative
expenses, as well as all claims for reinsurance payments from issuers
of reinsurance-eligible plans, all payments made to those issuers, and
all administrative expenses incurred. State-operated reinsurance
programs will already have a system in place to track reinsurance funds
received from HHS, claims from and payments to issuers, and expenses
incurred to operate the reinsurance program. The cost for States
operating reinsurance programs to maintain any records associated with
the reinsurance program was previously estimated in the RIA of the 2014
Payment Notice as being part of State administrative costs associated
with operating the reinsurance program and are not included in this
RIA.
State-operated reinsurance programs will submit to HHS annually and
make public a summary report of their program operations, which will
include a summary of the accounting kept pursuant to Sec. 153.260(a).
We assume that the data already collected and used to report to issuers
and HHS will be the same used to prepare this annual report. Therefore,
the cost associated with this requirement is the incremental time and
cost to prepare an annual report to HHS and the public on program
operations. We estimate it will take an insurance management analyst 16
hours (at $51 per hour) and a senior manager 2 hours (at $77 per hour)
to prepare the report. Therefore, we estimate it will cost each State
that operates reinsurance approximately $970 to submit this report to
HHS. Because two States will operate reinsurance programs in the 2014
benefit year, we estimate that an aggregate cost of $1,940 as a result
of this requirement in the first year. We note that HHS will provide a
portion of the reinsurance contributions it collects to States
operating reinsurance programs to support State administration of
reinsurance payments, which will likely cover the costs associated with
this requirement.
A State operating a risk adjustment program is required to maintain
documents and records relating to the risk adjustment program, whether
paper, electronic or in other media, for each benefit year for at least
10 years, and make them available upon request from HHS, the OIG, the
Comptroller General, or their designees, to any such entity. The
documents and records must be sufficient to enable the evaluation of a
State-operated risk adjustment program's compliance with Federal
standards. States are also directed to ensure that their contractors,
subcontractors, and agents maintain and make those documents and
records available upon request from HHS, the OIG, the Comptroller
General, or their
[[Page 65089]]
designees. States operating risk adjustment programs should already
have the documents and records of accounting procedures needed for
periodic audits. Therefore, we estimate that the additional burden
associated with this requirement is the time, effort, and additional
labor cost required to maintain and archive the records. We assume that
it will take an insurance operations analyst 10 hours (at $38.49 an
hour) to maintain records. Therefore, the average cost for each State
will be approximately $385. Because one State will operate risk
adjustment for the 2014 benefit year, we estimate an aggregate cost of
$385 to comply with this requirement in the first year.
A State operating a risk adjustment program is required to submit
by December 31st of the first benefit year of operation an interim
summary report on the first 10 months of risk adjustment activities, in
order to obtain re-certification for the third benefit year. The cost
of complying with this provision is the time and effort to write the
interim report and submit it to HHS. We estimate it will take an
insurance management analyst 16 hours (at $51 per hour) and a senior
manager 2 hours (at $77 per hour) to prepare the interim summary
report. Therefore, we estimate that it will cost each State operating
risk adjustment $970 to submit this report to HHS (an aggregate cost of
$970 in the 2014 benefit year). A State operating a risk adjustment
program will submit and make public, a summary report of its risk
adjustment program operations for each benefit year after the first
benefit year for which the State operates the program. This summary
report will include the results of a programmatic and financial audit
for each benefit year conducted by an independent qualified auditing
entity. We believe the cost of this annual report will be the same as
the cost of producing the interim first-year report described above,
except for the cost of independent external audits required in
subsequent years. The costs related to the annual external audit are
estimated later in this RIA. These estimates also include the
administrative costs related to the requirement for State-operated risk
adjustment programs to keep accurate accounting for each benefit year
of all receipts and expenditures related to risk adjustment payments,
charges, and administration of the program.
States face a variety of costs due to the monitoring requirements
in this final rule. Conducting oversight of the Exchanges, State-
operated risk adjustment and reinsurance programs, administration of
the advance payments of the premium tax credit or cost-sharing
reductions, and other activities require independent external audits,
investigations, rectification of errors, and the development of summary
reports which will be submitted to HHS. The estimated total costs for
independent external audits for State-operated reinsurance, risk
adjustment and Exchange programs are presented in Table IV.2. It is
expected that 18 States will establish State Exchanges in 2014 and,
without further information; we assume that number will stay the same
during the period covered by the RIA. We also assume that each State
will conduct a financial audit and a programmatic audit annually, which
will encompass the reinsurance and risk adjustment programs if the
State operates these programs. Financial audit costs are estimated
based on prices among the big four audit firms for governmental
entities of similar size to those of the anticipated State Exchanges
for a financial statement audit and Yellowbook Report (report on
internal controls) that reflects different levels of cost for small,
medium, and large entities, for entities with low, medium, and high
risk. Programmatic audit estimates reflect the experience of Federal
entitlement programs similar to Medicaid, audited under an A-133
program compliance supplement, and vary only by the size of the program
(small, medium and large). For example, a small Exchange judged to have
low risk is estimated to have a combined financial and programmatic
audit cost of $90,000; a large Exchange, in a State that also
administers a reinsurance program (which implies a more complex, high
risk operation) is estimated to have combined financial and
programmatic audit costs of $360,000. Audit prices are based on 2012
pricing and reflect an annual increase of 3 percent each year, based on
recent industry experience. It is expected that there will be four
small State Exchanges, 12 medium size State Exchanges and two large
State Exchanges. The lower bound of the range in Table IV.2 below
assumes that all State Exchanges have low risk and the upper bound is
calculated assuming that all State Exchanges have high risk.
Table IV.2--Estimated Audit Costs for State Programs: Exchanges, Risk Adjustment and Reinsurance
--------------------------------------------------------------------------------------------------------------------------------------------------------
2014 2015 2016 2017
--------------------------------------------------------------------------------------------------------------------------------------------------------
Mid-range point estimate.................... $2,572,000 $2,649,160 $2,728,635 $2,810,494
Range....................................... $2,320,000-$2,820,000 $2,389,600-$2,904,600 $2,461,288-$2,991,738 $2,535,127-$3,081,490
--------------------------------------------------------------------------------------------------------------------------------------------------------
A State operating a SHOP-only Exchange will be able to establish
and operate a risk adjustment program for both the small group and
individual markets starting in 2015, which will allow it to minimize
costs by achieving economies of scale and reduce compliance costs for
issuers. The approach to allowable costs will be operationally simpler
for issuers to implement and thus minimize related costs.
The final rule permits QHP issuers to use the simplified
methodology to calculate cost-sharing reductions during a transitional
period and postpone a more costly IT implementation that would be
required for the standard methodology. The costs related to the
administration of cost-sharing reductions using the standard
methodology are accounted for in the 2014 Payment Notice and are not
included here. However, as explained in section III, the provisions of
this final rule allowing the use of a simplified methodology during the
transitional period are likely to result in a reduction in costs
estimated to be approximately $57.7 million.\26\
---------------------------------------------------------------------------
\26\ These cost savings have not been accounted for in the RIA
since they are mostly due to a postponement of IT implementation
necessary for using the standard methodology. QHP issuers will incur
those costs at the end of the transitional period.
---------------------------------------------------------------------------
The final rule requires the enrollee satisfaction survey vendors
engaged by issuers to meet HHS standards. Survey vendors will apply for
approval annually in order to administer enrollee satisfaction surveys
to QHP enrollees on behalf of a QHP issuer. Survey vendors will incur
costs to submit the annual applications to HHS and to meet the
requirements necessary to meet approval.
C. Regulatory Alternatives
Under the Executive Order, HHS is required to consider alternatives
to
[[Page 65090]]
issuing rules and alternative regulatory approaches. HHS considered the
following alternatives while developing this final rule:
1. Increased Uniformity of FFE and State Exchange Standards
Under this alternative, HHS would have required a single standard
for Exchanges across the nation regardless of whether the Exchange was
established and operated by a State or was Federally-facilitated. The
final rule defers to State discretion in oversight of QHPs. This
element of State flexibility would have been precluded if greater
uniformity in operations and standards were to be imposed. Greater
standardization would have had an uncertain impact on Federal oversight
activities but would have likely imposed greater costs of compliance on
State operations and issuers of QHPs in those States.
2. Place More Responsibility on the States To Oversee Standards,
Including Those for FFEs
Under this alternative, HHS would have placed more responsibility
on States and State Exchanges to interpret and meet statutory
requirements. This approach could have created a number of problems. If
every State developed its own monitoring standards, oversight of
different Exchanges could be quite uneven, as States across the country
have varying levels of fiscal resources with which to monitor
activities. States currently have certain levels of responsibility
under the Affordable Care Act to oversee standards for Exchanges, QHPs,
and other programs. State Exchanges also have latitude in the number,
type, and standardization of plans they certify and accept into the
Exchange as QHPs.
There are a number of provisions in the Affordable Care Act that
devolve responsibilities from the Federal government to States.
Increased devolution could have decreased the need of Federal
oversight, while granting States increased flexibility to regulate
Exchanges within their borders. There would also have been a decrease
in oversight-related activities for the Federal government such as HHS
investigations or audits. On the other hand, States would have likely
faced an increase in their own oversight activities and related costs.
3. Require QHP Issuers To Use the Standard Methodology To Reconcile
Cost-Sharing Reductions.
HHS considered not promulgating the simplified methodology during a
transition period. However, doing so could have imposed costly IT
system build requirements on many issuers at a time when QHP issuers
are required to make many significant IT and operational changes.
HHS believes that the options adopted in this final rule strike the
best balance of ensuring efficient operation and integrity of Exchanges
and the premium stabilization programs while providing flexibility to
the States and minimizing the burden on States.
D. Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA) requires agencies that issue a
rule to analyze options for regulatory relief of small businesses if a
rule has a significant 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 nonprofit 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 to 5 percent. HHS anticipates that this
final rule will not have a significant economic impact on a substantial
number of small entities.
As discussed in the Web Portal interim final rule with comment
period published on May 5, 2010 (75 FR 24481), HHS examined the health
insurance industry in depth in the RIA we prepared for the proposed
rule on the establishment of the Medicare Advantage program (69 FR
46866, August 3, 2004). In that analysis it was determined that there
were few, if any, insurance firms underwriting comprehensive health
insurance policies (in contrast, for example, to travel insurance
policies or dental discount policies) that fell below the size
thresholds for ``small'' business established by the SBA (currently
$35.5 million in annual receipts for health insurance issuers).\27\ In
addition, HHS used the data from Medical Loss Ratio (MLR) annual report
submissions for the 2012 MLR reporting year to develop an estimate of
the number of small entities that offer comprehensive major medical
coverage. These estimates may overstate the actual number of small
health insurance issuers that will be affected, since they do not
include receipts from these companies' other lines of business. It is
estimated that out of 510 issuers nationwide, there are 58 small
entities each with less than $35.5 million in earned premiums that
offer individual or group health insurance coverage and will therefore
be subject to the requirements of this final regulation. Forty three
percent of these small issuers belong to larger holding groups, and
many if not all of these small issuers are likely to have other lines
of business that will result in their revenues exceeding $35.5 million.
It is uncertain how many of these 510 issuers will offer QHPs and be
subject to the provisions of this final rule. Based on this analysis,
however, HHS expects that this final rule will not affect small
issuers.
---------------------------------------------------------------------------
\27\ ``Table of Small Business Size Standards Matched To North
American Industry Classification System Codes,'' effective July 23,
2013, U.S. Small Business Administration, available at http://www.sba.gov.
---------------------------------------------------------------------------
E. Unfunded Mandates Reform Act
Section 202 of the Unfunded Mandates Reform Act (UMRA) of 1995
requires that agencies assess anticipated costs and benefits before
issuing any final rule that includes a Federal mandate that could
result in expenditure in any one year by State, local or tribal
governments, in the aggregate, or by the private sector, of $100
million in 1995 dollars, updated annually for inflation. In 2013, that
threshold level is approximately $141 million.
UMRA does not address the total cost of a final rule. Rather, it
focuses on certain categories of cost, mainly those ``Federal mandate''
costs resulting from--(1) imposing enforceable duties on State, local,
or tribal governments, or on the private sector; or (2) increasing the
stringency of conditions in, or decreasing the funding of, State,
local, or tribal governments under entitlement programs.
