[Federal Register Volume 79, Number 55 (Friday, March 21, 2014)]
[Proposed Rules]
[Pages 15807-15879]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-06134]



[[Page 15807]]

Vol. 79

Friday,

No. 55

March 21, 2014

Part II





Department of Health and Human Services





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45 CFR Parts 146, 147, 148, et al.





Patient Protection and Affordable Care Act; Exchange and Insurance 
Market Standards for 2015 and Beyond; Proposed Rule

Federal Register / Vol. 79 , No. 55 / Friday, March 21, 2014 / 
Proposed Rules

[[Page 15808]]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

45 CFR Parts 146, 147, 148, 153, 155, 156, and 158

[CMS-9949-P]
RIN 0938-AS02


Patient Protection and Affordable Care Act; Exchange and 
Insurance Market Standards for 2015 and Beyond

AGENCY: Centers for Medicare & Medicaid Services (CMS), Department of 
Health and Human Services (HHS).

ACTION: Proposed rule.

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SUMMARY: This proposed rule addresses various requirements applicable 
to health insurance issuers, Affordable Insurance Exchanges 
(``Exchanges''), Navigators, non-Navigator assistance personnel, and 
other entities under 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, the rule 
proposes standards related to product discontinuation and renewal, 
quality reporting, non-discrimination standards, minimum certification 
standards and responsibilities of qualified health plan (QHP) issuers, 
the Small Business Health Options Program, and enforcement remedies in 
Federally-facilitated Exchanges. It also proposes: A modification of 
HHS's allocation of reinsurance contributions collected if those 
contributions do not meet our projections; certain changes to the 
ceiling on allowable administrative expenses in the risk corridors 
calculation; modifications to the way we calculate certain cost-sharing 
parameters so that we round those parameters down to the nearest $50 
increment; certain approaches we are considering to index the required 
contribution used to determine eligibility for an exemption from the 
shared responsibility payment under section 5000A of the Internal 
Revenue Code; grounds for imposing civil money penalties on persons who 
provide false or fraudulent information to the Exchange and on persons 
who improperly use or disclose information; updated standards for the 
consumer assistance programs; standards related to the opt-out 
provisions for self-funded, non-Federal governmental plans and the 
individual market provisions under the Health Insurance Portability and 
Accountability Act of 1996; standards for recognition of certain types 
of foreign group health coverage as minimum essential coverage; 
amendments to Exchange appeals standards and coverage enrollment and 
termination standards; and time-limited adjustments to the standards 
relating to the medical loss ratio program.

DATES: To be assured consideration, comments must be received at one of 
the addresses provided below no later than 5 p.m. on April 21, 2014.

ADDRESSES: In commenting, please refer to file code CMS-9949-P. Because 
of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    You may submit comments in one of four ways (please choose only one 
of the ways listed):
    1. Electronically. You may submit electronic comments on this 
regulation to http://www.regulations.gov. Follow the ``Submit a 
comment'' instructions.
    2. By regular mail. You may mail written comments to the following 
address ONLY: Centers for Medicare & Medicaid Services, Department of 
Health and Human Services, Attention: CMS-9949-P, P.O. Box 8016, 
Baltimore, MD 21244-8016.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By express or overnight mail. You may send written comments to 
the following address ONLY: Centers for Medicare & Medicaid Services, 
Department of Health and Human Services, Attention: CMS-9949-P, Mail 
Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
    4. By hand or courier. Alternatively, you may deliver (by hand or 
courier) your written comments ONLY to the following addresses prior to 
the close of the comment period:
    a. For delivery in Washington, DC--Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, Room 445-G, Hubert 
H. Humphrey Building, 200 Independence Avenue SW., Washington, DC 
20201.
    (Because access to the interior of the Hubert H. Humphrey Building 
is not readily available to persons without Federal government 
identification, commenters are encouraged to leave their comments in 
the CMS drop slots located in the main lobby of the building. A stamp-
in clock is available for persons wishing to retain a proof of filing 
by stamping in and retaining an extra copy of the comments being 
filed.)
    b. For delivery in Baltimore, MD--Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, 7500 Security 
Boulevard, Baltimore, MD 21244-1850.
    If you intend to deliver your comments to the Baltimore address, 
call telephone number (410) 786-9994 in advance to schedule your 
arrival with one of our staff members.
    Comments erroneously mailed to the addresses indicated as 
appropriate for hand or courier delivery may be delayed and received 
after the comment period.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: For general matters and matters 
related to Parts 146 through 148: Jacob Ackerman, (301) 492-4179.
    For matters related to reinsurance, under Part 153: Adrianne 
Glasgow, (410) 786-0686.
    For matters related to risk corridors, under Part 153: Jaya 
Ghildiyal, (301) 492-5149.
    For matters related to non-interference with Federal law and non-
discrimination standards, and Navigator, non-Navigator assistance 
personnel, and certified application counselor program standards, under 
Part 155, subparts B and C: Joan Matlack, (301) 492-4223.
    For matters related to civil money penalties and consumer 
authorization forms, under Part 155, subpart C: Emily Ames, (301) 492-
4246.
    For matters related to civil money penalties for false or 
fraudulent information or improper use of information, under Part 155, 
subpart C: Julia Cassidy, (301) 492-4412.
    For matters related to enrollment of a qualified individual, under 
Part 155, subpart E: Jack Lavelle, (410) 786-0639.
    For matters related to special enrollment periods and exemptions 
under Part 155, subparts D and G, and matters related to eligibility 
appeals, under Part 155, subparts F and H: Christine Hammer, (301) 492-
4431.
    For matters related to the Small Business Health Options Program, 
under Part 155, subpart H: Christelle Jang, (410) 786-8438.
    For matters related to the required contribution percentage for 
affordability exemptions, under Part 155, subpart G: Ariel Novick, 
(301) 492-4309.
    For matters related to cost sharing, under Part 156, subpart B: Pat 
Meisol, (410) 786-1917.
    For matters related to quality standards, under Parts 155 and 156: 
Nidhi Singh Shah, (301) 492-5110.
    For matters related to minimum essential coverage, under Part 156, 
subpart G: Cam Clemmons, (410) 786-1565.
    For all other matters related to Parts 155 and 156: Leigha Basini, 
(301) 492-4380.

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    For matters related to the medical loss ratio program, under Part 
158: Julie McCune, (301) 492-4196.

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

Table of Contents

I. Executive Summary
II. Background
    A. Legislative Overview
    B. Stakeholder Consultation and Input
    C. Structure of Proposed Rule
III. Provisions of the Proposed Rule
    A. Part 146--Requirements for the Group Health Insurance Market
    1. HIPAA Opt-Out Provisions for Plan Sponsors of Self-Funded, 
Non-Federal Governmental Plans (Sec.  146.180)
    B. Part 147--Health Insurance Reform Requirements for the Group 
and Individual Health Insurance Markets
    1. Guaranteed Availability and Guaranteed Renewability of 
Coverage (Sec. Sec.  147.104 and 147.106)
    a. No Effect on Other Laws
    b. Product Withdrawal and Uniform Modification of Coverage 
Exceptions to Guaranteed Renewability Requirements
    C. Part 148--Requirements for the Individual Health Insurance 
Market
    1. Conforming Changes to Individual Market Regulations 
(Sec. Sec.  148.101 Through 148.128)
    2. Fixed Indemnity Insurance in the Individual Health Insurance 
Market (Sec.  148.220)
    D. Part 153--Standards Related to Reinsurance, Risk Corridors, 
and Risk Adjustment Under the Affordable Care Act
    1. Provisions and Parameters for the Transitional Reinsurance 
Program (Sec.  153.405)
    2. Provisions for the Temporary Risk Corridors Program (Sec.  
153.500)
    E. Part 155--Exchange Establishment Standards and Other Related 
Standards Under the Affordable Care Act
    1. Subpart B--General Standards Related to the Establishment of 
the Exchange
    a. Non-Interference With Federal Law and Non-Discrimination 
Standards (Sec.  155.120)
    2. Subpart C--General Functions of an Exchange
    a. Civil Money Penalties for Violations of Applicable Exchange 
Standards by Consumer Assistance Entities in Federally-Facilitated 
Exchanges (Sec.  155.206)
    b. Navigator, Non-Navigator Assistance Personnel, and Certified 
Application Counselor Program Standards (Sec. Sec.  155.210, 
155.215, and 155.225)
    c. Certified Application Counselors (Sec.  155.225)
    d. Payment of Premiums (Sec.  155.240)
    e. Privacy and Security of Personally Identifiable Information 
(Sec.  155.260)
    f. Bases and Process for Imposing Civil Money Penalties for 
Provision of False or Fraudulent Information to an Exchange or 
Improper Use or Disclosure of Information (Sec.  155.285)
    3. Subpart D--Exchange Functions in the Individual Market: 
Eligibility Determinations for Exchange Participation and Insurance 
Affordability Programs
    a. Verification of Eligibility for Minimum Essential Coverage 
Other Than Through an Eligible Employer-Sponsored Plan (Sec.  
155.320)
    b. Eligibility Redetermination During a Benefit Year (Sec.  
155.330)
    4. Subpart E--Exchange Functions in the Individual Market: 
Enrollment in Qualified Health Plans
    a. Enrollment of Qualified Individuals in a QHP (Sec.  155.400)
    b. Initial and Annual Open Enrollment Periods (Sec.  155.410)
    c. Special Enrollment Periods (Sec.  155.420)
    d. Termination of Coverage (Sec.  155.430)
    5. Subpart F--Appeals of Eligibility Determinations for Exchange 
Participation and Insurance Affordability Programs
    a. General Eligibility Appeals Requirements (Sec.  155.505)
    b. Dismissals (Sec.  155.530)
    c. Employer Appeals Process (Sec.  155.555)
    6. Subpart G--Exchange Functions in the Individual Market: 
Eligibility Determinations for Exemptions
    a. Required Contribution Percentage
    b. Options for Conducting Eligibility Determinations for 
Exemptions (Sec.  155.625)
    7. Subpart H--Exchange Functions: Small Business Health Options 
Program
    a. Functions of a SHOP (Sec.  155.705)
    b. Enrollment Periods Under SHOP (Sec.  155.725)
    c. SHOP Employer and Employee Eligibility Appeals Requirements 
(Sec.  155.740)
    8. Subpart O--Quality Standards for Exchanges
    a. Quality Rating System (Sec.  155.1400)
    b. Enrollee Satisfaction Survey System (Sec.  155.1405)
    F. Part 156--Health Insurance Issuer Standards Under the 
Affordable Care Act, Including Standards Related to Exchanges
    1. Subpart B--Essential Health Benefits Package
    a. Prescription Drug Benefits (Sec.  156.122)
    b. Cost-Sharing Requirements (Sec.  156.130)
    2. Subpart C--General Functions of an Exchange
    a. QHP Issuer Participation Standards (Sec.  156.200)
    3. Subpart G--Minimum Essential Coverage
    a. Other Coverage That Qualifies as Minimum Essential Coverage 
(Sec.  156.602)
    b. Requirements for Recognition as Minimum Essential Coverage 
for Types of Coverage Not Otherwise Designated Minimum Essential 
Coverage in the Statute or This Subpart (Sec.  156.604)
    4. Subpart I--Enforcement Remedies in Federally-Facilitated 
Exchanges
    a. Available Remedies; Scope (Sec.  156.800)
    b. Bases and Process for Imposing Civil Money Penalties in 
Federally-Facilitated Exchanges (Sec.  156.805)
    c. Bases and Process for Decertification of a QHP Offered by an 
Issuer Through a Federally-Facilitated Exchange (Sec.  156.810)
    5. 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)
    b. Quality Rating System (Sec.  156.1120)
    c. Enrollee Satisfaction Survey (Sec.  156.1125)
    G. Part 158--Issuer Use of Premium Revenue: Reporting and Rebate 
Requirements
    1. Subpart A--Disclosure and Reporting
    a. ICD-10 Conversion Expenses (Sec.  158.150)
    2. Subpart B--Calculating and Providing the Rebate
    a. MLR and Rebate Calculations in States With Merged Individual 
and Small Group Markets (Sec. Sec.  158.211, 158.220, 158.231)
    b. Accounting for Special Circumstances (Sec.  158.221)
    c. Distribution of de Minimis Rebates (Sec.  158.243)
IV. Collection of Information Requirements
    A. ICRs Regarding Recertification for Certified Application 
Counselors (Sec.  155.225)
    B. ICRs Regarding Consumer Authorization (Sec. Sec.  155.210 and 
155.215)
    C. ICRs Regarding Enrollee Satisfaction & Marketplace Surveys 
(Sec. Sec.  155.1200, 156.1105, and 156.1125)
    D. ICR Regarding Quality Rating System (Sec.  156.1120)
    E. ICRs Regarding Quality Standards for Exchanges (Sec. Sec.  
155.1400 and 155.1405)
    F. ICR Regarding Medical Loss Ratio Requirements (Sec. Sec.  
158.150, 158.211, 158.220, 158.221, 158.231, and 158.243)

[[Page 15810]]

    G. ICRs Regarding Civil Money Penalties (Sec. Sec.  155.206 and 
155.285)
    H. ICRs regarding Fixed Indemnity Plans, Minimum Essential 
Coverage, Certifications of Creditable Coverage and HIPAA Opt-Out 
Election Notice, Notice of Discontinuation, Notice of Renewal 
(Sec. Sec.  146.152, 146.180, 147.106, 148.122, 148.220, and 
156.602)
V. Regulatory Impact Analysis
    A. Summary
    B. Executive Orders 13563 and 12866
    1. Need for Regulatory Action
    2. Summary of Impacts
    3. Anticipated Benefits, Costs and Transfers
    C. Regulatory Alternatives
    1. Collecting ESS Data at the Product Level Instead of Each 
Product per Metal Tier
    2. Using Medicaid CAHPS as Is Instead of Adding Additional and 
New Questions to the ESS
    3. Collecting QRS Data for Each Product per Metal Tier Instead 
of at the Product Level
    4. Using the Medicare Advantage (MA) CAHPS Instrument and Star 
System
    D. Regulatory Flexibility Act
    E. Unfunded Mandates Reform Act
    F. Federalism
    G. Congressional Review Act
VI. Regulations Text

Abbreviations

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)
AV Actuarial Value
CAC Certified Application Counselor
CAHPS[supreg] Consumer Assessment of Healthcare Providers and 
Systems
CFR Code of Federal Regulations
CMP Civil Money Penalty
CMS Centers for Medicare & Medicaid Services
CSR Cost-Sharing Reductions
DSH Disproportionate Share Hospital
EHB Essential Health Benefits
ERISA Employee Retirement Income Security Act of 1974 (Pub. L. 93-
406)
ESS Enrollee Satisfaction Survey
FFE Federally-facilitated Exchange
FF-SHOP Federally-facilitated Small Business Health Options Program
FQHC Federally Qualified Health Center
HHS United States Department of Health and Human Services
HIPAA Health Insurance Portability and Accountability Act of 1996 
(Pub. L. 104-191)
IRS Internal Revenue Service
MLR Medical Loss Ratio
NAIC National Association of Insurance Commissioners
OMB Office of Management and Budget
OPM United States Office of Personnel Management
PHS Act Public Health Service Act
PRA Paperwork Reduction Act of 1995
PSO Patient Safety Organization
QHP Qualified health plan
QRS Quality Rating System
SHOP Small Business Health Options Program
The Code Internal Revenue Code of 1986
URL Uniform Resource Locator

I. Executive Summary

    Since January 1, 2014, qualified individuals and small employers 
have been able to obtain private health insurance through Affordable 
Insurance Exchanges, or ``Exchanges'' (also known as Health Insurance 
Marketplaces, or ``Marketplaces'').\1\ The Exchanges provide 
competitive marketplaces where individuals and small employers can 
compare available private health insurance options on the basis of 
price, quality, and other factors. The Exchanges help enhance 
competition in the health insurance market, improve choice of 
affordable health insurance, and give small businesses the same 
purchasing power as large businesses.
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    \1\ The word ``Exchanges'' refers to both State Exchanges, also 
called State-based Exchanges, and Federally-facilitated Exchanges 
(FFEs). In this proposed 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 FFEs.
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    Individuals who enroll in qualified health plans (QHPs) through 
individual market Exchanges may be eligible to receive premium tax 
credits to make health insurance purchased through an Exchange more 
affordable and cost-sharing reductions that lower out-of-pocket 
expenses for health care services. The premium tax credits, combined 
with the new insurance reforms, will significantly increase the number 
of individuals with health insurance coverage. Premium stabilization 
programs--risk adjustment, reinsurance, and risk corridors--protect 
against adverse selection in the newly enrolled population. These 
programs, in combination with the medical loss ratio program and market 
reforms extending guaranteed availability (also known as guaranteed 
issue) protections, prohibiting the use of factors such as health 
status, medical history, gender, and industry of employment to set 
premium rates, will help to ensure that every American has access to 
high quality, affordable health insurance.
    This proposed rule would address various requirements applicable to 
health insurance issuers, Exchanges, Navigators, non-Navigator 
assistance personnel, and other entities under the Affordable Care Act. 
Specifically, the rule proposes standards related to product 
discontinuation and renewal, quality reporting, non-discrimination 
standards, minimum certification standards and responsibilities of 
qualified health plan (QHP) issuers, the Small Business Health Options 
Program, and enforcement remedies in Federally-facilitated Exchanges. 
It also proposes: A modification of HHS's allocation of reinsurance 
contributions collected if those contributions do not meet our 
projections; certain changes to the ceiling on allowable administrative 
expenses in the risk corridors calculation; modifications to the way we 
calculate certain cost-sharing parameters so that we round those 
parameters down to the nearest $50 increment; certain approaches we are 
considering to index the required contribution used to determine 
eligibility for an exemption from the shared responsibility payment 
under section 5000A of the Internal Revenue Code; grounds for imposing 
civil money penalties on persons who provide false or fraudulent 
information to the Exchange and on persons who improperly use or 
disclose information; updated standards for the consumer assistance 
programs; standards related to the opt-out provisions for self-funded, 
non-Federal governmental plans and the individual market provisions 
under the Health Insurance Portability and Accountability Act of 1996; 
standards for recognition of certain types of foreign group health 
coverage as minimum essential coverage; amendments to Exchange appeals 
standards and coverage enrollment and termination standards; and time-
limited adjustments to the standards relating to the medical loss ratio 
program. Nearly all of these proposed policies were described in the 
preamble to the final rule titled, HHS Notice of Benefit and Payment 
Parameters for 2015, published on March 11, 2014 (79 FR 13744) (2015 
Payment Notice).\2\
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    \2\ Patient Protection and Affordable Care Act; HHS Notice of 
Benefit and Payment Parameters for 2015, 79 FR 13744 (March 11, 
2014).
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    Product Withdrawal and Uniform Modification of Coverage Exceptions 
to Guaranteed Renewability Requirements: Under sections 2702 and 2703 
of the Public Health Service Act (PHS Act), as added by the Affordable 
Care Act, health insurance issuers in the group and individual markets 
must guarantee the availability and renewability of coverage unless an 
exception applies. In this proposed rule, we propose criteria for 
determining when modifications made by an issuer to the health 
insurance coverage for a product would and would not constitute the 
discontinuation of an existing product and the creation of a new 
product. We also propose that issuers use standard consumer notices in 
a format designated by the Secretary when discontinuing or renewing a 
product in the group or

[[Page 15811]]

individual market. Additionally, we propose to clarify that the 
guaranteed availability and renewability requirements should not be 
construed to supersede other provisions of Federal law in certain 
circumstances.
    Conforming Changes to Individual Market Provisions: Sections 2741 
through 2744 of the PHS Act were added by HIPAA to improve the 
portability and continuity of coverage in the individual health 
insurance market. These provisions are implemented through regulations 
in 45 CFR Part 148. In this proposed rule, we propose to amend the 
individual market provisions in Part 148 to reflect the amendments made 
by the Affordable Care Act. These amendments are for clarity only.
    Fixed Indemnity Insurance in the Individual Market: Consistent with 
previously released guidance, we propose to amend the criteria for 
fixed indemnity insurance to be treated as an excepted benefit in the 
individual health insurance market.\3\ The proposed amendments would 
eliminate the requirement that individual fixed indemnity insurance 
must pay on a per-period basis (as opposed to a per-service basis), and 
instead require, among other things, that it be sold only as secondary 
to other health coverage that is minimum essential coverage to be 
considered an excepted benefit.
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    \3\ FAQs about Affordable Care Act Implementation (Part XVIII) 
and Mental Health Parity Implementation, Q11 (January 9, 2014). 
Available at: http://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs18.html and http://www.dol.gov/ebsa/faqs/faq-aca18.html.
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    HIPAA Opt-Out for Self-Funded, Non-Federal Governmental Plans: 
Prior to enactment of the Affordable Care Act, sponsors of self-funded, 
non-Federal governmental plans were permitted to elect to exempt those 
plans from (``opt out of'') certain provisions of title XXVII of the 
PHS Act. Consistent with previously released guidance, we propose 
amendments to the non-Federal governmental plan regulations (45 CFR 
146.180) to reflect the amendments made by the Affordable Care Act to 
these provisions.\4\
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    \4\ Amendments to the HIPAA opt-out provision (formerly section 
2721(b)(2) of the Public Health Service Act) made by the Affordable 
Care Act (September 21, 2010). Available at: http://www.cms.gov/CCIIO/Resources/Files/Downloads/opt_out_memo.pdf.
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    Premium Stabilization Programs: The Affordable Care Act establishes 
three premium stabilization programs--risk adjustment, reinsurance, and 
risk corridors--to protect against adverse selection. The goal of the 
permanent risk adjustment program is to mitigate the impacts of 
possible adverse selection and stabilize the premiums in the individual 
and small group markets as and after insurance market reforms are 
implemented. The Affordable Care Act also directs that a transitional 
reinsurance program be established in each State to help stabilize 
premiums for coverage by helping to pay the cost of treating high-cost 
enrollees in the individual market from 2014 through 2016.
    Both the reinsurance and risk adjustment programs are subject to 
the fiscal year 2015 sequestration. The risk adjustment and reinsurance 
programs will be sequestered at a rate of 7.3 percent in fiscal year 
2015. The Federal government's 2015 fiscal year begins on October 1, 
2014. HHS, in coordination with the OMB, has determined that, pursuant 
to section 256(k)(6) of the Balanced Budget and Emergency Deficit 
Control Act of 1985 as amended, and the underlying authority for these 
programs, funds that are sequestered in fiscal year 2015 from the 
reinsurance and risk adjustment programs will become available for 
payment to issuers in fiscal year 2016 without further Congressional 
action. HHS is still working through operational questions regarding 
the structure and timing of these payments, but aims to make payments 
of sequestered fiscal year 2015 funding for the reinsurance and risk 
adjustment programs, which would have otherwise been paid in the summer 
of 2015, as soon as practicably possible in fiscal year 2016, which 
begins on October 1, 2015. Should Congress fail to enact deficit 
reduction that replaces the Joint Committee reductions, these programs 
would be sequestered in future fiscal years, and any sequestered 
funding would become available in the fiscal year following that in 
which it was sequestered.
    In this proposed rule, we solicit feedback on potential revisions 
to the allocation of reinsurance contributions collected and we suggest 
an approach such that the contributions collected under that program 
are allocated first to the reinsurance pool and administrative 
expenses, and second to the U.S. Treasury. In addition, we invite 
comment on alternative allocation approaches to maximize the premium 
stabilization benefits of the program.
    We also propose changing the limit on allowable administrative 
costs to 22 percent and the limit on profits to 5 percent in the risk 
corridors calculation, in recognition of the ongoing uncertainty and 
changes in the market in 2015; we expect to implement this change in a 
budget neutral way.
    Exchange Establishment and QHP Issuer Standards: The rule proposes 
amending oversight standards regarding QHP decertification and CMPs. It 
also proposes that QHP issuers provide enrollees with an annual notice 
of coverage changes. This rule proposes a process for survey vendors to 
appeal an HHS decision not to approve its application to become an 
enrollee satisfaction survey (ESS) vendor, as well as standards for 
revoking HHS-approval of ESS vendors. Finally, it proposes standards 
for the ESS and quality rating system (QRS) related to the display of 
such information by Exchanges and the submission of validated data by 
QHP issuers.
    We propose to align the start of annual employer election periods 
in all SHOPs for plan years beginning in 2015 with the start of open 
enrollment in the corresponding individual market Exchange for the 2015 
benefit year and to eliminate the 30-day minimum time frames for the 
employer and employee annual election periods. We also propose to allow 
State departments of insurance to recommend that, in 2015, a SHOP not 
provide employers with the option of selecting a level of coverage as 
described in section 1302(d)(1) of the Affordable Care Act, and making 
all QHPs at that level of coverage available to their employees if 
making that option available would result in significant adverse 
selection in the State's small group market resulting in market 
disruptions that could not be addressed by the premium stabilization 
programs or single risk pool, or if there would be insufficient issuers 
of qualified health plans or qualified stand-alone dental plans to 
allow for meaningful choice among plans. We propose to allow the 
opportunity for a person appealing a determination of SHOP eligibility 
to withdraw an appeal by telephone, if the appeals entity is capable of 
accepting telephonic signatures.
    Civil Money Penalties for False Information or Improper Use of 
Information: The proposed rule specifies the grounds for imposing civil 
money penalties on persons who provide false or fraudulent information 
to the Exchange and on persons who use or disclose information in 
violation of section 1411(g) of the Affordable Care Act. The grounds 
for imposing a penalty include: negligent failure to provide correct 
information, knowing and willful provision of false or fraudulent 
information, and knowing and willful use or disclosure of information 
in violation of section 1411(g). This section proposes the factors used 
to determine the amount of the CMP to be imposed against a person. The 
section also provides for the requirements for notices which must be 
provided to a

[[Page 15812]]

person if HHS proposes to impose a CMP, and the processes a person may 
follow should the person wish to challenge HHS' determination that a 
CMP should be imposed, including a process pursuant to which a person 
may request a hearing before an administrative law judge. We also 
propose to amend current privacy and security regulations at 45 CFR 
155.260 to reference the new CMP provisions associated with knowingly 
and willfully using or disclosing information in violation of section 
1411(g) of the Affordable Care Act.
    Civil Money Penalties for Consumer Assistance Entities: The 
proposed rule would provide that HHS may impose CMPs against 
Navigators, non-Navigator assistance personnel, certified application 
counselor designated organizations, and certified application 
counselors in FFEs, if these entities and/or individuals violate 
Federal requirements applicable to their activities.
    Navigator, Non-Navigator Assistance Personnel, and Certified 
Application Counselor Program Standards: In this proposed rule, we 
propose to specify certain types of State laws applicable to 
Navigators, non-Navigator assistance personnel, and certified 
application counselors that HHS considers to conflict with or prevent 
the application of the provisions of title I of the Affordable Care Act 
within the meaning of section 1321(d) of the Affordable Care Act. We 
would also make several changes to update the standards applicable to 
these consumer assistance entities and individuals, such as prohibiting 
them from specified marketing or solicitation activities. We propose to 
require Navigators and non-Navigator assistance personnel to obtain 
authorization before accessing a consumer's personally identifiable 
information and to prohibit them from charging consumers for their 
services. We also propose to require that certified application 
counselors be recertified on at least an annual basis, and propose to 
prohibit certified application counselors and certified application 
counselor designated organizations from receiving consideration, 
directly or indirectly, from health insurance issuers or stop loss 
insurance issuers in connection with the enrollment of consumers in 
QHPs or non-QHPs. We further propose that, in specific circumstances, 
certified application counselor designated organizations can serve 
targeted populations without violating the broad non-discrimination 
requirement related to Exchange functions.
    Indexing of Cost-Sharing Requirements: Under Sec.  156.130(a), the 
annual limitation on cost sharing and the annual limitation on 
deductibles in the small group market for years after 2014 are to be 
indexed by the premium adjustment percentage. We established our 
methodology for calculating the premium adjustment percentage in the 
2015 Payment Notice. In this rule, we propose calculating these 
limitations based on the premium adjustment percentage by rounding down 
to the nearest $50 increment.
    Required Contribution Percentage: Under section 5000A of the Code, 
an applicable individual must maintain minimum essential coverage for 
each month, qualify for an exemption, or make a shared responsibility 
payment. An individual may qualify for an exemption from the shared 
responsibility payment if the amount that he or she would be required 
to pay towards minimum essential coverage (required contribution) 
exceeds a particular percentage (the required contribution percentage) 
of his or her household income. Under section 5000A of the Code, the 
required contribution percentage for 2014 is 8 percent, and for each 
plan year beginning in a calendar year after 2014, the percentage, as 
determined by the Secretary of Health and Human Services (the 
Secretary), that reflects the excess of the rate of premium growth 
between the preceding calendar year and 2013 over the rate of income 
growth for the same period. In this preamble to this proposed rule, we 
describe issues related to possible methodologies for determining the 
percentage reflecting the excess of the rate of premium growth over the 
rate of income growth for plan years after 2014.
    Eligibility Appeals: This rule proposes to amend standards related 
to eligibility appeals provisions in subparts F and H of Part 155. To 
facilitate the efficient conclusion of an appeal at the request of the 
appellant, we propose to amend the withdrawal procedure to permit 
withdrawals made via telephonic signature.
    Minimum Essential Coverage: On October 31, 2013, we published 
guidance indicating that certain types of foreign group health coverage 
are recognized as minimum essential coverage.\5\ In this proposed rule, 
we propose amendments codifying the treatment of foreign group coverage 
as described in the October 31, 2013 guidance. We also clarify that 
entities other than plan sponsors (for example, issuers) can apply for 
their coverage to be recognized as minimum essential coverage, pursuant 
to the process outlined in 45 CFR 156.604 and guidance thereunder.
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    \5\ See CCIIO Sub-Regulatory Guidance: Process for Obtaining 
Recognition as Minimum Essential Coverage (October 31, 2013). 
Available at: http://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/mec-guidance-10-31-2013.pdf.
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    Medical Loss Ratio: The MLR program created pursuant to the 
Affordable Care Act generally requires issuers to rebate a portion of 
premiums if their MLR fails to meet the applicable MLR standard in a 
State and market for the applicable reporting year. An issuer's MLR is 
the ratio of claims plus quality improvement activities to premium 
revenue, with the premium adjusted by the amounts paid for taxes, 
licensing and regulatory fees, and the premium stabilization programs. 
On December 1, 2010, we published an interim final rule entitled 
``Health Insurance Issuers Implementing Medical Loss Ratio (MLR) 
Requirements under the Patient Protection and Affordable Care Act'' (75 
FR 74864), which established standards for the MLR program. Since then, 
we have made several revisions and technical corrections to those 
rules. In this proposed rule, we propose to modify the timeframe for 
which issuers can include their ICD-10 conversion costs in their MLR 
calculation. We also propose to modify the regulation to clarify how 
issuers would calculate MLRs and rebates in States that require the 
individual and small group markets to be merged. We note that the 
standards for ICD-10 conversion costs and merged markets would also 
apply to the risk corridors program. Further, we propose to modify the 
regulation to account for the special circumstances of the issuers 
affected by the CMS November 2013 transitional policy and the issuers 
impacted by systems challenges during the implementation of the 
Exchanges. We also propose to amend the requirements for distribution 
of de minimis rebates.

II. 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 proposed rule, we refer to the 
two statutes collectively as the ``Affordable Care Act.''
    The Affordable Care Act reorganizes, amends, and adds to the 
provisions of title XXVII of the PHS Act relating to group health plans 
and health insurance

[[Page 15813]]

issuers in the group and individual markets.
    Section 1201 of the Affordable Care Act added sections 2702 and 
2703 of the PHS Act. Section 2702 of the PHS Act generally requires an 
issuer that offers health insurance coverage in the individual or group 
market in a State to offer coverage to and accept every individual or 
employer in the State that applies for such coverage. Section 2703 of 
the PHS Act generally requires an issuer to renew or continue in force 
coverage in the group or individual market at the option of the plan 
sponsor or the individual.
    Prior to enactment of the Affordable Care Act, HIPAA amended the 
PHS Act to improve access to individual health insurance coverage for 
certain eligible individuals who previously had group coverage, and to 
guarantee the renewability of all coverage in the individual market. 
These reforms were added as sections 2741 through 2744 of the PHS Act.
    HIPAA also added PHS Act provisions permitting sponsors of self-
funded, non-Federal governmental plans to elect to exempt those plans 
from (``opt out of'') certain provisions of title XXVII of the PHS Act. 
This election was authorized under section 2721(b)(2) of the PHS Act, 
which is now designated as section 2722(a)(2) of the PHS Act by the 
Affordable Care Act.
    Section 2718 of the PHS Act, as added by the Affordable Care Act, 
generally requires health insurance issuers to submit an annual MLR 
report to HHS and provide rebates to consumers if they do not achieve 
specified MLRs.
    Sections 2722 and 2763 of the PHS Act, as implemented in 45 CFR 
146.145(b) and 148.220, provide that the requirements of parts A and B 
of title XXVII of the PHS Act shall not apply to any individual 
coverage or any group health plan (or group health insurance coverage) 
in relation to its provision of excepted benefits. Excepted benefits 
are described in section 2791(c) of the PHS Act. One category of 
excepted benefits, called ``noncoordinated excepted benefits,'' 
includes coverage for only a specified disease or illness, and hospital 
indemnity or other fixed indemnity insurance. Benefits in this category 
are excepted only if they meet certain conditions specified in the 
statute and regulations.
    Section 1302(c) of the Affordable Care Act establishes an annual 
limitation on cost sharing and an annual limitation on deductibles in 
the small group market for 2014, and provides that those limitations 
are to be increased for each year after 2014 by the percentage by which 
the average per capita premium for health insurance coverage in the 
United States for the preceding year exceeds the average per capita 
premium for 2013. Under section 1302(c), those limitations are to be 
rounded to the next lowest multiple of $50.
    Section 1311(b) of the Affordable Care Act provides that each State 
has the opportunity to establish an Exchange that: (1) Facilitates the 
purchase of insurance coverage by qualified individuals through QHPs; 
(2) provides for the establishment of a SHOP designed to assist 
qualified employers in the enrollment of their qualified employees in 
QHPs; and (3) meets other requirements specified in the Affordable Care 
Act.
    Section 1311(c)(3) of the Affordable Care Act requires the 
Secretary to develop a rating system to rate QHPs offered through an 
Exchange on the basis of quality and price. Section 1311(c)(4) of the 
Affordable Care Act directs the Secretary to establish an ESS system 
that would evaluate the level of enrollee satisfaction of members in 
QHPs offered through an Exchange, for each QHP with more than 500 
enrollees in the previous year. Sections 1311(c)(3) and 1311(c)(4) of 
the Affordable Care Act further require an Exchange to provide 
information to individuals and employers from the rating and ESS 
systems on the Exchange's Web site. We have already promulgated 
regulations in 45 CFR 155.200(d) that direct Exchanges to oversee 
implementation of ESSs and ratings of health care quality and outcomes, 
and 45 CFR 156.200(b)(5) \6\ that directs QHP issuers that participate 
in Exchanges to report health care quality and outcomes information and 
to implement an ESS consistent with the Affordable Care Act.
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    \6\ Patient Protection and Affordable Care Act; Establishment of 
Exchanges and Qualified Health Plans; Exchange Standards for 
Employers; Final Rule, 77 FR 18310 (Mar. 27, 2012) (to be codified 
at 45 CFR parts 155, 156, & 157).
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    Sections 1311(d)(4)(K) and 1311(i) of the Affordable Care Act 
direct all Exchanges to establish a Navigator program.
    Section 1321(a) of the Affordable Care Act provides broad authority 
for 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 1321(a)(1) 
directs the Secretary to issue regulations that set standards for 
meeting the requirements of title I of the Affordable Care Act with 
respect to, among other things, the establishment and operation of 
Exchanges. Section 1321(a)(2) requires the Secretary to engage in 
consultation to ensure balanced representation among interested 
parties.
    Section 1321 of the Affordable Care Act provides for State 
flexibility in the operation and enforcement of Exchanges and related 
requirements. Section 1321(d) provides that nothing in title I of the 
Affordable Care Act shall be construed to preempt any State law that 
does not prevent the application of title I of the Affordable Care Act. 
Section 1311(k) specifies that Exchanges may not establish rules that 
conflict with or prevent the application of regulations promulgated by 
the Secretary.
    Section 1321(c)(1) requires the Secretary of HHS (referred to 
throughout this rule as the Secretary) to establish and operate an FFE 
within States that either: (1) Did not elect to establish an Exchange; 
or (2) as determined by the Secretary, did not have any required 
Exchange operational by January 1, 2014.
    Section 1321(c)(2) of the Affordable Care Act provides that the 
provisions of section 2723(b) of the PHS Act \7\ shall apply to the 
enforcement under section 1321(c)(1) of requirements of section 
1321(a)(1), without regard to any limitation on the application of 
those provisions to group health plans. Section 2723(b) of the PHS Act 
authorizes the Secretary to impose CMPs as a means of enforcing the 
individual and group market reforms contained in Part A of title XXVII 
of the PHS Act when, in the Secretary's determination, a State fails to 
substantially enforce these provisions.
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    \7\ Section 1321(c) of the Affordable Care Act erroneously cites 
to section 2736(b) of the PHS Act instead of 2723(b) of the PHS Act. 
This was clearly a typographical error, and we have interpreted 
section 1321(c) of the Affordable Care Act to incorporate section 
2723(b) of the PHS Act.
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    Section 1341 of the Affordable Care Act requires the establishment 
of a transitional reinsurance program in each State to help pay the 
cost of treating high-cost enrollees in the individual market from 2014 
through 2016. Section 1342 of the Affordable Care Act directs the 
Secretary to establish a temporary risk corridors program that provides 
for the sharing in gains or losses resulting from inaccurate rate 
setting from 2014 through 2016 between the Federal government and 
certain participating health plans.
    Section 1411(f)(1) of the Affordable Care Act provides that the 
Secretary, in consultation with the Secretary of the Treasury, the 
Secretary of Homeland Security, and the Commissioner of Social 
Security, shall establish procedures by which the Secretary or one of 
such other Federal officers hears and makes decisions with respect to

[[Page 15814]]

appeals of any determination under subsection (e) and redetermines 
eligibility on a periodic basis in appropriate circumstances. Section 
1411(f)(2) of the Affordable Care Act provides that the Secretary shall 
establish a separate appeals process for employers who are notified 
under section 1411(e)(4)(C) of the Affordable Care Act that the 
employer may be liable for a tax imposed by section 4980H of the 
Internal Revenue Code of 1986 (the Code) with respect to an employee 
because of a determination that the employer does not provide minimum 
essential coverage through an employer-sponsored plan or that the 
employer does provide that coverage but it is not affordable coverage 
with respect to an employee.
    Section 1411(h) of the Affordable Care Act sets forth CMPs to which 
any person may be subject if that person provides inaccurate 
information as part of an Exchange application or improperly uses or 
discloses an applicant's information.
    Section 1501(b) of the Affordable Care Act added section 5000A to 
the Code. That section, as amended by the TRICARE Affirmation Act of 
2010 (Pub. L. 111-159, 124 Stat. 1123) and Public Law 111-173 (124 
Stat. 1215), requires nonexempt individuals to either maintain minimum 
essential coverage or make a shared responsibility payment for each 
month beginning in 2014. It also describes categories of individuals 
who may qualify for an exemption from the individual shared 
responsibility payment. Section 1311(d)(4)(H) of the Affordable Care 
Act specifies that the Exchange will, subject to section 1411 of the 
Affordable Care Act, grant certifications of exemption from the 
individual shared responsibility payment specified in section 5000A of 
the Code. Standards relating to these provisions were established in 
IRS regulations titled, Shared Responsibility Payment for Not 
Maintaining Minimum Essential Coverage Final Rule published in the 
August 30, 2013 Federal Register (78 FR 53646) (IRS Minimum Essential 
Coverage Final Rule) and HHS regulations titled, Exchange Functions: 
Eligibility for Exemptions; Miscellaneous Minimum Essential Coverage 
Provisions Final Rule published in the July 1, 2013 Federal Register 
(78 FR 39494) (HHS Minimum Essential Coverage Final Rule).

B. Stakeholder Consultation and Input

    HHS has consulted with stakeholders on policies related to the 
operation of Exchanges, including the SHOP and the premium 
stabilization programs. HHS has held a number of listening sessions 
with consumers, providers, employers, health plans, the actuarial 
community, and State representatives to gather public input. HHS 
consulted with stakeholders through regular meetings with the National 
Association of Insurance Commissioners (NAIC), regular contact with 
States through the Exchange Establishment grant and Exchange Blueprint 
approval processes, technical health care quality measurement experts, 
health care survey development experts, and meetings with Tribal 
leaders and representatives, health insurance issuers, trade groups, 
consumer advocates, employers, and other interested parties. In 
addition, HHS received public comment on various notices published in 
the Federal Register relating to health care quality in the 
Exchanges,\8\ enrollee experience measures and domains,\9\ and the 
quality rating system, which provided valuable feedback on quality 
reporting and quality rating requirements.\10\ We considered all of the 
public input as we developed the policies in this proposed rule.
---------------------------------------------------------------------------

    \8\ Request for Information Regarding Health Care Quality for 
Exchanges: http://www.gpo.gov/fdsys/pkg/FR-2012-11-27/pdf/2012-28473.pdf.
    \9\ 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: http://www.gpo.gov/fdsys/pkg/FR-2012-06-21/html/2012-15162.htm.
    \10\ Patient Protection and Affordable Care Act; Exchanges and 
Qualified Health Plans, Quality Rating System (QRS) Framework, 
Measures and Methodology; Notice with Comment, 78 FR 69418 (Nov. 19, 
2013).
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C. Structure of Proposed Rule

    The regulations outlined in this proposed rule would be codified in 
45 CFR parts 146, 147, 148, 153, 155, 156, and 158. Part 146 outlines 
the group health insurance market requirements of the PHS Act added by 
HIPAA and other laws, including guaranteed renewability standards and 
opt-out provisions for sponsors of self-funded, non-Federal 
governmental plans. Part 147 outlines health insurance reform 
requirements for the group and individual markets added by the 
Affordable Care Act, including standards related to guaranteed 
availability and guaranteed renewability of coverage. Part 148 outlines 
the individual health insurance market requirements of the PHS Act 
added by HIPAA and other laws, including standards related to 
guaranteed availability with respect to certain eligible individuals 
and guaranteed renewability for all individuals. Part 153 outlines 
standards related to reinsurance program and risk corridors programs. 
Part 155 outlines standards related to the operations and functions of 
an Exchange, including standards related to non-discrimination, 
accessibility, and enforcement remedies; standards applicable to the 
consumer assistance functions performed by Navigators, non-Navigator 
assistance personnel, and certified application counselors; standards 
related to eligibility appeals; standards related to exemptions; 
standards related to quality reporting; and standards related to SHOP. 
Part 156 outlines health insurance issuer responsibilities, including 
the methodology for calculating the annual limit on cost-sharing and 
deductibles for years after 2014; minimum certification standards; 
standards for recognition of certain types of foreign group health 
coverage as minimum essential coverage; quality standards for QHPs; and 
other QHP issuer responsibilities. Part 158 outlines standards related 
to the medical loss ratio program, including standards related to 
treatment of ICD-10 conversion costs, standards related to adjustments 
for issuers affected by the November 2013 CMS transitional policy and 
issuers that incurred costs due to the technical problems during the 
implementation of the Exchanges, standards related to MLR reporting and 
rebate calculations in States with merged individual and small group 
markets, and standards related to distribution of de minimis rebates.

III. Provisions of the Proposed Rule

A. Part 146--Requirements for the Group Health Insurance Market

1. HIPAA Opt-Out Provisions for Plan Sponsors of Self-Funded, Non-
Federal Governmental Plans (Sec.  146.180)
    Prior to enactment of the Affordable Care Act, sponsors of self-
funded, non-Federal governmental plans were permitted to elect to 
exempt those plans from (``opt out of'') certain provisions of title 
XXVII of the PHS Act. This election was authorized under section 
2721(b)(2) of the PHS Act. Sponsors of those plans could elect to opt 
out of all or any of the following title XXVII requirement categories:
    1. Limitations on preexisting condition exclusion periods under 
section 2701 of the PHS Act (redesignated as section 2704 by the 
Affordable Care Act).
    2. Requirements for special enrollment periods under section 2701 
of the PHS Act (redesignated as section 2704 by the Affordable Care 
Act).
    3. Prohibitions against discriminating against individual 
participants and beneficiaries based on health status (but

[[Page 15815]]

not including provisions added by the Genetic Information 
Nondiscrimination Act of 2008) under 2702 of the PHS Act (redesignated 
as section 2705 by the Affordable Care Act).
    4. Standards relating to benefits for newborns and mothers under 
section 2704 of the PHS Act (redesignated as section 2725 by the 
Affordable Care Act).
    5. Parity in the application of certain limits to mental health and 
substance use disorder benefits (including requirements of the Mental 
Health Parity and Addiction Equity Act of 2008) under section 2705 of 
the PHS Act (redesignated as section 2726 by the Affordable Care Act).
    6. Required coverage for reconstructive surgery following 
mastectomies under section 2706 of the PHS Act (redesignated as section 
2727 of the PHS Act).
    7. Coverage of dependent students on a medically necessary leave of 
absence under section 2707 of the PHS Act (redesignated as section 2728 
by the Affordable Care Act).
    The Affordable Care Act made a number of changes, with the result 
that sponsors of self-funded, non-Federal governmental plans can no 
longer opt out of as many requirements of title XXVII. First, PHS Act 
section 2721 was redesignated as section 2722. The new section 
2722(a)(2) no longer allows a sponsor of a self-funded, non-Federal 
governmental plan to exempt that plan from the first 3 requirement 
categories listed above, but may continue to exempt the plan from 
requirement categories 4 through 7.
    In response to the Affordable Care Act amendments, HHS issued 
guidance on September 21, 2010 indicating that, for plan years 
beginning on or after September 23, 2010, plan sponsors of non-
collectively bargained plans can only elect to be exempt from 
provisions 4-7 and that provisions 1-3 are no longer available for 
exemption.\11\ Group health plans maintained pursuant to a collective 
bargaining agreement that was ratified before March 23, 2010, and that 
has been exempted from any of the first 3 requirement categories listed 
above, would not have to come into compliance with those provisions 
until the commencement of the first plan year following the expiration 
of the last plan year governed by the collective bargaining agreement. 
Because of the timing of the guidance, HHS elected not to take any 
enforcement actions with respect to opt-out elections for plan years 
beginning prior to April 1, 2011 on the provisions 1-3.
---------------------------------------------------------------------------

    \11\ Amendments to the HIPAA opt-out provision (formerly section 
2721(b)(2) of the Public Health Service Act) made by the Affordable 
Care Act (September 21, 2010). Available at: http://www.cms.gov/CCIIO/Resources/Files/Downloads/opt_out_memo.pdf.
---------------------------------------------------------------------------

    We propose to revise the provisions of Sec.  146.180 to reflect the 
amendments of the Affordable Care Act and the September 21, 2010 
guidance. While the proposed rule restates the current rule in the 
procedures for filing an opt-out election with CMS, the following 
revisions are being proposed primarily to reflect the Affordable Care 
Act amendments: identification of PHS Act provisions subject to the 
opt-out election as noted above; deletion of references to the notice 
of creditable coverage requirement since that requirement has been 
superseded; and the deletion of examples referencing provisions that 
are no longer available for opt-out elections.
    Additionally, we propose to replace the address for submitting the 
election documents with language indicating that opt-out elections must 
be submitted in an electronic format as specified by the Secretary in 
guidance. We believe that electronic submissions will be easier and 
more efficient for both the plan sponsors and for CMS to track the 
submissions. We welcome comments on improving the election process in 
order for elections to be submitted electronically. Until the issuance 
of final regulations, elections will be accepted via U.S. Mail or 
facsimile. The current address for the submission, as noted on the CMS/
CCIIO Web site, is Centers for Medicare & Medicaid Services (CMS), 
Center for Consumer Information and Insurance Oversight (CCIIO), Attn: 
HIPAA Opt-Out, 200 Independence Avenue SW., Room 733H-02, Washington, 
DC 20201. Elections can also be submitted via facsimile at 301-492-
4462. Questions regarding the opt-out process can be submitted to CMS 
at HIPAAOptOut@cms.hhs.gov. CMS makes publicly available on its Web 
site a list of self-funded, non-Federal governmental plans that have 
submitted an opt-out election and the PHS Act provisions subject to the 
election.\12\
---------------------------------------------------------------------------

    \12\ See List of HIPAA Opt-Out Elections for Self-Funded Non-
Federal Governmental Plans. Available at: http://www.cms.gov/CCIIO/Resources/Files/Downloads/hipaa-nfgp-list-7-9-2013.pdf.
---------------------------------------------------------------------------

    The proposed rule would clarify that plan sponsors of self-funded, 
non-Federal governmental plans offering health coverage subject to a 
collectively bargained agreement that was ratified before March 23, 
2010 can continue to be exempt from any of the 7 original provisions 
for which a timely election was filed with CMS until the expiration of 
the last plan year subject to the agreement.
    These proposed amendments would generally become applicable upon 
the effective date of the final rule. Comments are welcome on the 
proposed revisions and on any aspect of the proposed rule, including 
the provisions unchanged from the current regulation.
    Finally, we note that some plan administrators have been submitting 
one opt-out election to CMS for multiple group health plans. While this 
is permitted for plans subject to the same collective bargaining 
agreement, single elections have been received for multiple plans not 
under a collective bargaining agreement. The current regulations 
expressly require a separate election for each group health plan not 
subject to collective bargaining. We request comments on whether the 
regulation should be modified to allow a single opt-out submission for 
multiple group health plans not subject to collective bargaining. We 
are also considering requiring, as part of the opt-out election 
document, that sponsors of plans subject to a collective bargaining 
agreement be required to list all plans subject to the agreement. We 
welcome comments on this proposal.

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

1. Guaranteed Availability and Guaranteed Renewability of Coverage 
(Sec. Sec.  147.104 and 147.106)
a. No Effect on Other Laws
    Section 2702 of the PHS Act generally requires a health insurance 
issuer that offers health insurance coverage in the individual or group 
market in a State to offer coverage to and accept every individual or 
employer in the State that applies for coverage. Section 2703 of the 
PHS Act generally requires a health insurance issuer to renew or 
continue in force \13\ coverage in the group or individual market at 
the option of the plan sponsor or the individual. These sections are 
implemented by regulations at 45 CFR 147.104 and 147.106, respectively. 
They apply to health plans offered both through and outside of an 
Exchange.
---------------------------------------------------------------------------

    \13\ ``Continue in force'' means that the issuer maintains the 
same policy form that the plan sponsor or individual purchased.
---------------------------------------------------------------------------

    There are several exceptions to these requirements. In addition to 
statutorily specified exceptions set forth in sections 2702 and 2703 of 
the PHS Act, other Federal laws restrict the products that are 
available to certain individuals. For example, section 1882(d) of the 
Social

[[Page 15816]]

Security Act establishes an anti-duplication provision that makes it 
unlawful for an issuer to knowingly sell to an individual entitled to 
benefits under Medicare part A or enrolled under Medicare part B an 
individual health insurance policy that duplicates Medicare benefits; 
sections 1311(d)(2) and 1312(f) of the Affordable Care Act limit access 
of an individual market QHP offered through an Exchange to citizens and 
lawful residents; \14\ and section 1302(e) of the Affordable Care Act 
provides that only individuals under age 30, and individuals who are 
certified as exempt from the requirement to maintain minimum essential 
coverage based on lack of affordable coverage or hardship, are eligible 
to enroll in catastrophic plans. Consistent with the canons of 
statutory construction, which provide that specific statutory language 
ordinarily trumps conflicting general language,\15\ the guaranteed 
availability and renewability requirements are subordinated to these 
and other Federal law requirements limiting access to coverage. As a 
result, issuers of coverage subject to specific Federal statutes that 
conflict with PHS Act sections 2702 and 2703 could deny enrollment or 
reenrollment in coverage where doing otherwise is contrary to law.
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    \14\ Although the Affordable Care Act creates a limited 
exception to the guaranteed availability requirements for qualified 
individuals purchasing coverage through an Exchange, if an 
individual declines or is ineligible to enroll through an Exchange 
and seeks enrollment directly with the issuer, issuers of coverage 
subject to the guaranteed availability requirements of section 2702 
of the PHS Act must accept every individual in the State that 
applies for such coverage unless an exception applies.
    \15\ See Fourco Glass Co. v. Transmirra Products Corp., 353 U.S. 
222, 228 (1957) (citations omitted) (providing that, ``However 
inclusive may be the general language of a statute, it will not be 
held to apply to a matter specifically dealt with in another part of 
the same enactment.'' The same principle is used to resolve conflict 
between two statutes. See also, e.g., United States v. Estate of 
Romani, 523 U.S. 517, 532 (1998) (later, more specific statute 
governs). See also Morton v. Mancari, 417 U.S. 535, 550-51 (1974) (a 
general statute will not be held to have repealed by implication a 
more specific one unless there is ``clear intention otherwise'').
---------------------------------------------------------------------------

    We propose to amend the guaranteed availability and renewability 
regulations to codify this interpretation in regulation text. We 
propose to add new paragraph (h) in Sec.  147.104 providing that 
nothing in the guaranteed availability requirements should be construed 
to require an issuer to offer coverage where other Federal laws operate 
to prohibit the issuance of such coverage. Similarly, we propose to 
redesignate paragraphs (g) and (h) as (h) and (i), and add new 
paragraph (g) in Sec.  147.106 providing that nothing in the guaranteed 
renewability requirements should be construed to require an issuer to 
renew or continue in force coverage for which continued eligibility 
would otherwise be prohibited under applicable Federal law. We believe 
that these regulatory changes are consistent with current market 
practice and will cause no disruption in the health insurance market. 
We solicit comment on these and other clarifications that may be 
helpful. We note that only Federal laws, not State laws, can create 
exceptions to the Federal guaranteed availability and renewability 
requirements.
    We also note that, due to a formatting error in the interim final 
rule with comment period titled, Patient Protection and Affordable Care 
Act; Maximizing January 1, 2014 Coverage Opportunities (78 FR 76212), 
the regulation text at Sec.  147.104(b)(1)(i) contains a duplicate 
reference to the SHOP regulation at Sec.  155.725. We propose to 
correct the duplicate reference in this proposed rule, and to make 
other minor regulatory revisions in this paragraph for clarity.
b. Product Withdrawal and Uniform Modification of Coverage Exceptions 
to Guaranteed Renewability Requirements
    The PHS Act provisions enacted by HIPAA and the Affordable Care Act 
require health insurance issuers to guarantee the renewal of coverage 
unless at least one of several listed exceptions applies.\16\ One 
exception to the guaranteed renewability requirements permits an issuer 
to cease offering a particular product in a market and to discontinuing 
existing blocks of business with respect to that product (product 
withdrawal). This may be done, in accordance with State law, provided 
certain other requirements are met. The PHS Act also provides for 
issuers, only at the time of coverage renewal, to modify the health 
insurance coverage for a product offered to a group health plan or an 
individual in the individual market, if the modification is consistent 
with State law and effective uniformly for all group health plans or 
individuals with that product (uniform modification of coverage). The 
law contemplates that a uniform modification does not alter a 
policyholder's right to renewability, and that such modifications do 
not in effect result in the termination of the existing policy under 
the product withdrawal rules.
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    \16\ See PHS Act sections 2703 (applicable to non-grandfathered 
health plans in the group and individual markets), section 2712 as 
codified prior to enactment of the Affordable Care Act (applicable 
to grandfathered health plans in the group market), and section 2742 
(applicable to both grandfathered and non-grandfathered health plans 
in the individual market), as implemented in 45 CFR 146.152, 
147.106, and 148.122.
---------------------------------------------------------------------------

    In this proposed rule, we propose standards defining whether 
certain modifications to a policy would constitute ``uniform 
modifications'' within the meaning of the PHS Act, or would constitute 
the withdrawal of the existing product and the creation of a new 
product. These provisions would be codified in each of the guaranteed 
renewability regulations at 45 CFR 146.152, 147.106, and 148.122, and 
would therefore apply to both grandfathered and non-grandfathered 
coverage in the group and individual markets.\17\
---------------------------------------------------------------------------

    \17\ While the Affordable Care Act amended section 2703 of the 
PHS Act to generally apply to health insurance issuers in the group 
and individual markets, the uniform modification of coverage 
exception in section 2703(d) of the PHS Act addresses only the large 
and small group markets. Section 2742 of the PHS Act and the 
regulations at Sec.  148.122(g) contain parallel provisions allowing 
for the uniform modification of coverage in the individual market. 
For ease of reference and to facilitate compliance, we propose to 
add a provision in Sec.  147.106(e)(1) reiterating the uniform 
modification of coverage exception for non-grandfathered coverage in 
the individual market.
---------------------------------------------------------------------------

Definition of Uniform Modification of Coverage
    We propose that a modification made solely pursuant to applicable 
Federal or State law would be considered a modification of coverage 
rather than a product withdrawal. These modifications could include 
changes required to comply with Affordable Care Act standards (such as 
elimination of a prohibited annual limit) and changes permitted based 
on updated standards (such as increasing an annual limitation on cost 
sharing based on the annual increase in the limit permitted as a result 
of the application of the premium adjustment percentage). Additionally, 
we propose that if an issuer makes changes to the health insurance 
coverage for a product that are not pursuant to applicable Federal or 
State law, the modifications would constitute a uniform modification of 
coverage for purposes of the guaranteed renewability requirements under 
the PHS Act if the product that has been modified meets all of the 
following criteria:
     The product is offered by the same health insurance issuer 
(within the meaning of section 2791(b)(2) of the PHS Act);
     The product is offered as the same product type (e.g., 
preferred provider organization (PPO) or health maintenance 
organization (HMO));
     The product covers a majority of the same counties in its 
service area;

[[Page 15817]]

     The product has the same cost-sharing structure, except 
for variation in cost sharing solely related to changes in cost and 
utilization of medical care, or to maintain the same level of coverage 
described in sections 1302(d) and (e) of the Affordable Care Act (e.g., 
bronze, silver, gold, platinum or catastrophic); and
     The product provides the same covered benefits, except for 
changes in benefits that cumulatively impact the rate for the product 
by no more than 2 percent (not including changes required by applicable 
Federal or State law).
    Under this proposal, if an issuer modifies the coverage for a 
product and the resulting product is consistent with the above 
criteria, the issuer would be considered under the PHS Act to have made 
a uniform modification of coverage and therefore not to have withdrawn 
the product from that market. Conversely, if an issuer modifies the 
coverage for a product in a manner that results in a product that 
differs from the above criteria, the issuer would be considered to have 
changed the coverage to such extent that the issuer has withdrawn the 
existing product and created a new product.\18\
---------------------------------------------------------------------------

    \18\ Whether an issuer is considered to offer the same product 
for purposes of this proposal is unrelated to and would not 
determine whether a plan maintains status as a grandfathered health 
plan under section 1251 of the Affordable Care Act and its 
implementing regulations. 26 CFR 54.9815-1251T, 29 CFR 2590.715-
1251, and 45 CFR 147.140.
---------------------------------------------------------------------------

    These criteria, if finalized, would establish minimum Federal 
standards determining whether coverage modifications constitute the 
continuance of an existing product in a market within a State for 
products offered both through and outside of an Exchange. We believe 
these proposed standards will minimize unnecessary terminations of 
coverage, ensuring predictability and continuity for consumers, while 
reasonably providing issuers the flexibility to make necessary 
adjustments to coverage.
    We recognize that some States may have different definitions of 
what changes to a health insurance product constitute modifications and 
what changes constitute withdrawals and re-filings of new products. The 
definitions proposed here would preempt any conflicting State 
definitions. We acknowledge that the guaranteed renewability sections 
of the PHS Act provide that a uniform modification of coverage must, 
among other things, be ``consistent with State law.'' We interpret this 
statutory language as governing the extent or type of modifications 
that may legally be made under State law. As discussed in the preamble 
to the final rule published on February 27, 2013 under section 2703 of 
the PHS Act (78 FR 13419), State laws that prevent issuers from 
uniformly modifying coverage to comply with Federal law requirements 
would, in effect, prevent the application of such requirements and 
therefore be preempted.\19\ Accordingly, under the approach we are 
proposing, States would have the flexibility to apply additional 
criteria that broaden the scope of what would be considered a uniform 
modification, but not narrow its scope.
---------------------------------------------------------------------------

    \19\ Patient Protection and Affordable Care Act; Health 
Insurance Market Rules; Rate Review, 78 FR 13406 (February 27, 
2013).
---------------------------------------------------------------------------

    We request comment on all aspects of this proposal.
Standard Consumer Notices When Discontinuing or Renewing a Product in 
the Group or Individual Market
    To reduce confusion and ensure consumers receive clear, accurate, 
and consistent information about their coverage options, we are also 
proposing standard notice requirements when issuers discontinue or 
renew coverage in the group and individual markets.
    First, under the current regulations, issuers electing to 
discontinue offering a particular product in a market must provide to 
each plan sponsor or individual provided that product (and to all 
participants and beneficiaries covered under such coverage) at least 90 
calendar days' notice of the discontinuation in writing. We propose 
that, to satisfy this requirement, the issuer must provide notice ``in 
a form and manner specified by the Secretary.''
    Second, we propose to establish a new notice requirement when 
issuers provide the option to renew coverage, including a renewal of 
coverage with modifications. We propose the issuer in this situation 
must provide written notice of the renewal to each plan sponsor in the 
small or large group market and to each individual policyholder in the 
individual market (as applicable). We propose this notice must also be 
provided in a form and manner specified by the Secretary.
    We request comment on these proposals. Concurrently with the 
issuance of this proposed rule, we are publishing four draft notices in 
guidance that would be required to be used when issuers elect to 
discontinue or renew a product, consistent with the above 
discussion.\20\ We solicit comments on the draft notices as described 
in the guidance.
---------------------------------------------------------------------------

    \20\ Standard Notices When Discontinuing or Renewing a 
Particular Product in the Group or Individual Market (March 14, 
2014). Available at: http://www.cms.gov/CCIIO/Resources/Files/Downloads/draft-notice-renewal-discontinuation-bulletin-3-14-2014.pdf.
---------------------------------------------------------------------------

Rate Review
    Section 2794 of the PHS Act, and regulations at 45 CFR Part 154, 
establish a process whereby CMS or the applicable State will review 
rate increases of health insurance coverage that meet or exceed 
specified thresholds to determine if the rate increases are 
unreasonable. It has come to our attention, however, that some issuers 
may attempt to avoid review of rate increases by withdrawing a 
product(s) offered in the individual or small group market in a State 
and re-filing the product(s) as a ``new'' product(s) the following 
year. Under Sec.  154.102, a ``rate increase'' is defined as ``any 
increase of the rates for a specific product offered in the individual 
or small group market,'' and a ``product'' is defined as ``a package of 
health insurance coverage benefits with a discrete set of rating and 
pricing methodologies that a health insurance issuer offers in a 
State.''
    CMS intends to apply the criteria outlined above regarding product 
discontinuation and renewal to determine whether the rate filing is 
subject to review under 45 CFR Part 154. Specifically, if an issuer 
withdraws a product in a market in a State and, within a 12-month 
period, reintroduces a product in that market with modifications of the 
discontinued product that do not differ from the above criteria, we 
would consider the issuer to be continuing to offer the same 
``product'' within the meaning of that term under Sec.  154.102. As 
such, the rate filing for the product would be subject to the annual 
review of rate increases of health insurance coverage should it meet or 
exceed the specified thresholds to determine if the rate increase is 
unreasonable. CMS will consider compliance with the proposed criteria 
to constitute compliance with PHS Act section 2794 until this 
rulemaking is finalized.
    We request comment on whether this clarification, or a cross-
reference to the proposed definition of a uniform modification of 
coverage in Sec.  147.106 of this proposed rule, should be added to 
Part 154.