The final rule directs States to undertake oversight activities for
State Exchanges, State-operated reinsurance and risk adjustment
programs. The costs related to oversight activities, recordkeeping,
reporting and audits are estimated to be approximately $2.8 million in
2014. There are no mandates on local or tribal governments. The private
sector, for example, QHP issuers and agents and brokers, will incur
costs to comply with the record maintenance and reporting requirements
set forth in this final rule. The related costs are estimated to be
approximately $14.2 million in 2014. However, QHP issuers are also
expected to experience a cost savings of approximately $57.7 million by
adopting the simplified methodology to calculate cost sharing
reductions during a transitional period and postponing costly IT
implementation.
[[Page 65091]]
Consistent with the policy embodied in UMRA, this final rule has been
designed to be a low-burden alternative for State, local and tribal
governments, and the private sector while achieving the objectives of
the Affordable Care Act.
F. Federalism
Executive Order 13132 establishes certain requirements that an
agency must meet when it promulgates a final rule that imposes
substantial direct requirement costs on State and local governments,
preempts State law, or otherwise has Federalism implications.
States are the primary regulators of health insurance coverage.
States will continue to apply State laws regarding health insurance
coverage. However, if any State law or requirement prevents the
application of a Federal standard, then that particular State law or
requirement would be preempted. State requirements that are more
stringent than the Federal requirements would be not be preempted by
this final rule. Accordingly, States have significant latitude to
impose requirements with respect to health insurance coverage that are
more restrictive than the Federal law.
The State Exchange oversight program builds on State oversight
efforts, where possible, by coordinating with State authorities to
address compliance issues and concerns. Because QHPs are one of several
commercial market insurance products operating in State markets, HHS
will not seek to inappropriately duplicate or interfere with the
traditional regulatory roles played by the State DOIs. HHS will
generally confine its QHP oversight to Exchange-specific requirements
and attributes. HHS will also seek to work collaboratively with State
DOIs on topics of mutual concern, in the interest of efficiently
deploying oversight resources and avoiding needlessly duplicative
regulatory roles. QHP issuers are expected to comply with standards
established by State law and regulation for cases forwarded to an
issuer by a State in which it offers QHPs.
The requirements specified in this final rule will impose direct
costs on State and local governments and HHS has attempted to minimize
those costs. State Exchanges and State-operated reinsurance and risk
adjustment programs are required to undertake oversight, record
maintenance and reporting activities.
In compliance with the requirement of Executive Order 13132 that
agencies examine closely any policies that may have Federalism
implications or limit the policymaking discretion of the States, HHS
has engaged in efforts to consult with and work cooperatively with
affected States. Throughout the process of developing this final rule,
HHS has attempted to balance the States' interests in regulating health
insurance issuers, and the Congress' intent to provide uniform
protections to consumers in every State. By doing so, it is HHS's view
that it has complied with the requirements of Executive Order 13132.
Under the requirements set forth in section 8(a) of Executive Order
13132, and by the signatures affixed to this rule, HHS certifies that
the CMS Center for Consumer Information and Insurance Oversight has
complied with the requirements of Executive Order 13132 for the
attached final rule in a meaningful and timely manner.
G. Congressional Review Act
This final rule is subject to the Congressional Review Act
provisions of the Small Business Regulatory Enforcement Fairness Act of
1996 (5 U.S.C. 801 et seq.), which specifies that before a rule can
take effect, the Federal agency promulgating the rule shall submit to
each House of the Congress and to the Comptroller General a report
containing a copy of the rule along with other specified information,
and has been transmitted to the Congress and the Comptroller General
for review.
List of Subjects
45 CFR Part 144
Health care, Health insurance, Reporting and recordkeeping
requirements.
45 CFR Part 146
Health care, Health insurance, Reporting and recordkeeping
requirements.
45 CFR Part 147
Health care, Health insurance, Reporting and recordkeeping
requirements, and State regulation of health insurance.
45 CFR Part 153
Administrative practice and procedure, Adverse selection, Health
care, Health insurance, Health records, Organization and functions
(Government agencies), Premium stabilization, Reporting and
recordkeeping requirements, Reinsurance, Risk adjustment, Risk
corridors, Risk mitigation, State and local governments.
45 CFR Part 155
Administrative practice and procedure, Health care access, Health
insurance, Reporting and recordkeeping requirements, State and local
governments, Cost-sharing reductions, Advance payments of premium tax
credit, Administration and calculation of advance payments of the
premium tax credit, Plan variations, Actuarial value.
45 CFR Part 156
Administrative practice and procedure, Advertising, Advisory
Committees, Brokers, Conflict of interest, Consumer protection, Cost-
sharing reductions, Cost-sharing reduction reconciliation,
Administration and calculation of advance payments of the premium tax
credit, Payment and Collection Reports, 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.
For the reasons set forth in the preamble, the Department of Health
and Human Services amends 45 CFR parts 144, 146, 147, 153, 155, and 156
as set forth below:
PART 144--REQUIREMENTS RELATING TO HEALTH INSURANCE COVERAGE
0
1. The authority citation for part 144 continues to read as follows:
Authority: Secs. 2701 through 2763, 2791, and 2792 of the Public
Health Service Act 42 U.S.C. 300gg through 300gg-63, 300gg-91, and
300gg-92.
0
2. Section 144.102 is amended by revising the second sentence of
paragraph (c) to read as follows:
Sec. 144.102 Scope and applicability.
* * * * *
(c) * * * If the coverage is offered to an association member other
than in connection with a group health plan, the coverage is considered
individual health insurance coverage for purposes of 45 CFR parts 144
through 148.
* * * * *
0
3. Section 144.103 is amended by revising the introductory text and the
definitions of ``Group market,'' ``Individual market,'' ``Large
employer,'' ``Policy year,'' and ``Small employer'' to read as follows:
[[Page 65092]]
Sec. 144.103 Definitions.
For purposes of parts 146 (group market), 147 (group and individual
market), 148 (individual market), and 150 (enforcement) of this
subchapter, the following definitions apply unless otherwise provided:
* * * * *
Group market means the market for health insurance coverage offered
in connection with a group health plan.
* * * * *
Individual market means the market for health insurance coverage
offered to individuals other than in connection with a group health
plan.
* * * * *
Large employer means, in connection with a group health plan with
respect to a calendar year and a plan year, an employer who employed an
average of at least 101 employees on business days during the preceding
calendar year and who employs at least 1 employee on the first day of
the plan year. In the case of plan years beginning before January 1,
2016, a State may elect to define large employer by substituting ``51
employees'' for ``101 employees.''
* * * * *
Policy year means, with respect to--
(1) A grandfathered health plan offered in the individual health
insurance market, the 12-month period that is designated as the policy
year in the policy documents of the individual health insurance
coverage. If there is no designation of a policy year in the policy
document (or no such policy document is available), then the policy
year is the deductible or limit year used under the coverage. If
deductibles or other limits are not imposed on a yearly basis, the
policy year is the calendar year.
(2) A non-grandfathered health plan offered in the individual
health insurance market, or in a market in which the State has merged
the individual and small group risk pools, for coverage issued or
renewed beginning January 1, 2014, a calendar year for which health
insurance coverage provides coverage for health benefits.
* * * * *
Small employer means, in connection with a group health plan with
respect to a calendar year and a plan year, an employer who employed an
average of at least 1 but not more than 100 employees on business days
during the preceding calendar year and who employs at least 1 employee
on the first day of the plan year. In the case of plan years beginning
before January 1, 2016, a State may elect to define small employer by
substituting ``50 employees'' for ``100 employees.''
* * * * *
PART 146--HEALTH INSURANCE REFORM REQUIREMENTS FOR THE GROUP AND
INDIVIDUAL HEALTH INSURANCE MARKETS
0
4. The authority citation for part 146 continues to read as follows:
Authority: Secs. 2702 through 2705, 2711 through 2723, 2791, and
2792 of the Public Health Service Act (42 U.S.C. 300gg-1 through
300gg-5, 300gg-11 through 300gg-23, 200gg-91, and 300gg-92) (1996).
Section 146.145 also issued under secs. 2701 through 2763, 2791,
and 2792 of the Public Health Service Act (42 U.S.C. 300gg through
300gg-63, 300gg-91, and 300gg-92), as amended (2010).
Sec. 146.145 [Amended]
0
5. Section 146.145 is amended by--
0
A. Removing paragraph (b).
0
B. Redesignating paragraphs (c) through (e) as paragraphs (b) through
(d).
0
C. In redesignated paragraph (b), removing references to ``paragraph
(c)'' and adding in their place ``paragraph (b)'' wherever they appear
in the following places:
0
i. Paragraph (b)(1).
0
ii. Paragraph (b)(3)(i).
0
iii. Paragraph (b)(3)(ii).
0
iv. Paragraph (b)(4)(i).
0
v. Paragraph (b)(4)(ii).
0
vi. Paragraph (b)(4)(iii) and Conclusion.
0
vii. Paragraph (b)(5)(ii) and Conclusion.
0
D. In redesignated paragraph (c), removing references to ``paragraph
(d)'' and adding in their place ``paragraph (c)'' wherever they appear
in the following places:
0
i. Paragraph (c)(1).
0
ii. Paragraph (c)(3).
PART 147--HEALTH INSURANCE REFORM REQUIREMENTS FOR THE GROUP AND
INDIVIDUAL HEALTH INSURANCE MARKETS
0
6. The authority citation for part 147 continues to read as follows:
Authority: Secs. 2701 through 2763, 2791, and 2792 of the Public
Health Service Act (42 U.S.C. 300gg through 300gg-63, 300gg-91, and
300gg-92), as amended.
0
7. Section 147.104 is amended by revising paragraph (a), adding a
sentence at the end of paragraph (b)(2), and revising paragraphs
(c)(2), (d)(1)(ii), and (d)(2) introductory text to read as follows:
Sec. 147.104 Guaranteed availability of coverage.
(a) Guaranteed availability of coverage in the individual and group
market. Subject to paragraphs (b) through (d) of this section, a health
insurance issuer that offers health insurance coverage in the
individual, small group, or large group market in a State must offer to
any individual or employer in the State all products that are approved
for sale in the applicable market, and must accept any individual or
employer that applies for any of those products.
* * * * *
(b) * * *
(2) * * * Health insurance coverage in the individual market or in
a market in which the State has merged the individual and small group
risk pools must be offered on a calendar year basis.
* * * * *
(c) * * *
(2) An issuer that denies health insurance coverage to an
individual or an employer in any service area, in accordance with
paragraph (c)(1)(ii) of this section, may not offer coverage in the
individual, small group, or large group market, as applicable, for a
period of 180 calendar days after the date the coverage is denied. This
paragraph (c)(2) does not limit the issuer's ability to renew coverage
already in force or relieve the issuer of the responsibility to renew
that coverage.
* * * * *
(d) * * *
(1) * * *
(ii) It is applying this paragraph (d)(1) uniformly to all
employers or individual in the large group, small group, or individual
market, as applicable, in the State consistent with applicable State
law and without regard to the claims experience of those individuals,
employers and their employees (and their dependents) or any health
status-related factor relating to such individuals, employees, and
dependents.
(2) An issuer that denies health insurance coverage to any employer
or individual in a state under paragraph (d)(1) of this section may not
offer coverage in the large group, small group, or individual market,
as applicable, in the State before the later of either of the following
dates:
* * * * *
0
8. Section 147.106 is amended by revising paragraphs (a) and (d)(1)
introductory text to read as follows:
[[Page 65093]]
Sec. 147.106 Guaranteed renewability of coverage.
(a) General rule. Subject to paragraphs (b) through (d) of this
section, a health insurance issuer offering health insurance coverage
in the individual, small group, or large group market is required to
renew or continue in force the coverage at the option of the plan
sponsor or the individual, as applicable.
* * * * *
(d) * * *
(1) An issuer may elect to discontinue offering all health
insurance coverage in the individual, small group, or large group
market, or all markets, in a State in accordance with applicable State
law only if--
* * * * *
PART 153--STANDARDS RELATED TO REINSURANCE, RISK CORRIDORS, AND
RISK ADJUSTMENT UNDER THE AFFORDABLE CARE ACT
0
9. The authority citation for part 153 is revised to read as follows:
Authority: Secs. 1311, 1321, 1341-1343, Pub. L. 111-148, 24
Stat. 119.
0
10. Section 153.20 is amended by revising the definition of
``contributing entity'' to read as follows:
Sec. 153.20 Definitions.