C. Part 148--Requirements for the Individual Health Insurance Market

1. Conforming Changes to Individual Market Regulations (Sec. Sec.  
148.101 through 148.128)
    The Health Insurance Portability and Accountability Act of 1996 
(HIPAA),

[[Page 15818]]

Public Law 104-191, was enacted in 1996 to provide for, among other 
things, improved portability and continuity of coverage in both the 
group and individual health insurance markets. Section 111 of HIPAA 
added sections 2741 through 2744 of the PHS Act to improve availability 
and renewability in the individual market. HIPAA also added provisions 
of the Code, the Employee Retirement Income Security Act of 1974 
(ERISA), and the PHS Act governing the group health insurance market 
and group health plan coverage provided in connection with employment. 
These provisions permitted limited exclusions of coverage under certain 
circumstances based on preexisting conditions.
    The individual health insurance market provisions of HIPAA are 
implemented in 45 CFR Part 148. These provisions guarantee the 
availability of individual health insurance coverage without 
preexisting condition exclusions for certain eligible individuals who 
lose group health insurance coverage; require issuance of certificates 
of creditable coverage; guarantee the renewability of individual health 
insurance coverage for all individuals; and set forth procedures for 
States that choose to implement an alternative mechanism under State 
law with respect to guaranteed availability for eligible individuals.
    The Affordable Care Act added a new section 2704 of the PHS Act, 
which renumbered and amended the HIPAA requirements relating to 
preexisting condition exclusions.\21\ In general, the new PHS Act 
section 2704 provides that a group health plan and a health insurance 
issuer offering group or individual health insurance coverage may not 
impose any preexisting condition exclusions. Section 2704 and the 
regulations under that section are generally effective for plan years 
(in the individual market, policy years) beginning on or after January 
1, 2014, but for enrollees under the age of 19, the prohibition became 
effective for plan years (in the individual market, policy years) 
beginning on or after September 23, 2010.\22\
---------------------------------------------------------------------------

    \21\ The Affordable Care Act adds section 715(a)(1) of ERISA and 
section 9815(a)(1) of the Code to incorporate the provisions of part 
A of title XXVII of the PHS Act, including section 2704 of the PHS 
Act, into ERISA and the Code, and to make them applicable to group 
health plans and health insurance issuers providing health insurance 
coverage in connection with group health plans.
    \22\ PHS Act section 2704 applies to grandfathered and non-
grandfathered group health plans and group health insurance 
coverage, and non-grandfathered individual health insurance 
coverage. It does not apply to grandfathered individual health 
insurance coverage. For more information on grandfathered health 
plans, see section 1251 of the Affordable Care Act and its 
implementing regulations at 26 CFR 54.9815-1251T, 29 CFR 2590.715-
1251, and 45 CFR 147.140.
---------------------------------------------------------------------------

    This proposed rule would make conforming amendments to the 
individual market provisions contained in Part 148 by removing 
provisions concerning preexisting condition exclusions that are 
superseded by new section 2704 of the PHS Act. These amendments would 
generally become applicable upon the effective date of the final rule. 
However, the proposed amendment to eliminate the requirement to issue 
certificates of creditable coverage is proposed to apply December 31, 
2014, so that individuals needing to offset a preexisting condition 
exclusion under a group health plan that will become subject to the 
prohibition on preexisting condition exclusions starting with a plan 
year beginning on December 31, 2014, would still have access to the 
certificate for proof of coverage until that time. These proposed 
amendments are consistent with rulemaking amending the group market 
regulations under HIPAA \23\ and with previously released guidance 
addressing the maintenance of State alternative mechanisms.\24\
---------------------------------------------------------------------------

    \23\ See Ninety-Day Waiting Period Limitation and Technical 
Amendments to Certain Health Coverage Requirements Under the 
Affordable Care Act, 78 FR 10296 (February 24, 2014).
    \24\ See Questions and Answers Related to Health Insurance 
Market Rules, Q2. Available at: http://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/qa_hmr.html.
---------------------------------------------------------------------------

    We solicit comment on this proposal.
2. Fixed Indemnity Insurance in the Individual Health Insurance Market 
(Sec.  148.220)
    Pursuant to PHS Act sections 2722(c)(2), 2763(b) and 2791(c)(3)(B), 
insurance that pays a fixed amount under specified conditions without 
regard to other insurance (``fixed indemnity insurance'') is considered 
to be an excepted benefit, exempt from many of the provisions of title 
XXVII of the PHS Act for the group and individual markets, if it meets 
all of the following conditions: (1) The benefits are be provided under 
a separate policy, certificate or contract of insurance; (2) there is 
no coordination between the provision of such benefits and any 
exclusion of benefits under any group health plan maintained by the 
same plan sponsor; and (3) such benefits are paid with respect to an 
event without regard to whether benefits are provided with respect to 
such event under any group health plan maintained by the same plan 
sponsor.
    These statutory requirements are reflected in regulations at 45 CFR 
146.145(b)(4) and 148.220(b)(3). In addition, under Sec.  
146.145(b)(4), incorporated through Sec.  148.220(b)(3), benefits of 
fixed indemnity insurance in the group and individual markets must be 
paid on a fixed amount basis without regard to the cost of the item or 
service and can only be paid on a per-period basis as opposed to on a 
per-service basis in order to be treated as an excepted benefit.
    The primary reason fixed indemnity insurance is considered to be an 
excepted benefit if it meets the statutory and regulatory criteria is 
that its primary purpose is not to provide major medical coverage but 
to provide a cash-replacement benefit for those individuals with other 
health coverage. Since the issuance of the regulations, however, 
various situations have come to the attention of HHS, the Department of 
Labor, and the Department of the Treasury (the Departments) where a 
health insurance policy is advertised as fixed indemnity coverage but 
pays a fixed amount based not on a period of time, but if a particular 
service is received. For example, the fixed indemnity coverage pays a 
fixed $50 per visit for doctors' visits, or $100 for a day of 
hospitalization, different fixed dollar amounts for other various 
surgical procedures, and/or a fixed $15 per prescription without regard 
to cost. In all cases, these fixed amounts are paid under these 
policies without regard to costs, and without regard to other insurance 
payments that may cover the same services. In such circumstances, the 
fixed payments for doctors' visits, surgery, and prescription drugs are 
not made not on a per-period basis, but instead based on the type of 
procedure or item, such as the surgery or doctor visit actually 
performed or the drug prescribed, and the amount of payment varies 
widely based on the type of surgery or the cost of the drug. Because 
these payments are not based on a ``fixed dollar amount per day (or per 
other period),'' such a policy is not an excepted benefit under the 
current regulations.
    The Departments issued a frequently asked question (FAQ) on January 
24, 2013 affirming that under the current regulations, for fixed 
indemnity insurance to be an excepted benefit, payment based on an 
event must be paid on a per-period basis as opposed to on a per-service 
basis.\25\ While the FAQ only addressed fixed indemnity insurance sold 
in the group health

[[Page 15819]]

insurance market, the same analysis also applies to fixed indemnity 
insurance sold in the individual health insurance market, as noted 
above.
---------------------------------------------------------------------------

    \25\ See FAQs about Affordable Care Act Implementation (Part 
XI), Q7, available at http://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs11.html and http://www.dol.gov/ebsa/faqs/faq-aca11.html.
---------------------------------------------------------------------------

    Since the issuance of the January 24, 2013 FAQ, however, 
stakeholders have expressed concerns over the distinction made under 
the current regulations between payment on a per-period basis (which is 
permitted) and payment on a per-service basis (which is not permitted). 
State insurance regulators indicated that they have for years been 
approving policies as fixed indemnity insurance that pay on a per-
service basis and treating such coverage as an excepted benefit. In an 
August 27, 2013 letter to the Secretaries of the Departments on behalf 
of the National Association of Insurance Commissioners (NAIC), it was 
stated that ``state regulators believe hospital and other fixed 
indemnity coverage with variable fixed amounts based on service types 
could provide important options for consumers as supplemental coverage. 
Consumers who purchase major medical coverage that meets the definition 
of `minimum essential coverage' may still want to buy fixed indemnity 
coverage to help meet out-of-pocket medical and other costs.'' Industry 
groups representing health insurance issuers have also expressed 
similar concerns.
    Based on the feedback from stakeholders and the fact that, starting 
in 2014, most individuals are required to have minimum essential 
coverage in order to satisfy the individual shared responsibility 
requirement under section 5000A of the Code, CMS agrees that it is 
appropriate to revise the current regulatory criteria for individual 
market fixed indemnity coverage to be treated as an excepted benefit by 
(1) eliminating the current requirement that payment be made on a per-
period basis and not on a per-service basis, and (2) among other 
things, imposing a new requirement that fixed indemnity insurance be 
sold only as secondary to other health coverage that meets the 
definition of minimum essential coverage.\26\
---------------------------------------------------------------------------

    \26\ Fixed indemnity plans paying fixed amounts per service that 
meet these requirements to be excepted benefits do not qualify as 
permitted insurance that can be provided in addition to a High 
Deductible Health plan to an eligible individual under section 
223(c)(3) of the Code. The statutory language for permitted 
hospitalization insurance specifically refers to ``insurance paying 
a fixed amount per day (or other period) of hospitalization'' rather 
than ``hospital indemnity or other fixed indemnity insurance.''
---------------------------------------------------------------------------

    On January 9, 2014, the Departments published an FAQ stating that, 
``HHS intends to propose amendments to 45 CFR 148.220(b)(3) that would 
allow fixed indemnity coverage sold in the individual health insurance 
market to be considered to be an excepted benefit if it meets the 
following conditions: (1) It is sold only to individuals who have other 
health coverage that is minimum essential coverage within the meaning 
of section 5000A(f) of the Code; (2) there is no coordination between 
the provision of benefits and an exclusion of benefits under any other 
health coverage; (3) the benefits are paid in a fixed dollar amount 
regardless of the amount of expenses incurred and without regard to the 
amount of benefits provided with respect to an event or service under 
any other health coverage; and (4) a notice is displayed prominently in 
the plan materials informing policyholders that the coverage does not 
meet the definition of minimum essential coverage and will not satisfy 
the individual responsibility requirements of section 5000A of the 
Code.'' \27\ The FAQ further provided that, ``Until HHS finalizes this 
rulemaking related to these proposed amendments, HHS will treat fixed 
indemnity coverage in the individual market as excepted benefits for 
enforcement purposes if it meets the conditions above in States where 
HHS has direct enforcement authority. For States with primary 
enforcement authority, HHS encourages those States to also treat this 
coverage as an excepted benefit and will not consider that a State is 
not substantially enforcing the individual market requirements merely 
because it does so.''
---------------------------------------------------------------------------

    \27\ FAQs about Affordable Care Act Implementation (Part XVIII) 
and Mental Health Parity Implementation, Q11 (January 9, 2014). 
Available at: http://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs18.html and http://www.dol.gov/ebsa/faqs/faq-aca18.html.
---------------------------------------------------------------------------

    Consistent with the January 9, 2014 FAQ, we are proposing the 
following revised criteria for fixed indemnity insurance to be treated 
as an excepted benefit in the individual health insurance market: (1) 
The benefits are provided only to individuals who have other health 
coverage that is minimum essential coverage within the meaning of 
section 5000A(f) of the Code; (2) there is no coordination between the 
provision of benefits and an exclusion of benefits under any other 
health coverage; (3) the benefits are paid in a fixed dollar amount per 
day of hospitalization or illness or per service (for example, $100/day 
or $50/visit) regardless of the amount of expenses incurred and without 
regard to the amount of benefits provided with respect to the event or 
service under any other health coverage; and (4) a notice is displayed 
prominently in the plan materials in at least 14 point type that has 
the following language: ``THIS IS A SUPPLEMENT TO HEALTH INSURANCE AND 
IS NOT A SUBSTITUTE FOR MAJOR MEDICAL COVERAGE. LACK OF MAJOR MEDICAL 
COVERAGE (OR OTHER MINIMUM ESSENTIAL COVERAGE) MAY RESULT IN AN 
ADDITIONAL PAYMENT WITH YOUR TAXES.''
    CMS is aware of at least one State law that requires fixed 
indemnity insurance to be sold as secondary to major medical insurance 
in order to be treated as an excepted benefit. We welcome comments on 
this approach including the language in the required notice. We also 
solicit comments on whether the requirement for individuals to have 
other minimum essential coverage in order to be sold fixed indemnity 
insurance is sufficient protection, especially given the fact that a 
group health plan that provides minimum benefits can be minimum 
essential coverage. For example, we solicit comment on whether to 
require that fixed indemnity insurance must only be sold to individuals 
with other health coverage that meets the EHB requirements. To meet the 
standard that fixed indemnity insurance must be sold on a secondary 
basis, an issuer of fixed indemnity insurance would have to be 
reasonably assured that an individual has obtained other health 
coverage that is minimum essential coverage. We seek comments on the 
extent of verification issuers should require from applicants to be 
reasonably assured that they have minimum essential coverage, including 
whether an attestation included in the application is sufficient.
    The current regulation requires fixed indemnity insurance to be 
sold under a separate policy, certificate or contract of insurance but 
does not require that it be provided by an issuer other than the issuer 
providing the major medical coverage to the enrollees of the fixed 
indemnity insurance. The Departments previously released guidance 
establishing a safe harbor under which supplemental health insurance 
coverage will be considered to be an excepted benefit.\28\ In the 
guidance, one of the criteria for the safe harbor is that the 
supplemental coverage has to be issued by an entity that does not 
provide the primary coverage under the plan in

[[Page 15820]]

order for the supplemental coverage to be an excepted benefit. This 
prevents an issuer from carving out certain benefits from its major 
medical coverage and packaging those benefits with the major medical 
coverage as a supplemental excepted benefit. We are considering adding 
the same protection for fixed indemnity insurance sold in the 
individual market and welcome comments on this approach.
---------------------------------------------------------------------------

    \28\ See CMS Insurance Standards Bulletin 08-01 (available at 
http://www.cms.gov/CCIIO/Resources/Files/Downloads/hipaa_08_01_508.pdf ); the Department of Labor's Employee Benefits Security 
Administration's Field Assistance Bulletin No. 2007-04 (available at 
http://www.dol.gov/ebsa/pdf/fab2007-4.pdf ); and Internal Revenue 
Service Notice 2008-23 (available at http://www.irs.gov/irb/2008-07_IRB/ar09.html ).
---------------------------------------------------------------------------

    This proposal only addresses fixed indemnity insurance sold in the 
individual market. For fixed indemnity insurance sold in the group 
health insurance market, see the FAQ published by the Departments on 
January 9, 2014.
    We believe that most fixed indemnity products in the individual 
market today will largely satisfy these criteria and we welcome comment 
on how this proposal would affect existing market arrangements. If 
these proposals are finalized, they would apply for policy years 
beginning on or after January 1, 2015. We welcome comments on whether 
this would provide a sufficient transition period. We also solicit 
comments on whether the existing regulatory criteria for fixed 
indemnity insurance to be an excepted benefit (as interpreted in our 
January 24, 2013 FAQ) should instead remain in place on a permanent 
basis or at least on a temporary basis to ensure a sufficient 
transition that avoids market disruption.

D. Part 153--Standards Related to Reinsurance, Risk Corridors, and Risk 
Adjustment under the Affordable Care Act

1. Provisions and Parameters for the Transitional Reinsurance Program 
(Sec.  153.405)
    The Affordable Care Act directs that a transitional reinsurance 
program be established in each State to help stabilize premiums for 
coverage in the individual market from 2014 through 2016. In the 2014 
Payment Notice and the 2015 Payment Notice, we expanded on the 
standards set forth in subparts C and E of the Premium Stabilization 
Rule, and established the reinsurance payment parameters and uniform 
reinsurance contribution rate for the 2014 and 2015 benefit years. In 
this proposed rule, we solicit feedback on a potential revision to the 
allocation of reinsurance contributions collected for all benefit years 
such that reinsurance contributions collected are allocated first to 
the reinsurance payment pool and administrative expenses and second to 
payments to the U.S. Treasury.
    Section 1341(b)(3)(B)(iii) of the Affordable Care Act specifies the 
total contribution amounts to be collected from contributing entities 
for the reinsurance payment pool as $10 billion for 2014, $6 billion 
for 2015, and $4 billion for 2016. Sections 1341(b)(3)(B)(iv) and 
1341(b)(4) of the Affordable Care Act direct the collection of funds 
for contribution to the U.S. Treasury in the amounts of $2 billion for 
2014, $2 billion for 2015, and $1 billion for 2016. Section 
1341(b)(3)(B)(ii) of the Affordable Care Act allows for the collection 
of additional amounts for administrative expenses. Taken together, 
these three components make up the total dollar amount to be collected 
from contributing entities for each of the three years of the 
reinsurance program under a national per capita contribution rate. For 
2014, to collect $12.02 billion, HHS set a per capita contribution rate 
of $63; for 2015, to collect $8.025 billion, HHS set a per capita 
contribution rate of $44.
    In the 2014 and 2015 Payment Notices, we provided that if total 
contributions collected for 2014 and 2015 exceed $12.02 billion and 
$8.025 billion, respectively, we would allocate $2 billion to the U.S. 
Treasury, $20.3 or $25.4 million, as applicable, to administrative 
expenses, and would allocate all remaining contributions for 
reinsurance payments, thus prioritizing excess contributions towards 
reinsurance contributions. Due to the uncertainty in our estimates of 
reinsurance contributions to be collected, and to help assure that the 
reinsurance payment pool is sufficient to provide the premium 
stabilization benefits intended by the statute, we propose to revise 
our allocation of reinsurance contributions collected and adopt a 
similar prioritization in the event that reinsurance collections fall 
short of our estimates. Specifically, if collections fall short of our 
estimates for a particular benefit year, we propose to alter the 
allocation so that the reinsurance contributions that are collected are 
allocated first to the reinsurance pool and administrative expenses, 
and are allocated to the U.S. Treasury once the targets for reinsurance 
payments and administrative expenses are met. For example, as Table 1 
provides, in 2014, reinsurance contributions would go first to the 
reinsurance payment pool and administrative expenses, up to $10.02 
billion, and any additional contributions collected would be allocated 
to the U.S. Treasury, up to the total $12.02 billion.

 Table 1--Proportion of Reinsurance Contributions Collected Under the Uniform Reinsurance Contribution Rate for
   the 2014 Benefit Year for Reinsurance Payments, Payments to the U.S. Treasury, and Administrative Expenses
----------------------------------------------------------------------------------------------------------------
                                                                If total contribution
                                     If total contribution      collections under the
                                     collections under the    2014 uniform reinsurance    If total contribution
                                    2014 uniform reinsurance    contribution rate are     collections under the
    Proportion or amount for:        contribution rate are        more than $10.02      2014 uniform reinsurance
                                     less than or equal to     billion, but less than     contribution rate are
                                         $10.02 billion          or equal to $12.02     more than $12.02 billion
                                                                       billion
----------------------------------------------------------------------------------------------------------------
Reinsurance payments.............  99.9 percent ($10 billion/ $10 billion.............  Total collections less
                                    $10.02 billion).                                     $2.02 billion (U.S.
                                                                                         Treasury and
                                                                                         administrative
                                                                                         expenses).
Payments to the U.S. Treasury....  0 percent................  Total collections less    $2 billion.
                                                               $10.02 billion.
Administrative expenses..........  0.1 percent ($20.3         $20.3 million...........  $20.3 million.
                                    million/$10.02 billion).
----------------------------------------------------------------------------------------------------------------

    Therefore, if we collect $11 billion instead of $12.02 billion for 
2014, we propose to fully fund the reinsurance payment pool and 
administrative expenses, and to pay to the U.S. Treasury $0.98 billion.
    Similarly, for 2015, reinsurance contributions would go first to 
the reinsurance payment pool and

[[Page 15821]]

administrative expenses, up to $6.025 billion, and any additional 
contributions collected would be allocated to the U.S. Treasury, up to 
the total $8.025 billion.

 Table 2--Proportion of Reinsurance Contributions Collected Under the Uniform Reinsurance Contribution Rate for
   the 2015 Benefit Year for Reinsurance Payments, Payments to the U.S. Treasury, and Administrative Expenses
----------------------------------------------------------------------------------------------------------------
                                                                If total contribution
                                     If total contribution      collections under the
                                     collections under the    2015 uniform reinsurance    If total contribution
                                    2015 uniform reinsurance    contribution rate are     collections under the
    Proportion or amount for:        contribution rate are        more than $6.025      2015 uniform reinsurance
                                     less than or equal to     billion, but less than     contribution rate are
                                         $6.025 billion          or equal to $8.025     more than $8.025 billion
                                                                       billion
----------------------------------------------------------------------------------------------------------------
Reinsurance payments.............  99.9 percent ($6 billion/  $6 billion..............  Total collections less
                                    $6.025 billion).                                     $2.025 billion (U.S.
                                                                                         Treasury and
                                                                                         administrative
                                                                                         expenses).
Payments to the U.S. Treasury....  0 percent................  Total collections less    $2 billion.
                                                               $6.025 billion.
Administrative expenses..........  0.1 percent ($25.4         $25.4 million...........  $25.4 million.
                                    million/$6.025 billion).
----------------------------------------------------------------------------------------------------------------

    Therefore, if we collect $7 billion instead of $8.025 billion in 
2015, we propose to fully fund the reinsurance payment pool and 
administrative expenses, and to pay to the U.S. Treasury $0.975 
billion.
    We note that in the 2015 Payment Notice, we amended 45 CFR 
153.405(c) to provide a bifurcated contribution collection schedule, 
under which contributing entities would submit reinsurance 
contributions via two payments. The first payment would cover the 
contribution amount allocated to reinsurance payments and 
administrative expenses; the second payment would cover the 
contribution amount allocated to payments to the U.S. Treasury for the 
applicable benefit year. In light of our proposed allocation policy, we 
note that contributions collected in the second collection would be 
allocated for reinsurance payments and administrative expenses if the 
first collection does not fully provide for the target reinsurance pool 
and administrative expenses. Therefore, for 2014, if the first 
collection resulted in a total collection of $9 billion, any 
contribution collected via the second collection up to $1.02 billion 
would be allocated for reinsurance payments and administrative 
expenses.
    We seek comment on this allocation proposal, including on the legal 
authority to implement a prioritization of reinsurance contributions to 
reinsurance payments over payments to the U.S. Treasury. We also seek 
comment on the appropriate and permissible prioritization of 
reinsurance administrative expenses, and whether those expenses should 
have the same or different priority as reinsurance payments or payments 
to the U.S. Treasury. In addition, we seek comment on alternative 
allocation approaches to provide the premium stabilization benefits of 
the reinsurance program, as intended by the statute.
2. Provisions for the Temporary Risk Corridors Program (Sec.  153.500)
    In the 2015 Payment Notice, we indicated that we would consider 
additional adjustments to the risk corridors program for benefit year 
2015. We did so recognizing that issuers of QHPs may face additional 
administrative costs, risk pool effects, and uncertainty for that 
benefit year related to State extensions of renewals of plans that do 
not comply with 2014 market reforms, including the rating rules, the 
additional time it will take to fully assess the risk profile of 2014 
enrollees given the six-month initial open enrollment period, 
protracted phase-outs of high-risk pools, and the scheduled decline in 
the reinsurance program payments. We also recognize that issuers of 
QHPs may face additional costs from other transitions to the 2014 
market rules, including the infrastructure requirements around 
Exchanges, and the distributed data collection methodology for risk 
adjustment and reinsurance. We note that these uncertainties will 
continue through the summer of 2014, while issuers are in the process 
of setting their rates for the 2015 benefit year. Therefore, for the 
2015 benefit year, we are considering further adjustments to the risk 
corridors formula that would help to mitigate these additional 
administrative costs and uncertainties around operations and the risk 
pool, and to stabilize the market as it continues to transition to full 
compliance with Affordable Care Act provisions.
    We propose to implement an adjustment to the risk corridors formula 
set forth in subpart F of part 153 for each of the individual and small 
group markets by increasing the ceiling on allowable administrative 
costs (currently set at 20 percent, plus the adjustment percentage, of 
after-tax premiums). Such an adjustment could increase a QHP issuer's 
risk corridors ratio if administrative expenses are unexpectedly high 
or claims costs are unexpectedly low, thereby increasing risk corridors 
payments or decreasing risk corridors charges. We propose to raise the 
administrative cost ceiling by 2 percentage points, from 20 percent to 
22 percent. We also propose to increase the profit margin floor in the 
risk corridors formula (currently set at 3 percent, plus the adjustment 
percentage, of after-tax premiums). Such an adjustment could increase a 
QHP issuer's risk corridors ratio if claims costs are unexpectedly 
high, thereby increasing risk corridors payments or decreasing risk 
corridors charges. We propose to raise the profit margin floor by 2 
percentage points, from 3 percent to 5 percent.
    We are proposing to implement this proposed increase to the 
administrative cost ceiling and profit floor in a manner similar to the 
risk corridors adjustment percentage set forth in the 2015 Payment 
Notice. In the 2015 Payment Notice, we provided for an adjustment that 
would increase the administrative cost ceiling and profit floor in the 
risk corridors formula for QHP issuers in transitional States, in order 
to account for the effects of the transitional policy. In this proposed 
rule, we are proposing to increase the administrative cost and profit 
floor for 2015 for QHP issuers in every State for the reasons described 
below.
    We note that, because the risk corridors program applies only to 
certain plans defined to be qualified health plans at 45 CFR 153.500, 
the extent to which an issuer may receive

[[Page 15822]]

the full effect of this adjustment would depend upon the portion of an 
issuer's individual and small group enrollees in plans subject to risk 
corridors. We intend to implement this program in a budget neutral 
manner, and may make future adjustments to program parameters, upwards 
or downwards, as necessary to achieve this goal.
    We are proposing that these adjustments apply on a national basis 
for the 2015 benefit year because we believe that these additional 
transitional costs and uncertainties will be faced by issuers in all 
States, not just States adopting the transitional policy. Because many 
of these costs and uncertainties are difficult to measure, we believe 
it would be difficult to estimate them on an issuer-by-issuer or State-
by-State basis. Additionally, we believe that a national adjustment 
would be administratively simple for issuers.
    For example, issuers will continue to face administrative expenses 
in seeking to measure the extent to which issuers will extend renewals 
of plans through the 2015 rate-setting period. They will continue to 
accrue additional expenses monitoring the risk profile of 2014 
enrollees during this period, particularly with the protracted phase-
outs of high-risk pools. And they will continue to face uncertainty and 
administrative costs in measuring likely payouts from the reinsurance 
program. These costs were not anticipated when we established the 20 
percent ceiling on administrative expenses; and we believe that these 
uncertainties will be difficult to accommodate as part of 2015 rate 
setting.
    Although the adjustments that we are considering would affect each 
issuer differently, depending on its particular experience and 
administrative cost rate, we believe that, on average, the adjustment 
could suitably offset some of these increased costs.
    We also propose that the medical loss ratio formula not take into 
account any additional risk corridors payments resulting from this 
adjustment, under our authority under section 2718(c) of the PHS Act to 
``take into account the special circumstances of smaller plans, 
different types of plans, and newer plans.'' This proposed approach is 
similar to the policy established forth in the 2015 Payment Notice, 
which removes the effect of the risk corridors adjustment percentage 
from an issuer's MLR calculation.
    We request comment on all aspects of this proposal. In particular, 
we request comment on the specific administrative costs associated with 
each of these policies, and other types of additional administrative or 
other expenses that will be incurred by issuers of QHP in 2015. We seek 
comment on the magnitude of these expenses, and whether these expenses 
could have been fairly estimated and included in premium rating. We 
seek comment on whether the administrative ceiling or the profit floor 
should be raised (or both), and in each case, by how much, to account 
for these costs and uncertainties. We also seek comment on alternate 
ways of implementing adjustments to the risk corridors program, 
including whether raising the administrative cost ceiling or raising 
the profit floor would alone be sufficient to help offset issuer's 
unexpected administrative expenses. Finally, we seek comment on whether 
certain limitations or conditions should be placed on the adjustment, 
and whether the adjustment should be limited to certain types of plans 
or should apply only in certain States.

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

1. Subpart B--General Standards Related to the Establishment of the 
Exchange
a. Non-Interference with Federal Law and Non-Discrimination Standards 
(Sec.  155.120)
    In section 45 CFR 155.120(c), we established the requirement that 
the State and the Exchange, when carrying out the requirements of Part 
155, must comply with any applicable non-discrimination statutes, and 
must not discriminate on the basis of race, color, national origin, 
disability, age, sex, gender identity or sexual orientation. We stated 
that the non-discrimination provisions of Sec.  155.120(c) apply not 
just to the Exchanges themselves, but to Exchange contractors and all 
Exchange activities (including but not limited to marketing, outreach 
and enrollment), Navigators, non-Navigator assistance personnel, 
certified application counselors, and organizations designated to 
certify their staff and volunteers as certified application counselors 
(78 FR 42829). We also established in 45 CFR 155.105(f) that this non-
discrimination requirement applies to the Federally-facilitated 
Exchanges.
    We now propose to re-designate the introductory language in 
existing Sec.  155.120(c) as a new section Sec.  155.120(c)(1), re-
designate existing Sec.  155.120(c)(1) as a new Sec.  155.120(c)(1)(i), 
and re-designate existing Sec.  155.120(c)(2) as a new Sec.  
155.120(c)(1)(ii). We are proposing to make these technical changes to 
existing Sec.  155.120(c) so that we can add a new paragraph (c)(2) to 
Sec.  155.120 that creates a limited exception to the non-
discrimination provisions in existing Sec.  155.120(c)(1) and (c)(2). 
Under this proposed exception, an organization receiving Federal funds 
to provide services to a defined population under the terms of Federal 
legal authorities (for example, a Ryan White HIV/AIDS Program or an 
Indian health provider) that participates in the certified application 
counselor program under 45 CFR 155.225 may limit its provision of 
certified application counselor services to the same defined population 
without violating the non-discrimination provisions in existing Sec.  
155.120(c). We are proposing to adopt this exception to the non-
discrimination provisions in order to allow such organizations to 
provide certified application counselor services and assist their 
defined populations in enrolling in health coverage offered through the 
Exchanges consistent with the Federal legal authorities under which 
such organizations operate.
    To the extent that one of these organizations decides to take 
advantage of this exception, but is approached for certified 
application counselor services by an individual who is not included in 
the defined population that the organization serves, we propose that 
the organization must refer the individual to other Exchange-approved 
resources, such as the toll-free Exchange call center, a Navigator, 
non-Navigator assistance personnel, or another designated certified 
application counselor organization, that are able to provide assistance 
to the individual.
    However, to the extent that one of these organizations decides that 
it will not take advantage of this proposed exception, we propose that 
the non-discrimination provisions in existing Sec.  155.120(c) would 
continue to apply. That is, if an organization decides that it will 
provide certified application counselor services to individuals that 
are not included in the defined population that it serves, it must 
provide those services to all individuals consistent with the non-
discrimination provisions in existing Sec.  155.120(c).
2. Subpart C--General Functions of an Exchange
a. Civil Money Penalties for Violations of Applicable Exchange 
Standards by Consumer Assistance Entities in Federally-Facilitated 
Exchanges (Sec.  155.206)
    In a new Sec.  155.206, as part of HHS's enforcement authority 
under section

[[Page 15823]]

1321(c)(2) of the Affordable Care Act, we propose to provide for the 
imposition of civil money penalties (CMPs) on Navigators, non-Navigator 
assistance personnel, and certified application counselors and 
certified application counselor designated organizations in FFEs and 
State Partnership Exchanges that do not comply with applicable Federal 
requirements. This proposal is designed to deter these entities and 
individuals from failing to comply with the Federal requirements that 
apply to them, and to ensure that consumers interacting with the 
Exchange receive high-quality assistance and robust consumer 
protection. As a general principle, while HHS proposes to establish 
authority to assess CMPs when appropriate, consistent with this 
proposed rule, we note that we also intend to continue to work 
collaboratively with consumer assistance entities and personnel to 
prevent noncompliance issues and address any that may arise before they 
might rise to the level where CMP would be assessed.
    The Secretary, under the authority of sections 1311(i) and 
1321(a)(1) of the Affordable Care Act, has previously established a 
range of consumer assistance programs to help consumers apply for and 
enroll in QHPs and insurance affordability programs through the 
Exchange. These consumer assistance programs include the Navigator 
program described at section 1311(i) of the Affordable Care Act and 45 
CFR 155.210; the consumer assistance, outreach, and education functions 
authorized by section 1321(a)(1) of the Affordable Care Act and 
established at 45 CFR 155.205(d) and (e), which can include a non-
Navigator assistance personnel program; and the certified application 
counselor program authorized by section 1321(a)(1) of the Affordable 
Care Act and set forth at 45 CFR 155.225. Under these authorities and 
the authority granted to the Secretary by section 1321(c)(1) of the 
Affordable Care Act, the FFE has implemented a Navigator and certified 
application counselor program in all States that did not elect to 
establish an Exchange, and has implemented a non-Navigator assistance 
program in some of those States, through an enrollment assistance 
contract.
    Under section 1321(c)(2) of the Affordable Care Act, the provisions 
of section 2723(b) of the PHS Act \29\ apply to the Secretary's 
enforcement, under section 1321(c)(1) of the Affordable Care Act, of 
the standards established by the Secretary under section 1321(a)(1) of 
the Affordable Care Act for meeting the requirements under title I of 
the Affordable Care Act, including the establishment and operation of 
Exchanges, without regard to any limitation on the application of the 
provisions of section 2723(b) of the PHS Act to group health plans. 
Section 2723(b) of the PHS Act provides the Secretary with authority to 
assess CMPs against health insurance issuers that fail to meet certain 
Federal requirements set forth in the PHS Act that apply to group 
health plans, in circumstances where, in the Secretary's determination, 
the State that regulates the issuer has failed to ``substantially 
enforce'' those requirements. We interpret the cross-reference to 
section 2723(b) of the PHS Act in section 1321(c)(2) of the Affordable 
Care Act as providing the Secretary with authority to assess CMPs to 
enforce requirements established under section 1321(a)(1) of the 
Affordable Care Act against any entity subject to those requirements, 
under circumstances where the Secretary is exercising her authority 
under 1321(c)(1) of the Affordable Care Act. For purposes of this 
proposal, we would consider that any State that has not elected to 
establish an Exchange, and in which the Secretary has therefore had to 
establish and operate an Exchange under section 1321(c)(1), is not 
``substantially enforcing'' the requirements related to Exchanges that 
the Secretary has established under section 1321(a)(1).
---------------------------------------------------------------------------

    \29\ Section 1321(c)(2) of the Affordable Care Act erroneously 
cites to section 2736(b) of the PHS Act instead of 2723(b) of the 
PHS Act. This was clearly a typographical error, and we have 
therefore interpreted section 1321(c)(2) of the Affordable Care Act 
to incorporate section 2723(b) of the PHS Act.
---------------------------------------------------------------------------

    Accordingly, HHS has the authority under section 1321(c)(2) of the 
Affordable Care Act to assess CMPs against Navigators, non-Navigator 
assistance personnel, and certified application counselors and 
certified application counselor designated organizations in FFEs, 
including State Partnership Exchanges, for violations of the 
requirements of the Navigator, non-Navigator, and certified application 
counselor programs that the Secretary established under section 
1321(a)(1) of the Affordable Care Act. This proposal sets forth the 
circumstances under which the Secretary would exercise this authority. 
It is based on the enforcement scheme laid out in section 2723(b) of 
the PHS Act, and the implementing regulations at 45 CFR 150.301 et 
seq., but it does not follow that enforcement scheme exactly, in light 
of the differences between the circumstances in which the Secretary 
would exercise her authority under PHS Act 2723(b) versus those under 
which she would exercise her authority under section 1321(c)(2) of the 
Affordable Care Act.
    Proposed Sec.  155.206(a) would establish the scope and purpose of 
the proposed CMP provisions and explains when and against whom HHS 
would assess a CMP under this proposal. At Sec.  155.206(a)(2), we 
propose that HHS could permit an entity or individual to whom it has 
issued a notice of assessment of CMP to enter into a corrective action 
plan instead of paying the CMP. We specify that permitting an entity to 
enter into a corrective action plan would not limit HHS's authority to 
require payment of the assessed CMP if the corrective action plan is 
not followed. Under this proposal, the determination of whether HHS 
would enter into a corrective action plan in place of imposing a CMP 
would depend upon the factors proposed in Sec.  155.206(h). We believe 
this approach would allow us not only to penalize violations if 
necessary, but also to prioritize working collaboratively with consumer 
assistance entities to ensure that improvements are made and future 
violations are prevented. We also believe this approach is consistent 
with the limitation on imposing CMPs that is set forth at PHS Act 
section 2723(b)(2)(C)(iii)(II), under which no CMP may be assessed for 
violations due to reasonable cause and not due to willful neglect, if 
the violation is corrected during the 30-day period beginning on the 
first day any of the entities against whom the penalty would be 
assessed knew, or exercising reasonable diligence would have known, 
that such failure existed.
    We are considering whether to provide for an expedited process 
through which HHS may assess and impose CMPs, if extenuating 
circumstances exist or if necessary to protect the public. We believe 
HHS's ability to take swift action might be particularly useful in 
cases where HHS permits an entity to enter into a corrective action 
plan in lieu of a CMP, so that the entity would promptly begin remedial 
efforts under the corrective action plan without undue delay. We are 
considering an expedited process through which HHS would provide the 
consumer assistance entity less than the 30-day period provided for 
under proposed paragraph (e) to respond to the notice of investigation 
under proposed paragraph (e)(1), or possibly omit that period 
altogether. In all cases where an expedited process would apply, we 
anticipate that the entity against which a CMP is assessed would have 
an

[[Page 15824]]

opportunity to appeal the imposition of the penalty after it has been 
assessed. We seek comment on whether HHS should provide for such an 
expedited process and on all aspects of how it should be structured, 
including comments on how such an expedited process could provide 
sufficient protection to the public, comments on how such an expedited 
process could be sufficiently protective of the rights of entities and 
individuals that might be assessed a CMP, and comments on other ways 
through which the process for imposing CMPs under this proposal could 
be expedited if necessary to protect the public.
    We are also considering implementing an approach that would give 
the HHS Office of Inspector General (OIG) concurrent authority with CMS 
to enforce violations under this section. Given OIG's expertise in 
investigating waste, fraud, and abuse in the Medicare and Medicaid 
programs, we are considering whether certain violations of an Exchange 
consumer assistance entity's program requirements might be most 
effectively investigated by OIG, or whether a more streamlined approach 
with a single enforcement authority would be preferable. In considering 
whether OIG should have concurrent enforcement authority under this 
proposed section, we are considering whether both CMS and OIG should 
use the procedures laid out in proposed Sec.  155.206 for investigating 
potential violations and conducting administrative appeals, or whether 
and to what extent OIG should rely on its own enforcement procedures 
under 42 CFR, chapter V, subchapter B for either the investigative 
process or the administrative appeals process, or both, and whether 
some of the procedures outlined in OIG's enforcement procedures under 
those regulations should be incorporated into this section. We note 
that because our enforcement authority under section 1321(c)(2) of the 
Affordable Care Act requires compliance with the provisions of section 
2723(b) of the PHS Act, any process used by OIG would have to comply 
with the requirements in those statutory provisions. We seek comment on 
whether OIG should have concurrent authority to enforce these proposed 
CMP provisions. In addition, we seek comment on what procedures we 
should use to determine which cases should fall under CMS or OIG 
enforcement authority, in the event OIG has concurrent authority. For 
example, we are considering providing that OIG would enforce only 
consumer assistance personnel or entity noncompliance involving 
systemic fraud or gross misconduct, rather than isolated incidents. We 
invite comment on this issue, and how those determinations would be 
made, as well as comments on any other aspects of a concurrent 
authority scheme that we should consider.
    In proposed Sec.  155.206(b), we specify the individuals and 
entities that could be subject to HHS' enforcement authority under this 
proposal. These individuals and entities would include Navigators, non-
Navigator assistance personnel (also referred to as in-person 
assistance personnel) authorized under Sec.  155.205(d) and (e), and 
certified application counselors and organizations designated as 
certified application counselor organizations in FFEs, including in 
State Partnership Exchanges. We refer to these individuals and entities 
in the proposed rule as ``consumer assistance entities,'' but these 
proposed CMPs could be assessed against both entities and individuals. 
We seek comment on whether all of the individuals and entities listed 
in proposed Sec.  155.205(b) should be subject to CMPs, and on whether 
other entities and individuals should be added to that list.
    In Sec.  155.206(c), we propose the grounds on which HHS could 
impose CMPs on the entities and individuals specified in Sec.  
155.206(b). Section 1321(c)(2) of the Affordable Care Act authorizes 
the Secretary to enforce the requirements of section 1321(a)(1) of the 
Affordable Care Act, which include the requirements established by the 
Secretary regarding Exchange consumer assistance functions. Under our 
proposal, this statutory provision would authorize HHS to assess a CMP 
or, in lieu of a CMP, a corrective action plan against Navigators, non-
Navigator assistance personnel, certified application counselors, and 
certified application counselor organizations in FFEs if HHS determines 
that these individuals or entities are not in compliance with the 
Exchange standards applicable to them. These Exchange standards would 
include any applicable regulations implemented under title I of the 
Affordable Care Act, as interpreted through applicable HHS guidance, 
such as the regulations governing consumer assistance tools and 
programs of an Exchange at Sec.  155.205; those governing Navigators at 
Sec.  155.210 and Navigators in FFEs at Sec.  155.215; those governing 
certified application counselors at Sec.  155.225; and those under 
Sec.  155.215 governing non-Navigator assistance personnel in FFEs. 
These standards would also include any applicable HHS guidance 
interpreting an existing regulatory or statutory provision.
    For example, Sec.  155.215(b)(1)(i) requires FFE Navigators to 
obtain certification by the Exchange prior to carrying out any consumer 
assistance functions under Sec.  155.210. Under this proposal, a 
Navigator who facilitates the selection of a QHP (a Navigator duty 
under Sec.  155.210(e)(3)) prior to obtaining his or her Exchange 
certification might, depending on the circumstances, be subject to CMPs 
under Sec.  155.206.
    As another example, Sec.  155.210(e)(2) requires Navigators to 
provide information and services in a fair, accurate, and impartial 
manner, and Sec.  155.215(a)(2)(i) extends this duty to non-Navigator 
assistance personnel in FFEs. Any FFE Navigator or FFE non-Navigator 
assistance personnel who, while carrying out Exchange-related 
activities, furnishes information that he or she knew or should have 
known is false or fraudulent to consumers, the Exchange, or to HHS, 
would have violated these provisions and might, depending upon the 
circumstances, be subject to CMPs under proposed Sec.  155.206. If a 
Navigator or any non-Navigator assistance personnel in a FFE encourages 
an applicant or enrollee to submit false information on an application 
for coverage though the Exchange, we would also consider that to be a 
violation of his or her duty to provide information in a fair, 
accurate, and impartial manner; and this violation might, depending on 
the circumstances, also subject the individual or entity to the 
proposed CMPs. Such a Navigator or non-Navigator assistance personnel 
would not be providing fair or accurate information to consumers, 
because in light of the penalties at section 1411(h) of the Affordable 
Care Act for providing false information on an Exchange application, it 
is not fair or accurate to state or imply that a consumer would be 
permitted to falsify application information.
    As a final example, a certified application counselor in an FFE who 
steers consumers toward one particular QHP would not be acting in the 
best interest of consumers, as required by Sec.  155.225(d)(4), and 
would not be giving consumers information about the full range of QHP 
options and insurance affordability programs for which they are 
eligible, as required by Sec.  155.225(c)(1). Such a certified 
application counselor might, depending on the circumstances, be subject 
to CMPs under our proposed Sec.  155.206.
    We note that Sec.  155.285 of this proposed rule would extend CMPs 
to consumer assistance entities who misuse or impermissibly disclose

[[Page 15825]]

personally identifiable information in violation of section 1411 of the 
Affordable Care Act. Therefore, we have not addressed penalties for 
those actions here. Some conduct by consumer assistance entities may 
warrant CMPs under either Sec.  155.285 or Sec.  155.206, and in such 
cases we believe HHS has discretion to determine whether to impose a 
CMP under this regulation or under Sec.  155.285 of this subpart. 
However, we specify in proposed Sec.  155.206(c) that HHS would not 
assess a CMP under this section if a CMP has already been assessed for 
the same conduct under Sec.  155.285. Additionally, CMPs are not the 
only enforcement remedy that would apply to the entities and 
individuals who would be subject to proposed Sec.  155.206. For 
instance, HHS could take other enforcement actions against FFE 
Navigators, which are Federal grantees, under the regulations governing 
HHS grants. Furthermore, some of the actions described above may 
subject consumer assistance entities to criminal liability under 
Federal or State law.
    In Sec.  155.206(d), we propose the basis for initiating an 
investigation of a potential violation. We propose that HHS could 
initiate an investigation based on any information it receives 
indicating that a consumer assistance entity might be in noncompliance 
with applicable Exchange standards. Such information could include 
consumer complaints, reports from State insurance departments and other 
Federal and State agencies, and any other information indicating such a 
violation. We also propose that any entity or individual could file 
such a complaint with HHS.
    In Sec.  155.206(e), (f) and (g), we propose to outline the process 
that HHS would follow to investigate potential violations in order to 
determine whether the consumer assistance entity has engaged in 
noncompliance of applicable Exchange standards. Under proposed Sec.  
155.206(e), if HHS learns of a potential violation through the means 
described in paragraph (d) in this section and determines that further 
investigation is warranted, HHS would provide written notice of its 
investigation to the consumer assistance entity. Such notice would 
describe the potential violation, provide 30 days from the date of the 
notice for the consumer assistance entity to respond and provide HHS 
with information and documents, including information and documents to 
refute an alleged violation, and would state that a CMP might be 
assessed if the consumer assistance entity fails to refute the 
allegations in HHS' determination.
    In Sec.  155.206(f), we propose a process for a consumer assistance 
entity to request an extension from HHS when the entity cannot prepare 
a response to HHS's notice of investigation within the 30 days provided 
in the notice. Under our proposal, if HHS grants the extension, the 
responsible entity would be required to respond to the notice of 
investigation within the time frame specified in HHS's letter granting 
the extension of time, and failure to respond within 30 days, or within 
the extended time frame, could result in HHS's imposition of the CMP 
that would apply based upon HHS's initial determination of a potential 
violation as set forth in the notice of investigation under Sec.  
155.206(e).
    In Sec.  155.206(g), we propose that HHS could review and consider 
documents or information received or collected in accordance with 
paragraph (d)(1) of this section or provided by the consumer assistance 
entity in response to receiving a notice in accordance with paragraph 
(e)(2) of this section. We also propose that HHS may conduct an 
independent investigation into the alleged violation, which may include 
site visits and interviews, if applicable, and may consider the results 
of this investigation in its determination. The purpose of these 
proposed provisions is to ensure that HHS would follow reasonable 
procedures when investigating a potential violation, and to allow a 
consumer assistance entity a reasonable timeframe to provide evidence 
refuting the allegation or other information regarding the alleged 
violation, including its severity or mitigating circumstances.
    In Sec.  155.206(h), we propose the factors that HHS would use to 
determine the appropriate CMP amount, and to determine whether it would 
be appropriate to offer the entity or individual an opportunity to 
enter into a corrective action plan in place of the CMP. We intend that 
the CMP amount, and opportunity to enter into a corrective action plan, 
would vary based on our assessment of the consumer assistance entity's 
previous or ongoing record of compliance; the gravity of the violation, 
as determined in part by the frequency of the violation and the 
financial harm incurred by a consumer; and the culpability of the 
consumer assistance entity, as determined, in part, by whether the 
entity received payment for committing the violation. We believe these 
factors would allow us to tailor enforcement actions to specific 
violations, while maintaining robust enforcement authority in the 
interest of protecting consumers.
    Section 2723(b)(2)(C) of the PHS Act limits the amount of CMPs 
authorized under section 1321(c)(2) of the Affordable Care Act to $100 
for each day for each individual directly affected. Therefore in Sec.  
155.206(i), we propose that the maximum daily amount of penalty 
assessed for each violation would be $100 for each day, for each 
consumer assistance entity, for each individual directly affected by 
the entity's non-compliance. Similar to our rules on the maximum 
penalty for noncompliant QHP issuers in 45 CFR 156.805(c), we 
anticipate that there might be situations where HHS cannot determine 
the number of individuals directly affected. Therefore, we propose, 
consistent with the approach under existing rules at 45 CFR 156.805(c), 
that in such situations HHS may reasonably estimate this number, based 
on available information, such as data from a Federal Navigator 
grantee's quarterly or weekly report concerning the number of consumers 
assisted. We also clarify that imposing $100 for each day an individual 
is directly affected would mean that we would look at the entirety of 
time the consumer was affected by the noncompliance of the assistance 
entity. For example, if a certified application counselor in an FFE is 
found to be steering consumers into a specific plan without regard to 
the consumers' best interests in violation of Sec.  155.225(d)(4), we 
might assess CMPs based on our reasonable estimate of the number of 
consumers affected by the conduct, as well as the entire time the 
conduct took place, including the time during which each consumer is 
enrolled in the plan to which he or she was improperly steered. 
Although we have proposed a maximum per day penalty, we have not 
proposed a cap on the total penalty that could be assessed by HHS, and 
we seek comment on whether we should propose such a cap.
    In proposed Sec.  155.206(j), we propose to clarify that nothing in 
this section limits HHS's authority to settle any issue or case 
described in the notice furnished in accordance with paragraph (e), or 
to compromise on any CMP provided for in this section. This provision 
is based on a similar provision in the HIPAA enforcement scheme at 45 
CFR 150.325.
    Section 2723(b)(2)(C) of the PHS Act places certain limitations on 
CMPs authorized under section 1321(c)(2) of the Affordable Care Act, 
including the limitation that HHS will not assess a CMP where the 
entity did not know, or exercising reasonable diligence would not have 
known, of the violation. We propose to implement these limitations in 
Sec.  155.206(k). We believe these limitations would help balance the 
interests of HHS, the Exchange, and consumers to have consumer 
assistance

[[Page 15826]]

entities exercise reasonable diligence in understanding and executing 
their obligations, while not unnecessarily penalizing consumer 
assistance entities who are acting in good faith. We also propose, 
based on the HIPAA enforcement structure at 45 CFR 150.341, that the 
burden is on the consumer assistance entity to establish that the 
circumstances triggering these limitations existed.
    In Sec.  155.206(l), we propose standards for notifying consumer 
assistance entities of the intent to assess a CMP, which notice would 
include an explanation of the entity's right to an appeal pursuant to 
the process set forth at 45 CFR Part 150, Subpart D, as provided in 
proposed Sec.  155.206(m). We seek comment on whether all aspects of 
that process should be applicable to appeals of these CMPs. Finally, in 
Sec.  155.205(n), we propose that HHS may require payment of the 
proposed CMP if the consumer assistance entity does not timely request 
a hearing.
    We seek comment on all aspects of these proposals, including but 
not limited to whether other provisions of 45 CFR Part 150 should be 
adopted and made applicable to this proposed enforcement scheme, 
whether a specific limitations period should apply, and if so, what 
limitations period would be appropriate for violations of applicable 
Exchange standards by consumer assistance entities in FFEs.
b. Navigator, Non-Navigator Assistance Personnel, and Certified 
Application Counselor Program Standards (Sec. Sec.  155.210, 155.215, 
and 155.225)
    Sections 1311(d)(4)(K) and 1311(i) of the Affordable Care Act 
direct all Exchanges to establish a Navigator program. Section 
1321(a)(1) of the Affordable Care Act directs the Secretary to issue 
regulations that set standards for meeting the requirements of title I 
of the Affordable Care Act, with respect to, among other things, the 
establishment and operation of Exchanges. Pursuant to the authority 
established in section 1321(a)(1), the Secretary issued 45 CFR 
155.205(d) and (e), which authorize Exchanges to perform certain 
consumer service functions in addition to the Navigator program. 45 CFR 
155.205(d) provides that each Exchange must conduct consumer assistance 
activities, and Sec.  155.205(e) provides that each Exchange must 
conduct outreach and education activities to inform consumers about the 
Exchange and insurance affordability programs, to encourage 
participation.
    The consumer assistance function authorized by Sec.  155.205(d) 
includes the Navigator grant program established under section 1311(i) 
of the Affordable Care Act. Section 155.205(d) and (e) also allow for 
the establishment of a non-Navigator consumer assistance program. 45 
CFR 155.215 establishes standards for non-Navigator assistance 
personnel in FFEs, including State Partnership Exchanges, and for non-
Navigator assistance personnel in State Exchanges if they are funded 
with section 1311(a) Exchange Establishment grant funds. Also pursuant 
to the authority established in section 1321(a)(1), the Secretary 
issued 45 CFR 155.225, which establishes the certified application 
counselor program as a consumer assistance function of the Exchange, 
separate from and in addition to the functions described in Sec. Sec.  
155.205(d) and (e), 155.210, and 155.215.
    Navigator duties and requirements for all Exchanges are set forth 
in section 1311(i) of the Affordable Care Act and 45 CFR 155.210. 
Additional duties and requirements for Navigators in Federally-
facilitated and State Partnership Exchanges are set forth at 45 CFR 
155.215. Section 155.215 also sets forth duties and requirements for 
non-Navigator assistance personnel in Federally-facilitated and State 
Partnership Exchanges, and for non-Navigator assistance personnel in 
State Exchanges if those personnel are funded with section 1311(a) 
Exchange Establishment grant funds. Certified application counselor 
duties and requirements for all Exchanges are set forth in 45 CFR 
155.225.
    In accordance with sections 1311(i)(4) and 1321(d) of the 
Affordable Care Act, we previously established in 45 CFR 
155.210(c)(1)(iii) that Navigators ``must meet any licensing, 
certification or other standards prescribed by the State or Exchange, 
if applicable, so long as such standards do not prevent the application 
of the provisions of title I of the Affordable Care Act.'' We have not 
established a similar requirement for the non-Navigator assistance 
personnel that are subject to 45 CFR 155.215. Nor did we finalize a 
proposed requirement that would have required certified application 
counselors to comply with State law as a condition of certification. 
However, we noted in the preamble to the rulemaking establishing the 
certified application counselor program that section 1321(d) of the 
Affordable Care Act provides that State laws that do not prevent the 
application of the provisions of title I of the Affordable Care Act are 
not preempted.\30\ These preemption principles apply to all of the 
Federal standards and duties that apply to Navigators, non-Navigator 
assistance personnel and certified application counselors, since these 
have been authorized and established under title I of the Affordable 
Care Act.
---------------------------------------------------------------------------

    \30\ Patient Protection and Affordable Care Act; Exchange 
Functions: Standards for Navigators and Non-Navigator Assistance 
Personnel; Consumer Assistance Tools and Programs of an Exchange and 
Certified Application Counselors, 78 FR 42845 (finalized July 17, 
2013).
---------------------------------------------------------------------------

    We now propose to specify certain non-Federal requirements that 
would prevent the application of provisions of title I of the 
Affordable Care Act with respect to the Navigator, non-Navigator 
assistance personnel, and certified application counselor programs, 
within the meaning of section 1321(d) of the Affordable Care Act. This 
proposal does not purport to capture the complete universe of State 
requirements that might be preempted in this context, and we therefore 
recognize that a Federal court may also find other non-Federal 
requirements that we do not expressly mention in this proposed rule to 
be preempted.\31\
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    \31\ The U.S. District Court for the Western District of 
Missouri recently granted the plaintiff's motion for a preliminary 
injunction in litigation challenging a Missouri law regulating 
Navigators and other Exchange consumer assistance personnel on the 
grounds, inter alia, that certain provisions of the Missouri law are 
preempted by Federal law. The court concluded that ``state laws that 
make operation of the [Federally-facilitated Exchange] more 
difficult or onerous run afoul of the Affordable Care Act's purpose 
and are subject to preemption.'' St. Louis Effort for AIDS, et al. 
v. Huff, No. 13-4246-CV-C-ODS, 2014 WL 273201, at *5 (W.D. Mo. Jan. 
23, 2014) (order granting preliminary injunction). This decision is 
currently under appeal before the United States Court of Appeals for 
the Eighth Circuit, St. Louis Effort for AIDS v. Huff, No. 14-1520 
(8th Cir. appeal docketed Mar. 6, 2014).
---------------------------------------------------------------------------

    We propose amending Sec.  155.210(c)(1)(iii) by adding new 
paragraphs (A) through (F) to specify certain non-Federal requirements 
that would prevent the application of the provisions of title I of the 
Affordable Care Act, within the meaning of section 1321(d) of the 
Affordable Care Act, with respect to the Navigator program. We also 
propose to amend Sec.  155.215(f) to make clear that we would consider 
the same types of non-Federal requirements listed in Sec.  
155.210(c)(1)(iii)(A) through (F) (except for 155.210(c)(1)(iii)(D)) to 
prevent the application of the provisions of title I of the Affordable 
Care Act within the meaning of section 1321(d) of the Affordable Care 
Act, when applied to non-Navigator assistance personnel subject to 
Sec.  155.215. Similarly, with respect to the certified application 
counselor program, we propose amending Sec.  155.225(d) by adding a new 
paragraph (d)(8) to specify that certified application counselors must 
meet any licensing, certification or

[[Page 15827]]

other standards prescribed by the State or Exchange, if applicable, so 
long as such standards do not prevent the application of the provisions 
of title I of the Affordable Care Act within the meaning of section 
1321(d) of the Affordable Care Act. New Sec.  155.225(d)(8) would also 
make clear that we would consider non-Federal requirements similar to 
those listed in Sec.  155.210(c)(1)(iii)(A) through (F) (except for 
155.210(c)(1)(iii)(D)) to prevent the application of the provisions of 
title I of the Affordable Care Act within the meaning of section 
1321(d) of the Affordable Care Act, when applied to certified 
application counselors.
    As we discuss in greater detail below, these proposed amendments 
are directed at non-Federal requirements that conflict with Federal 
statutory or regulatory standards and that either, on their face, 
prevent assisters from performing their Federally required duties, or 
that would conflict with Federal standards in specific factual 
circumstances.
    The purpose of these proposed provisions is to specify a non-
exhaustive list of circumstances under which HHS would consider a non-
Federal requirement applicable to Navigators, non-Navigator assistance 
personnel, or certified application counselors to prevent the 
application of provisions of title I of the Affordable Care Act, within 
the meaning of section 1321(d) of the Affordable Care Act. As a general 
principle, if a non-Federal requirement would, on its face, prevent 
Navigators, non-Navigator assistance personnel subject to Sec.  
155.215, or certified application counselors from carrying out 
Federally mandated duties or from otherwise meeting Federal standards 
that apply to them, or if a non-Federal requirement would make it 
impossible for an Exchange to implement those consumer assistance 
programs consistent with the Federal statutes and regulations governing 
those programs, then, in HHS's view, such a requirement would prevent 
the application of the provisions of title I of the Affordable Care 
Act.
    These proposed preemption standards would not preclude a State from 
establishing or implementing additional State law protections for its 
consumers, so long as such laws do not prevent the application of 
Federal requirements for these consumer assistance programs. For 
example, a State may require these types of Exchange-approved assisters 
to undergo fingerprinting or background checks before they can operate 
in a State, so long as a State's implementation of these additional 
requirements does not prevent the Exchange from implementing these 
consumer assistance programs in the State consistent with Federal 
standards or make it impossible for the assisters to perform their 
Federally required duties.
    We propose to make some, but not all, of the proposed provisions 
applicable to Navigators, non-Navigator assistance personnel subject to 
45 CFR 155.215, and certified application counselors (or certified 
application counselor designated organizations) that are operating in 
State Exchanges. Non-Federal requirements that would prevent these 
individuals or entities from carrying out their Federally mandated 
duties or from otherwise meeting applicable Federal statutory and 
regulatory standards and requirements would prevent the application of 
title I of the Affordable Care Act. Generally, for the reasons 
addressed below, proposed Sec.  155.210(c)(1)(iii)(A) through (D) would 
apply to Navigators in State Exchanges; through the cross reference to 
Sec.  155.210(c)(1)(iii), proposed Sec.  155.215(f) would apply 
provisions Sec.  155.210(c)(1)(iii)(A) through (C) to non-Navigator 
assistance entities or individuals in State Exchanges that are funded 
through an Exchange Establishment Grant under section 1311(a) of the 
Affordable Care Act; and proposed Sec.  155.225(d)(8)(i) through (iii) 
would apply to certified application counselors and/or designated 
certified application counselor organizations in State Exchanges. In 
general, we believe that the provisions listed above should apply in a 
State Exchange because these provisions address requirements that, in 
HHS' view, would facially conflict with Federal requirements or 
standards established under Federal law, while the provisions that we 
propose would not apply in State Exchanges relate to how the State 
interacts with an FFE or implements State requirements for the relevant 
consumer assistance personnel. Based on our observations, a State 
Exchange has an enhanced ability to work with the State to establish 
its own standards and coordinate the implementation of State law 
applicable to assisters in a manner that does not conflict with Federal 
standards or prevent the State Exchange from implementing consumer 
assistance programs consistent with Federal requirements. We solicit 
comments on whether all the proposed provisions should apply in State 
Exchanges. We also seek comments on whether there are other types of 
non-Federal requirements for these types of assisters in a State 
Exchange that might prevent the application of Federal law within the 
meaning of section 1321(d) of the Affordable Care Act.
    In our proposal, we first propose that non-Federal laws or 
regulations which require Navigators, non-Navigator assistance 
personnel subject to Sec.  155.215, and certified application 
counselors to refer consumers to agents or brokers, or to any other 
sources not required to provide them with impartial advice, would 
prevent the application of the provisions of title I of the Affordable 
Care Act. Non-Federal laws or regulations that require referrals to 
sources that are not required to provide impartial advice would, on 
their face, make it impossible for these assisters to comply with 
existing Federal statutory and regulatory duties and standards. 
Navigators are required to ``distribute fair and impartial information 
concerning enrollment in qualified health plans, and the availability 
of premium tax credits . . . and cost-sharing reductions . . .,'' under 
section 1311(i)(3)(B) of the Affordable Care Act. Additionally, section 
1311(i)(5) of the Affordable Care Act requires the Secretary, in 
collaboration with States, to ``develop standards to ensure that 
information made available by [N]avigators is fair, accurate, and 
impartial.'' Accordingly, HHS regulations at Sec.  155.210(e)(2) 
require Navigators in all Exchanges to provide ``information and 
services in a fair, accurate and impartial manner'' and HHS regulations 
at Sec.  155.215(a)(1)(iii) require Navigators in Federally-facilitated 
and State Partnership Exchanges to ``provide information to consumers 
about the full range of QHP options and insurance affordability 
programs for which they are eligible.'' HHS regulations at Sec.  
155.215(a)(2)(i) and (iv) impose the same requirements upon non-
Navigator assistance personnel in Federally-facilitated and State 
Partnership Exchanges. Similarly, Sec.  155.225(c)(1) requires 
certified application counselors to provide ``information to 
individuals and employees about the full range of QHP options and 
insurance affordability programs for which they are eligible'' and 
Sec.  155.225(d)(4) requires certified application counselors to act in 
the best interest of the applicants assisted. If a non-Federal law or 
regulation requires Navigators or non-Navigator assistance personnel 
subject to Sec.  155.215 to refer consumers to third parties that do 
not have a duty to provide consumers with information that is fair, 
accurate, and impartial or requires a certified application counselor 
to refer consumers to third parties that do not

[[Page 15828]]

have a duty to act in the consumer's best interest, that non-Federal 
law would prevent Navigators, non-Navigator assistance personnel, or 
certified application counselors from meeting the above-mentioned 
Federal requirements. This proposal would apply in all Exchanges, with 
the following limited exception for certain Navigators. Where a State 
has elected to establish and operate only a SHOP Exchange pursuant to 
45 CFR 155.100(a)(2), and has opted under 45 CFR 155.705(d) to permit 
Navigator duties at Sec.  155.210(e)(3) and (4) in the SHOP-only State 
Exchange to be fulfilled through referrals to agents and brokers, we 
would not consider State laws or regulations that permit the State to 
take the option at Sec.  155.705(d) to prevent the application of the 
provisions of title I of the Affordable Care Act, since that option is 
authorized under Federal law.
    We solicit comment on whether non-Federal requirements that 
obligate Navigators, non-Navigator assistance personnel subject to 
Sec.  155.215, and certified application counselors to refer employers 
and employees in the small group market to agents and brokers should 
not be considered to prevent the application of the provisions of title 
I of the Affordable Care Act within the meaning of section 1321(d) of 
the Affordable Care Act.
    Second, we propose that non-Federal laws or regulations that 
prevent Navigators, non-Navigator assistance personnel subject to Sec.  
155.215, and certified application counselors from providing services 
to all persons to whom they are required to provide assistance would 
also, on their face, prevent the application of the provisions of title 
I of the Affordable Care Act within the meaning of section 1321(d) of 
the Affordable Care Act. For example, if a non-Federal requirement 
prohibited Navigators and non-Navigator assistance personnel subject to 
Sec.  155.215 from assisting an employer or employee regarding SHOP 
coverage or from acting as an intermediary between that employer and an 
issuer without being a licensed insurance agent or broker, then such a 
prohibition would prevent Navigators from performing their Federally 
required duties and would therefore prevent the application of the 
provisions of title I of the Affordable Care Act within the meaning of 
section 1321(d) of the Affordable Care Act. Specifically, such non-
Federal requirements would prevent Navigators from providing 
``information and services in a fair, accurate and impartial manner'' 
as required by 45 CFR 155.210(e)(2). They would also prevent non-
Navigator assistance personnel subject to 155.215 from complying with 
the same requirement, as is required by Sec.  155.215(a)(2)(i). We 
interpret the requirement that Navigators and non-Navigator assistance 
personnel subject to Sec.  155.215 provide information and services 
fairly and impartially as a requirement that these assisters provide 
their services to all consumers seeking assistance. As we have 
mentioned in prior rulemaking, Navigators and non-Navigator assistance 
personnel should have the ability to help any individual who presents 
him or herself for assistance (see 78 FR 42830). Further, these 
requirements would prevent Navigators and non-Navigator assistance 
personnel subject to Sec.  155.215 from being prepared to serve both 
the individual Exchange and SHOP, as required by Sec.  
155.215(b)(1)(v). Similarly, with respect to certified application 
counselors and certified application counselor organizations, if a non-
Federal requirement barred these individuals or entities from assisting 
an employee with SHOP coverage, then such a requirement would prevent 
them from performing their Federally required duty to provide 
information to employees about the full range of QHP options for which 
they are eligible and assist employees to apply for coverage in a QHP 
through the Exchange and for insurance affordability programs, as set 
forth under Sec.  155.225(c)(1) and (2).
    As another example, with respect to Navigators, non-Navigator 
assistance personnel subject to Sec.  155.215, and certified 
application counselors and organizations, if a non-Federal law required 
these individuals or entities to either cease assisting a consumer or 
to discourage the consumer from seeking assistance from the assister 
whenever a consumer disclosed that he or she was currently insured or 
had previously purchased health insurance with the aid of an agent or 
broker (even if that consumer expresses to the assister that he or she 
does not want to be assisted by an agent or broker), then such a non-
Federal requirement would prevent the application of the provisions of 
title I of the Affordable Care Act within the meaning of section 
1321(d) of the Affordable Care Act. Specifically, these types of 
requirements would prevent Navigators from providing ``information and 
services in a fair, accurate and impartial manner'' as required by 45 
CFR 155.210(e)(2). They would also prevent non-Navigator assistance 
personnel subject to 155.215 from complying with the same requirement, 
as is required by Sec.  155.215(a)(2)(i). We interpret the requirement 
that Navigators and non-Navigator assistance personnel subject to Sec.  
155.215 provide information and services fairly and impartially as a 
requirement that these assisters serve any consumer who presents him or 
herself for assistance, without regard to whether the consumer has 
existing health insurance coverage or previously had such coverage. 
Such a non-Federal requirement would also keep these assisters from 
performing their Federally required duty to be prepared to serve both 
the individual Exchange and SHOP, as required by Sec.  
155.215(b)(1)(v). With respect to certified application counselors, 
these types of requirements would prevent them from carrying out 
required duties under Sec.  155.225(c)(1) and (2), which require that 
certified application counselors provide information to employees about 
the full range of QHP options for which they are eligible and assist 
employees to apply for coverage in a QHP through the Exchange. 
Requirements of this type would also potentially prevent certified 
application counselors from acting in the best interests of the 
applicants assisted, as required by Sec.  155.225(d)(4), especially in 
circumstances where a consumer expresses a desire to not consult an 
agent or broker.
    Where a State has elected to establish and operate only a SHOP 
Exchange pursuant to 45 CFR 155.100(a)(2), and has opted under 45 CFR 
155.705(d) to permit Navigator duties at Sec.  155.210(e)(3) and (4) in 
the SHOP-only State Exchange to be fulfilled through referrals to 
agents and brokers, we would not consider State laws or regulations 
that permit the State to take the option at Sec.  155.705(d) to prevent 
the application of the provisions of title I of the Affordable Care 
Act, since that option is authorized under Federal law.
    Third, we propose that non-Federal laws that prevent Navigators, 
non-Navigator assistance personnel subject to Sec.  155.215, and 
certified application counselors from discussing the terms of coverage 
of any particular policy or plan, or from providing advice regarding 
substantive benefits or comparative benefits of different health plans, 
would also, on their face, prevent the application of the provisions of 
title I of the Affordable Care Act within the meaning of section 
1321(d) of the Affordable Care Act. Such non-Federal requirements would 
prevent Navigators from fulfilling their statutory and regulatory 
duties under section 1311(i)(3) of the Affordable Care Act and 45 CFR 
155.210(e)(2) and (3) to distribute fair and impartial information 
concerning enrollment in qualified health plans and to facilitate 
enrollment