* * * * *
Contributing entity means a health insurance issuer or a self-
insured group health plan (including a group health plan that is
partially self-insured and partially insured, where the health
insurance coverage does not constitute major medical coverage). A self-
insured group health plan is responsible for the reinsurance
contributions, although it may elect to use a third party administrator
or administrative services-only contractor for transfer of the
reinsurance contributions.
* * * * *
0
11. Section 153.240 is amended by revising paragraph (c) to read as
follows:
Sec. 153.240 Disbursement of reinsurance payments.
* * * * *
(c) Maintenance of records. If a State establishes a reinsurance
program, the State must maintain documents and records relating to the
reinsurance program, whether paper, electronic, or in other media, for
each benefit year for at least 10 years, and make them available upon
request from HHS, the OIG, the Comptroller General, or their designees,
to any such entity. The documents and records must be sufficient to
enable the evaluation of the State-operated reinsurance program's
compliance with Federal standards. The State must also ensure that its
contractors, subcontractors, and agents similarly maintain and make
relevant documents and records available upon request from HHS, the
OIG, the Comptroller General, or their designees, to any such entity.
* * * * *
0
12. Section 153.260 is added to subpart C to read as follows:
Sec. 153.260 General oversight requirements for State-operated
reinsurance programs.
(a) Accounting requirements. A State that establishes a reinsurance
program must ensure that its applicable reinsurance entity keeps an
accounting for each benefit year of:
(1) All reinsurance contributions received from HHS for reinsurance
payments and for administrative expenses;
(2) All claims for reinsurance payments received from issuers of
reinsurance-eligible plans;
(3) All reinsurance payments made to issuers of reinsurance-
eligible plans; and
(4) All administrative expenses incurred for the reinsurance
program.
(b) State summary report. A State that establishes a reinsurance
program must submit to HHS and make public a report on its reinsurance
program operations for each benefit year in the manner and timeframe
specified by HHS. The report must summarize the accounting for the
benefit year kept pursuant to paragraph (a) of this section.
(c) Independent external audit. A State that establishes a
reinsurance program must engage an independent qualified auditing
entity to perform a financial and programmatic audit for each benefit
year of its State-operated reinsurance program in accordance with
generally accepted auditing standards (GAAS). The State must:
(1) Provide to HHS the results of the audit, in the manner and
timeframe to be specified by HHS;
(2) Ensure that the audit addresses the prohibitions set forth in
Sec. 153.265;
(3) Identify to HHS any material weakness or significant deficiency
identified in the audit, and address in writing to HHS how the State
intends to correct any such material weakness or significant
deficiency; and
(4) Make public a summary of the results of the audit, including
any material weakness or significant deficiency and how the State
intends to correct the material weakness or significant deficiency, in
the manner and timeframe to be specified by HHS.
0
13. Section 153.265 is added to subpart C to read as follows:
Sec. 153.265 Restrictions on use of reinsurance funds for
administrative expenses.
A State that establishes a reinsurance program must ensure that its
applicable reinsurance entity does not use any funds for the support of
reinsurance operations, including any reinsurance contributions
provided under the national contribution rate for administrative
expenses, for any of the following purposes:
(a) Staff retreats;
(b) Promotional giveaways;
(c) Excessive executive compensation; or
(d) Promotion of Federal or State legislative or regulatory
modifications.
0
14. Section 153.310 is amended by:
A. Adding paragraph (c)(4).
B. Revising the paragraph (d) subject heading and adding paragraphs
(d)(3) and (4).
C. Removing paragraph (f).
The additions and revision read as follows:
Sec. 153.310 Risk adjustment administration.
* * * * *
(c) * * *
(4) Maintenance of records. A State operating a risk adjustment
program must maintain documents and records relating to the risk
adjustment program, whether paper, electronic, or in other media, for
each benefit year for at least 10 years, and make them available upon
request from HHS, the OIG, the Comptroller General, or their designees,
to any such entity. The documents and records must be sufficient to
enable the evaluation of the State-operated risk adjustment program's
compliance with Federal standards. A State operating a risk adjustment
program must also ensure that its contractors, subcontractors, and
agents similarly maintain and make relevant documents and records
available upon request from HHS, the OIG, the Comptroller General, or
their designees, to any such entity.
(d) Approval for a State to operate risk adjustment. * * *
(3) In addition to requirements set forth in paragraphs (d)(1) and
(2) of this section, to obtain re-approval from HHS to operate risk
adjustment for a third benefit year, the State must, in the first
benefit year for which it operates risk adjustment, provide to HHS an
interim report, in a manner specified by HHS, including a detailed
summary of its risk adjustment activities in the first 10 months of the
benefit year, no later than December 31 of the applicable benefit year.
(4) To obtain re-approval from HHS to operate risk adjustment for
each benefit year after the third benefit year, each
[[Page 65094]]
State operating a risk adjustment program must submit to HHS and make
public a detailed summary of its risk adjustment program operations for
the most recent benefit year for which risk adjustment operations have
been completed, in the manner and timeframe specified by HHS.
(i) The summary must include the results of a programmatic and
financial audit for each benefit year of the State-operated risk
adjustment program conducted by an independent qualified auditing
entity in accordance with generally accepted auditing standards (GAAS).
(ii) The summary must identify any material weakness or significant
deficiency identified in the audit and address how the State intends to
correct any such material weakness or significant deficiency.
0
15. Section 153.365 is added to subpart D to read as follows:
Sec. 153.365 General oversight requirements for State-operated risk
adjustment programs.
If a State is operating a risk adjustment program, it must keep an
accounting of all receipts and expenditures related to risk adjustment
payments and charges and the administration of risk adjustment-related
functions and activities for each benefit year.
0
16. Section 153.400 is amended by revising paragraph (a)(1)(i) and
adding paragraph (a)(3) to read as follows:
Sec. 153.400 Reinsurance contribution funds.
(a) * * *
(1) * * *
(i) Such plan or coverage is not major medical coverage, subject to
paragraph (a)(3) of this section.
* * * * *
(3) Notwithstanding paragraph (a)(1)(i) of this section, a health
insurance issuer must make reinsurance contributions for lives covered
by its group health insurance coverage whether or not the insurance
coverage constitutes major medical coverage, if--
(i) The group health plan provides health insurance coverage for
those covered lives through more than one insurance policy that in
combination constitute major medical coverage;
(ii) The lives are not covered by self-insured coverage of the
group health plan (except for self-insured coverage limited to excepted
benefits); and
(iii) The health insurance coverage under the policy offered by the
health insurance issuer constitutes the greatest portion of inpatient
hospitalization benefits under the group health plan.
* * * * *
0
17. Section 153.405 is amended by adding paragraph (h) to read as
follows:
Sec. 153.405 Calculation of reinsurance contributions.
* * * * *
(h) Maintenance of records. A contributing entity must maintain
documents and records, whether paper, electronic, or in other media,
sufficient to substantiate the enrollment count submitted pursuant to
this section for a period of at least 10 years, and must make those
documents and records available upon request from HHS, the OIG, the
Comptroller General, or their designees, to any such entity, for
purposes of verification, investigation, audit, or other review of
reinsurance contribution amounts.
0
18. Section 153.410 is amended by adding paragraph (c) to read as
follows:
Sec. 153.410 Requests for reinsurance payment.
* * * * *
(c) Maintenance of records. An issuer of a reinsurance-eligible
plan must maintain documents and records, whether paper, electronic, or
in other media, sufficient to substantiate the requests for reinsurance
payments made pursuant to this section for a period of at least 10
years, and must make those documents and records available upon request
from HHS, the OIG, the Comptroller General, or their designees, or, in
a State where the State is operating reinsurance, the State or its
designee, to any such entity, for purposes of verification,
investigation, audit, or other review of reinsurance payment requests.
0
19. Section 153.510 is amended by adding paragraph (e)
Sec. 153.510 Risk corridors establishment and payment methodology
* * * * *
(e) A QHP issuer is not subject to the provisions of this subpart
with respect to a stand-alone dental plan.
0
20. Section 153.520 is amended by revising paragraphs (a), (b), and (e)
to read as follows:
Sec. 153.520 Attribution and allocation of revenue and expense items.
(a) Attribution to plans. Each item of expense in the target amount
with respect to a QHP must be reasonably attributable to the operation
of the QHP issuer's non-grandfathered health plans in a market within a
State, with the attribution based on a generally accepted accounting
method, consistently applied. To the extent that a QHP issuer utilizes
a specific method for allocating expenses for purposes of Sec. 158.170
of this subchapter, the method used for purposes of this paragraph must
be consistent.
(b) Allocation across plans. Each item of expense in the target
amount must reflect an amount equal to the pro rata portion of the
aggregate amount of such expense across all of the QHP issuer's non-
grandfathered health plans in a market within a State, allocated to the
QHP based on premiums earned.
* * * * *
(e) Maintenance of records. A QHP issuer must maintain documents
and records, whether paper, electronic, or in other media, sufficient
to enable the evaluation of the issuer's compliance with applicable
risk corridors standards, for each benefit year for at least 10 years,
and must make those documents and records available upon request from
HHS, the OIG, the Comptroller General, or their designees, to any such
entity, for purposes of verification, investigation, audit or other
review.
0
21. Section 153.530 is amended by revising paragraphs (b) and (c) to
read as follows:
Sec. 153.530 Risk corridors data requirements.
* * * * *
(b) Allowable costs. A QHP issuer must submit to HHS data on the
allowable costs incurred with respect to the QHP issuer's non-
grandfathered health plans in a market within a State in a manner
specified by HHS. For purposes of this subpart, allowable costs must be
--
(1) Increased by any risk adjustment charges paid by the issuer for
the non-grandfathered health plans under the risk adjustment program
established under subpart D of this part.
(i) Any risk adjustment charges paid by the issuer for the non-
grandfathered health plans under the risk adjustment program
established pursuant to subpart D of this part; and
(ii) Any reinsurance contributions made by the issuer for the non-
grandfathered health plans under the transitional reinsurance program
established pursuant to subpart C of this part.
(2) Reduced by --
(i) Any risk adjustment payments received by the issuer for the
non-grandfathered health plans under the risk adjustment program
established pursuant to subpart D of this part;
(ii) Any reinsurance payments received by the issuer for the non-
grandfathered health plans under the transitional reinsurance program
established pursuant to subpart C of this part; and
[[Page 65095]]
(iii) Any cost-sharing reduction payments received by the issuer
for the QHP issuer's QHPs in a market within a State to the extent not
reimbursed to the provider furnishing the item or service.
(c) Allowable administrative costs. A QHP issuer must submit to HHS
data on the allowable administrative costs incurred with respect to the
QHP issuer's non-grandfathered health plans in a market within a State
in a manner specified by HHS.
* * * * *
0
22. Section 153.620 is amended by revising paragraph (b) to read as
follows:
Sec. 153.620 Compliance with risk adjustment standards.
* * * * *
(b) Issuer records maintenance requirements. An issuer that offers
risk adjustment covered plans must also maintain documents and records,
whether paper, electronic, or in other media, sufficient to enable the
evaluation of the issuer's compliance with applicable risk adjustment
standards, for each benefit year for at least 10 years, and must make
those documents and records available upon request to HHS, the OIG, the
Comptroller General, or their designees, or in a State where the State
is operating risk adjustment, the State or its designee to any such
entity, for purposes of verification, investigation, audit or other
review.
0
23. Section 153.740 is added to subpart H to read as follows:
Sec. 153.740 Failure to comply with HHS-operated risk adjustment and
reinsurance data requirements.
(a) Enforcement actions. If an issuer of a risk adjustment covered
plan or reinsurance-eligible plan fails to establish a dedicated
distributed data environment in a manner and timeframe specified by
HHS; fails to provide HHS with access to the required data in such
environment in accordance with Sec. 153.700(a) or otherwise fails to
comply with the requirements of Sec. Sec. 153.700 through 153.730;
fails to adhere to the reinsurance data submission requirements set
forth in Sec. 153.420; or fails to adhere to the risk adjustment data
submission and data storage requirements set forth in Sec. Sec.
153.610 through 153.630, HHS may impose civil money penalties in
accordance with the procedures set forth in Sec. 156.805 of this
subchapter. Civil monetary penalties will not be imposed for non-
compliance with these requirements during 2014 pursuant to this
paragraph (a) if the issuer has made good faith efforts to comply with
these requirements.
(b) Default risk adjustment charge. If an issuer of a risk
adjustment covered plan fails to establish a dedicated distributed data
environment or fails to provide HHS with access to the required data in
such environment in accordance with Sec. 153.610(a), Sec. 153.700,
Sec. 153.710, or Sec. 153.730 such that HHS cannot apply the
applicable Federally certified risk adjustment methodology to calculate
the risk adjustment payment transfer amount for the risk adjustment
covered plan in a timely fashion, HHS will assess a default risk
adjustment charge.
PART 155--EXCHANGE ESTABLISHMENT STANDARDS AND OTHER RELATED
STANDARDS UNDER THE AFFORDABLE CARE ACT
0
24. The authority citation for part 155 is revised to read as follows:
Authority: Title I of the Affordable Care Act, sections 1301,
1302, 1303, 1304, 1311, 1312, 1313, 1321, 1322, 1331, 1332, 1334,
1402, 1411, 1412, 1413, Pub. L. 111-148, 124 Stat. 119 (42 U.S.C.
18021-18024, 18031-18033, 18041-18042, 18051, 18054, 18071, and
18081-18083).
0
25. Section 155.340 is amended by adding paragraph (h) to read as
follows:
Sec. 155.340 Administration of advance payments of the premium tax
credit and cost-sharing reductions.
* * * * *
(h) Failure to reduce enrollee's premiums to account for advance
payments of the premium tax credit. If the Exchange discovers that it
did not reduce an enrollee's premium by the amount of the advance
payment of the premium tax credit, then the Exchange must notify the
enrollee of the improper reduction within 45 calendar days of discovery
of the improper reduction and refund the enrollee any excess premium
paid by or for the enrollee as follows:
(1) Unless a refund is requested by or for the enrollee, the
Exchange must, within 45 calendar days of discovery of the error, apply
the excess premium paid by or for the enrollee to the enrollee's
portion of the premium (or refund the amount directly). If any excess
premium remains, the Exchange must then apply the excess premium to the
enrollee's portion of the premium for each subsequent month for the
remainder of the period of enrollment or benefit year until the excess
premium is fully refunded (or refund the remaining amount directly). If
any excess premium remains at the end of the period of enrollment or
benefit year, the Exchange must refund any excess premium within 45
calendar days of the end of the period of enrollment or benefit year,
whichever comes first.
(2) If a refund is requested by or for the enrollee, the refund
must be provided within 45 calendar days of the date of the request.
0
26. Section 155.420 is amended by adding paragraph (d)(10) to read as
follows:
Sec. 155.420 Special enrollment periods.
* * * * *
(d) * * *
(10) It has been determined by the Exchange that a qualified
individual or enrollee, or his or her dependents, was not enrolled in
QHP coverage; was not enrolled in the QHP selected by the qualified
individual or enrollee; or is eligible for but is not receiving advance
payments of the premium tax credit or cost-sharing reductions as a
result of misconduct on the part of a non-Exchange entity providing
enrollment assistance or conducting enrollment activities. For purposes
of this provision, misconduct includes, but is not limited to, the
failure of the non-Exchange entity to comply with applicable standards
under this part, part 156 of this subchapter, or other applicable
Federal or State laws, as determined by the Exchange.
* * * * *
Sec. 155.725 [Amended]
0
27. Section 155.725(j)(2)(i) is revised to read as follows:
* * * * *
(j) * * *
(2) * * *
(i) Experiences an event described in Sec. 155.420(d)(1), (2),
(4), (5), (7), (8), (9), or (10);
* * * * *
0
28. Subpart M is added to read as follows:
Subpart M--Oversight and Program Integrity Standards for State
Exchanges
Sec.
155.1200 General program integrity and oversight requirements.
155.1210 Maintenance of records.
Subpart M--Oversight and Program Integrity Standards for State
Exchanges
Sec. 155.1200 General program integrity and oversight requirements.
(a) General requirement. A State Exchange must:
(1) Keep an accurate accounting of Exchange receipts and
expenditures in accordance with generally accepted accounting
principles (GAAP).
(2) Monitor and report to HHS on Exchange related activities.
[[Page 65096]]
(3) Collect and report to HHS performance monitoring data.
(b) Reporting. The State Exchange must, at least annually, provide
to HHS, in a manner specified by HHS, the following data and
information:
(1) A financial statement presented in accordance with GAAP by
April 1 of each year,
(2) Eligibility and enrollment reports,
(3) Performance monitoring data, and
(4) If the Exchange is collecting premiums under Sec. 155.240, a
report on instances in which it did not reduce an enrollee's premium by
the amount of the advance payment of the premium tax credit in
accordance with Sec. 155.340(g)(1) and (2).
(c) External audits. The State Exchange must engage an independent
qualified auditing entity which follows generally accepted governmental
auditing standards (GAGAS) to perform an annual independent external
financial and programmatic audit and must make such information
available to HHS for review. The State must:
(1) Provide to HHS the results of the annual external audit; and
(2)) Inform HHS of any material weakness or significant deficiency
identified in the audit and must develop and inform HHS of a corrective
action plan for such material weakness or significant deficiency;
(3) Make public a summary of the results of the external audit.
(d) External audit standard. The State Exchange must ensure that
independent audits of State Exchange financial statements and program
activities in paragraph (c) of this section address:
(1) Compliance with paragraph (a)(1) of this section;
(2) Compliance with requirements under this part;
(3) Processes and procedures designed to prevent improper
eligibility determinations and enrollment transactions; and
(4) Identification of errors that have resulted in incorrect
eligibility determinations.
Sec. 155.1210 Maintenance of records.
(a) General. The State Exchange must maintain and must ensure its
contractors, subcontractors, and agents maintain for 10 years,
documents and records (whether paper, electronic, or other media) and
other evidence of accounting procedures and practices, which are
sufficient to do the following:
(1) Accommodate periodic auditing of the State Exchange's financial
records; and
(2) Enable HHS or its designee(s) to inspect facilities, or
otherwise evaluate the State- Exchange's compliance with Federal
standards.
(b) Records. The State Exchange and its contractors,
subcontractors, and agents must ensure that the records specified in
paragraph (a) of this section include, at a minimum, the following:
(1) Information concerning management and operation of the State
Exchange's financial and other record keeping systems;
(2) Financial statements, including cash flow statements, and
accounts receivable and matters pertaining to the costs of operations;
(3) Any financial reports filed with other Federal programs or
State authorities;
(4) Data and records relating to the State Exchange's eligibility
verifications and determinations, enrollment transactions, appeals, and
plan variation certifications; and
(5) Qualified health plan contracting (including benefit review)
data and consumer outreach and Navigator grant oversight information.
(c) Availability. A State Exchange must make all records and must
ensure its contractors, subcontractors, and agents must make all
records in paragraph (a) of this section available to HHS, the OIG, the
Comptroller General, or their designees, upon request.
PART 156--HEALTH INSURANCE ISSUER STANDARDS UNDER THE AFFORDABLE
CARE ACT, INCLUDING STANDARDS RELATED TO EXCHANGES
0
29. The authority citation for part 156 continues to read as follows:
Authority: Title I of the Affordable Care Act, sections 1301-
1304, 1311-1313, 1321-1322, 1324, 1334, 1342-1343, 1401-1402, Pub.
L. 111-148, 124 Stat. 119 42 U.S.C. 18021-18024, 18031-18032, 18041-
18042, 18044, 18054, 18061, 18063, 18071, 18082, 26 U.S.C. 36B, and
31 U.S.C. 9701).
0
30. Section 156.20 is amended by adding definitions in alphabetical
order for ``Enrollee satisfaction survey vendor'' and ``Registered user
of the enrollee satisfaction survey data warehouse'' to read as
follows:
Sec. 156.20 Definitions
* * * * *
Enrollee satisfaction survey vendor means an organization that has
relevant survey administration experience (for example, CAHPS[supreg]
surveys), organizational survey capacity, and quality control
procedures for survey administration.
* * * * *
Registered user of the enrollee satisfaction survey data warehouse
means enrollee satisfaction survey vendors, QHP issuers, and Exchanges
authorized to access CMS's secure data warehouse to submit survey data
and to preview survey results prior to public reporting.
0
31. Section 156.80 is amended by revising the first sentence of
paragraph (d)(1) and adding paragraph (d)(3) to read as follows:
Sec. 156.80 Single risk pool.
* * * * *
(d) * * *
(1) In general. A health insurance issuer must establish an index
rate that is effective January 1 of each calendar year for a state
market described in paragraphs (a) through (c) of this section based on
the total combined claims costs for providing essential health benefits
within the single risk pool of that state market. * * *
* * * * *
(3) Frequency of index rate and plan-level adjustments. (i) A
health insurance issuer may not establish an index rate and make the
market-wide adjustments pursuant to paragraph (d)(1) of this section,
or make the plan-level adjustments pursuant to paragraph (d)(2) of this
section, more or less frequently than annually, except as provided in
paragraph (d)(3)(ii) of this section.
(ii) Beginning the quarter after HHS issues notification that the
FF-SHOP can process quarterly rate updates, a health insurance issuer
in the small group market (not including a merged market) may establish
index rates and make the market-wide adjustments pursuant to paragraph
(d)(1) of this section, and make the plan-level adjustments pursuant to
paragraph (d)(2) of this section, no more frequently than quarterly,
provided that any changes to rates must have effective dates of January
1, April 1, July 1, or October 1.
* * * * *
0
32. Section 156.155 is amended by revising paragraph (a)(3) to read as
follows:
Sec. 156.155 Enrollment in catastrophic plans.
(a) * * *
(3) Provides coverage of the essential health benefits under
section 1302(b) of the Affordable Care Act, except that the plan
provides no benefits for any plan year (except as provided in
paragraphs (a)(4) and (b) of this section) until the annual limitation
on cost sharing in section 1302(c)(1) of the act is reached.
* * * * *
0
33. Section 156.330 is added to subpart D to read follows:
[[Page 65097]]
Sec. 156.330 Changes of Ownership of Issuers of Qualified Health
Plans in Federally-facilitated Exchanges.
When a QHP issuer that offers one or more QHPs in a Federally-
facilitated Exchange undergoes a change of ownership as recognized by
the State in which the issuer offers the QHP, the QHP issuer must
notify HHS of the change in a manner to be specified by HHS, and
provide the legal name and Taxpayer Identification Number (TIN) of the
new owner and the effective date of the change at least 30 days prior
to the effective date of the change of ownership. The new owner must
agree to adhere to all applicable statutes and regulations.
0
34. Section 156.400 is amended by revising the definition of ``Most
generous or more generous'' to read as follows:
Sec. 156.400 Definitions.
* * * * *
Most generous or more generous means, as between a QHP (including a
standard silver plan) or plan variation and one or more other plan
variations of the same QHP, the standard plan or plan variation
designed for the category of individuals last listed in Sec.
155.305(g)(3) of this subchapter. Least generous or less generous has
the opposite meaning.
* * * * *
0
35. Section 156.410 is amended by adding paragraphs (c) and (d) to read
as follows:
Sec. 156.410 Cost-sharing reductions for enrollees.
* * * * *
(c) Improper cost-sharing reductions. (1) If a QHP issuer fails to
ensure that an individual assigned to a plan variation receives the
cost-sharing reductions required under the applicable plan variation,
taking into account Sec. 156.425(b) concerning continuity of
deductibles and out-of-pocket amounts (if applicable), then the QHP
issuer must notify the enrollee of the improper application of any
cost-sharing reduction within 45 calendar days of discovery of such
improper application, and refund any resulting excess cost sharing paid
by or for the enrollee as follows:
(i) If the excess cost sharing was paid by the provider, the QHP
issuer must refund the excess cost sharing to the provider within 45
calendar days of discovery of the improper application.
(ii) If the excess cost sharing was not paid by the provider and is
not requested by the enrollee as a refund, the QHP issuer must, within
45 calendar days of discovery of the error, apply the excess cost
sharing paid by or for the enrollee to the enrollee's portion of the
premium (or refund the amount directly). If any excess premium remains,
the QHP issuer must apply the excess premium to the enrollee's portion
of the premium for each subsequent month for the remainder of the
period of enrollment or benefit year until the excess is fully applied
(or refund any remaining amount directly). If any excess premium
remains at the end of the period of enrollment or benefit year, the QHP
issuer must refund the enrollee any remaining excess cost sharing paid
by or for the enrollee within 45 calendar days of the end of the period
of enrollment or benefit year, whichever comes first.