[[Page 15829]]

in qualified health plans. Such non-Federal requirements would also 
prevent non-Navigator assistance personnel subject to Sec.  155.215 
from carrying out their required duties under Sec.  155.215(a)(2)(i), 
which requires that they comply with Sec.  155.210(e)(2). Finally, such 
non-Federal requirements would also prevent certified application 
counselors and organizations from fulfilling regulatory duties 
established under Sec.  155.225(c) to provide information to 
individuals and employees about the full range of QHP options and 
insurance affordability programs for which they are eligible, assist 
individuals and employees to apply for coverage in a QHP through the 
Exchange and for insurance affordability programs, and help to 
facilitate enrollment of eligible individuals in QHPs and insurance 
affordability programs. CMS interprets these statutory and regulatory 
provisions to require Navigators, non-Navigator assistance personnel 
subject to Sec.  155.215, and certified application counselors to be 
prepared to discuss the terms and features of any coverage for which a 
consumer is or might be eligible, consistent with each consumer's 
expressed interests and needs, including, for example, plan features 
such as deductibles, coinsurance and copayments, coverage limitations 
or exclusions, and/or whether a particular provider or hospital is 
included within a plan's network. CMS has always interpreted the 
statute and regulations to prohibit Navigators, non-Navigators, and 
certified application counselors from steering a consumer toward a 
particular plan or plans. However, under 45 CFR 155.210(e)(3) and 
155.215(a)(2)(i), Navigators and non-Navigator assistance personnel 
subject to Sec.  155.215 have a duty to ``facilitate selection of a 
QHP,'' and that duty includes providing information to consumers about 
the substantive benefits or particular features of a health plan. 
Similarly, certified application counselors are required to provide 
this same type of information to consumers, since they have a duty 
under 45 CFR 155.225(c)(3) to help to facilitate enrollment of eligible 
individuals in QHPs and insurance affordability programs. We therefore 
propose that non-Federal requirements that prevent assisters from 
describing or providing information about the substantive benefits or 
particular features of a health plan, including comparative information 
to facilitate a consumer's selection of a plan, would prevent the 
application of the provisions of title I of the Affordable Care Act 
within the meaning of section 1321(d) of the Affordable Care Act.
    Fourth, we propose to put into regulatory text a position we 
previously expressed in preamble, that a State or an Exchange must not 
require that all Navigators be agents or brokers or carry errors and 
omissions coverage. Section 1311(i)(2)(B) of the Affordable Care Act 
provides that various types of entities may serve as Navigators, and 
through Sec.  155.210(c)(2), we established the requirement that in all 
Exchanges, at least two types of entities, including one community and 
consumer-focused nonprofit group, must serve as Navigators. Requiring 
that each Navigator be a licensed agent or broker or carry errors and 
omissions coverage (which is typically held only by licensed 
professionals such as agents and brokers) would mean that all 
Navigators would fall under only one type of entity listed in 
155.210(c)(2), specifically, agents and brokers, and would therefore 
prevent the application of Sec.  155.210(c)(2)(i). In other words, 
these types of non-Federal requirements would make it impossible for 
the Exchange in such States to fulfill the Federal requirement that at 
least two types of entities listed at 155.210(c)(2), including one 
community and consumer-focused nonprofit group, serve as Navigators. 
HHS has previously advised (see 77 FR 18310, 18331-32) that such 
requirements would prevent the application of Sec.  155.210(c)(2) 
within the meaning of section 1321(d) of the Affordable Care Act; this 
proposal makes this policy explicit in regulation text.
    Fifth, we propose to specify that, in States with an FFE, non-
Federal requirements may not, in effect, render ineligible any 
individuals or entities that the FFE would deem eligible under 
applicable Federal standards. Such non-Federal requirements would 
prevent the FFE from implementing the consumer assistance programs that 
they are required (or authorized) to implement under section 1311(i) of 
the Affordable Care Act, and 45 CFR 155.205, 155.210, 155.215, and 
155.225, consistent with Federal requirements established for those 
programs.
    For example, non-Federal requirements that prohibit Navigators, 
non-Navigator assistance personnel, or certified application counselors 
or organizations in an FFE from receiving any consideration, directly 
or indirectly, from a health insurance issuer offering health insurance 
coverage in or outside of an Exchange, even if not in connection with 
the enrollment of individuals into a QHP, go beyond Federal conflict of 
interest standards set forth in section 1311(i)(4)(A)(i) and (ii) of 
the Affordable Care Act and Sec. Sec.  155.210(d)(4), 155.215(a) and 
155.225(d)(2) and (4), as interpreted in Federal guidance, and would 
also go beyond the parallel conflict of interest standards proposed for 
certified application counselors in our proposed Sec.  155.225(g)(2). 
For Navigators, section 1311(i)(4)(A)(i) and (ii) of the Affordable 
Care Act and 45 CFR 155.210(d)(4) together provide that a Navigator 
shall not be a health insurance or stop loss insurance issuer or 
receive any consideration directly or indirectly from a health 
insurance issuer or issuer of stop loss insurance in connection with 
the enrollment of any qualified individuals or employees of a qualified 
employer in a qualified health plan or a non-qualified health plan. 
Under 45 CFR 155.215(a)(2), a set of parallel conflict of interest 
standards apply in FFEs (including State Partnership Exchanges) to non-
Navigator assistance personnel carrying out consumer assistance 
functions under 155.205(d) and (e), and to non-Navigator assistance 
personnel in a State Exchange funded through Federal Exchange 
Establishment grants.\32\ For certified application counselors, 
conflict of interest standards in Sec.  155.225(d)(2) require that each 
staff member or volunteer seeking certification disclose to the 
organization, or to the Exchange if directly certified by an Exchange, 
and to potential applicants, any relationships the certified 
application counselor or sponsoring agency has with QHPs or insurance 
affordability programs, or other potential conflicts of interest.\33\
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    \32\ For Navigators and non-Navigator assistance personnel 
subject to 155.215, we have clarified in Federal guidance the scope 
of these conflict of interest standards. Specifically, conflict of 
interest standards do not apply to consideration received by a 
provider to support specific activities, such as the provision of 
medical services, if the consideration is not connected to the 
enrollment of individuals or employees in QHPs (78 FR 42831). In 
addition, Federal regulations do not inherently prohibit Navigators 
from receiving grants and other consideration from health insurance 
issuers for activities unrelated to enrollment into health plans (77 
FR 18332); For example, entities such as chambers of commerce, that 
include as a constituent member an association that has members of 
or lobbies on behalf of the insurance industry, are not prohibited 
from serving as Navigator grantees (78 FR 42835).
    \33\ We have clarified in guidance that no conflict of interest 
should bar an otherwise eligible individual from serving as a 
certified application counselor, provided that they disclose any 
conflicts of interest, including but not limited to, any 
relationships with QHPs or insurance affordability programs, such as 
Medicaid plans and Medicaid managed care organizations (78 FR 
42842).
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    A non-Federal requirement that prohibits consumer assistance 
entities and individuals from receiving any

[[Page 15830]]

consideration, directly or indirectly, from a health insurance issuer 
offering health insurance coverage in or outside of an Exchange, even 
if not in connection with the enrollment of individuals into a QHP, 
would prevent an FFE from approving as Navigators, non-Navigator 
assistance personnel, or certified application counselors and 
organizations certain entities, including hospitals and community 
health care clinics, that would otherwise be eligible to serve in those 
capacities. Further, with respect to the Navigator program, we further 
note that such a requirement could bar the FFE from awarding a grant to 
the most qualified applicants as required and therefore might prevent 
HHS from allocating Federal money in the most appropriate manner.
    As another example, if a State with an FFE effectively prohibits an 
individual or organization from serving as a Navigator, non-Navigator 
assistance personnel or certified application counselor in the FFE 
merely because the individual or entity does not maintain its principal 
place of business in that State, that State could render ineligible 
individuals or entities that the FFE would deem eligible under 
applicable Federal standards. Such a standard would therefore prevent 
the FFE from implementing the consumer assistance programs that it is 
required (or authorized) to implement, within the meaning of section 
1321(d) of the Affordable Care Act. We mean to address here only non-
Federal requirements that would interpret ``principal place of 
business'' as meaning that a business could have only one principal 
place of business nationwide, in a single State (similar to the legal 
concept that may be used in determining corporate citizenship for 
purposes of establishing diversity jurisdiction in Federal court, as 
required under 28 U.S.C. 1332(c)). States may however, require 
organizations to register with or be incorporated in the State, which 
will allow States and Exchanges to work with these organizations to 
ensure that they are meeting the needs of their consumers.
    Sixth and last, we propose to specify that in the FFEs, States may 
not impose requirements that, as applied or as implemented in the 
State, prevent the application of Federal standards applicable to 
Exchanges, Navigators, non-Navigator assistance personnel subject to 
Sec.  155.215, and certified application counselors and designated 
organizations. For example, with respect to the Navigator program, if a 
State with an FFE implemented a requirement that prevented the only 
Navigator entity operating in the State from continuing to perform its 
Federally required duties, then such a provision, as applied, would 
prevent the Exchange from operating a Navigator program in that State 
as section 1311(i)(1) of the Affordable Care Act and Sec.  155.210(a) 
require. As another example, a State might impose requirements as 
mandatory conditions for continuing to perform any applicable Federally 
required duties, such as additional training or fingerprinting or 
background checks, which, on their face, we consider as generally 
permissible, but might also set a deadline for compliance that made it 
impossible for any of individual or entity approved by the FFE to 
comply on a timely basis, despite good faith efforts to comply. Under 
such circumstances these entities and individuals could not fulfill any 
of their Federally required duties, and the FFE could not operate the 
consumer assistance programs that it is required (or authorized) to 
implement under section 1311(i) of the Affordable Care Act, and 45 CFR 
155.205, 155.210, 155.215, and 155.225.
    We believe these proposals will provide additional clarity 
regarding HHS's position with respect to whether a non-exhaustive list 
of specific non-Federal requirements would prevent the application of 
Federal requirements applicable to Navigators, non-Navigator assistance 
personnel, and certified application counselors and Exchanges' 
operation of such programs, within the meaning of section 1321(d) of 
the Affordable Care Act. In advancing these proposals, HHS's intent is 
to accord all States the comity that they are due under section 1321(d) 
of the Affordable Care Act, while preserving the ability of Exchanges, 
and the individuals and entities approved by Exchanges, to carry out 
such programs. HHS proposes these provisions to ensure that it can 
establish and operate the consumer assistance functions of an FFE 
consistent with the Federal requirements set forth in section 1311(i) 
of the Affordable Care Act and 45 CFR 155.205, 155.210, 155.215, and 
155.225. We solicit comments on all aspects of these proposals.
    This proposed rule would also amend some of the current regulatory 
prohibitions on Navigator conduct. If these proposals are finalized, we 
expect that they would be effective on the date the final regulations 
are effective.
    Section 155.210(d), among other things, currently prohibits 
Navigators from being health insurance issuers or stop-loss issuers. We 
propose to amend section 155.210(d) by adding a provision that would 
provide that Navigators may not charge consumers for performing any 
Navigator duties. Our proposal would prohibit Navigators from 
requesting any form of remuneration from consumers for Navigator 
duties, such as charging fees, asking for favors in exchange for 
services provided, or requesting compensation from consumers for 
Navigator duties. As we previously explained in preamble when existing 
rules establishing a prohibition on charging fees by certified 
application counselors were finalized, HHS does not believe that it 
would be consistent with the purpose of the Navigator program or the 
consumer assistance, education, and outreach functions under Sec.  
155.205(d) and (e), for Navigators to charge consumers for their 
services. (78 FR 42829) The goal of the Navigator program is to provide 
consumers with information about and assistance with enrollment in 
coverage through the Exchange, without cost to the consumer. That is 
why the Affordable Care Act, at section 1311(i)(1), makes clear that 
Navigator duties must be funded by the Exchange through grants. We 
believe that having free assistance available to consumers helps 
further both the goals of the Navigator program and the Exchanges 
generally by supporting access for low-income individuals who might 
previously have been priced out of the health insurance market. We now 
propose to make this an express prohibition in our regulations, through 
the addition of a new provision at Sec.  155.210(d)(5). If finalized, 
this prohibition would also apply to non-Navigator assistance personnel 
carrying out consumer assistance functions under Sec. Sec.  155.205(d) 
and (e) in an FFE and to non-Navigator assistance personnel funded 
through an Exchange Establishment Grant, since existing rules at Sec.  
155.215(a)(2)(i) require that these entities must comply with the 
prohibitions on Navigator conduct set forth at Sec.  155.210(d). We 
think the same rationale for the prohibition generally applies in the 
case of non-Navigator personnel. This proposal would also align the 
Navigator and non-Navigator assistance personnel provisions with the 
similar provision applicable to certified application counselors in 
existing Sec.  155.225(g).
    Our proposal would not prevent Navigators from charging for other, 
non-Navigator-related services the organization may offer, given that 
section 1311(i)(2) of the Affordable Care Act and implementing 
regulations at Sec.  155.210(c)(2) allow for various commercial 
entities or associations to become Navigators.\34\ We do not intend

[[Page 15831]]

to prevent a Navigator entity or individual Navigators from pursuing 
the normal course of their non-Navigator-related business or 
established non-Navigator-related programs. However, Navigators would 
not be permitted to solicit customers for their other, non-Navigator-
related services in connection with their Navigator duties. For 
example, a hospital conducting outreach and education events as a 
Navigator would not be permitted to use these events as opportunities 
to solicit new patients.
---------------------------------------------------------------------------

    \34\ Specifically, section 1311(i)(2)(B) and Sec.  155.210(c)(2) 
provide that Navigator entities may include, among others, trade, 
industry, and professional associations; commercial fishing industry 
organizations; ranching and farming organizations; community and 
consumer-focused nonprofit groups; chambers of commerce; unions, 
resource partners of the Small Business Administration; and licensed 
agents and brokers.
---------------------------------------------------------------------------

    We also propose to amend Sec.  155.210(d) to provide that Navigator 
organizations would be prohibited from compensating individual 
Navigators on a per-application, per-person assisted, or per-enrollment 
basis. We believe that such practices create adverse incentives that 
may result in enrollment errors or even improper conduct on the part of 
the Navigator, such as favoring consumers who take less time to assist 
than other consumers, or pressuring consumers to make quick decisions 
about their health coverage, rather than ensuring that they are fully 
informed about the full range of their options. Additionally, such a 
compensation methodology is inconsistent with the statutory and 
regulatory scheme for Navigators. We request comment on whether this 
proposal would negatively affect existing Navigator programs, including 
whether it would present implementation challenges for these programs 
if it becomes effective before November 15, 2014.
    The duties of a Navigator under section 1311(i)(3) of the 
Affordable Care Act and Sec.  155.210(e) are not limited to 
facilitating selection of a QHP. Navigators' duties also include 
conducting public education activities; distributing fair and impartial 
information about qualified health plans and advance payments of the 
premium tax credit and cost-sharing reductions; providing appropriate 
referrals for consumers with complaints, questions, or grievances about 
their health plan, coverage, or a determination under such plan or 
coverage; and providing information in a manner that is culturally and 
linguistically appropriate and accessible to people with disabilities. 
We believe that compensating Navigators based on the number of 
successful applications or enrollments may create disincentives to 
perform the full spectrum of required duties. To discourage improper 
conduct and ensure that Navigators fully perform each of their required 
duties, we propose to prohibit such compensation arrangements. Under 
the proposal, Navigators would be permitted to pay employees on a 
salaried basis, on a per-hour basis, or any other way that is not tied 
to the numbers of consumers who apply or enroll successfully with the 
Navigator's assistance. Because Sec.  155.210 applies to all 
Navigators, including those in States with State Exchanges, this 
prohibition would apply to Navigators in all States. We seek comment on 
this proposal and alternatives that build in rewards for performance 
without the unintended consequences previously described.
    As with Navigators, we believe it is important that non-Navigator 
assistance personnel authorized under Sec.  155.205(d) and (e) in FFEs 
and in State Exchanges if funded through section 1311(a) Exchange 
Establishment grants focus on providing full and accurate information 
rather than on meeting quotas. Because Sec.  155.215(a)(2) applies the 
prohibitions on certain conduct established for Navigators in Sec.  
155.210(d) to non-Navigator assistance personnel in FFEs, State 
Partnership Exchanges, and in State Exchanges if funded with section 
1311(a) Exchange Establishment grants, these prohibitions on Navigator 
conduct would also apply to these non-Navigator assistance personnel, 
and would help decrease the risk of creating adverse incentives that 
could potentially lead to improper conduct.
    In Sec.  155.210(d)(7), we propose that Navigators be prohibited 
from providing gifts to applicants or potential enrollees as an 
inducement for application assistance or enrollment, including gift 
cards or cash, unless they are of nominal value. We propose to define 
nominal value as a cash value of $15 of less, or an item worth $15 or 
less, based on the retail purchase price of the item regardless of the 
actual cost. This definition would be consistent with the definition 
used for nominal value in connection with prohibitions applicable to 
the marketing of Medicare Advantage and Medicare Part D plans. (See 73 
FR 54236) CMS proposes that it would update the definition of nominal 
value in guidance as necessary to account for inflation and other 
relevant factors. We seek comment on how nominal value should be 
defined in this context.
    We also propose in Sec.  155.210(d)(7) to prohibit Navigators from 
providing any applicant or potential enrollee with promotional items, 
that is, items that market or promote the products or services of a 
third party. There are several reasons we are proposing these 
prohibitions. First, providing cash or gifts, other than those of 
nominal value, would not be an appropriate use of Navigator grant 
funds, which are intended to be used to support a Navigator's outreach, 
education, and application assistance activities. In addition, section 
1311(d)(5)(B) of the Affordable Care Act prohibits an Exchange from 
utilizing any funds intended for the administrative and operational 
expenses of the Exchange, which would include the funds used to pay for 
the Exchange's grants to Navigators, to pay for promotional giveaways. 
Second, the provision of cash or gifts to potential applicants or 
enrollees may shift the focus of a Navigator's interaction with a 
potential applicant or enrollee away from its duties to provide 
information and services in a fair, accurate, and impartial manner and 
to facilitate selection of a QHP, in appropriate circumstances. 
Offering cash or gifts to potential applicants or enrollees could also 
cause some consumers to approach Navigators for reasons other than the 
receipt of information and Exchange application assistance. Third, 
providing to applicants or potential enrollees any promotional items 
that market or promote the products or services of a third party would 
be in conflict with the Navigator's duty to be fair and impartial in 
its dealings with consumers, since it introduces a third party's 
interests and marketing goals into the relationship between a Navigator 
and the consumers they serve. We believe that the duty of a Navigator 
to provide information and services in a fair, accurate and impartial 
manner make it inappropriate for a Navigator to engage in activities 
that give the appearance of promoting or marketing the products or 
services of third party business interests when it is performing 
Navigator activities and services.
    We are also proposing in Sec.  155.210(d)(8) and (9) new standards 
for Navigators with respect to their contacts and interaction with 
consumers, and the outreach and marketing practices they use when 
offering their services. In Sec.  155.210(d)(8), we propose to prohibit 
Navigators from going door-to-door or using other unsolicited means of 
direct contact to help consumers fill out applications or enroll in 
health coverage, although these proposed rules would not prohibit a 
Navigator from going door-to-door to provide consumers with educational 
or outreach materials. This would include making cold calls to a 
consumer to provide

[[Page 15832]]

application or enrollment assistance, without the consumer initiating 
the contact. In Sec.  155.210(d)(9), we propose to prohibit Navigators 
from making robocalls, or calls that use an automatic telephone dialing 
system or an artificial or prerecorded voice, when initiating contact 
with consumers. We believe that these standards will ensure that 
Navigator practices are protective of the privacy and security 
interests of the consumers they serve, and will also provide important 
guidance and peace of mind to consumers, when they are faced with 
questions or concerns about what to expect in their interactions with 
individuals offering Exchange assistance. We seek comment about whether 
any of the activities and strategies that we propose to prohibit for 
Navigators are appropriate and consistent with section 1311(i) of the 
Affordable Care Act.
    For the same reasons, the proposed standards established in Sec.  
155.210(d)(7), (8) and (9) would also apply to non-Navigator assistance 
personnel in FFEs, State Partnership Exchanges, and in State Exchanges 
if funded with section 1311(a) Exchange Establishment grants, through 
the reference in Sec.  155.215(a)(2), which applies the prohibitions on 
conduct established for Navigators in Sec.  155.210(d) to these types 
of non-Navigator assistance personnel.
    In addition, we propose to amend paragraph (e), which describes the 
duties of a Navigator, by adding a new paragraph (e)(6) that would 
require Navigators to provide applicants and enrollees seeking their 
assistance with notice of the functions and responsibilities of 
Navigators, to obtain written authorization from those they are 
assisting, in a form determined by the Secretary, and to retain these 
authorization forms. We propose that Exchanges must establish a 
reasonable retention period for maintaining this authorization, and 
that in FFEs the retention period would be three years, unless a 
different retention period has already been provided in the 
administrative requirements for CMS grant and cooperative agreement 
recipients at 45 CFR 92.42 and 45 CFR 74.53 or in other applicable 
Federal law. We have considered specifying a retention period for all 
Exchanges, including specifying either a minimum retention period or a 
specified retention period ranging from three to five years, and 
solicit comments on the best approach. We also propose that consumers 
would be able to revoke this authorization at any time. These 
provisions would ensure that all consumers receive adequate notice of 
the role and duties of a Navigator and that all consumers give their 
informed consent before sharing any personally identifiable information 
with the Navigator.
    For the same reasons, we also propose to add a new Sec.  155.215(g) 
applying these authorization provisions to non-Navigator assistance 
personnel authorized under Sec.  155.205(d) and (e) in FFEs, State 
Partnership Exchanges, and in State Exchanges if funded through section 
1311(a) Exchange Establishment grants.
    Finally, we propose to add a new Sec.  155.210(e)(7), requiring 
Navigators to maintain a physical presence in their Exchange service 
area, so that face-to-face assistance can be provided to applicants and 
enrollees. Under this proposal, a Navigator would not be required to 
have its principal place of business in the State in which Navigator 
services are being provided. For the same reasons, we also propose to 
add a new Sec.  155.215(g), to make the same provisions proposed for 
Navigators under Sec.  155.205(e)(7), as outlined above, also 
applicable to non-Navigator assistance personnel subject to Sec.  
155.215.
    We solicit comments on all aspects of these proposals.
c. Certified Application Counselors (Sec.  155.225)
    Section 1321(a)(1) of the Affordable Care Act directs and 
authorizes the Secretary to issue regulations setting standards for 
meeting the requirements under title I of the Affordable Care Act, with 
respect to, among other things, the establishment and operation of 
Exchanges. Pursuant to this authority, the Secretary issued Sec.  
155.225, which establishes the certified application counselor program 
as a consumer assistance function of the Exchange separate from and in 
addition to the functions described in Sec. Sec.  155.205(d) and (e), 
155.210, and 155.215.
    Section 155.225(b) establishes standards for the designation of a 
certified application counselor organization by an Exchange. We propose 
to add to these designation standards a new Sec.  155.225(b)(iii) which 
would establish the requirement that certified application counselor 
organizations maintain a physical presence in the Exchange service 
area, so that face-to-face assistance would be provided to applicants 
and enrollees. This proposed requirement would also facilitate consumer 
protection efforts by a State. We note that, under this proposal, an 
entity designated as a certified application counselor organization 
would not be required to have its principal place of business in the 
State in which certified application counselor services are being 
provided by the organization.
    Section 155.225(d) currently sets forth CAC certification 
standards, including the successful completion of Exchange-approved 
training. We propose to amend 45 CFR 155.225(d) to propose, in a new 
paragraph (d)(7), that individual certified application counselors 
would also be required to successfully complete Exchange-approved 
recertification training and be recertified on at least an annual 
basis. This proposal would ensure that certified application counselors 
keep up to date with current Exchange requirements and that they remain 
appropriately trained in order to best serve consumers. Under this 
proposal, each Exchange would establish its own recertification 
standards consistent with these requirements.
    Existing Sec.  155.225(f)(2) provides that certified application 
counselor organizations, or, if applicable, an Exchange that certifies 
staff members or volunteers of organizations directly, must establish 
procedures to ensure that consumers provide authorization before a 
certified application counselor has access to the consumer's personally 
identifiable information, and that the organization or application 
counselor must maintain a record of the authorization. We propose to 
revise this paragraph to clarify the retention period of the 
authorization form. We propose that Exchanges would be required to 
establish a reasonable retention period for maintaining this 
authorization, and specify that in FFEs, the retention period would be 
three years. We based this period on the retention period in the 
current administrative requirements for CMS grant and cooperative 
agreement recipients at 45 CFR 92.42 and 45 CFR 74.53. Because 
certified application counselors perform similar duties to Navigators 
and are subject to similar privacy and security requirements, we 
believe a similar retention period should apply, even though certified 
application counselors would not necessarily be HHS grantees. We have 
considered specifying a retention period for all Exchanges, including 
specifying either a minimum retention period or a specified retention 
period ranging from three to five years, and solicit comments on the 
best approach.
    Under existing regulations at 45 CFR 155.225(g), certified 
application counselors ``may not impose any charge on applicants for 
application or other assistance related to the Exchange.'' This was 
intended as a strict prohibition on the imposition of charges or fees 
by

[[Page 15833]]

certified application counselors. We now propose to amend Sec.  
155.225(g) to substitute ``must not'' for ``may not,'' so that there 
can be no doubt about the intent of this requirement.
    We also propose to amend 45 CFR 155.225(g) to reorganize and 
renumber this section and to propose several additional standards for 
certified application counselors. We propose that what is now Sec.  
155.225(g) should be renamed as a section establishing standards 
related to ``fees, consideration, solicitation and marketing.'' We 
propose to redesignate amended Sec.  155.225(g) as Sec.  155.225(g)(1) 
and add the new prohibitions in this amended section to new Sec. Sec.  
155.225(g)(2) through (6).
    In Sec.  155.225(g)(2), we propose to expressly prohibit certified 
application counselors from receiving consideration, directly or 
indirectly, from health insurance issuers or stop loss issuers in 
connection with the enrollment of consumers in qualified health plans 
(QHPs) or non-QHPs. This proposed new requirement would align with the 
same standards of conduct applicable to Navigators and certain non-
Navigator assistance personnel under 45 CFR 155.210(d)(4) and 
155.215(a)(2)(ii), and would apply to individual certified application 
counselors as well as to the organizations that have been designated as 
certified application counselor organizations. The reason for this 
proposal is that, in our view, receiving commissions or other 
consideration for enrollment in QHPs or non-QHPs is not consistent with 
the purpose and scope of certified application counselor program 
activities. Under Sec.  155.225(c), certified application counselors 
must act in the best interest of consumers they assist, inform 
consumers about the full range of health coverage options and 
affordability programs for which they are eligible, and help to 
facilitate enrollment of eligible individuals in QHPs and insurance 
affordability programs. As such, neither an individual certified 
application counselor nor his or her designated organization should 
have any personal financial incentive to recommend a particular health 
coverage option.
    Under this proposed amendment, while an Exchange could certify 
individuals as certified application counselors who are agents or 
brokers, and a designated certified application counselor organization 
similarly could certify staff or volunteers as certified application 
counselors who are agents or brokers, those individuals and the 
certified application counselor organization itself would not be 
permitted to receive compensation from health insurance or stop loss 
insurance issuers for enrolling individuals in QHPs or non-QHPs. Under 
this proposed amendment, in other words, certified application 
counselors and the certified application counselor designated 
organizations with which they are affiliated would not be strictly 
prohibited from being agents and brokers, as long as they do not 
receive any consideration in connection with enrollment of a consumer 
in a QHP or non-QHP. Therefore, agents and brokers who sell lines of 
insurance other than health insurance or stop loss insurance (for 
example, auto, life, and homeowners' policies) would not be prohibited 
from receiving consideration from the sale of those other lines of 
insurance while serving as a certified application counselor, provided 
they disclose the relationship to the consumer receiving assistance. We 
note that Sec.  155.225(d)(2) requires a certified application 
counselor to disclose any relationship he or she or the sponsoring 
certified application counselor agency has with QHPs or insurance 
affordability programs, ``or other potential conflicts of interest,'' 
to the appropriate parties outlined in that provision. Consistent with 
the interpretation we advanced with respect to the Navigator program, 
we interpret ``other potential conflicts of interest'' in this context 
to include any private or personal interest sufficient to influence, or 
appear to influence, the objective exercise of a certified application 
counselor's or certified application counselor organization's official 
duties (see 77 FR 18330-31). In an FFE, we interpret ``other potential 
conflicts of interest'' to encompass any relationship with a certified 
application counselor which may have an influence on the information or 
scope of assistance being provided to the consumer during the course of 
the certified application counselor's assistance or any relationship 
that would confer benefits or indirect financial gain that could 
potentially compromise a certified application counselor's ability to 
act in the best interests of the consumer.
    We also propose to add a new Sec.  155.225(g)(3), which would 
prohibit individual certified application counselors from being 
compensated on a per-application, per-individual- assisted, or per-
enrollment basis. As with Navigators and non-Navigator assistance 
personnel, we believe that in order for application and enrollment 
assistance to be effective and appropriate for each consumer, per-
enrollment or per-application incentives that might encourage certified 
application counselors to rush through sessions with consumers, or not 
to provide them with complete information or enough time to make 
complex and important health coverage decisions, should not be 
permitted. Such incentives would impede a certified application 
counselor's ability to act in the best in the best interests of 
consumers, as they are required to do under Sec.  155.225(d)(4). This 
proposal would also help streamline requirements for these three types 
of assistance personnel. We seek comment on this proposal and 
alternatives that build in rewards for performance without the 
unintended consequences previously described.
    We also propose to add a new paragraph (g)(4) to prohibit certified 
application counselors from providing applicants or potential enrollees 
any gifts, including gift cards or cash, unless they are of nominal 
value. As we also proposed in our earlier discussion with respect to 
Navigators, we propose to define nominal value consistent with the 
definition used for nominal value in connection with prohibitions 
applicable to the marketing of Medicare Advantage and Medicare Part D 
plans. (See 73 FR 54236) Specifically, nominal value would be defined 
as a cash value of $15 of less, or an item worth $15 or less, based on 
the retail purchase price of the item regardless of the actual cost. 
CMS proposes that it would update the definition of nominal value in 
guidance as necessary to account for inflation and other relevant 
factors. We seek comment on how nominal value should be defined in this 
context. We also propose in this section to prohibit certified 
application counselors from providing applicants and potential 
enrollees with promotional items that market or promote the products or 
services of a third party, in connection with, or as an inducement for 
application assistance or enrollment. We are proposing this prohibition 
for certified application counselors for similar reasons to those 
expressed above in connection with the prohibition in the Navigator and 
non-Navigator assistance programs. We are concerned that the provision 
of cash or gifts to potential applicants or enrollees might interfere 
with the duties of the individual providing assistance to that 
applicant or potential enrollee; and in the case of a certified 
application counselor, might shift the focus of a certified application 
counselor's interaction with a potential applicant or enrollee away 
from the certified application counselor's duties to act in the 
consumer's best interest and to