(iii) If the excess cost sharing was not paid by the provider, and
if a refund is requested by the enrollee, the refund must be provided
to the enrollee within 45 calendar days of the date of the request.
(2) If a QHP issuer provides an individual assigned to a plan
variation greater cost-sharing reductions than required under the
applicable plan variation, taking into account Sec. 156.425(b)
concerning continuity of deductibles and out-of-pocket amounts (if
applicable), then the QHP issuer will not be eligible for reimbursement
of any excess cost-sharing reductions provided to the enrollee, and may
not seek reimbursement from the enrollee or the applicable provider for
any of the excess cost-sharing reductions.
(d) Improper assignment. If a QHP issuer does not assign an
individual to the applicable plan variation (or standard plan without
cost-sharing reductions) in accordance with Sec. 156.410(b) and Sec.
156.425(a) based on the eligibility and enrollment information or
notification provided by the Exchange, then the QHP issuer must
reassign the enrollee to the applicable plan variation (or standard
plan without cost-sharing reductions) and notify the enrollee of the
improper assignment such that:
(1) If the QHP issuer discovers the improper assignment between the
first and fifteenth day of the month, the QHP issuer must reassign the
enrollee to the correct plan variation (or standard plan without cost-
sharing reductions) by the first day of the following month.
(2) If the QHP issuer discovers the improper assignment between the
sixteen and the last day of the month, the QHP issuer must reassign the
individual to the correct plan variation (or standard plan without
cost-sharing reductions) by the first day of the second following
month.
(3) If, pursuant to a reassignment under this paragraph (d), a QHP
issuer reassigns an enrollee from a more generous plan variation to a
less generous plan variation of a QHP (or a standard plan without cost-
sharing reductions), the QHP issuer will not be eligible for
reimbursement for any of the excess cost-sharing reductions provided to
the enrollee following the effective date of eligibility required by
the Exchange, and may not seek reimbursement from the enrollee or the
applicable provider for any of the excess cost-sharing reductions.
(4) If, pursuant to a reassignment under this paragraph (d), a QHP
issuer reassigns an enrollee from a less generous plan variation (or a
standard plan without cost-sharing reductions) to a more generous plan
variation of a QHP, the QHP issuer must recalculate the enrollee's
liability for cost sharing paid between the effective date of
eligibility required by the Exchange and the date on which the issuer
effectuated the change, and must refund any excess cost sharing paid by
or for the enrollee during such period as follows:
(i) If the excess cost sharing was paid by the provider, the QHP
issuer must refund the excess cost sharing to the provider within 45
calendar days of discovery of the improper assignment.
(ii) If the excess cost sharing was not paid by the provider and is
not requested by the enrollee as a refund, the QHP issuer must, within
45 calendar days of discovery of the improper assignment, apply the
excess cost sharing paid by or for the enrollee to the enrollee's
portion of the premium (or refund the amount directly). If any excess
premium remains, the QHP issuer must apply the excess premium to the
enrollee's portion of the premium for each subsequent month for the
remainder of the period of enrollment or benefit year until the excess
is fully applied (or refund the remaining amount directly). If any
excess premium remains at the end of the period of enrollment or
benefit year, the QHP issuer must refund the enrollee any remaining
excess cost sharing paid by or for the enrollee within 45 calendar days
of the end of the period of enrollment or benefit year, whichever comes
first.
(ii) If the excess cost sharing was not paid by the provider, then,
if the enrollee requests a refund, the refund must be provided to the
enrollee within 45 calendar days of the date of the request.
0
36. Section 156.430 is amended by revising paragraphs (c)(3)
introductory text, (c)(3)(iii) through (iv), and (c)(4) to read as
follows:
[[Page 65098]]
Sec. 156.430 Payment for cost-sharing reductions.
* * * * *
(c) * * *
(3) Selection of methodology. For benefit years 2014 through 2016,
notwithstanding paragraph (c)(2) of this section, a QHP issuer may
choose to calculate the amounts that would have been paid under the
standard plan without cost-sharing reductions using the simplified
methodology described in paragraph (c)(4) of this section.
* * * * *
(iii) The QHP issuer may not select the simplified methodology for
a benefit year if the QHP issuer did not select the simplified
methodology for the prior benefit year.
(iv) Notwithstanding paragraphs (c)(3)(ii) and (iii) of this
section, if a QHP issuer merges with or acquires another issuer of a
QHP on the Exchange, or acquires a QHP offered on the Exchange from
another QHP issuer, and if one, but not all, of the merging, acquiring,
or acquired parties had selected the simplified methodology for the
benefit year, then for the benefit year in which the merger or
acquisition took place, the QHP issuer must calculate the amounts that
would have been paid using the methodology (whether the standard
methodology described in paragraph (c)(2) of this section or the
simplified methodology described in paragraph (c)(4) of this section)
selected with respect to the plan variation prior to the start of the
benefit year (even if the selection was not made by that QHP issuer).
For the next benefit year (if such benefit year is 2015 or 2016), the
QHP issuer may select the simplified methodology (subject to paragraph
(c)(3)(ii) of this section but, for that benefit year, not paragraph
(c)(3)(iii) of this section) or the standard methodology.
(4) Simplified methodology. Subject to paragraph (c)(4)(v) of this
section, a QHP issuer that selects the simplified methodology described
in this paragraph (c)(4) must calculate the amount that the enrollees
would have paid under the standard plan without cost-sharing reductions
for each policy that was assigned to a plan variation for any portion
of the benefit year by applying each set of the standard plan's
effective cost-sharing parameters (as calculated under paragraphs
(c)(3)(ii) and (iii) of this section) to the corresponding subgroup of
total allowed costs for EHB for the policy (as described in paragraph
(c)(4)(i) of this section).
(i) For plan variation policies with total allowed costs for EHB
for the benefit year that are:
(A) Less than or equal to the effective deductible, the amount that
the enrollees would have paid under the standard plan is equal to the
total allowed costs for EHB under the policy for the benefit year
multiplied by the effective pre-deductible coinsurance rate.
(B) Greater than the effective deductible but less than the
effective claims ceiling, the amount that the enrollees would have paid
under the standard plan is equal to the sum of (x) the average
deductible, plus (y) the effective non-deductible cost sharing, plus
(z) the difference, if positive, between the total allowed costs under
the policy for the benefit year for EHB that are subject to a
deductible and the average deductible, multiplied by the effective
post-deductible coinsurance rate.
(C) Greater than or equal to the effective claims ceiling, the
amount that the enrollees would have paid under the standard plan is
equal to the annual limitation on cost sharing for the standard plan
(as defined at 45 CFR 156.400), or, at the QHP issuer's election on a
policy-by-policy basis, the amount calculated pursuant to the standard
methodology described in paragraph (c)(2) of this section,
(ii) The QHP issuer must calculate one or more sets of effective
cost-sharing parameters, as described in paragraph (c)(4)(iii) of this
section, based on policies assigned to the standard plan without cost-
sharing reductions for the entire benefit year and must separately
apply each set of effective cost-sharing parameters to the
corresponding subgroup of total allowed costs for EHB for each plan
variation policy, as described in paragraph (c)(4)(i) of this section,
as follows:
(A) If the standard plan has separate cost-sharing parameters for
self-only coverage and other than self-only coverage, but does not have
separate cost-sharing parameters for pharmaceutical and medical
services, the QHP issuer must calculate and apply separate sets of
effective cost-sharing parameters based on the costs of enrollees in
the standard plan with self-only coverage, and based on the costs of
enrollees in the standard plan with other than self-only coverage.
(B) If the standard plan has separate cost-sharing parameters for
pharmaceutical and medical services, but does not have separate cost-
sharing parameters for self-only coverage and other than self-only
coverage, the QHP issuer must calculate and apply separate sets of
effective cost-sharing parameters based on the medical costs of the
enrollees in the standard plan, and based on the pharmaceutical costs
of the enrollees in the standard plan.
(C) If the standard plan has separate cost-sharing parameters for
self-only coverage and other than self-only coverage, and also has
separate cost-sharing parameters for pharmaceutical and medical
services, the QHP issuer must calculate and apply separate sets of
effective cost-sharing parameters based on the medical costs of
enrollees in the standard plan with self-only coverage, based on the
pharmaceutical costs of enrollees in the standard plan with self-only
coverage, based on the medical costs of enrollees in the standard plan
with other than self-only coverage, and based on the pharmaceutical
costs of enrollees in the standard plan with other than self-only
coverage.
(iii) The effective cost-sharing parameters for the standard plan
without cost-sharing reductions must be calculated based on policies
assigned to the standard plan for the entire benefit year for each of
the required subgroups under paragraph (c)(4)(ii) of this section as
follows:
(A) If the standard plan has only one deductible (for the
applicable subgroup), the average deductible of the standard plan is
that deductible amount. If the standard plan has more than one
deductible (for the applicable subgroup), the average deductible is the
weighted average of the deductibles, weighted by allowed costs for EHB
under the standard plan for the benefit year that are subject to each
separate deductible. Services that are not subject to any deductible
(including services subject to copayments or coinsurance but not any
deductible) are not to be incorporated into the calculation of the
average deductible.
(B) The effective non-deductible cost sharing for the applicable
subgroup is the average portion of total allowed costs for EHB that are
not subject to any deductible for the standard plan for the benefit
year incurred for standard plan enrollees and payable by the enrollees
as cost sharing. The effective non-deductible cost sharing must be
calculated based only on standard plan policies with total allowed
costs for EHB for the benefit year that are above the effective
deductible but for which associated cost sharing for EHB is less than
the annual limitation on cost sharing.
(C) The effective deductible for the applicable subgroup is equal
to the sum of the average deductible and the average total allowed
costs for EHB that are not subject to any deductible for the standard
plan for the benefit year. The average total allowed costs for EHB that
[[Page 65099]]
are not subject to any deductible for the standard plan for the benefit
year must be calculated based only on standard plan policies with total
allowed costs for EHB for the benefit year that are above the average
deductible but for which associated cost sharing for EHB is less than
the annual limitation on cost sharing.
(D) The effective pre-deductible coinsurance rate for the
applicable subgroup is the proportion of the total allowed costs for
EHB under the standard plan for the benefit year incurred for standard
plan enrollees and payable as cost sharing. The effective pre-
deductible coinsurance rate must be calculated based only on standard
plan policies with total allowed costs for EHB for the benefit year
that are less than or equal to the effective deductible.
(E) The effective post-deductible coinsurance rate for the
applicable subgroup is the quotient of (x) the portion of average
allowed costs for EHB subject to a deductible incurred for enrollees
for the benefit year, and payable by the enrollees as cost sharing
other than through a deductible, over the difference of (y) the average
allowed costs for EHB subject to a deductible incurred for enrollees
for the benefit year, and (z) the average deductible. The effective
post-deductible coinsurance rate must be calculated based only on
standard plan policies with total allowed costs for EHB for the benefit
year that are above the effective deductible but for which associated
cost sharing for EHB is less than the annual limitation on cost
sharing.
(F) The effective claims ceiling for the applicable subgroup is
calculated as the effective deductible plus the quotient of (x) the
difference between the annual limitation on cost sharing and the sum of
the average deductible and the effective non-deductible cost sharing,
divided by (y) the effective post-deductible coinsurance rate.
(iv) If a QHP issuer uses the simplified methodology described in
this paragraph (c)(4), and the QHP issuer's standard plan does not meet
any of the criteria in paragraphs (c)(4)(v)(A) through (D) of this
section, the QHP issuer must also submit to HHS, in the manner and
timeframe established by HHS, the following information for each
standard plan offered by the QHP issuer in the individual market
through the Exchange for each of the required subgroups described in
paragraph (c)(4)(ii) of this section:
(A) The average deductible for each applicable subgroup;
(B) The effective deductible for each applicable subgroup;
(C) The effective non-deductible cost sharing amount for each
applicable subgroup;
(D) The effective pre-deductible coinsurance rate for each
applicable subgroup;
(E) The effective post-deductible coinsurance rate for each
applicable subgroup;
(F) The effective claims ceiling for each applicable subgroup; and
(G) A memorandum developed by a member of the American Academy of
Actuaries in accordance with generally accepted actuarial principles
and methodologies that describes how the QHP issuer calculated the
effective cost-sharing parameters for each applicable subgroup for the
standard plan.
(v) Notwithstanding paragraphs (c)(4)(i) through (iii) of this
section, if a QHP issuer's standard plan meets the criteria in any of
the following subparagraphs, and the QHP issuer has selected the
simplified methodology described in this paragraph (c)(4), then the QHP
issuer must calculate the amount that the enrollees in the plan
variation would have paid under the standard plan without cost-sharing
reductions as the lesser of the annual limitation on cost sharing for
the standard plan or the amount equal to the product of, (x) one minus
the standard plan's actuarial value, as calculated under 45 CFR
156.135, and (y) the total allowed costs for EHB for the benefit year
under each policy that was assigned to a plan variation for any portion
of the benefit year.
(A) The standard plan has separate cost-sharing parameters for
self-only coverage and other than self-only coverage, does not have
separate cost-sharing parameters for pharmaceutical and medical
services, and has an enrollment during the benefit year of fewer than
12,000 member months for coverage with total allowed costs for EHB for
the benefit year that are greater than the effective deductible, but
for which associated cost sharing for EHB is less than the annual
limitation on cost sharing, in either of the following categories -
(1) Self-only coverage; or
(2) Other than self-only coverage.
(B) The standard plan has separate cost-sharing parameters for
pharmaceutical and medical services, does not have separate cost-
sharing parameters for self-only coverage and other than self-only
coverage, and has an enrollment during the benefit year of fewer than
12,000 member months for coverage with total allowed costs for EHB for
the benefit year that are greater than the effective deductible, but
for which associated cost sharing for EHB is less than the annual
limitation on cost sharing, in either of the following categories:
(1) Coverage of medical services; or
(2) Coverage of pharmaceutical services.
(C) The standard plan has separate cost-sharing parameters for
self-only coverage and other than self-only coverage and for
pharmaceutical and medical services, and has an enrollment during the
benefit year of fewer than 12,000 member months for coverage with total
allowed costs for EHB for the benefit year that are greater than the
effective deductible, but for which associated cost sharing for EHB is
less than the annual limitation on cost sharing, in any of the
following categories:
(1) Self-only coverage of medical services;
(2) Self-only coverage of pharmaceutical services;
(3) Other than self-only coverage of medical services; or
(4) Other than self-only coverage of pharmaceutical services.
(D) The standard plan does not have separate cost-sharing
parameters for pharmaceutical and medical services, or for self-only
coverage and other than self-only coverage, and has an enrollment
during the benefit year of fewer than 12,000 member months with total
allowed costs for EHB for the benefit year that are greater than the
effective deductible, but for which associated cost sharing for EHB is
less than the annual limitation on cost sharing.
(vi) Notwithstanding paragraphs (c)(4)(i)(A) and (B) of this
section, and paragraphs (c)(4)(iii)(A) through (E) of this section, if
more than eighty percent of the total allowed costs for EHB for the
benefit year under a standard plan for a subgroup that requires a
separate set of effective cost-sharing parameters pursuant to paragraph
(c)(4)(ii) are not subject to a deductible, then:
(A) The average deductible, the effective non-deductible cost
sharing, and the effective deductible for the subgroup equal zero;
(B) The effective pre-deductible coinsurance rate for the subgroup
is equal to the effective post-deductible coinsurance rate for the
subgroup, which is determined based on all standard plan policies for
the applicable subgroup for which associated cost sharing for EHB is
less than the annual limitation on cost sharing, and calculated for the
applicable subgroup as the proportion of the total allowed costs for
EHB under the standard plan for the benefit year incurred for standard
plan enrollees and payable as
[[Page 65100]]
cost sharing (including cost sharing payable through a deductible); and
(C) The amount that enrollees in the applicable subgroup in plan
variation policies with total allowed costs for EHB for the benefit
year that are less than the effective claims ceiling would have paid
under the standard plan must be calculated using the formula in
paragraph (c)(4)(i)(A).
* * * * *
0
37. Section 156.460 is amended by adding paragraph (c) to read as
follows:
Sec. 156.460 Reduction of enrollee's share of premium to account for
advance payments of the premium tax credit.
* * * * *
(c) Refunds to enrollees for improper reduction of enrollee's share
of premium to account for advance payments of the premium tax credit.
If a QHP issuer discovers that it did not reduce the portion of the
premium charged to or for an enrollee for the applicable month(s) by
the amount of the advance payment of the premium tax credit in
accordance with paragraph (a)(1) of this section, the QHP issuer must
notify the enrollee of the improper reduction within 45 calendar days
of the QHP issuer's discovery of the improper reduction and refund any
excess premium paid by or for the enrollee, as follows:
(1) Unless a refund is requested by or for the enrollee, the QHP
issuer must, within 45 calendar days of discovery of the error, apply
the excess premium paid by or for the enrollee to the enrollee's
portion of the premium (or refund the amount directly). If any excess
premium remains, the QHP issuer must apply the excess premium to the
enrollee's portion of the premium for each subsequent month for the
remainder of the period of enrollment or benefit year until the excess
is fully applied (or refund the remaining amount directly). If any
excess premium remains at the end of the period of enrollment or
benefit year, the QHP issuer must refund any excess premium within 45
calendar days of the end of the period of enrollment or benefit year,
whichever comes first.
(2) If a refund is requested by or for the enrollee, the refund
must be provided within 45 calendar days of the date of the request.
0
38. Section 156.480 is added to subpart E to read as follows:
Sec. 156.480 Oversight of the administration of the cost-sharing
reductions and advance payments of the premium tax credit programs.
(a) Maintenance of records. An issuer that offers a QHP in the
individual market through a State Exchange must adhere to, and ensure
that any relevant delegated entities and downstream entities adhere to,
the standards set forth in Sec. 156.705 concerning maintenance of
documents and records, whether paper, electronic, or in other media, by
issuers offering QHPs in a Federally-facilitated Exchange, in
connection with cost-sharing reductions and advance payments of the
premium tax credit.
(b) Annual reporting requirements. For each benefit year, an issuer
that offers a QHP in the individual market through an Exchange must
report to HHS, in the manner and timeframe required by HHS, summary
statistics specified by HHS with respect to administration of cost-
sharing reduction and advance payments of the premium tax credit
programs, including any failure to adhere to the standards set forth
under Sec. 156.410(a) through (d), Sec. 156.425(a) through (b), and
Sec. 156.460(a) through (c) of this Part.
(c) Audits. HHS or its designee may audit an issuer that offers a
QHP in the individual market through an Exchange to assess compliance
with the requirements of this subpart.
0
39. Subpart H is added to read as follows:
Subpart H--Oversight and Financial Integrity Standards for Issuers of
Qualified Health Plans in Federally-Facilitated Exchanges
Sec.
156.705 Maintenance of records for Federally-facilitated Exchange.
156.715 Investigations and compliance reviews in Federally-
facilitated Exchanges.
Subpart H--Oversight and Financial Integrity Standards for Issuers
of Qualified Health Plans in Federally-Facilitated Exchanges
Sec. 156.705 Maintenance of records for Federally-facilitated
Exchanges.
(a) General standard. Issuers offering QHPs in a Federally-
facilitated Exchange must maintain all documents and records (whether
paper, electronic, or other media) and other evidence of accounting
procedures and practices, necessary for HHS to do the following:
(1) Periodically audit financial records related to QHP issuers'
participation in a Federally-facilitated Exchange, and evaluate the
ability of QHP issuers to bear the risk of potential financial losses;
and
(2) Conduct compliance reviews or otherwise monitor QHP issuers'
compliance with all Exchange standards applicable to issuers offering
QHPs in a federally-facilitated Exchange as listed in this part.
(b) Records. The records described in paragraph (a) of this section
include the sources listed in Sec. 155.1210(b)(2), (3), and (5) of
this subchapter.
(c) Record retention timeframe. Issuers offering QHPs in a
Federally-facilitated Exchange must maintain all records referenced in
paragraph (a) of this section for 10 years.
(d) Record availability. Issuers offering QHPs in a Federally-
facilitated Exchange must make all records in paragraph (a) of this
section available to HHS, the OIG, the Comptroller General, or their
designees, upon request.
Sec. 156.715 Compliance Reviews of QHP Issuers in Federally-
facilitated Exchanges.
(a) General standard. Issuers offering QHPs in a Federally-
facilitated Exchange may be subject to compliance reviews to ensure
ongoing compliance with Exchange standards applicable to issuers
offering QHPs in a Federally-facilitated Exchange.
(b) Records. In preparation for or in the course of the compliance
review, a QHP issuer must make available for HHS to review the records
of the QHP issuer that pertain to its activities within a Federally-
facilitated Exchange. Such records may include, but are not limited to
the following:
(1) The QHP issuer's books and contracts, including the QHP
issuer's policy manuals and other QHP plan benefit information provided
to the QHP issuer's enrollees;
(2) The QHP issuer's policies and procedures, protocols, standard
operating procedures, or other similar manuals related to the QHP
issuer's activities in a Federally-facilitated Exchange;
(3) Any other information reasonably necessary for HHS to--
(i) Evaluate the QHP issuer's compliance with QHP certification
standards and other Exchange standards applicable to issuers offering
QHPs in a Federally-facilitated Exchange;
(ii) Evaluate the QHP's performance, including its adherence to an
effective compliance plan, within a Federally-facilitated Exchange;
(iii) Verify that the QHP issuer has performed the duties attested
to as part of the QHP certification process; and
(iv) Assess the likelihood of fraud or abuse.
(c) Interest of Qualified Individuals and Qualified Employers.
HHS's findings from the compliance reviews under this section may be in
conjunction with other findings related to the QHP issuers' compliance
with certification standards, used to confirm
[[Page 65101]]
that permitting the issuer's QHPs to be available through a Federally-
facilitated Exchange is in the interest of the qualified individuals
and qualified employers as provided under Sec. 155.1000(c)(2) of this
subchapter.
(d) Onsite and desk reviews. The QHP issuer will make available,
for the purposes listed in paragraph (c) of this section, its premises,
physical facilities and equipment (including computer and other
electronic systems), for HHS to conduct a compliance review as provided
under this section.
(1) A compliance review under this section will be carried out as
an onsite or desk review based on the specific circumstances.
(2) Unless otherwise specified, nothing in this section is intended
to preempt Federal laws and regulations related to information privacy
and security.
(e) Compliance review timeframe. A QHP issuer may be subject to a
compliance review up to 10 years from the last day of that plan benefit
year, or 10 years from the last day that the QHP certification is
effective if the QHP is no longer available through a Federally-
facilitated Exchange; provided, however, that if the 10 year review
period falls during an ongoing compliance review, the review period
would be extended until the compliance review is completed.
0
40. Subpart J is added to read as follows:
Subpart J--Administrative Review of QHP Issuer Sanctions in Federally-
Facilitated Exchanges
Sec.
156.901 Definitions.
156.903 Scope of Administrative Law Judge's (ALJ) authority.
156.905 Filing of request for hearing.
156.907 Form and content of request for hearing.
156.909 Amendment of notice of assessment or decertification request
for hearing.
156.911 Dismissal of request for hearing.
156.913 Settlement.
156.915 Intervention.
156.917 Issues to be heard and decided by ALJ.
156.919 Forms of hearing.
156.921 Appearance of counsel.
156.923 Communications with the ALJ.
156.925 Motions.
156.927 Form and service of submissions.
156.929 Computation of time and extensions of time.
156.929 Computation of time and extensions of time.
156.931 Acknowledgment of request for hearing.
156.935 Discovery.
156.937 Submission of briefs and proposed hearing exhibits.
156.939 Effect of submission of proposed hearing exhibits.
156.941 Prehearing conferences.
156.943 Standard of proof.
156.945 Evidence.
156.947 The record.
156.951 Posthearing briefs.
156.953 ALJ decision.
156.955 Sanctions.
156.957 Review by Administrator.
156.959 Judicial review.
156.961 Failure to pay assessment.
156.963 Final order not subject to review.
Subpart J--Administrative Review of QHP Issuer Sanctions in
Federally-Facilitated Exchanges
Sec. 156.901 Definitions.
In this subpart, unless the context indicates otherwise:
ALJ means administrative law judge of the Departmental Appeals
Board of HHS.