[[Page 15834]]

facilitate selection of a QHP. In addition, if a certified application 
counselor provides promotional items that market or promote the 
products or services of a third party, this too would conflict with the 
duty of a certified application counselor to act in the best interest 
of the consumer, since it introduces a third party's interests and 
marketing goals into the relationship between the certified application 
counselor and the consumer they are assisting and may also cause 
consumers to approach certified application counselors for reasons 
unrelated to the receipt of information and Exchange application 
assistance.
    In proposed section Sec.  155.225(g)(5), we would establish a 
standard for certified application counselors that would prohibit them 
from soliciting consumers for application or enrollment assistance by 
going door-to-door to provide this assistance, or to use other 
unsolicited means of direct contact, including calling a consumer, to 
provide application or enrollment assistance without the consumer 
initiating the contact. We also propose in a new Sec.  155.225(g)(6) to 
prohibit certified application counselors from making robocalls to 
consumers, such as those that are initiated to a consumer using an 
automatic telephone dialing system or an artificial or prerecorded 
voice. As we explained earlier in this preamble in relation to the 
parallel proposed standard for Navigators and non-Navigator assistance 
personnel, we believe restrictions on door-to-door solicitation and 
cold-calling would ensure that certified application counselors use 
practices that are protective of the privacy and security interests of 
the consumers they serve, and give those consumers the greatest peace 
of mind. We also believe that these standards would provide important 
guidance to consumers about what to expect in their interactions with 
certified application counselors. As with the parallel proposal for 
Navigators and non-Navigator assistance personnel, we clarify that this 
proposal would not prohibit a certified application counselor from 
going door-to-door to provide consumers with information about the 
availability of application assistance services, or other educational 
or outreach materials,\35\ We seek comment about whether any of the 
activities and strategies that we propose to prohibit are appropriate 
and consistent with Federal requirements.
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    \35\ We note that certified application counselors are not 
required to perform outreach activities. (see 78 FR 42826).
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    We solicit public comments on all aspects of these proposals.
d. Payment of Premiums (Sec.  155.240)
    There are a limited number of circumstances in which an individual 
will be enrolled in a qualified health plan through the Exchange for 
less than a full month. In particular, these include situations in 
which a child is born, adopted, placed for adoption, or placed for 
foster care, or when an individual voluntarily terminates enrollment. 
Currently, there are no Federal standards for how premiums are prorated 
in these limited situations. In order to provide flexibility for 
Exchanges to establish a standardized methodology for partial month 
premiums or rely on issuers to prorate premiums in accordance with 
State law and issuer policies, we propose in Sec.  155.240(e) that the 
Exchange may establish one or more standard processes for premium 
calculation. Further, consistent with the methodology finalized for the 
FF-SHOP at Sec.  155.705(b)(4)(ii)(B) in the 2015 Payment Notice, in 
paragraph (e)(1), we propose that for the Federally-facilitated 
Exchange, the premium for coverage lasting less than one month must 
equal the product of the premium for one month of coverage divided by 
the number of days in the month and the number of days for which 
coverage is being provided in the month described in paragraph 
(e)(1)(i) of this section. Adopting this policy for the Federally-
facilitated Exchange will address situations in which enrollees have 
mid-month changes in enrollment. For example, the proposed policy will 
also address mid-month births or adoptions and prevent these enrollees 
from paying for coverage on days they were not enrolled in coverage. In 
addition, the proposed policy will eliminate issues where consumers who 
transition to Medicaid are charged premiums for days on which they are 
enrolled in Medicaid. Although it is not a new occurrence for consumers 
to transition from private health insurance to Medicaid without the 
benefit of premiums that are prorated precisely to the last day of 
private health insurance and the first day of Medicaid coverage, we 
anticipate that the expansion of private health insurance through the 
Exchange will increase the number of individuals who will be able to 
move between coverage types. We believe that the proposed policy will 
benefit this broadening group. This policy will also be consistent with 
proposed 26 CFR 1.36B-3(d)(2), which specifies that when coverage is 
terminated before the last day of the month, and the issuer reduces or 
refunds a portion of the monthly premium, the premium tax credit is 
adjusted using the same methodology described in this regulation for 
the FF-SHOP. Aligning with the premium tax credit calculation will 
provide a cohesive policy across the Federally-facilitated Exchange for 
handling mid-month changes in enrollment, and will simplify the 
calculation of net premiums. Finally, the proposed Federally-
facilitated Exchange policy will protect consumers and prevent them 
from paying premiums for days in which they are not enrolled in 
coverage. We intend to work closely with QHP issuers to implement this 
provision in the Federally-facilitated Exchange as soon as is 
reasonably possible.
    We seek comment on this proposed amendment.
e. Privacy and Security of Personally Identifiable Information (Sec.  
155.260)
    We propose amending Sec.  155.260(g) to add a reference to Sec.  
155.285, which is being proposed as part of this proposed rule. Section 
155.285 proposes to specify the grounds for imposing civil money 
penalties, the notice required to be given to a person when a civil 
money penalty is assessed, and factors to be used to determine the 
amount of civil money penalties assessed, as well as some aspects of 
the process for imposing civil money penalties. We propose this 
addition to Sec.  155.260(g) to clearly link these two regulatory 
provisions and to ensure that readers fully understand how civil money 
penalties will be assessed for any improper use or disclosure of 
information.
f. Bases and Process for Imposing Civil Money Penalties for Provision 
of False or Fraudulent Information to an Exchange or Improper Use or 
Disclosure of Information (Sec.  155.285)
    Section 1411 of the Affordable Care Act sets forth the procedures 
for determining eligibility for Exchange participation, premium tax 
credits and reduced cost-sharing, and the individual responsibility 
exemptions. Section 1411(b) specifies minimum information required to 
be provided by an applicant, including name, address, date of birth, 
social security number (if applicable, based on the applicant's 
citizenship or immigration status), and immigration status. For 
applicants seeking eligibility for advance payment of the premium tax 
credit or cost sharing reductions, section 1411(b) also specifies that 
the applicant must provide information regarding income and family 
size, and information regarding employer sponsored coverage.

[[Page 15835]]

For applicants for an exemption from the shared responsibility payment 
for failure to maintain minimum essential coverage, section 1411(b) 
also requires submission of information relevant to the specific 
exemption sought by the applicant. In addition, section 1411(g) of the 
Affordable Care Act also requires that any person who receives 
information provided by an applicant under section 1411(b), whether 
directly from the applicant, by another person at the request of the 
applicant, or from a Federal agency may use the information only for 
the purposes of, and to the extent necessary in, ensuring the efficient 
operation of the Exchange. Finally, section 1411(h) specifies the civil 
money penalties which can be imposed for the provision of false or 
fraudulent information as well as for the improper use and disclosure 
of information. In Sec.  155.285, we propose to regulate on this 
statutory authority to impose civil money penalties for the provision 
of false and fraudulent information in violation of section 1411(h)(1) 
of the Affordable Care Act and the improper use and disclosure of 
information in violation of section 1411(g) of the Affordable Care Act.
    In Sec.  155.285(a), in accordance with the grounds on which 
penalties may be imposed as specified in section 1411(h) of the 
Affordable Care Act, we propose the circumstances in which HHS may 
impose civil money penalties (CMPs) on a person if HHS determines that 
the person has provided false or fraudulent information as prohibited 
by section 1411(h)(1) or improperly used or disclosed information in 
violation of section 1411(g). We want to ensure that any person who 
does not comply with relevant statutory and regulatory provisions, 
which limit the ways in which information provided by an applicant or 
from a Federal agency can be used, may be appropriately penalized. HHS 
may impose CMPs for three specific types of actions related to the 
provision of false or fraudulent information and the improper use of 
information. HHS intends to work in collaboration with States to 
oversee, monitor, and enforce compliance with Sec.  155.285 in order to 
protect consumers, avoid duplication of efforts, and provide consistent 
enforcement practices.
    Section 1411(b) specifies the information that is required to be 
provided by an applicant for enrollment in a QHP offered through an 
Exchange in the individual market, for premium tax credits or cost 
sharing reductions, or for an exemption from the individual shared 
responsibility payment based on the individual's status as a member of 
an exempt religious sect or division, as an Indian, or as an individual 
eligible for a hardship exemption, or based on the individual's lack of 
affordable coverage or the individual's status as a taxpayer with 
household income less than 100 percent of the poverty line. In Sec.  
155.285(a)(1)(i), we propose that if any person (as defined at proposed 
Sec.  155.285(a)(2)) fails to provide correct information under section 
1411(b) of the Affordable Care Act and such failure is attributable to 
negligence or disregard of any regulations of the Secretary, the person 
may be subject to a CMP. For purposes of this subsection, the terms 
``negligence'' and ``disregard'' have the same meaning as those in 
section 6662 of the Code. Thus, we propose that ``negligence'' includes 
any failure to make a reasonable attempt to provide accurate, complete, 
and comprehensive information, and the term ``disregard'' includes any 
careless, reckless, or intentional disregard for any rules or 
regulations of the Secretary. Under proposed Sec.  155.285(a)(1)(i), if 
a person fails to make a reasonable attempt to provide accurate, 
complete and comprehensive information and as a result provides 
incorrect information, the person may be subject to a CMP.
    Second, in Sec.  155.285(a)(1)(ii), we propose that if a person 
knowingly and willfully provides false or fraudulent information under 
section 1411(b) of the Affordable Care Act, the person may be subject 
to a CMP. Here, HHS must find that a person provided false or 
fraudulent information ``knowingly and willfully.'' This provision aims 
to ensure that any person who intentionally provides information 
required under section 1411(b) of the Affordable Care Act that the 
person knew to be false could be subject to a CMP. In addition, if 
consumer assistance personnel such as an agent, broker, Navigator, 
certified application counselor, or non-Navigator assistance personnel, 
were to in some manner directly provide false or incorrect information 
required under section 1411(b), they may also be subject to a CMP. If 
consumer assistance personnel subject to Sec.  155.206 of this subpart 
were to engage in this type of behavior, we propose that it should be 
left to HHS' discretion to determine whether it was appropriate to 
impose a CMP under this regulation, or under Sec.  155.206 of this 
subpart, if applicable. We note that Sec.  155.206 would only apply to 
Navigators, certified application counselors, and non-Navigator 
assistance personnel in a Federally-facilitated Exchange and that 
violations of Sec.  155.285 may not necessarily also constitute 
violations of Sec.  155.206. In such instances where consumer 
assistance personnel may be subject to a CMP under both Sec. Sec.  
155.206 and 155.285, we have considered specifying that HHS may only 
impose a CMP under Sec.  155.285. However, we propose that it should be 
left to HHS' discretion to determine whether it would be appropriate to 
impose a CMP under Sec.  155.206 or Sec.  155.285. We seek comment on 
this proposal and whether any alternative approaches should be used.
    Third, in Sec.  155.285(a)(1)(iii), we propose that if a person 
knowingly and willfully uses or discloses information in violation of 
Affordable Care Act section 1411(g), the person may be subject to a 
CMP. Section 1411(g) of the Affordable Care Act specifies that any 
person who receives information required to be provided by an 
applicant, whether the person receives the information directly or by 
another person at the request of the applicant, or receives information 
from a Federal agency that has been verified as being consistent or 
inconsistent with the records of that Federal agency, may use the 
information only for the purposes of, and to the extent necessary in, 
ensuring the efficient operation of the Exchange. We will refer to the 
personally identifiable information (PII) described in the previous 
sentence as ``Exchange PII'' for the purposes of this section. Section 
1411(g) of the Affordable Care Act also specifies that any person who 
receives Exchange PII may not disclose the information to any other 
person except as provided in section 1411 of the Affordable Care Act. 
Section 155.260(a)(1) and (2) implement section 1411(g) of the 
Affordable Care Act by specifying that an Exchange may only use or 
disclose Exchange PII to carry out the functions described at Sec.  
155.200 or to carry out additional functions which the Secretary has 
determined ensure the efficient operation of the Exchange and for which 
the individual has provided consent for his or her information to be so 
used or disclosed.
    In Sec.  155.285(a)(1)(iii)(A) through (C), we propose types of 
activities that would be in violation of section 1411(g) of the 
Affordable Care Act. Because Sec.  155.260 further describes the 
limitations on the use and disclosure of Exchange PII, we propose that 
any use or disclosure of Exchange PII that violates relevant privacy 
and security standards established by the Exchange pursuant to Sec.  
155.260 of this subpart may constitute a violation of section 1411(g) 
of the Affordable Care Act. We also propose that any other use or 
disclosure that has not been determined by the Secretary to ensure the 
efficient

[[Page 15836]]

operation of the Exchange be compliant with section 1411(g)(2)(A) of 
the Affordable Care Act pursuant to Sec.  155.260(a), and which is not 
necessary to carry out a function described in a contract with a non-
Exchange entity executed pursuant to Sec.  155.260(b)(2) of this 
subpart, may constitute a violation of section 1411(g) Affordable Care 
Act. More specific examples of activities that would violate section 
1411(g) Affordable Care Act include a person selling lists of Exchange 
PII belonging to individuals who apply for enrollment or enroll in an 
Exchange qualified health plan, or a non-Exchange entity using the PII 
of individuals who sought enrollment in an Exchange qualified health 
plan to market products or services to those individuals. We note that 
without the express, specific consent of the consumer for their PII to 
be used for marketing purposes, use of Exchange PII for marketing 
purposes is prohibited by section 1411(g). In addition, we note that 
any person who obtains specific consent from an applicant or enrollee 
to use PII for marketing purposes must clearly inform the applicant or 
enrollee that the marketing activities have no relationship to or 
bearing on an eligibility determination for or enrollment in the 
Exchange. To the extent any person plans to obtain such consent to 
market products to Exchange applicants and enrollees, the person should 
be prepared to provide proof of consent upon request by the agency 
during the course of the agency's normal oversight activities.
    In Sec.  155.285(a)(2), we propose a definition of the term 
``person.'' We propose that for purposes of this regulation, the term 
``person'' should be defined to include, but should not be limited to, 
all individuals; corporations; Exchanges; Medicaid and CHIP agencies; 
other entities gaining access to PII submitted to an Exchange to carry 
out additional functions which the Secretary has determined ensure the 
efficient operation of the Exchange pursuant to 155.260(a)(1); and non-
Exchange entities as defined in Sec.  155.260(b) of this subsection, 
which includes agents, brokers, Web-brokers, QHP issuers, Navigators, 
certified application counselors, in-person assistors, and other third 
party contractors. The term ``person'' would also include the employees 
of the aforementioned entities. We propose to define the term very 
broadly because there are several different types of individuals and 
entities that could engage in the actions enumerated in Sec.  
155.285(a)(1), and we hope to ensure that all such individuals and 
entities are aware of the penalties they could incur. We seek comment 
on these proposals.
    In Sec.  155.285(b), we propose the factors that HHS may take into 
consideration when determining the amount of CMPs to impose. We propose 
in Sec.  155.285(b)(1) that HHS may take into account factors that 
include, but are not limited to, the following factors: the nature and 
circumstances of the conduct including the number of individual 
violations; the severity of the violations; the person's history with 
the Exchange, including any prior violations that would indicate 
whether the violation is an isolated occurrence or represents a pattern 
of behavior; the length of time during which the violation(s) occurred; 
the number of individuals affected or potentially affected; and the 
extent to which the person received compensation or other consideration 
associated with the violation. We also propose in Sec.  155.285(b)(2) 
that HHS take into account the nature and extent of the harm resulting 
from the action, including the number of individuals affected; whether 
the violation resulted in financial harm; whether there was harm to an 
individual's reputation; whether the violation hindered or could have 
hindered an individual's ability to obtain health care coverage; the 
actual or potential impact of the provision of false or fraudulent 
information or of the improper use or disclosure of information; and 
whether any person received a more favorable eligibility determination 
for enrollment in a QHP or insurance affordability program, such as 
greater advance payment of the premium tax credits or cost-sharing 
reduction than he or she would be eligible for if the correct 
information had been provided.
    In Sec.  155.285(b)(3), we implement the reasonable cause exception 
of section 1411(h)(1)(A)(ii) of the Affordable Care Act pursuant to 
which no penalty will be imposed under Sec.  155.285(a)(1)(i) if HHS 
determines that there was a reasonable cause for the failure to provide 
correct information required on an Exchange application and that the 
person acted in good faith. We feel that this reasonable cause 
exception is very important to ensure that no CMP may be imposed for a 
situation in which a person was acting in good faith.
    In Sec.  155.285(c), we propose maximum penalties for each 
different type of violation, in accordance with the statutory 
limitations set forth in section 1411(h) of the Affordable Care Act. 
Section 155.285(c)(1) addresses maximum penalties for provision of 
incorrect information, where such failure is attributable to negligence 
or disregard of any rules or regulations of the Secretary, and for 
knowing and willful provision of false or fraudulent information in 
violation of section 1411(h) of the Affordable Care Act. We propose 
that the maximum penalty may be imposed on a per application basis, as 
defined at proposed Sec.  155.285(c)(1)(iii), during a single ``plan 
year.'' We propose to use the definition for ``plan year'' at Sec.  
155.20, where a ``plan year'' means a consecutive 12 month period 
during which a health plan provides coverage for health benefits and 
which may be a calendar year or otherwise. In Sec.  155.285(c)(1)(i), 
we propose that any person who fails to provide correct information as 
specified in Sec.  155.285(a)(1)(i) may be subject to a maximum CMP, as 
specified in section 1411(h)(1)(A)(i) of the Affordable Care Act, for 
each ``application'' on which the person fails to provide correct 
information. In Sec.  155.285(c)(1)(ii), we propose that any person who 
knowingly and willfully provides false information as specified in 
Sec.  155.285(a)(1)(ii) may be subject to a maximum CMP, as specified 
in section 1411(h)(1)(A)(i) of the Affordable Care Act, for each 
application on which the person knowingly and willfully provides false 
information. Since we are proposing that we would impose a penalty on a 
plan year basis, if a person were to elect to use the same information 
which he or she entered on an initial application for the subsequent 
plan year, and the person had knowingly and willfully entered false 
information on an application as described in Sec.  155.285(c)(1)(ii), 
the person may be subject to two CMPs, each up to the maximum CMP 
specified in section 1411(h)(1)(A)(i) of the Affordable Care Act, based 
on the provision of false information for two plan years.
    In Sec.  155.285(c)(1)(iii), we propose that for the purposes of 
this subsection, an ``application'' is defined as a submission of 
information whether submitted through an online portal, over the 
telephone through a call center, or through a paper submission process. 
This submission of information is provided in relation to any of the 
following: An eligibility determination; an eligibility redetermination 
based on a change in an individual's circumstances; or an annual 
eligibility redetermination for either enrollment in a qualified health 
plan, for premium tax credits or cost sharing reductions, or for an 
exemption from the individual shared responsibility payment. By 
proposing this definition of application, we intend for each submission 
of information, regardless of the means of

[[Page 15837]]

submission, to be considered a distinct application. For example, where 
a person submits an initial application for enrollment in a QHP, and 
later updates his or her information to reflect a change in 
circumstance, we propose that this person would have submitted two 
applications. We anticipate that there may be situations where a person 
submits a false piece of information on an initial application for 
coverage, and this false information could be seen as re-submitted on a 
second application in the same plan year. We propose to provide HHS 
flexibility in such situations as that described above so that HHS may, 
in its discretion, and depending on the particular facts of the case, 
determine the number of incorrect pieces of information submitted, and 
therefore determine the appropriate penalty for this situation. We 
solicit comment on this proposal as well as on alternate methods 
through which HHS could determine the appropriate amount of penalties 
to impose.
    In Sec.  155.285(c)(2), we propose that any person who knowingly or 
willfully uses or discloses information as specified in Sec.  
155.285(a)(1)(iii) may be subject to a CMP. We propose in Sec.  
155.285(c)(2)(i) that a person may be subject to a maximum CMP, as 
specified in section 1411(h)(2) of the Affordable Care Act, for each 
use or disclosure described in paragraph (a)(1)(iii) of this section, 
per use or disclosure. We also propose to define, in Sec.  
155.285(d)(2)(ii) that a use or disclosure includes one separate use or 
disclosure of a single individual's PII that the person against whom a 
civil money penalty may be imposed has made. For example, if an agent 
were to sell a list of 100 consumers' names and other identifiable 
information to another entity, the proposed definition of a use or 
disclosure would mean that HHS could impose a total of 100 CMPs, each 
with a maximum penalty of the amount specified in section1411(h)(2) of 
the Affordable Care Act because the agent had disclosed the PII of 100 
individuals. In Sec.  155.285(c)(3), we also propose that these 
penalties may be imposed in addition to any other penalties that may be 
prescribed by law.
    In Sec.  155.285(d), we propose standards for a notice of intent to 
issue a CMP that HHS must send to the person against whom the CMP is 
being imposed. We propose that the written notice will be either hand 
delivered, sent by certified mail, return receipt requested, or sent by 
overnight delivery service with signature upon delivery required. In 
Sec.  155.285(d)(1)(i)-(viii), we propose eight elements that must be 
included in the notice. The elements which must be included are as 
follows: (1) A description of the findings of fact regarding the 
violations with respect to which the CMP is proposed; (2) the basis and 
reasons why the findings of fact subject the person to a penalty; (3) 
any circumstances described in Sec.  155.285(c) that were considered in 
determining the amount of the proposed penalty; (4) the amount of the 
proposed penalty; (5) an explanation of the person's right to a hearing 
under any applicable administrative hearing process; (6) a statement 
that the failure to request a hearing within 60 calendar days after the 
date of the notice permits the assessment of the proposed penalty; and 
(7) information explaining how to file a request for a hearing and the 
address to which the hearing request must be sent. We propose that the 
person may request a hearing before an ALJ on the proposed penalty by 
filing a request pursuant to the procedure that will be outlined in the 
notice of intent to issue a penalty that the person receives.
    In Sec.  155.285(e), we propose the consequences for a person who 
fails to request a hearing in a timely manner. We propose that HHS may 
assess the proposed CMP 60 calendar days after the date of issuance 
printed on the notice of intent to issue a CMP. In Sec.  155.285(e)(1), 
we propose that HHS will notify the person in writing of any penalty 
that has been imposed, the means by which the person can satisfy the 
penalty, and the date on which the penalty is due. We propose in Sec.  
155.285(e)(2) that a person has no right to appeal a penalty with 
respect to which the person has not timely requested a hearing. We 
believe 60 days is a sufficient period for a person to request a 
hearing. We seek comment on these proposals.
    In Sec.  155.285(f), we propose to use the existing appeals 
framework in regulation at 45 CFR Part 150, Subpart D. We propose to 
exclude Sec. Sec.  150.461, 150.463, and 150.465 based on their lack of 
applicability to Sec.  155.285. In Sec.  155.285(g), we propose that 
CMS and OIG will share enforcement authority to impose the CMPs in 
Sec.  155.285. In Sec.  155.285(g)(1), we propose that CMS may impose 
CMPs for any of the violations at Sec.  155.285(a). In Sec.  
155.285(g)(2), we propose that OIG may impose CMPs for violations 
specified at Sec.  155.285(a)(1)(ii) and (iii) in place of imposition 
of penalties by CMS. We believe OIG has the investigative capabilities 
which would be necessary to determine whether a person performed an 
action knowingly and willfully, a finding which would be required 
before imposing a CMP for the violations specified at Sec.  
155.285(a)(1)(ii) and (iii). In light of our proposal to allow OIG to 
impose CMPs for violations specified at Sec.  155.285(a)(1)(ii) and 
(iii), we anticipate that OIG would amend its regulations at part 1003 
of Chapter V of title 42 to encompass the standards set forth in this 
section. We seek comment on the proposed use of the regulatory 
framework for appeals at 45 CFR Part 150, Subpart D and on the question 
of whether any other regulatory framework used by HHS for appeals 
presents a more appropriate framework.
    In Sec.  155.285(h), we propose a settlement authority provision to 
ensure CMS is able to settle any issue or case described in Sec.  
155.285(a) if necessary. Finally, in Sec.  155.285(i), we propose a six 
year statute of limitations, beginning from the date on which the 
violation occurred, within which HHS may impose a CMP against a person. 
We seek comment on the proposed 6 year statute of limitations.
3. Subpart D--Exchange Functions in the Individual Market: Eligibility 
Determinations for Exchange Participation and Insurance Affordability 
Programs
a. Verification of Eligibility for Minimum Essential Coverage Other 
Than Through an Eligible Employer-Sponsored Plan (Sec.  155.320)
    In Sec.  155.320(d)(4), we established an option under which a 
State Exchange could rely on HHS to conduct verifications of enrollment 
in an eligible employer-sponsored plan and eligibility for qualifying 
coverage in an eligible employer-sponsored plan for purposes of 
eligibility for advance payments of the premium tax credit. This option 
was made available for eligibility determinations that are effective on 
or after January 1, 2015. Under this option, a State Exchange would 
need to develop an interface through which to transfer information to 
HHS, HHS would need to develop a way to receive and process the 
information, check data sources, potentially communicate with 
consumers, and then return information to the State Exchange, and the 
State Exchange would need to modify systems to integrate this response 
into what should otherwise be a near-real-time eligibility process. 
Responsibilities for customer service would likely be split across the 
State Exchange and HHS, which would be difficult to coordinate and 
increase administrative costs.
    Accordingly, we have determined that the benefit gained by having 
HHS provide this function is far outweighed

[[Page 15838]]

by the information technology development and administrative and 
consumer complexity that would be introduced for a State through this 
approach. As such, we propose to strike paragraph (d)(4). We remain 
committed to working with State Exchanges to develop effective 
solutions for verifying enrollment in an eligible employer-sponsored 
plan and eligibility for qualifying coverage in an eligible employer-
sponsored plan, and will work to make any additional electronic data 
sources that are accessible to HHS equally available to State 
Exchanges. We note that this proposed modification does not change the 
substantive rules regarding the verification of enrollment in an 
eligible employer-sponsored plan and eligibility for qualifying 
coverage in an eligible employer-sponsored plan. Therefore, the change 
does not affect program integrity.
b. Eligibility Redetermination During a Benefit Year (Sec.  155.330)
    We propose a technical correction in paragraph (d)(2)(ii) to remove 
the reference to paragraph (e)(3) of this section. In the final rule 
titled, ``Medicaid and Children's Health Insurance Programs: Essential 
Health Benefits in Alternative Benefit Plans, Eligibility Notices, Fair 
Hearing and Appeal Processes, and Premiums and Cost Sharing; Exchanges: 
Eligibility and Enrollment'', 78 FR 32319, we previously removed 
paragraph (e)(3) from this section. As such, we now clarify that 
paragraph (d)(2)(ii) should only refer to the standards specified in 
paragraph (e)(2) of this section.
4. Subpart E--Exchange Functions in the Individual Market: Enrollment 
in Qualified Health Plans
a. Enrollment of Qualified Individuals in a QHP (Sec.  155.400)
    In Sec.  155.400, we propose to add paragraph (e). In this 
paragraph, we propose to establish that the Exchange would provide 
instructions to issuers regarding payment of the first month's premium 
for enrollments. Additionally, in Sec.  156.265 we propose to establish 
a requirement for issuers in the Federally-facilitated Exchanges 
regarding payment due dates to collect premiums no later than the day 
before the coverage effective date. Our intention is to give the 
Exchange the flexibility to establish policy and process rules 
regarding premium payment.
    We also propose to add paragraph (f), which would authorize 
Exchanges to provide requirements to QHP issuers regarding the 
instructions for processing electronic enrollment-related transactions.
b. Initial and Annual Open Enrollment Periods (Sec.  155.410)
    In 45 CFR 155.410(d), we specify that starting in 2014, the 
Exchange must provide a written annual open enrollment notification to 
each enrollee no earlier than September 1, and no later than September 
30. In 45 CFR 155.335(d), we specify that notice of annual 
redetermination for coverage effective January 1, 2015 be provided as a 
single, consolidated notice with the notice specified in 45 CFR 
155.410(d). In the 2015 Payment Notice, we amended 45 CFR 155.410(e) to 
specify that for the benefit year beginning on January 1, 2015, the 
annual open enrollment period begins on November 15, 2014. Accordingly, 
we believe that it is appropriate to modify the timing of the notice of 
annual open enrollment and annual redetermination. Two options we could 
consider for this notice include, but are not limited to: (1) Shifting 
the period during which the notice would be sent by a month, so that 
the notice would be sent no earlier than October 1, and no later than 
October 31; and (2) shifting the period during which the notice would 
be sent by a month and lengthening this period so that the notice would 
be sent no earlier than October 1, and no later than November 15, 
provided that electronic notices are available for any consumer who 
contacts the Exchange on November 15. We solicit comment on which of 
these options we should implement, or if we should implement another 
option.
c. Special Enrollment Periods (Sec.  155.420)
    In 45 CFR 155.420, we set forth provisions for special enrollment 
periods. We now propose amending Sec.  155.420(b)(2)(ii), (d)(1), 
(d)(6)(iii) and (e), which pertain to the special enrollment period for 
loss of coverage; Sec.  155.420(b)(2)(i) and (iii), which pertain to 
effective dates for certain special enrollment periods; and Sec.  
155.420(c), to address the length of the special enrollment periods.
    In paragraph (b)(2)(i), we propose to provide flexibility for 
coverage effective dates in the case of birth, adoption, placement for 
adoption, or placement in foster care. We continue to require the 
Exchange to ensure that coverage is effective for a qualified 
individual or enrollee on the date of birth, adoption, placement for 
adoption, or placement in foster care, but we allow Exchanges to permit 
the qualified individual or enrollee to elect a later coverage 
effective date. If the Exchange permits the qualified individual or 
enrollee to elect a later coverage effective date, the Exchange must 
ensure coverage is effective on the date elected by the qualified 
individual or enrollee. We are considering establishing parameters for 
the dates that may be chosen by the qualified individual or enrollee.
    In Sec.  147.104(b)(2), we specified that, ``a health insurance 
issuer in the individual market must provide, with respect to 
individuals enrolled in non-calendar year individual health insurance 
policies, a limited open enrollment period . . .'' Accordingly, in 
order to align Exchange regulations with those of the broader insurance 
market, in paragraph (d)(1), we propose that the Exchange permit 
qualified individuals and their dependents to enroll in or change from 
one QHP to another if they are enrolled in a non-calendar year 
individual health insurance policy in 2014 described in Sec.  
147.104(b)(2), even if such non-calendar year policies are renewing. 
Thus, consumers whose individual health insurance policies that renew 
outside the Exchange open enrollment period have an opportunity to 
enroll in an Exchange, just as they would if their policies renewed 
during the Exchange open enrollment period. Without this addition, 
consumers with individual health insurance policies renewing outside 
the Exchange open enrollment period would be required to renew such 
policies, and wait to terminate the policies during the Exchange open 
enrollment period, should they wish to enroll in the Exchange, thus 
disadvantaging these consumers as compared to consumers enrolled in 
calendar year individual market policies.
    In 26 CFR 1.5000A-2(b)(1)(ii)(C), the Secretary of the Treasury 
specified that coverage of pregnancy-related services under section 
1902(a)(10)(A)(i)(IV) and (a)(10)(A)(ii)(IX) of the Social Security Act 
(42 U.S.C. 1396a(a)(10)(A)(i)(IV), (a)(10)(A)(ii)(IX)) was not minimum 
essential coverage. In order to ensure that women losing eligibility 
for coverage of pregnancy-related services as described above are not 
left without an option to enroll in a QHP after the conclusion of 
Medicaid eligibility, in paragraph (d)(1), we propose that the Exchange 
permit qualified individuals and their dependents to enroll in a new 
QHP if they lose eligibility for such pregnancy-related services. We 
note that HHS may designate certain specific pregnancy-related programs 
to be minimum essential coverage under section 5000A(f)(1)(E) of the 
Affordable Care Act, though we propose to require this special 
enrollment period, regardless. We solicit comments