Filing date means the date postmarked by the U.S. Postal Service,
deposited with a carrier for commercial delivery, or hand delivered.
Hearing includes a hearing on a written record as well as an in-
person or telephone hearing.
Party means HHS or the respondent.
Receipt date means five days after the date of a document, unless
there is a showing that it was in fact received later.
Respondent means an entity that received a notice of proposed
assessment of a civil money penalty issued pursuant to Sec. 156.805 or
a notice of decertification pursuant to Sec. 156.810(c) or (d).
Sec. 156.903 Scope of Administrative Law Judge's (ALJ) authority.
(a) The ALJ has the authority, including all of the authority
conferred by the Administrative Procedure Act (5 U.S.C. 554a), to adopt
whatever procedures may be necessary or proper to carry out in an
efficient and effective manner the ALJ's duty to provide a fair and
impartial hearing on the record and to issue an initial decision
concerning the imposition of a civil money penalty or the
decertification of a QHP offered in a Federally-facilitated Exchange.
(b) The ALJ's authority includes the authority to modify,
consistent with the Administrative Procedures Act (5 U.S.C. 552a), any
hearing procedures set out in this subpart.
(c) The ALJ does not have the authority to find invalid or refuse
to follow Federal statutes or regulations.
Sec. 156.905 Filing of request for hearing.
(a) A respondent has a right to a hearing before an ALJ if it files
a request for hearing that complies with Sec. 156.907(a), within 30
days after the date of issuance of either HHS' notice of proposed
assessment under Sec. 156.805, notice of decertification of a QHP
under Sec. 156.810(c) or Sec. 156.810(d). The request for hearing
should be addressed as instructed in the notice of proposed
determination. ``date of issuance'' is five (5) days after the filing
date, unless there is a showing that the document was received earlier.
(b) The ALJ may extend the time for filing a request for hearing
only if the ALJ finds that the respondent was prevented by events or
circumstances beyond its control from filing its request within the
time specified above. Any request for an extension of time must be made
promptly by written motion.
Sec. 156.907 Form and content of request for hearing.
(a) The request for hearing must do the following:
(1) Identify any factual or legal bases for the assessment or
decertifications with which the respondent disagrees.
(2) Describe with reasonable specificity the basis for the
disagreement, including any affirmative facts or legal arguments on
which the respondent is relying.
(b) Identify the relevant notice of assessment or decertification
by date and attach a copy of the notice.
Sec. 156.909 Amendment of notice of assessment or decertification
request for hearing.
The ALJ may permit CMS to amend its notice of assessment or
decertification, or permit the respondent to amend a request for
hearing that complies with Sec. 156.907(a), if the ALJ finds that no
undue prejudice to either party will result.
Sec. 156.911 Dismissal of request for hearing.
An ALJ will order a request for hearing dismissed if the ALJ
determines that:
(a) The request for hearing was not filed within 30 days as
specified by Sec. 156.905(a) or any extension of time granted by the
ALJ pursuant to Sec. 156.905(b).
(b) The request for hearing fails to meet the requirements of Sec.
156.907.
(c) The entity that filed the request for hearing is not a
respondent under Sec. 156.901.
(d) The respondent has abandoned its request.
(e) The respondent withdraws its request for hearing.
Sec. 156.913 Settlement.
HHS has exclusive authority to settle any issue or any case,
without the consent of the ALJ at any time before or after the ALJ's
decision.
[[Page 65102]]
Sec. 156.915 Intervention.
(a) The ALJ may grant the request of an entity, other than the
respondent, to intervene if all of the following occur:
(1) The entity has a significant interest relating to the subject
matter of the case.
(2) Disposition of the case will, as a practical matter, likely
impair or impede the entity's ability to protect that interest.
(3) The entity's interest is not adequately represented by the
existing parties.
(4) The intervention will not unduly delay or prejudice the
adjudication of the rights of the existing parties.
(b) A request for intervention must specify the grounds for
intervention and the manner in which the entity seeks to participate in
the proceedings. Any participation by an intervenor must be in the
manner and by any deadline set by the ALJ.
(c) The Department of Labor (DOL) or the Internal Revenue Service
(IRS) may intervene without regard to paragraphs (a)(1) through (3) of
this section.
Sec. 156.917 Issues to be heard and decided by ALJ.
(a) The ALJ has the authority to hear and decide the following
issues:
(1) Whether a basis exists to assess a civil money penalty against
the respondent.
(2) Whether the amount of the assessed civil money penalty is
reasonable.
(3) Whether a basis exists to decertify a QHP offered by the
respondent in a Federally-facilitated Exchange.
(b) In deciding whether the amount of a civil money penalty is
reasonable, the ALJ--
(1) Will apply the factors that are identified in Sec. 156.805 for
civil money penalties.
(2) May consider evidence of record relating to any factor that HHS
did not apply in making its initial determination, so long as that
factor is identified in this subpart.
(c) If the ALJ finds that a basis exists to assess a civil money
penalty, the ALJ may sustain, reduce, or increase the penalty that HHS
assessed.
Sec. 156.919 Forms of hearing.
(a) All hearings before an ALJ are on the record. The ALJ may
receive argument or testimony in writing, in person, or by telephone.
The ALJ may receive testimony by telephone only if the ALJ determines
that doing so is in the interest of justice and economy and that no
party will be unduly prejudiced. The ALJ may require submission of a
witness' direct testimony in writing only if the witness is available
for cross-examination.
(b) The ALJ may decide a case based solely on the written record
where there is no disputed issue of material fact the resolution of
which requires the receipt of oral testimony.
Sec. 156.921 Appearance of counsel.
Any attorney who is to appear on behalf of a party must promptly
file, with the ALJ, a notice of appearance.
Sec. 156.923 Communications with the ALJ.
No party or person (except employees of the ALJ's office) may
communicate in any way with the ALJ on any matter at issue in a case,
unless on notice and opportunity for both parties to participate. This
provision does not prohibit a party or person from inquiring about the
status of a case or asking routine questions concerning administrative
functions or procedures.
Sec. 156.925 Motions.
(a) Any request to the ALJ for an order or ruling must be by
motion, stating the relief sought, the authority relied upon, and the
facts alleged. All motions must be in writing, with a copy served on
the opposing party, except in either of the following situations:
(1) The motion is presented during an oral proceeding before an ALJ
at which both parties have the opportunity to be present.
(2) An extension of time is being requested by agreement of the
parties or with waiver of objections by the opposing party.
(b) Unless otherwise specified in this subpart, any response or
opposition to a motion must be filed within 20 days of the party's
receipt of the motion. The ALJ does not rule on a motion before the
time for filing a response to the motion has expired except where the
response is filed at an earlier date, where the opposing party consents
to the motion being granted, or where the ALJ determines that the
motion should be denied.
Sec. 156.927 Form and service of submissions.
(a) Every submission filed with the ALJ must be filed in
triplicate, including one original of any signed documents, and
include:
(1) A caption on the first page, setting forth the title of the
case, the docket number (if known), and a description of the submission
(such as ``Motion for Discovery'').
(2) The signatory's name, address, and telephone number.
(3) A signed certificate of service, specifying each address to
which a copy of the submission is sent, the date on which it is sent,
and the method of service.
(b) A party filing a submission with the ALJ must, at the time of
filing, serve a copy of such submission on the opposing party. An
intervenor filing a submission with the ALJ must, at the time of
filing, serve a copy of the submission on all parties. Service must be
made by mailing or hand delivering a copy of the submission to the
opposing party. If a party is represented by an attorney, service must
be made on the attorney.
Sec. 156.929 Computation of time and extensions of time.
(a) For purposes of this subpart, in computing any period of time,
the time begins with the day following the act, event, or default and
includes the last day of the period unless it is a Saturday, Sunday, or
legal holiday observed by the Federal government, in which event it
includes the next business day. When the period of time allowed is less
than seven days, intermediate Saturdays, Sundays, and legal holidays
observed by the Federal government are excluded from the computation.
(b) The period of time for filing any responsive pleading or papers
is determined by the date of receipt (as defined in Sec. 156.901) of
the submission to which a response is being made.
(c) The ALJ may grant extensions of the filing deadlines specified
in these regulations or set by the ALJ for good cause shown (except
that requests for extensions of time to file a request for hearing may
be granted only on the grounds specified in Sec. 156.905(b)).
Sec. 156.931 Acknowledgment of request for hearing.
After receipt of the request for hearing, the ALJ assigned to the
case or someone acting on behalf of the ALJ will send a letter to the
parties that acknowledges receipt of the request for hearing,
identifies the docket number assigned to the case, provides
instructions for filing submissions and other general information
concerning procedures, and sets out the next steps in the case.
Sec. 156.935 Discovery.
(a) The parties must identify any need for discovery from the
opposing party as soon as possible, but no later than the time for the
reply specified in Sec. 156.937(c). Upon request of a party, the ALJ
may stay proceedings for a reasonable period pending completion of
discovery if the ALJ determines that a party would not be able to make
the submissions required by Sec. 156.937 without discovery. The
parties should attempt to resolve any discovery issues informally
before seeking an order from the ALJ.
[[Page 65103]]
(b) Discovery devices may include requests for production of
documents, requests for admission, interrogatories, depositions, and
stipulations. The ALJ orders interrogatories or depositions only if
these are the only means to develop the record adequately on an issue
that the ALJ must resolve to decide the case.
(c) Each discovery request must be responded to within 30 days of
receipt, unless that period of time is extended for good cause by the
ALJ.
(d) A party to whom a discovery request is directed may object in
writing for any of the following reasons:
(1) Compliance with the request is unduly burdensome or expensive.
(2) Compliance with the request will unduly delay the proceedings.
(3) The request seeks information that is wholly outside of any
matter in dispute.
(4) The request seeks privileged information. Any party asserting a
claim of privilege must sufficiently describe the information or
document being withheld to show that the privilege applies. If an
asserted privilege applies to only part of a document, a party
withholding the entire document must state why the nonprivileged part
is not segregable.
(5) The disclosure of information responsive to the discovery
request is prohibited by law.
(e) Any motion to compel discovery must be filed within 10 days
after receipt of objections to the party's discovery request, within 10
days after the time for response to the discovery request has elapsed
if no response is received, or within 10 days after receipt of an
incomplete response to the discovery request. The motion must be
reasonably specific as to the information or document sought and must
state its relevance to the issues in the case.
Sec. 156.937 Submission of briefs and proposed hearing exhibits.
(a) Within 60 days of its receipt of the acknowledgment provided
for in Sec. 156.931, the respondent must file the following with the
ALJ:
(1) A statement of its arguments concerning CMS's notice of
assessment or decertification (respondent's brief), including citations
to the respondent's hearing exhibits provided in accordance with
paragraph (a)(2) of this section. The brief may not address factual or
legal bases for the assessment or decertification that the respondent
did not identify as disputed in its request for hearing or in an
amendment to that request permitted by the ALJ.
(2) All documents (including any affidavits) supporting its
arguments, tabbed and organized chronologically and accompanied by an
indexed list identifying each document.
(3) A statement regarding whether there is a need for an in-person
hearing and, if so, a list of proposed witnesses and a summary of their
expected testimony that refers to any factual dispute to which the
testimony will relate.
(4) Any stipulations or admissions.
(b) Within 30 days of its receipt of the respondent's submission
required by paragraph (a) of this section, CMS will file the following
with the ALJ:
(1) A statement responding to the respondent's brief, including the
respondent's proposed hearing exhibits, if appropriate. The statement
may include citations to CMS's proposed hearing exhibits submitted in
accordance with paragraph (b)(2) of this section.
(2) Any documents supporting CMS's response not already submitted
as part of the respondent's proposed hearing exhibits, organized and
indexed as indicated in paragraph (a)(2) of this section (CMS's
proposed hearing exhibits).
(3) A statement regarding whether there is a need for an in-person
hearing and, if so, a list of proposed witnesses and a summary of their
expected testimony that refers to any factual dispute to which the
testimony will relate.
(4) Any admissions or stipulations.
(c) Within 15 days of its receipt of CMS's submission required by
paragraph (b) of this section, the respondent may file with the ALJ a
reply to CMS's submission.
Sec. 156.939 Effect of submission of proposed hearing exhibits.
(a) Any proposed hearing exhibit submitted by a party in accordance
with Sec. 156.937 is deemed part of the record unless the opposing
party raises an objection to that exhibit and the ALJ rules to exclude
it from the record. An objection must be raised either in writing prior
to the prehearing conference provided for in Sec. 156.941 or at the
prehearing conference. The ALJ may require a party to submit the
original hearing exhibit on his or her own motion or in response to a
challenge to the authenticity of a proposed hearing exhibit.
(b) A party may introduce a proposed hearing exhibit following the
times for submission specified in Sec. 156.937 only if the party
establishes to the satisfaction of the ALJ that it could not have
produced the exhibit earlier and that the opposing party will not be
prejudiced.
Sec. 156.941 Prehearing conferences.
An ALJ may schedule one or more prehearing conferences (generally
conducted by telephone) on the ALJ's own motion or at the request of
either party for the purpose of any of the following:
(a) Hearing argument on any outstanding discovery request.
(b) Establishing a schedule for any supplements to the submissions
required by Sec. 156.937 because of information obtained through
discovery.
(c) Hearing argument on a motion.
(d) Discussing whether the parties can agree to submission of the
case on a stipulated record.
(e) Establishing a schedule for an in-person hearing, including
setting deadlines for the submission of written direct testimony or for
the written reports of experts.
(f) Discussing whether the issues for a hearing can be simplified
or narrowed.
(g) Discussing potential settlement of the case.
(h) Discussing any other procedural or substantive issues.
Sec. 156.943 Standard of proof.
(a) In all cases before an ALJ--
(1) CMS has the burden of coming forward with evidence sufficient
to establish a prima facie case;
(2) The respondent has the burden of coming forward with evidence
in response, once CMS has established a prima facie case; and
(3) CMS has the burden of persuasion regarding facts material to
the assessment or decertification; and
(4) The respondent has the burden of persuasion regarding facts
relating to an affirmative defense.
(b) The preponderance of the evidence standard applies to all cases
before the ALJ.
Sec. 156.945 Evidence.
(a) The ALJ will determine the admissibility of evidence.
(b) Except as provided in this part, the ALJ will not be bound by
the Federal Rules of Evidence. However, the ALJ may apply the Federal
Rules of Evidence where appropriate; for example, to exclude unreliable
evidence.
(c) The ALJ excludes irrelevant or immaterial evidence.
(d) Although relevant, evidence may be excluded if its probative
value is substantially outweighed by the danger of unfair prejudice,
confusion of the issues, or by considerations of undue delay or
needless presentation of cumulative evidence.
(e) Although relevant, evidence is excluded if it is privileged
under Federal law.
[[Page 65104]]
(f) Evidence concerning offers of compromise or settlement made in
this action will be inadmissible to the extent provided in the Federal
Rules of Evidence.
(g) Evidence of acts other than those at issue in the instant case
is admissible in determining the amount of any civil money penalty if
those acts are used under Sec. 156.805 of this part to consider the
entity's prior record of compliance, or to show motive, opportunity,
intent, knowledge, preparation, identity, or lack of mistake. This
evidence is admissible regardless of whether the acts occurred during
the statute of limitations period applicable to the acts that
constitute the basis for liability in the case and regardless of
whether HHS' notice sent in accordance with Sec. 156.805 referred to
them.
(h) The ALJ will permit the parties to introduce rebuttal witnesses
and evidence.
(i) All documents and other evidence offered or taken for the
record will be open to examination by all parties, unless the ALJ
orders otherwise for good cause shown.
(j) The ALJ may not consider evidence regarding the willingness and
ability to enter into and successfully complete a corrective action
plan when that evidence pertains to matters occurring after HHS' notice
under Sec. 156.805(d) or Sec. 156.810(c) or Sec. 156.810(d).
Sec. 156.947 The record.
(a) Any testimony that is taken in-person or by telephone is
recorded and transcribed. The ALJ may order that other proceedings in a
case, such as a prehearing conference or oral argument of a motion, be
recorded and transcribed.
(b) The transcript of any testimony, exhibits and other evidence
that is admitted, and all pleadings and other documents that are filed
in the case constitute the record for purposes of an ALJ decision.
(c) For good cause, the ALJ may order appropriate redactions made
to the record.
Sec. 156.951 Posthearing briefs.
Each party is entitled to file proposed findings and conclusions,
and supporting reasons, in a posthearing brief. The ALJ will establish
the schedule by which such briefs must be filed. The ALJ may direct the
parties to brief specific questions in a case and may impose page
limits on posthearing briefs. Additionally, the ALJ may allow the
parties to file posthearing reply briefs.
Sec. 156.953 ALJ decision.
The ALJ will issue an initial agency decision based only on the
record and on applicable law; the decision will contain findings of
fact and conclusions of law. The ALJ's decision is final and appealable
after 30 days unless it is modified or vacated under Sec. 156.957.
Sec. 156.955 Sanctions.
(a) The ALJ may sanction a party or an attorney for failing to
comply with an order or other directive or with a requirement of a
regulation, for abandonment of a case, or for other actions that
interfere with the speedy, orderly or fair conduct of the hearing. Any
sanction that is imposed will relate reasonably to the severity and
nature of the failure or action.
(b) A sanction may include any of the following actions:
(1) In the case of failure or refusal to provide or permit
discovery, drawing negative fact inferences or treating such failure or
refusal as an admission by deeming the matter, or certain facts, to be
established.
(2) Prohibiting a party from introducing certain evidence or
otherwise advocating a particular claim or defense.
(3) Striking pleadings, in whole or in part.
(4) Staying the case.
(5) Dismissing the case.
(6) Entering a decision by default.
(7) Refusing to consider any motion or other document that is not
filed in a timely manner.
(8) Taking other appropriate action.
Sec. 156.957 Review by Administrator.
(a) The Administrator of CMS (which for purposes of this section
may include his or her delegate), at his or her discretion, may review
in whole or in part any initial agency decision issued under Sec.
156.953.
(b) The Administrator may decide to review an initial agency
decision if it appears from a preliminary review of the decision (or
from a preliminary review of the record on which the initial agency
decision was based, if available at the time) that:
(1) The ALJ made an erroneous interpretation of law or regulation.
(2) The initial agency decision is not supported by substantial
evidence.
(3) The ALJ has incorrectly assumed or denied jurisdiction or
extended his or her authority to a degree not provided for by statute
or regulation.
(4) The ALJ decision requires clarification, amplification, or an
alternative legal basis for the decision.
(5) The ALJ decision otherwise requires modification, reversal, or
remand.
(c) Within 30 days of the date of the initial agency decision, the
Administrator will mail a notice advising the respondent of any intent
to review the decision in whole or in part.
(d) Within 30 days of receipt of a notice that the Administrator
intends to review an initial agency decision, the respondent may
submit, in writing, to the Administrator any arguments in support of,
or exceptions to, the initial agency decision.
(e) This submission of the information indicated in paragraph (d)
of this section must be limited to issues the Administrator has
identified in his or her notice of intent to review, if the
Administrator has given notice of an intent to review the initial
agency decision only in part. A copy of this submission must be sent to
the other party.
(f) After receipt of any submissions made pursuant to paragraph (d)
of this section and any additional submissions for which the
Administrator may provide, the Administrator will affirm, reverse,
modify, or remand the initial agency decision. The Administrator will
mail a copy of his or her decision to the respondent.
(g) The Administrator's decision will be based on the record on
which the initial agency decision was based (as forwarded by the ALJ to
the Administrator) and any materials submitted pursuant to paragraphs
(b), (d), and (f) of this section.
(h) The Administrator's decision may rely on decisions of any
courts and other applicable law, whether or not cited in the initial
agency decision.
Sec. 156.959 Judicial review.
(a) Filing of an action for review. Any responsible entity against
whom a final order imposing a civil money penalty or decertification of
a QHP is entered may obtain review in the United States District Court
for any district in which the entity is located or in the United States
District Court for the District of Columbia by doing the following:
(1) Filing a notice of appeal in that court within 30 days from the
date of a final order.
(2) Simultaneously sending a copy of the notice of appeal by
registered mail to HHS.
(b) Certification of administrative record. HHS promptly certifies
and files with the court the record upon which the penalty was
assessed.
(c) Standard of review. The findings of HHS and the ALJ may not be
set aside unless they are found to be unsupported by substantial
evidence, as provided by 5 U.S.C. 706(2)(E).
[[Page 65105]]
Sec. 156.961 Failure to pay assessment.
If any entity fails to pay an assessment after it becomes a final
order, or after the court has entered final judgment in favor of CMS,
CMS refers the matter to the Attorney General, who brings an action
against the entity in the appropriate United States district court to
recover the amount assessed.
Sec. 156.963 Final order not subject to review.
In an action brought under Sec. 156.961, the validity and
appropriateness of the final order imposing a civil money penalty is
not subject to review.
0
41. Subpart L is added to read as follows:
Subpart L--Quality Standards
Sec. 156.1105 Establishment of standards for HHS-approved enrollee
satisfaction survey vendors for use by QHP issuers in Exchanges.
(a) Application for approval. An enrollee satisfaction survey
vendor must be approved by HHS, in a form and manner to be determined
by HHS, to administer, on behalf of a QHP issuer, enrollee satisfaction
surveys to QHP enrollees. HHS will approve enrollee satisfaction survey
vendors on an annual basis, and each enrollee satisfaction survey
vendor must submit an application for each year that approval is
sought.
(b) Standards. To be approved by HHS, an enrollee satisfaction
survey vendor must meet each of the following standards:
(1) Sign and submit an application form for approval in accordance
with paragraph (a) of this section;
(2) Ensure, on an annual basis, that appropriate staff participate
in enrollee satisfaction survey vendor training and successfully
complete a post-training certification exercise as established by HHS;
(3) Ensure the accuracy of their data collection, calculation and
submission processes and attest to HHS the veracity of the data and
these processes;
(4) Sign and execute a standard HHS data use agreement, in a form
and manner to be determined by HHS, that establishes protocols related
to the disclosure, use, and reuse of HHS data;
(5) Adhere to the enrollee satisfaction survey protocols and
technical specifications in a manner and form required by HHS;
(6) Develop and submit to HHS a quality assurance plan and any
supporting documentation as determined to be relevant by HHS. The plan
must describe in adequate detail the implementation of and compliance
with all required protocols and technical specifications described in
paragraph (b)(5) of this section;
(7) Adhere to privacy and security standards established and
implemented under Sec. 155.260 of this subchapter by the Exchange with
which they are associated;
(8) Comply with all applicable State and Federal laws;
(9) Become a registered user of the enrollee satisfaction survey
data warehouse to submit files to HHS on behalf of its authorized QHP
contracts;
(10) Participate in and cooperate with HHS oversight for quality-
related activities, including, but not limited to: review of the
enrollee satisfaction survey vendor's quality assurance plan and other
supporting documentation; analysis of the vendor's submitted data and
sampling procedures; and site visits and conference calls; and,
(11) Comply with minimum business criteria as established by HHS.
(c) Approved list. A list of approved enrollee satisfaction survey
vendors will be published on an HHS Web site.
0
42. Section 156.1210 is added to subpart M to read as follows:
Sec. 156.1210 Confirmation of HHS payment and collections reports.
(a) Responses to reports. Within 15 calendar days of the date of a
payment and collections report from HHS, the issuer must, in a format
specified by HHS, either:
(1) Confirm to HHS that the amounts identified in the payment and
collections report for the timeframe specified in the report accurately
reflect applicable payments owed by the issuer to the Federal
government and the payments owed to the issuer by the Federal
government; or
(2) Describe to HHS any inaccuracy it identifies in the payment and
collections report.
(b) Late discovery of a discrepancy. If an issuer reports a
discrepancy in a payment and collections report later than 15 calendar
days after the date of the report, HHS will work with the issuer to
resolve the discrepancy as long as the late reporting was not due to
misconduct on the part of the issuer.
(Catalog of Federal Domestic Assistance Program No. 93.778, Medical
Assistance Program)
(Catalog of Federal Domestic Assistance Program No. 93.773,
Medicare--Hospital Insurance; and Program No. 93.774, Medicare--
Supplementary Medical Insurance Program)
Dated: September 27, 2013.
Marilyn Tavenner,
Administrator, Centers for Medicare & Medicaid Services.
Dated: Approved: October 18, 2013
Kathleen Sebelius,
Secretary, Department of Health and Human Services.
[FR Doc. 2013-25326 Filed 10-24-13; 4:15 pm]
BILLING CODE 4120-01-P