[[Page 15839]]

regarding whether there are other situations in which an individual 
loses coverage that is not defined as minimum essential coverage, such 
as AmeriCorps coverage, and should be provided with a special 
enrollment period.
    We propose to add to paragraph (c) to specify that the Exchange 
must permit qualified individuals and their dependents to access the 
special enrollment periods described in paragraph (d)(1) for up to 60 
days prior to the end of the qualified individual's or his or her 
dependent's existing coverage. This is consistent with existing 
regulations in paragraph (d)(6)(iii) that are specific to an individual 
who is enrolled in an eligible employer-sponsored plan who is 
determined newly eligible for advance payments of the premium tax 
credit based in part on a finding that such individual is ineligible 
for qualifying coverage in an eligible employer-sponsored plan. To 
improve the clarity and structure of this rule, we propose to move the 
language in paragraph (d)(6)(iii) regarding the 60 days prior access to 
the SEP to paragraph (c). The proposed change, to paragraph (d)(1) that 
would expand the ability to report a change in advance to all 
individuals who are described in paragraph (d)(1) is designed to allow 
an individual who is losing eligibility for coverage outside the 
Exchange to transition to coverage offered through an Exchange without 
a gap in coverage, but with protections to ensure that advance payments 
of the premium tax credit are not provided in advance of the loss of 
eligibility for minimum essential coverage outside the Exchange. 
Accordingly, we note that individuals are not eligible for advance 
payments of the premium tax credit until they are no longer enrolled in 
minimum essential coverage outside the Exchange. Lastly, we propose to 
make conforming changes to paragraphs (b)(2)(ii) and (e) to align with 
the changes in terminology proposed in paragraph (d)(1).
    In paragraphs (d)(4), (d)(5), (d)(9) and (d)(10), we provide 
special enrollment periods for errors, contract violations, exceptional 
circumstances and misconduct. Existing paragraph (b)(2)(iii) specifies 
that for a plan selection made during one of the special enrollment 
periods under paragraphs (d)(4), (d)(5), and (d)(9), coverage must be 
effective on an appropriate date based on the circumstances of the 
special enrollment period, in accordance with guidelines issued by HHS, 
and provides two options for that effective date. We propose to add 
special enrollment periods triggered under paragraph (d)(10) to those 
special enrollment periods for which these special coverage effective 
dates are available. In order to ensure that the Exchange has 
sufficient flexibility with which to address the types of scenarios 
that may trigger these special enrollment periods, we propose to amend 
paragraph (b)(2)(iii) to remove the restriction to these two options. 
The resulting regulatory text would allow the Exchange to set an 
effective date based on what is appropriate to the circumstances, in 
accordance with any guidelines issued by HHS. Similarly, in order to 
ensure that the Exchange sets the length of these same special 
enrollment periods to be appropriate to the circumstances of the 
specific enrollment period, we propose to modify paragraph (c) to 
specify that the Exchange may define the length of these special 
enrollment periods as appropriate based on the circumstances of the 
special enrollment period, in accordance with any guidelines issued by 
HHS. We believe that this flexibility is important to ensure that the 
special enrollment periods can be implemented as intended.
    Section 155.420(e) clarifies what qualifies as loss of coverage for 
purposes of the special enrollment period described in paragraph 
(d)(1). We propose to modify this paragraph to clarify that voluntary 
termination does not qualify as loss of coverage for purposes of a 
special enrollment period, since the intent of this special enrollment 
period is to ensure that an individual who is losing coverage can 
transition to the Exchange without interruption, and not to allow an 
individual to switch from another form of coverage to the Exchange 
during the year when the other form of coverage remains available and 
he or she does not qualify for another special enrollment period 
described in this section. We solicit comments regarding this 
clarification.
d. Termination of Coverage (Sec.  155.430)
    We propose to add paragraph (e) to Sec.  155.430 to establish the 
difference between a termination and a cancellation and establish the 
significance of a reinstatement action in the context of QHP coverage 
offered through an Exchange. Specifically, we propose to specify that a 
cancellation is a specific type of termination action taken either 
prior to or after the effective date of coverage that ends a qualified 
individual's coverage on or before the effective date, thus rendering 
coverage as never effective. In contrast, a termination is an action 
taken after the effective date of coverage that ends an enrollee's 
coverage effective on a date after the coverage effective date. In a 
cancellation, the effect of the QHP's action would be that a qualified 
individual never receives coverage from the QHP, whereas in a 
termination the QHP covers the enrollee for some period of time and 
would be liable for covered services that the enrollee received during 
the time period between the coverage effective date and the termination 
date, under the terms of the coverage. A reinstatement action is a 
correction of an erroneous termination or cancellation action resulting 
in restoration of an enrollment with no break in coverage.
    In addition to establishing the difference between cancellations 
and terminations, we also propose that an Exchange may establish 
operational standards for QHP issuers for implementing terminations, 
cancellations, and reinstatements. Enrollment systems for both SBEs and 
the FFE continue to evolve, and we believe that the Exchange's ability 
to issue operational instructions will enable both the Exchange and the 
issuer community to respond more effectively to changing systems and 
changing processes. We believe the effectiveness of this approach has 
been demonstrated in other programs administered by CMS, specifically 
the Medicare Advantage and Medicare Part D programs.
    Further, we are proposing to clarify in paragraph (d)(6) that the 
termination effective date being the day before the effective date of 
coverage in the new QHP would also apply in cases of retroactive 
enrollments. This could occur when a consumer is granted a special 
enrollment period to change QHPs with a retroactive coverage effective 
date under 155.420(b)(2)(iii). For coverage that is terminated 
retroactively, CMS will adjust any applicable payments to the original 
QHP issuer based on the retroactive termination date, in order to 
recoup any advance payments of the premium tax credit and cost-sharing 
reductions made to the former issuer for the enrollee. The Exchange 
would be required to ensure that the former issuer refunds or credits 
any premium paid to the issuer by the enrollee, reversing claim 
payments, and ensuring the provision of refunds for out-of-pocket 
payments made by or for the enrollee for covered benefits and services 
incurred, during the retroactive coverage period. We seek comment on 
whether to add a specific requirement to this effect on issuers in Part 
156.
    Conversely, in the case of a retroactive coverage date, CMS will 
provide the gaining issuer any applicable advance payments of the 
premium tax credit and

[[Page 15840]]

cost-sharing reductions based on the retroactive coverage effective 
date. Cost-sharing reduction reconciliation will occur for all cost-
sharing reductions provided beginning with the retroactive coverage 
date. The gaining issuer would collect the enrollee's portion of the 
premium for all months of coverage and will be required to adjudicate 
the enrollee's claims incurred during the retroactive period, and 
provide any applicable cost-sharing reductions.
5. Subpart F--Appeals of Eligibility Determinations for Exchange 
Participation and Insurance Affordability Programs
a. General Eligibility Appeals Requirements (Sec.  155.505)
    In Sec.  155.505, we propose a technical correction to paragraph 
(b)(4) by removing ``; and'' at the end of the paragraph and adding a 
period in its place.
b. Dismissals (Sec.  155.530)
    In Sec.  155.530, we propose to amend paragraph (a)(1) to provide 
an additional method for appellants to withdraw appeal requests. The 
existing provision requires an appellant who wishes to withdraw his or 
her appeal request to do so in writing (hard copy or electronic). We 
are proposing to include the alternative for an appellant to withdraw 
his or her appeal by telephone, if the appeals entity is capable of 
accepting telephonic withdrawals. In paragraphs (a)(1)(i)(A) and (B), 
we propose the requirements for providing a telephonic withdrawal 
process. Specifically, we propose that the appeals entity must record 
in full the appellant's statement and telephonic signature made under 
penalty of perjury, and provide a written (in hard copy or 
electronically) confirmation to the appellant documenting the 
telephonic interaction. This written confirmation can be captured in 
the dismissal notice required in the case of a withdrawal under Sec.  
155.530(b). We note that a telephonic signature is a verbal 
acknowledgement in place of a written signature.
    The intent of this proposed amendment is to provide a more 
efficient and convenient method for appellants and appeals entities to 
conclude an appeal at the request of the appellant. For example, under 
the current rules, an appeals entity must keep an appeal open and 
proceed to hearing following an informal resolution in every case where 
the appellant has not communicated his or her wish to withdraw the 
appeal in writing, even if the appellant is satisfied with the informal 
resolution decision. Because we anticipate that many appellants will 
not take the step of withdrawing their appeal requests in writing in 
this scenario, we believe the proposed amendment will provide 
appellants an easier process through which they can indicate their wish 
to end the appeals process. In addition, we believe the proposed 
amendment will also benefit appeals entities by reducing administrative 
burden, such as the requirement to convene unnecessary hearings 
described in the example above. The telephonic signature process 
provides a verifiable record of the appellant's intention to withdraw 
the appeal and end the appeals process, including where the appellant 
is satisfied with a result he or she has obtained without fully 
exhausting the appeals process.
    We request comments on this proposed amendment, including the 
proposed requirements for accepting telephonic withdrawals. We also 
note that, although the proposed amendments to this provision will put 
the Exchange rules for withdrawal of an appeal request out of alignment 
with the Medicaid fair hearing rules, and we seek comment specifically 
on the impacts of this proposed change. Finally, we note that this 
proposed amendment also impacts withdrawal procedures for an employer 
appeal through the cross-reference in Sec.  155.555(f)(1), which 
currently requires withdrawals in writing.
c. Employer Appeals Process (Sec.  155.555)
    We propose to amend Sec.  155.555 by redesignating paragraphs 
(d)(1) through (d)(4) to more clearly delineate between the 
requirements associated with valid appeal requests versus invalid 
appeal requests. We note that under this proposed redesignation, 
paragraph (d)(4) would become new paragraph (d)(2), stating that upon 
receipt of an invalid appeal request, the appeals entity must promptly 
and without undue delay send written notice to the employer that the 
appeal request is not valid because it fails to meet the requirements 
of this section. New paragraph (d)(2) would also provide introductory 
language for the requirements provided in paragraphs (d)(2)(i) through 
(iv). The result of this proposed revisions would be to separate the 
requirements for valid appeal requests in redesignated paragraph (d)(1) 
and the requirements for invalid appeal requests in new paragraph 
(d)(2).
6. Subpart G--Exchange Functions in the Individual Market: Eligibility 
Determinations for Exemptions
a. Required Contribution Percentage
    Under section 5000A of the Code, an individual must maintain 
minimum essential coverage for each month, qualify for an exemption, or 
make a shared responsibility payment. Sections 5000A(d) and (e) provide 
for nine categories of exemptions, and authorize the Secretary to 
determine individuals' eligibility for some of the exemptions, 
including the hardship exemption. Sections 1.5000A-3(a) through (h) of 
26 CFR enumerate the circumstances in which an individual may be exempt 
from the shared responsibility payment. These grounds for exemption 
include: (1) Under 26 CFR 1.5000A-3(e), the individual lacks affordable 
coverage because the individual's annualized required contribution for 
minimum essential coverage for the month exceeds the required 
contribution percentage of the individual's household income; (2) the 
individual has in effect a hardship exemption certification described 
in 26 CFR 1.5000A-3(h) and issued by an Exchange, as described in 26 
CFR 1.5000A-3(h) and, based on the individual's projected household 
income, will have no affordable coverage; and (3) the individual and 
one or more employed members of his or her family has been determined 
eligible for affordable self-only employer-sponsored coverage through 
their respective employers, but the aggregate cost of employer-
sponsored coverage for all the employed members of the family exceeds 8 
percent of household income for that calendar year, as described in 45 
CFR 155.605(g)(5). Determining eligibility for these exemptions 
requires comparison between the individual's share of the costs for 
obtaining minimum essential coverage and a certain percentage of the 
individual's household income, actual or projected, for the taxable 
year. Under section 5000A(e)(1)(A) of the Code, the percentage of the 
individual's household income is 8 percent. Section 5000A(e)(1)(D) of 
the Code and 26 CFR 1.5000A-3(e)(2)(ii) further provide that, for plan 
years beginning in any calendar year after 2014, the percentage is 
determined by the Secretary to reflect the excess of the rate of 
premium growth between the preceding calendar year and 2013 over the 
rate of income growth for the period.
    Below, we outline and request comments on issues related to various 
methodologies we are considering for determining the excess of the rate 
of

[[Page 15841]]

premium growth over the rate of income growth. We are considering 
publishing the excess of the rate of premium growth over the rate of 
income growth for calendar years after 2015 in the annual HHS notice of 
benefit and payment parameters. We are also considering modifying Sec.  
155.605(g)(5), which currently sets the required contribution 
percentage at 8 percent, so that the required contribution percentage 
for this exemption in future years reflects the required contribution 
percentage for the applicable calendar year.
Methodology for Determining the Excess of Rate of Premium Growth Over 
Rate of Income Growth
    As one possibility, we are considering establishing the rate of 
premium growth over the rate of income growth for a particular calendar 
year as the quotient of (x) one plus the rate of premium growth between 
the preceding calendar year and 2013, carried out to ten significant 
digits, over (y) one plus the rate of income growth between the 
preceding calendar year and 2013, carried out to ten significant 
digits. (To avoid magnifying rounding errors, any ratio of this sort 
would also be carried out to ten significant digits.) This would be 
multiplied by the required contribution percentage for 2014, for ease 
of application, and the result would be rounded to the nearest 
hundredth of a percent to yield the required contribution percentage 
for the calendar year. We note that this methodology would lead to a 
reduction in the required contribution percentage if the ratio of 
premium growth to income growth is less than one. Allowing for such a 
possibility would help ensure that changes in the required contribution 
standard are proportional to changes in the ratio of premiums over 
income observed in the private market as a whole. In contrast, we are 
also considering constraining this ratio, the excess of premium growth 
over income growth, to be greater than or equal to one. In addition, as 
discussed in further detail below, we are considering constraining the 
rate of premium growth and/or the rate of income growth to be equal to 
or greater than zero in any given year, and seek comment of the impact 
of these constraints on the excess of the rate of premium growth over 
the rate of income growth. We welcome comment on approaches for 
determining the excess of the rate of premium growth over the rate of 
income growth. In particular, we seek comment on whether the excess of 
the rate of premium growth over income growth should be calculated 
based on the difference between the growth rates, the ratio of the 
growth rates, or through other methods, and whether the result should 
be subject to other adjustments.
    Premium Growth: We are considering setting the rate of premium 
growth for a calendar year to be the premium adjustment percentage for 
the year. We provided in the 2015 Payment Notice that the premium 
adjustment percentage, described at 45 CFR 156.130(e), will be 
published each year in the HHS notice of benefit and payment 
parameters, and will be used to adjust certain cost-sharing parameters 
established by the Affordable Care Act. As discussed in the 2015 
Payment Notice, the premium adjustment percentage is calculated based 
on projections of average per enrollee employer-sponsored insurance 
premiums from the National Health Expenditure Accounts (NHEA), which 
are calculated by the CMS Office of the Actuary. After the initial 
years of implementation of market reforms, once the premium trend is 
more stable, we may propose to change the methodology for calculating 
the premium adjustment percentage. For 2015, the premium adjustment 
percentage is 4.213431463 percent. We note that incorporating the 
premium adjustment percentage into the methodology for determining the 
required contribution percentage will ensure that adjustments for 
premium growth are made in a consistent manner across programs 
established by the Affordable Care Act. We welcome comment on whether 
we should use the premium adjustment percentage as a measure of premium 
growth for the purpose of calculating the contribution percentage 
index. We also seek comment on whether adjustments, such as ceilings or 
floors, should be made to that index. For example, we are also 
considering constraining the rate of premium growth to be equal to or 
greater than zero in any given year. We note the language of section 
5000A(e)(1)(D) of the Code could be read to support such an 
interpretation. That section uses the term ``premium growth,'' which 
could be read to mean that the statute envisions an adjustment of the 
required contribution percentage to only incorporate an increase in 
premiums. However, for purposes of this calculation, we seek comment on 
whether growth should be interpreted to refer to both positive and 
negative growth. We also seek comment on whether other data sources or 
methods should be used, such as alternative NHEA data sources, premium 
data from the Federal Employee Health Benefits Program, or any of the 
data sources discussed in connection with our proposal for the premium 
adjustment percentage index in the proposed 2015 Payment Notice.
    Income Growth: We are contemplating calculating the rate of income 
growth for a calendar year as the percentage by which the per capita 
GDP for the preceding calendar year exceeds the per capita GDP for 
2013, carried out to ten significant digits. In alignment with the 
premium adjustment percentage, we are considering using the projections 
of per capita GDP used for the NHEA.\36\ If we were to use the 
projection of per capita GDP used for the NHEA as a measure of income 
growth, the rate of income growth for 2015 would be 3.608458790 
percent. We note that GDP is a commonly used measure of income growth, 
but we are also considering other measures of income, such as indices 
of wages and salaries, and measures of personal income. We welcome 
comment on our proposed method for calculating the rate of income 
growth as well as alternative sources of income data that we should 
consider. In particular, we request comment on whether adjustments 
should be made to our data source or methodology, such as ceilings or 
floors. For example, similar to our discussion of ``premium growth'' 
above, we note that section 5000A(e)(1)(D) of the Code refers to ``the 
rate of income growth.'' Again, seek comment on whether growth should 
be interpreted to refer to both positive and negative growth. We also 
seek comment on whether we should seek to measure growth in GDP per 
person under the age of 65 or per worker, or growth in some other form 
of income index only for persons under the age of 65 or per worker, 
which may align more closely with certain measures of premium growth.
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    \36\ See Table 1 in http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/Downloads/Proj2012.pdf.
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    We seek comment on all aspects of these potential approaches.
b. Options for Conducting Eligibility Determinations for Exemptions 
(Sec.  155.625)
    In Sec.  155.625, we established an option under which a State 
Exchange could adopt an eligibility determination for an exemption from 
the shared responsibility payment that was made by HHS, provided that 
certain conditions were met. Section 1311(d)(4)(H) of the Affordable 
Care Act specifies that one of the minimum functions of an Exchange is 
to, ``. . . grant a certification attesting that . . .

[[Page 15842]]

an individual is exempt . . .'' Accordingly, Sec.  155.625(b)(2) 
specified that under this option, effective October 15, 2014, the 
Exchange would need to accept the exemption application, transmit it 
securely to HHS, receive the result, and notify the consumer. This 
process introduces significant information technology development and 
administrative burden into a process that could otherwise be executed 
at a single entity. In particular, such an arrangement would require a 
split of customer service responsibilities, which could make it very 
difficult for consumers to navigate the process. It also creates 
challenges for exemptions that involve information that can only be 
obtained through the eligibility process for insurance affordability 
programs, like the cost of the lowest-cost bronze plan net of advance 
payments of the premium tax credit, which is a component of one of the 
hardship exemptions described in this subpart, and is only available 
through a State Exchange.
    Accordingly, we propose to revise Sec.  155.625 to remove the 
option for a State Exchange to adopt an eligibility determination for 
an exemption from the shared responsibility payment made by HHS for 
applications submitted on or after November 15, 2014 and, for 
applications submitted before November 15, 2014, to retain the 
conditions currently imposed for adopting an eligibility determination 
for an exemption from the shared responsibility payment that was made 
by HHS under paragraph (b)(1). Under this proposal, HHS would continue 
to provide support in this area for applications up until that date. 
HHS has developed and released a set of model paper applications that 
can be adopted by State Exchanges, and is committed to providing 
technical assistance to assist State Exchanges in developing the 
capability to handle the minimum function of granting certificates of 
exemption.
7. Subpart H--Exchange Functions: Small Business Health Options Program
    a. Functions of a SHOP (Sec.  155.705) Section 155.705(b)(2) and 
(3) currently provide that, for plan years beginning on or after 
January 1, 2015, all SHOPs must make available to qualified employers 
the option of selecting an actuarial value level of coverage as 
described in section 1302(d)(1) of the Affordable Care Act and making 
all qualified health plans at that level available to qualified 
employees (``employee choice''). Based on communications with issuers 
and State insurance commissioners, HHS has become concerned that, in 
some circumstances, implementing employee choice in 2015 might 
significantly disrupt some small group markets, and might therefore 
have a negative effect on the ability of small business owners to 
access coverage. HHS is specifically concerned that in certain 
circumstances, employee choice might lead to sicker people enrolling in 
disproportionate numbers in certain plans, which could have the effect 
of discouraging issuers from participating in the SHOP or causing 
adverse selection in the market that cannot be fully addressed by the 
single risk pool provisions of the statute or the premium stabilization 
programs. We have also heard concerns from issuers and State insurance 
commissioners that requiring employee choice might reduce issuer 
participation, leading to minimal value to consumers when there is not 
broad participation among issuers in the SHOP. At the same time, HHS 
does not anticipate that these conditions will apply in most markets, 
and HHS is continuing to work toward implementing employee choice in 
all SHOPs, because in the long run employee choice will bring 
significant benefits to small business owners and their employees. Not 
implementing employee choice may also disrupt the implementation 
efforts that issuers, States, Exchanges, and other stakeholders have 
already undertaken.
    To address these concerns, we propose to amend Sec.  155.705(b)(2) 
and (3) to provide for a one year transition policy under which a SHOP 
would be permitted to not implement employee choice in 2015 under 
specific circumstances: (1) If employee choice would result in 
significant adverse selection in the State's small group market that 
could not be fully remediated by the single risk pool or premium 
stabilization programs; or (2) if there is an insufficient number of 
issuers offering qualified health plans or qualified stand-alone dental 
plans to allow for meaningful plan choice among qualified health plans 
or qualified stand-alone dental plans for all actuarial value levels in 
the State's SHOP. We believe that meaningful choice means sufficient 
competition in the market to allow for participation in the SHOP from 
multiple issuers throughout the State. Meaningful choice provides 
affordable, quality plan options throughout the State's SHOP for all 
actuarial value levels.
    Under this proposal, a State regulatory agency, such as the State 
department of insurance, would submit a recommendation to the SHOP (or 
in the case of an FF-SHOP, to the Secretary) in support of either 
circumstance for plan years beginning in 2015. We are considering 
whether such a recommendation by the State regulatory agency should 
include a mitigation plan describing the process the State regulatory 
agency will take to ensure that full implementation of employee choice 
in 2016 would not result in the occurrence of either aforementioned 
circumstance, and seek comment on whether such a plan should be 
included with the recommendation. We expect that the State would be 
required to provide in the recommendation to the SHOP concrete evidence 
that employee choice would result in significant adverse selection in 
the State's small group market that cannot be remediated through the 
premium stabilization programs or the single risk pool, or that there 
would not be a meaningful choice of QHPs and/or stand-alone dental 
plans in the State's SHOP. The SHOP would then evaluate the State's 
recommendation and request and determine whether the State's small 
group market would be significantly adversely affected by the 
implementation of employee choice. In the FF-SHOPs, CMS would seek 
public comment on the State's request regarding employee choice before 
making this determination. We seek comment on all aspects of the 
process SHOPs should follow in making this determination.
    We seek comment on all aspects of this proposal, including, but not 
limited to: (1) The effect of such a policy on all SHOPs; (2) the 
effect of such a policy on each State's small group market; (3) the 
effect of such a policy on small employers and their employees and 
dependents; (4) the information the State regulatory agency should 
provide in support of any recommendation; (5) the criteria the SHOP 
(including, in the case of an FF-SHOP, the Secretary) should use in 
assessing a State regulatory agency recommendation; (6) whether all 
SHOPs should seek public comment on the State's request regarding 
employee choice; (7) whether employee choice would have to exist for 
both medical QHPs and stand-alone dental plans, or for neither; and (8) 
whether other provisions of the HHS regulations applicable to SHOPs 
should also be subject to a transition in SHOPs that exercise the 
proposed option. In particular, we seek comments on what should qualify 
as a significant risk of adverse selection, what should qualify as a 
lack of meaningful plan choice, and how both these conditions should be 
measured.

[[Page 15843]]

    We also recognize the importance of the timing of a State 
regulatory agency's recommendation and the SHOP's decision regarding 
employee choice under this proposal. Whether or not employee choice is 
available in a SHOP may be relevant information for issuers to consider 
as they make QHP submissions, but State regulatory agencies also need 
time to evaluate market dynamics before they can make a recommendation 
about whether the SHOP should not implement employee choice in 2015. We 
are considering establishing a deadline for the State regulatory 
agency's recommendation to the SHOP. One option we are considering is 
that State regulatory agencies would make recommendations prior to the 
close of the initial QHP application window, with sufficient time for 
issuers to decide whether or not to participate in SHOP for the 
following plan year. Another option would be as follows: (1) All 
issuers interested in participating in SHOP would apply during the 
initial application window; (2) state regulatory agencies then would 
have a specific window of time within which to make a recommendation 
regarding whether to not implement employee choice in 2015 based on the 
applications received; (3) the SHOP would then have a specific window 
of time within which to make a decision about not implementing employee 
choice in 2015 based on that recommendation; (4) issuers could, based 
upon the SHOP's decision, decide whether to maintain, modify, or 
withdraw their QHP applications. In the FF-SHOPs, under this second 
scenario, we do not anticipate that issuers would be able to submit 
applications after the initial deadline to apply for QHP certification 
had passed. We solicit comment on these two options for timing the 
State regulatory agency's recommendation and the SHOP's decision, and 
also solicit additional, alternative suggestions for how best to 
operationalize this proposal. Generally, we request comment on the 
appropriate time for State regulatory agencies to submit a request to 
the Exchange regarding employee choice, on the appropriate time for the 
Exchange to make a decision on those requests, and on the effect of the 
timing of the decision making process on the QHP certification timeline 
as described in HHS regulations and guidance (including in the 2015 
Annual Issuer Letter).\37\ In any event, we expect that SHOPs would 
reach a decision about employee choice no later than early Fall 2014. 
We also seek comment on whether adverse selection could be avoided by 
allowing an employer to provide employee choice under the following 
circumstances: (1) Within a single issuer's plan offerings within an 
actuarial value level; (2) for all plans from a single issuer across 
two contiguous actuarial value levels; and (3) for all plans, all 
actuarial value levels, from a single issuer. These circumstances are 
transitional policies and do not reflect the full implementation of 
employee choice; we seek comment on how the proposed provisions would 
apply in these circumstances.
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    \37\ 2015 Letter to Issuers in the Federally-facilitated 
Marketplaces (March 14, 2014). Available at: http://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/2015-final-issuer-letter-3-14-2014.pdf.
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b. Enrollment Periods Under SHOP (Sec.  155.725)
    We propose amendments to Sec.  155.725(c) and (e) to amend the 
dates for the annual open enrollment periods for qualified employers 
and qualified employees in all SHOPs, both State-based or Federally-
facilitated. In proposed Sec. Sec.  155.725(c)(1), we propose to align 
the start of annual employer election periods in all SHOPs for plan 
years beginning in 2015 with the start of open enrollment in the 
corresponding individual market Exchange for the 2015 benefit year, as 
amended in the 2015 Payment Notice. In accordance with this proposal, 
we propose to modify paragraph (e) of this section to remove the 
reference to a period of no less than 30 days for the annual employee 
open enrollment period. Under this proposal, the annual employer and 
employee election periods would begin no sooner than November 15, 2014 
with employers making selections first, followed by employees. The 
employer's annual election period will end when the employer makes 
relevant decisions about the coming year's participation. Qualified 
employers and qualified employees would still have adequate time to 
perform plan selection for plan years beginning in 2015 under this 
proposal. SHOPs would benefit from having the same amount of time to 
complete the QHP certification process for the SHOP as they have to 
complete this process for the individual Exchange. Notification 
standards described in paragraph (d) and (f) of this section would 
still apply, as the standards merely require the SHOP to notify 
qualified employers of annual employer election periods and to notify 
qualified employees of the annual employee open enrollment periods in 
advance of such periods.
    The lack of alignment of the start of annual employer election 
periods in the SHOP for plan years beginning in 2015 with the start of 
open enrollment in the individual market Exchange for 2015 would place 
a burden on SHOPs and QHP issuers. Many Exchanges rely on the same 
technology solutions for plan management and other minimum functions of 
Exchanges in both the individual and small group markets. Aligning the 
start dates for the employer election period with the start of 
individual market Exchange open enrollment for 2015 would provide 
Exchanges with a uniform timeline for improving and launching Exchange 
services for 2015. Additionally, a uniform QHP filing and review 
timeline for both markets for 2015 would reduce confusion and provide 
efficiencies to scale in review, providing potential resource savings 
to Exchanges and QHP issuers. These efficiencies would still exist even 
if the SHOP and individual market Exchange were operated by different 
entities (such where a State has exercised the option at Sec.  
155.100(a)(2) to establish and operate only a SHOP, as many QHP issuers 
seek QHP certification in both markets.
    We note that pursuant to Sec.  147.104(b)(1)(i), group coverage 
purchased in the SHOP between November 15 and December 15 of each year 
is not subject to employer contribution or group participation rules as 
defined in Sec.  147.106(b)(3). FF-SHOPs do not enforce minimum 
participation requirements between November 15 and December 15 of each 
year, but they are enforced upon initial enrollment outside of this 
window and at renewal. Aligning the annual employer election period to 
the start of the individual market Exchange to begin no sooner than 
November 15, 2014 will provide qualified employers and employees with a 
period of time to enroll for 2015 coverage when the FF-SHOP minimum 
participation provisions are not enforced.
    We request comments on whether the proposed policy concerning 
aligning the timing of the SHOP employer election period for 2015 with 
the individual market annual open enrollment period would pose 
challenges for State-Based SHOPs as well as comments on any special 
circumstances that they would face in implementing the proposed policy. 
If implementing the proposed policy would disrupt the operations of 
State-Based SHOPs, we request comments on what flexibilities or 
adjustments to the proposed policy may be necessary to address these 
concerns.

[[Page 15844]]

For example, a State-based SHOP might have a 2015 small group market 
QHP certification process under which QHPs for 2015 coverage would be 
available sooner than November 15, 2014, such that the State-based 
SHOP's annual employer election period could start earlier than that 
date.
    In Sec. Sec.  155.725(c)(2) and 155.725(e), we propose to remove 
the required minimum lengths of both the employer election period and 
the employee open enrollment period to provide additional flexibility 
to SHOPs and qualified employers. The existing minimum standards may 
make it difficult for groups participating in the SHOP to renew 
coverage in a timely manner, as under the current regulations, the 
entire process could take as many as 75 days or longer to complete: up 
to 30 days for the employer's election, 30 days for the employees to 
enroll, and, depending on when in a given month that enrollment occurs, 
15 or more days before coverage becomes effective. Further, this 
timeframe is not feasible in light of the proposal above to align the 
earliest date that an employer election period could begin in all SHOPs 
for plan years beginning in 2015 with the start of open enrollment in 
the corresponding individual market Exchange for the 2015 benefit year.
    This proposal to remove the existing minimum timeframes for 
qualified employer and qualified employee enrollment decisions will 
permit SHOPs and qualified employers to act more quickly to renew 
coverage. Additionally, the existing minimum lengths for the employer 
election and employee open enrollment periods further complicate the 
renewal process for qualified employers renewing throughout the 
calendar year in SHOPs that permit the quarterly update of rates for 
QHPs. In many States, the updated rate may be published fewer than 45 
days prior to the rate taking effect. Therefore, under the existing 
minimum standard, a qualified employer might not be able to consider 
the most up-to-date rate information for the coverage it intends to 
offer. Instead, such rate information might only become available 
during the employee open enrollment period, in which case the qualified 
employer may need to reopen either the employer election period or the 
employee open enrollment period to determine whether the selected QHPs 
still meet their needs under the new rates. This proposal will 
ameliorate this concern by permitting SHOPs to complete the entire 
election and enrollment processes in fewer than 45 days.
    We seek comment on all aspects of these proposals.
c. SHOP Employer and Employee Eligibility Appeals Requirements (Sec.  
155.740)
    We propose to amend Sec.  155.740(g) by redesignating paragraphs 
(g)(1) through (g)(3) to more clearly delineate between the 
requirements associated with valid appeals and those associated with 
invalid appeals.
    In Sec.  155.740(i)(1)(i), we propose to amend the provision by 
cross-referencing the withdrawal standards proposed in the individual 
market at Sec.  155.530(a)(1). Under current rules, an appellant who 
wishes to withdraw his or her appeal request must do so in writing 
(hard copy or electronic). The amended provision would allow an 
appellant to withdraw his or her appeal request in writing or by 
telephone, if the appeals entity is capable of accepting telephonic 
withdrawals. As noted above in the preamble to Sec.  155.530(a), 
appeals entities that wish to provide telephonic withdrawals must 
record, in full, the appellant's statement and telephonic signature 
made under penalty of perjury and provide a written (in hard copy or 
electronically) confirmation to the appellant documenting the 
telephonic interaction. Written confirmation can be captured in the 
dismissal notice required in the case of a withdrawal under Sec.  
155.740(i)(2). Like the proposal in the individual market, this 
amendment is intended to provide greater efficiency and convenience for 
an appellant and appeals entity to close an appeal in accordance with 
the appellant's wishes. We seek comment on this proposal.
8. Subpart O--Quality Reporting Standards for Exchanges
a. Quality Rating System (Sec.  155.1400)
    To implement section 1311(c)(3) of the Affordable Care Act, we 
propose standards for data collection by QHP issuers and the public 
reporting by Exchanges of quality rating information. We intend to have 
a beta testing period in 2015 to provide early feedback to Exchanges 
and QHP issuers and begin public reporting of quality rating 
information and enrollee satisfaction survey information in 2016. We 
believe that it is important that the QRS provide QHP ratings that are 
based on health care quality, health outcomes, consumer experience, 
accessibility of care and affordability of care, which is information 
that is essential to inform consumer choices and to perform certain 
required functions of an Exchange. As outlined in the November 19, 2013 
Federal Register Notice with Comment \38\ on the QRS framework (QRS 
Notice), in the initial years, HHS aims to align the measures included 
in the QRS, to the extent possible, with measures health plans 
currently report in the commercial markets and public programs. The 
general functions of an Exchange outlined in 45 CFR 155.200(d) already 
include a requirement for an Exchange to oversee implementation of 
quality activities, including the ESS and QRS, and to ensure the 
reporting of data for these quality activities.
---------------------------------------------------------------------------

    \38\ Patient Protection and Affordable Care Act; Exchanges and 
Qualified Health Plans, Quality Rating System (QRS) Framework, 
Measures and Methodology; Notice with Comment, 78 FR 69418 (Nov. 19, 
2013).
---------------------------------------------------------------------------

    In Sec.  155.1400, we propose that the Exchange must prominently 
display on its Web site, in accordance with 45 CFR 155.205(b)(1)(v), 
quality rating information assigned for each QHP under the QRS, as 
calculated by HHS and in a form and manner specified by HHS, starting 
in 2016. The standards for QHP issuers regarding the collection and 
submission of validated quality measures data for the QRS are described 
in Part 156, Subpart L of this proposed rule. The list of proposed 
individual quality measures and the proposed organization of the QRS 
measure sets are described in the QRS Notice. In addition, we intend to 
release the proposed methodology for calculating quality ratings as 
well as details regarding measure specifications and data validation 
processes in technical guidance in 2014.
    We believe that the proposed approach where each Exchange displays 
quality ratings calculated by HHS based on a standard scoring 
methodology allows for reliable, uniform, and comparable QHP ratings 
across Exchanges. Therefore, HHS intends to calculate the quality 
ratings and provide the ratings to Exchanges for prominent display of 
quality rating information for each QHP offered in the Exchange. We 
encourage State Exchanges to have a plan review period, similar to what 
we intend to offer QHP issuers that participate in the Federally-
facilitated Exchange, to allow issuers to review their QHPs' quality 
rating information before the data become public and to identify any 
discrepancies or errors with the data submitted, as appropriate. We 
have not incorporated specific criteria for public display by the 
Exchanges of the QHP quality rating information in proposed Sec.  
155.1400. However, we intend to do so in future technical guidance and 
are considering modeling the display of QHP quality ratings in a 
consistent manner with existing CMS

[[Page 15845]]

programs. As outlined in the QRS Notice, we intend to implement a 
methodology that would assign a quality rating to a QHP using a five 
star scale. The star ratings would be displayed in a similar style and 
format to that of Medicare Advantage and Prescription Drug Plan 
ratings. We believe that the five star quality rating display of 
Medicare Advantage health plans offers reliable data that is 
understandable for consumers. HHS anticipates providing the calculated 
rating information, as proposed in Sec.  155.1400, for display on an 
Exchange Web site on an annual basis for the open enrollment period. We 
seek comment on the display of quality ratings of QHPs offered in an 
Exchange for consumers and employers, which aids comprehension of QHP 
quality information and which facilitates plan selection.
    HHS recognizes that some States already have requirements for and 
publicly report health plan quality and outcomes data, and we want to 
encourage State flexibility and innovation, consistent with the 
Affordable Care Act. In addition to prominently displaying quality 
rating information for each QHP, as calculated by HHS in accordance 
with the QRS, a State Exchange may display additional QHP quality-
related information, as appropriate, to enhance the consumer experience 
and help consumers compare QHPs being offered in an Exchange. We 
believe this proposed approach ensures that standardized information on 
the quality of health care will be collected and displayed across 
Exchanges but also provides flexibility for State Exchanges to 
incorporate additional information on their Web sites to support the 
plan comparison and selection process by consumers. We also are 
considering allowing State Exchanges the flexibility to display the QRS 
rating information, and satisfy the obligation under 45 CFR 
155.205(b)(1)(v), by prominently displaying a link to the Federally-
facilitated Exchange Web site that would present the Federal quality 
rating information. We seek comment on this approach including 
effective ways to display quality rating information to help consumers 
compare and select QHPs offered in an Exchange.
b. Enrollee Satisfaction Survey System (Sec.  155.1405)
    Similar to the display requirement for the QRS, we propose a 
display requirement for the Exchange in Sec.  155.1405 relating to the 
Enrollee Satisfaction Survey (ESS) to implement section 1311(c)(4) of 
the Affordable Care Act. We propose that the Exchange would prominently 
display results from the ESS on its Web site, in accordance with Sec.  
155.205(b)(1)(iv), as calculated by HHS, and in a form and manner 
specified by HHS, starting in 2016. The standards for QHP issuers 
regarding the collection and submission of validated data for the ESS 
are described in Part 156, Subpart L of this proposed rule. Because we 
believe that information regarding enrollee experience with the QHP is 
a fundamental aspect of the overall quality rating, HHS intends to 
incorporate enrollee experience data from the results of the ESS into 
the quality rating for each QHP. Research\39\ has shown that 
synthesizing and simplifying health plan quality information presented 
to consumers eases consumer comprehension; therefore, we have developed 
a methodology to incorporate enrollee experience data as part of the 
quality rating information. We intend for the display of quality 
ratings, including the member experience data from the ESS, to be 
capable of drilling down to the results for individual quality measures 
if consumers should choose to access more detail of the data underlying 
the synthesized global quality rating. We therefore believe that by 
displaying quality rating information as described in Sec.  155.1400 of 
this proposed rule (which would incorporate member experience data from 
the ESS), an Exchange would meet the requirement of displaying ESS 
information to consumers and employers for the purposes of plan 
comparison and satisfy the standard outlined in 45 CFR 
155.205(b)(1)(iv). HHS anticipates providing results to the full ESS 
survey to an Exchange on an annual basis. An Exchange may choose to 
display on its Web site all ESS results, including those scores not 
used as part of the QRS. We seek comment on this proposed approach for 
displaying ESS information on an Exchange Web site.
---------------------------------------------------------------------------

    \39\ Peters EM, Dieckmann N, Dixon A, Hibbard JH, Mertz CK. Less 
is more in presenting quality information to consumers. Med Care Res 
Rev. 2007;64 (2):169-90; Hibbard JH, Peters EM. Supporting informed 
consumer health care decisions: data presentation approaches that 
facilitate the use of information in choice. Annual Review of Public 
Health. 2003; 24:413-33.
---------------------------------------------------------------------------

    Similar to our approach with the QRS, we also want to encourage 
State flexibility and innovation, consistent with the Affordable Care 
Act, with respect to enrollee satisfaction information. We therefore 
seek comment on whether State Exchanges should have flexibility to 
display the ESS 2015 beta test results prior to the scheduled public 
display of the Federal ESS in 2016.\40\ Specifically, we solicit 
feedback on effective ways State Exchanges may share enrollee 
satisfaction information to help consumers compare and select QHPs 
offered in an Exchange prior to the availability of the Federal ESS 
data for the 2017 open enrollment period.
---------------------------------------------------------------------------

    \40\ The standards for QHP issuers regarding the collection and 
submission of data for the ESS, including the proposed timeline for 
public reporting of such data, are described below in Part 156, 
Subpart L of this proposed rule. Also see Agency Information 
Collection Activities: Health Insurance Marketplace Consumer 
Experience Surveys: Enrollee Satisfaction Survey and Marketplace 
Survey Data Collection; Notice, 78 FR 65658 (Nov. 1, 2013).
---------------------------------------------------------------------------

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

1. Subpart B--Essential Health Benefits Package
a. Prescription Drug Benefits (Sec.  156.122)
    Section 156.122(c) requires issuers that provide EHB to have 
procedures in place that allow an enrollee to request and gain access 
to clinically appropriate drugs not covered by the plan. We are 
concerned that some enrollees, particularly those with certain complex 
medical conditions, are having trouble accessing in a timely fashion 
clinically appropriate prescription drugs, such as prescription drugs 
that are combination drugs not covered by their plans' formularies. 
Accordingly, we are considering amending the formulary exceptions 
standards under Sec.  156.122(c) to require that these processes can be 
expedited when necessary based on exigent circumstances, such as when 
an enrollee is suffering from a serious health condition or an enrollee 
is in a current course of treatment using a non-formulary drug. For 
example, we could specify that an issuer render decisions regarding 
formulary exceptions requests within 24 hours following the issuers' 
receipt of the exceptions requests. This is currently suggested in the 
2014 Letter to Issuers.\41\ As clarification, the prescription drug 
standard in Sec.  156.122(a)(1) was not intended to discourage issuers 
from offering clinically appropriate drugs to enrollees, including 
combination drugs.
---------------------------------------------------------------------------

    \41\ See Appendix C of the 2014 Letter to Issuers on Federally-
facilitated and State Partnership Exchanges (April 5, 2013). 
Available at: http://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/2014_letter_to_issuers_04052013.pdf.
---------------------------------------------------------------------------

    We seek comment on what specific standards would be appropriate for 
defining this expedited exceptions process, and on all other aspects of 
this proposal.

[[Page 15846]]

b. Cost-Sharing Requirements (Sec.  156.130)
    Under Sec.  156.130(a), cost sharing for 2014 for self-only 
coverage may not exceed the annual dollar limit described in section 
223(c)(2)(A)(ii)(I) of the Code. Under Sec.  156.130(b), for a plan 
year beginning in calendar year 2014, the annual deductible for a 
health plan in the small group market for self-only coverage may not 
exceed $2,000. For 2015 and later years, these limitations are to be 
increased by an amount equal to the products of these amounts and the 
premium adjustment percentage established pursuant to paragraph (e) of 
that section. (The limitations for other than self-only coverage are 
twice the limitations for self-only coverage.) Under Sec.  156.130(d), 
any increase in these annual limits that does not result in a multiple 
of $50 is to be rounded to the next lowest multiple of 50 dollars.
    Section 156.130(e) provides that the premium adjustment percentage 
is the percentage (if any) by which the average per capita premium for 
health insurance coverage for the preceding calendar year exceeds such 
average per capita premium for health insurance for 2013, and that this 
percentage will be published annually in the HHS notice of benefit and 
payment parameters. The 2015 Payment Notice established our methodology 
for calculating the premium adjustment percentage.
    In calculating the proposed limitations on cost sharing and small 
group deductible in the proposed 2015 Payment Notice, we rounded these 
limitations up to the next lowest multiple of $50. However, we 
subsequently learned that the IRS convention for interpreting similar 
language for a number of longstanding tax parameters--such as indexing 
methodologies for the alternative minimum tax and the standard 
deduction--is to round down to the nearest applicable multiple. For 
example, the Department of the Treasury, in a rule on how employers 
should calculate average annual full-time-equivalent wages for purposes 
of the small employer health insurance tax credit, provides that if the 
result is not a multiple of $1,000, employers should round the result 
to the next lowest multiple of $1,000.\42\
---------------------------------------------------------------------------

    \42\ See 26 CFR 1.45R-2(f)(1).
---------------------------------------------------------------------------

    As a result, to align our rounding rules with those used by the 
Department of the Treasury and the Internal Revenue Service, we propose 
to amend Sec.  156.130(d) to specify that when indexing the annual 
limitation on cost sharing and the annual limitation on small group 
deductibles for years after 2014, we will round to the multiple of 50 
dollars that is lower than the number calculated by the formula.
    Under this proposed amendment to Sec.  156.130(d), using the 
premium adjustment percentage of 4.213431463 percent for 2015 we 
established in the 2015 Payment Notice and the 2014 maximum annual 
limitation on cost sharing of $6,350 for self-only coverage, which was 
published by the IRS on May 2, 2013,\43\ the 2015 maximum annual 
limitation on cost sharing would be $6,600 for self-only coverage and 
$13,200 for other than self-only coverage.
---------------------------------------------------------------------------

    \43\ See http://www.irs.gov/pub/irs-drop/rp-13-25.pdf.
---------------------------------------------------------------------------

    Similarly, under the proposed amendment to Sec.  156.130(d), using 
the premium adjustment percentage for 2015 of 4.213431463 percent and 
the 2014 maximum annual limitation on deductibles of $2,000 for self-
only coverage, as specified in Sec.  156.130(b)(1)(i), the 2015 maximum 
annual limitation on deductibles would be $2,050 for self-only coverage 
and $4,100 for other than self-only coverage.
    We seek comment on our proposed amendment and its application for 
2015.
2. Subpart C--General Functions of an Exchange
a. QHP Issuer Participation Standards (Sec.  156.200)
    In Sec.  156.200(b)(5), we propose technical amendments to clarify 
that implementing and reporting for the QRS and implementing a quality 
improvement strategy are conditions of participation in an Exchange. 
Specifically, we propose to include a reference to sections 1311(c)(3) 
and (c)(1)(E) of the Affordable Care Act to correctly align with other 
quality standards listed as part of QHP certification standards, 
including the ESS.
    We also propose to amend Sec.  156.200 to add paragraph (h) to 
require that, in order to receive QHP certification, the offering 
issuer attest that, subsequent to receiving such certification, it will 
comply with all operational requirements contained in Part 156, 
Subparts D, E, H, K, L, and M. We are proposing to add paragraph (h), 
however, to ensure that issuers seeking QHP certification understand 
and have fully committed to compliance with all operational 
requirements.
3. Subpart G--Minimum Essential Coverage
a. Other Coverage That Qualifies as Minimum Essential Coverage (Sec.  
156.602)
    In the final rule published on July 1, 2013 (78 FR 39494), we 
designated certain types of coverage as minimum essential coverage, 
including self-funded student health coverage (for plan or policy years 
beginning on or before December 31, 2014), Refugee Medical Assistance 
supported by the Administration for Children and Families, Medicare 
advantage plans, State-high risk pool coverage (for plan or policy 
years beginning on or before December 31, 2014) and other coverage that 
qualifies pursuant to the minimum essential coverage application 
process in 45 CFR 156.604. We also established a process by which 
sponsors of other coverage not designated as minimum essential coverage 
could apply with HHS to be recognized as minimum essential coverage.
    In guidance published on October 31, 2013, we further indicated 
that coverage under a group health plan provided through insurance 
regulated by a foreign government (and not regulated by a State) is 
recognized as minimum essential coverage for a month with respect to an 
individual who, for such month, is physically absent from the United 
States for at least one day of the month. In addition, coverage under a 
group health plan provided through insurance regulated by a foreign 
government (and not regulated by a State) will also be recognized as 
minimum essential coverage with respect to an individual who is 
physically present in the United States for an entire month if the 
coverage provides health benefits within the United States while the 
individual is an expatriate.\44\ The rationale behind this policy was 
that insurance that is regulated by a foreign government and not 
subject to regulation by a State does not meet the definition of health 
insurance coverage under the PHS Act, and thus should not be considered 
for purposes of a PHS Act analysis. The effect of this policy is to 
place group health coverage provided through foreign insurance on the 
same footing as self-insured group health coverage with respect to 
being deemed minimal

[[Page 15847]]

essential coverage without having to go through the application 
process.
---------------------------------------------------------------------------

    \44\ See CCIIO Sub-Regulatory Guidance: Process for Obtaining 
Recognition as Minimum Essential Coverage (October 31, 2013. 
Available at: http://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/mec-guidance-10-31-2013.pdf.
---------------------------------------------------------------------------

    We now propose to add new paragraph (e) to Sec.  156.602 codifying 
the treatment of foreign group health coverage as stated in the October 
31, 2013 guidance. We propose to designate foreign group health 
coverage for expatriates as minimum essential coverage if the coverage 
is self-insured, or is insured by an entity that is not subject to 
regulation by a State. Specifically, we propose to clarify in the 
regulations that foreign group health coverage is group health coverage 
that (1) is not insured by an issuer regulated by a State and (2) is 
for expatriates who are citizens or nationals of the United States 
residing abroad, or is for expatriates who are not citizens or 
nationals of the United States residing in the United States. We 
propose that if coverage for expatriates who are citizens or nationals 
of the United States who reside abroad is provided by a self-insured 
group health plan, or is provided by group health insurance not 
regulated by a State or group health coverage provided by a foreign 
national health plan, the coverage is designated as minimum essential 
coverage for any month that the citizen or national of the United 
States is physically absent from the United States for at least one day 
of the month.
    For purposes of this section, we propose to define an 
``expatriate'' as an individual for whom there is a good faith 
expectation that such individual will reside outside of their home 
country for at least six months of a 12-month period, including any 
covered dependents. This definition was adopted from the January 9, 
2014 Affordable Care Act Implementation FAQs.\45\ Another option is 
that we define ``expatriate'' more broadly to apply to individuals that 
are living outside of their home country for less than six months. For 
example, the Black's Law Dictionary defines ``expatriate'' as a citizen 
of country A living in country B where the classification of this 
citizen occurs regardless of if the citizen has a short stay or an 
extended or lifetime stay in country B.\46\ We solicit comments on 
either definition of expatriate discussed above or another definition 
that would be appropriate for this section.
---------------------------------------------------------------------------

    \45\ See FAQs about Affordable Care Act Implementation (Part 
XVIII) and Mental Health Parity Implementation (January 9, 2014). 
Available at: http://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs18.html and http://www.dol.gov/ebsa/faqs/faq-aca18.html.
    \46\ See Black's Law Dictionary Free (2d ed. 2014). Available 
at: http://thelawdictionary.org/expatriate.
---------------------------------------------------------------------------

    If an expatriate is a citizen or national of the United States and 
is physically present in the United States for an entire month, we 
propose that their foreign group health coverage is designated as 
minimum essential coverage if the coverage provides health benefits 
within the United States, and is provided by a self-insured group 
health plan, group health insurance regulated by a foreign government 
(and not by a State), or group health coverage provided by a foreign 
national health plan. We propose this time period so that expatriates 
who are citizens or nationals of the United States working abroad may 
visit the United States for a short period of time without their 
foreign group health coverage losing its designation as minimum 
essential coverage. We propose that the coverage must provide health 
benefits within the United States to ensure that the coverage is not 
limited to providing health benefits while an individual is absent from 
the United States. We solicit comments on the time period that 
expatriates who are citizens or nationals of the United States working 
abroad can remain in the United States without their foreign group 
health coverage losing its designation as minimum essential coverage.
    In 45 CFR 156.602(e), we propose that if the foreign group health 
coverage is for expatriates residing in the United States who are not 
citizens or nationals of the United States, the coverage is designated 
as minimum essential coverage if the coverage provides health benefits 
within the United States, and is provided by a self-insured group 
health plan, group health insurance regulated by a foreign government 
(and not regulated by a State), or group health coverage provided by a 
foreign national health plan. We propose that the coverage must provide 
health benefits within the United States so as to ensure that the 
coverage provides health insurance benefits in the United States while 
an individual is living in the United States.
    To ensure that expatriates enrolled in foreign group health 
coverage are aware that their coverage has been designated as minimum 
essential coverage and that foreign group health coverage complies with 
the same reporting requirements as other types of minimum essential 
coverage, we propose to require that the sponsor, issuer, or plan 
administrator, as applicable, of any foreign group health coverage must 
provide notice to enrollees who are citizens or nationals of the United 
States of its minimum essential coverage status and comply with the 
information and reporting requirements of section 6055 of the Code and 
implementing regulations with respect to those enrollees. We welcome 
comments on any aspect of these proposals.
b. Requirements for Recognition as Minimum Essential Coverage for Types 
of Coverage Not Otherwise Designated Minimum Essential Coverage in the 
Statute or This Subpart (Sec.  156.604)
    Section 45 CFR 156.604 outlined a process by which types of 
coverage not statutorily specified and not designated by regulation as 
minimum essential coverage may seek to be recognized as minimum 
essential coverage. We established the requirement that the application 
must be submitted to HHS on behalf of the plan or policy by the sponsor 
of the coverage or government agency.
    We now propose to clarify that the application may also be 
submitted to HHS on behalf of the plan or policy by a health insurance 
issuer or a plan administrator because the health insurance issuer or 
plan administrator may be the more appropriate party to submit the 
application. For example, a health insurance issuer may more 
efficiently provide the information required for an application on 
behalf of a foreign health insurance plan sold in the individual market 
to expatriates living abroad. We welcome comments on all aspects of 
these proposals.
4. Subpart I--Enforcement Remedies in Federally-Facilitated Exchanges
a. Available Remedies; Scope (Sec.  156.800)
    In subpart I of 45 CFR part 156, finalized on August 30, 2013 in 
the rule Patient Protection and Affordable Care Act; Program Integrity: 
Exchange, SHOP, and Eligibility Appeals (Program Integrity Rule),\47\ 
we established the enforcement remedies available to HHS for enforcing 
standards applicable to issuers offering QHPs in the FFEs. Since the 
publication of that rule and in the course of our routine monitoring of 
QHP issuers for compliance with applicable FFE standards, we have 
received multiple inquiries from QHP issuers and States about whether 
HHS will be coordinating and sharing information about QHP issuers with 
State regulatory entities as part of its oversight activities. We 
propose adding paragraph (d) to clarify that HHS may consult and share 
information about QHP issuers with other Federal and State regulatory 
and enforcement entities to the extent that

[[Page 15848]]

this information is necessary for HHS to determine whether an 
enforcement remedy under subpart I is appropriate. We believe this is 
consistent with our intent to coordinate with States in enforcement 
actions as described in the proposed Program Integrity Rule.\48\
---------------------------------------------------------------------------

    \47\ Patient Protection and Affordable Care Act; Program 
Integrity: Exchange, SHOP, and Eligibility Appeals, 78 FR 54070 
(August 30, 2013) (to be codified at 45 CFR parts 147, 153, 155, and 
156).
    \48\ Patient Protection and Affordable Care Act; Program 
Integrity: Exchange, SHOP, Premium Stabilization Programs, and 
Market Standards; Proposed Rule, 78 FR 37032 (June 19, 2013).
---------------------------------------------------------------------------

b. Bases and Process for Imposing Civil Money Penalties in Federally-
Facilitated Exchanges (Sec.  156.805)
    In the Program Integrity Rules, we established the bases for HHS to 
impose CMPs against QHP issuers for violations of certain standards 
applicable to issuers offering QHPs in the FFEs. In Sec.  156.805(d) we 
set forth the general process for notifying the QHP issuer against 
which the CMP is being imposed. The general process did not address how 
prior to the imposition of the CMP, the QHP issuer would be notified of 
the alleged violation which forms the basis for the imposition of CMP. 
We propose adding Sec.  156.806 to explain that HHS will provide a 
written notice to the issuer, to include a description of the potential 
violation, a 30-day period for the QHP issuer to respond and to provide 
additional information to refute an alleged violation.
    If HHS determines that a CMP will be imposed, HHS will notify the 
QHP issuer as required under Sec.  156.805(d). We note that Sec.  
156.805(d) does not specify the method of delivery of such notice. We 
believe it is important to ensure that such notices are appropriately 
delivered to the QHP issuer to provide the QHP issuer with proper 
notice. We propose adding Sec.  156.805(d)(3) to require that delivery 
of the notice required in paragraph (d) will be either hand delivered, 
sent by certified mail, return receipt requested, or sent by overnight 
delivery service with signature upon delivery required. This 
requirement is identical to the requirement under Sec.  158.613 which 
applies to the delivery of notice of civil penalties under 45 CFR Part 
158, with which we believe QHP issuers will generally be familiar. We 
believe this proposed requirement will ensure that QHP issuers have 
proper notice of HHS's intent to impose CMPs. Finally, we also note 
that paragraph (e)(2) requires HHS to notify the QHP issuer of any 
penalty that has been assessed and of the means by which the 
responsible entity may satisfy the judgment. We propose rewording the 
regulatory text to clarify that the responsible entity refers to the 
QHP issuer against whom a CMP is being imposed or another entity 
responsible for satisfying the CMP assessment and that the judgment 
refers to the CMP assessed under of this subpart.
c. Bases and Process for Decertification of a QHP Offered by an Issuer 
Through a Federally-Facilitated Exchange (Sec.  156.810)
    In subpart I of 45 CFR part 156, finalized in the Program Integrity 
Rule, we established the bases for HHS to decertify QHPs for violations 
of certain standards applicable to issuers offering QHPs in the 
Federally-facilitated Exchanges. Under Sec.  156.810(a) we set forth 
the bases for decertification. Since the publication of this final 
rule, we believe that certain paragraphs should be clarified. For 
example, paragraph (a)(6) should be reworded to clarify that the 
certification criteria means the standards under subpart C of this 
part. In paragraph (a)(9), it was unclear which laws were intended and 
we proposing clarifying that violation of State or Federal law relating 
to internal claims and appeals and external review processes are bases 
for decertification under this paragraph. We propose aligning the 
standards set forth under subparts K and M with the bases for 
decertification. We propose adding a paragraph (12) to reflect that HHS 
may decertify a QHP if the QHP issuer substantially fails to meet the 
requirements related to the cases forwarded to QHP issuers under 
Subpart K, and adding a paragraph (13) to reflect that HHS may 
decertify a QHP if the QHP issuer substantially fails to meet the 
requirements in Subpart M. Finally, in the preamble to the proposed 
Program Integrity Rule, we explained that when the basis for a 
decertification is one in which the QHP enrollees' ability to access 
necessary medical items or services is at risk or the integrity of an 
FFE is substantially compromised, HHS would have the authority to 
pursue an expedited decertification (78 FR 37062). Because QHP issuers 
are required to demonstrate compliance with the minimum certification 
standards in subpart C of part 156 and Exchanges are required under 
section 155.1010(a)(2) to monitor QHP issuers for demonstration of 
ongoing compliance with the certification requirements, we believe that 
it is appropriate for the FFEs to be able to pursue an expedited 
decertification when HHS has determined that the QHP no longer meets 
applicable certification standards. Accordingly, we propose amending 
Sec.  156.810(d) to reflect this change.
5. 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 the rule 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 (Second Program Integrity Rule) \49\ at 45 CFR 
156.1105, we established processes for HHS to approve and oversee ESS 
vendors that will administer the ESS on behalf of QHP issuers. We 
outlined a process by which enrollee satisfaction survey vendors would 
submit an annual application demonstrating that they meet all of the 
application and approval standards in paragraphs (a) and (b). Lastly, 
we noted that HHS would publish a list of approved enrollee 
satisfaction survey vendors on an HHS Web site.
---------------------------------------------------------------------------

    \49\ 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, 78 FR 65046 (Oct. 30, 2013) (to be codified at 
45 CFR parts 144, 146, 147, 153, 155, and 156).
---------------------------------------------------------------------------

    We propose to amend Sec.  156.1105 to also include monitoring and 
appeals processes that would apply for plan years beginning 2015. In 
paragraph (d), we propose that HHS will monitor HHS-approved enrollee 
satisfaction survey vendors to ensure ongoing compliance with the 
application and approval standards. Further, we propose that if HHS 
determines that an approved vendor is non-compliant with the standards 
outlined in paragraph (b), they may be removed from the approved list 
described in paragraph (c) and/or the submitted survey results may be 
ineligible to be included for ESS results.
    We propose to establish a monitoring process to prepare for 
situations when an HHS-approved enrollee satisfaction survey vendor is 
no longer in compliance with the standards outlined in Sec.  156.1105. 
It is possible that once the enrollee satisfaction survey vendor is 
approved and contracts with a QHP issuer to provide survey 
administration services, the HHS-approved vendor may stop participating 
in or complying with required activities described in paragraph (b)(1) 
(for example, the vendor does not participate in site visits or 
conferences calls or fails to become a registered user for the ESS data 
warehouse). We propose that in the event that HHS determines, through 
its oversight activities, that the HHS-approved survey vendor is non-
compliant, a process would already be

[[Page 15849]]

in place to take appropriate remedial action as well as notify QHP 
issuers and the public of any changes to the approved list of vendors. 
We propose that, in addition to other existing remedies, HHS would have 
the ability to remove a survey vendor from the approved list and/or 
determine that the submitted survey results are ineligible to be 
included for ESS results, as the validity of the results may be 
impacted. HHS would also update the published list of approved vendors 
to reflect any changes. We seek comment to inform future guidance on 
the factors that should be considered, as well as the conditions that 
may lead to the removal of an approved survey vendor from the HHS 
approved list and/or a determination that the submitted survey results 
are ineligible to be included for ESS results.
    In paragraph (e), we propose an appeals process for an ESS vendor 
that submits an application to HHS for approval, as described in 
paragraph (a), and is not approved. Specifically, we propose that an 
enrollee satisfaction survey vendor may appeal HHS's decision by 
notifying HHS in writing within 15 days of the notification of not 
being approved by HHS and submitting additional documentation 
demonstrating how the vendor meets the standards in paragraph (b). HHS 
will review the submitted documentation and make a final approval 
determination within 30 days from receipt of the additional 
documentation. An enrollee satisfaction survey vendor that becomes 
approved via the appeals process would be included in the approved 
list, described in paragraph (c). We seek comment on the proposed 
approach to implementing an appeals process for survey vendors that are 
not approved by HHS after submission of an application for approval.
b. Quality Rating System (Sec.  156.1120)
    In addition to proposing standards for Exchanges to oversee the QRS 
and display quality rating information on Exchange Web sites as set 
forth in Sec.  155.1400 of this proposed rule, we also propose 
standards for QHP issuers to collect and report the necessary 
information to implement the QRS pursuant to section 1311(c)(3) of the 
Affordable Care Act. While the QRS Notice describes areas such as the 
overarching goals, framework, measure selection process and individual 
measures of the QRS, this proposed rule outlines the QRS implementation 
and reporting standards for QHP issuers.
    In the QRS Notice, we proposed a QRS measure set that applies to 
QHPs that provide family and adult self-only coverage and we proposed a 
separate Child-only QRS measure set applying to QHPs that provide 
child-only coverage. CMS continues to monitor the number of child-only 
QHP offerings on the Exchanges. A limited number of child-only QHPs and 
enrollees may prohibit reliable child-only QHP rating calculations. As 
mentioned in the QRS Notice, we will also consider the development of a 
quality rating system applicable to other Exchange offerings, such as 
stand-alone dental plans, catastrophic plans, and health savings 
accounts. After considering public comment as well as the review by the 
Measures Application Partnership's Health Insurance Exchange Taskforce 
convened by the National Quality Forum, we intend to finalize the 
quality measures outlined in the QRS Notice and provide measure 
specifications in future technical guidance. Our goal is to publish 
this future technical guidance on a HHS Web site in 2014 to provide 
time for QHP issuers to collect and submit the relevant validated data 
for the 2015 beta test.
QRS Implementation and Reporting
    At Sec.  156.1120(a), we propose data submission requirements for a 
QHP issuer for the information necessary to calculate the quality 
ratings under the QRS, and in Sec.  156.1120(b), we propose to direct a 
QHP issuer to annually submit data necessary to calculate the QHP's 
quality ratings to HHS and the Exchange, on a timeline and in a 
standardized form and manner specified by HHS. In paragraph (a)(1), we 
propose that a QHP issuer must submit data to calculate quality ratings 
for each QHP that has been offered in an Exchange for at least one 
year. HHS proposes to phase in implementation of the QRS over time in 
recognition of the fact that QHP issuers would need time to collect, 
ensure the reliability of, and report quality measure data. In 
addition, certain quality measures require one or two year reference 
periods, and QHP issuers would need time for data collection, 
validation and submission. Therefore, we propose that for the first 
year that a QHP is offered in an Exchange, the QHP issuer would prepare 
to submit the required validated data elements for QRS beta testing in 
the second year that the QHP is offered in an Exchange. The QHP issuer 
would then submit the required validated data elements for QRS public 
reporting in the third year that the QHP offers coverage (reflecting 
second year data). For example, an issuer that offers a QHP in the 
Exchange during the 2013 open enrollment period for coverage beginning 
in January 2014 would submit the required validated data for a QRS beta 
testing period beginning in mid-2015 (coverage year two), which would 
not be publicly reported by the Federally-facilitated Exchange. The 
issuer would next be required to submit the required validated data for 
the QHP offered in the Exchange to calculate quality rating information 
for QRS public reporting during the 2016 open enrollment period for the 
2017 coverage year (coverage year four). Specifically, we intend for 
the QRS data reporting period to begin the first month of a calendar 
year through the middle of the sixth month of the calendar year. For 
example, a QHP issuer submitting data for the 2015 QRS beta testing 
period would submit data on or around June 15, 2015 and would submit 
data for its first QRS public reporting on or around June 15, 2016. We 
intend for the QRS to include data from all eligible QHP enrollees 
covered during the measurement year which would be the previous 
calendar year(s) and based on measure specifications for that year's 
collection. We intend to provide details of the QRS rating methodology, 
measure specifications, criteria for quality rating display, and 
information regarding QRS data validation in technical guidance that 
would be periodically updated.
    In paragraph (a)(2), we propose to direct a QHP issuer to submit 
data that has been validated in a form and manner specified by HHS. We 
believe that the submission of validated data by QHP issuers is 
necessary to ensure the integrity and reliability of the QRS to allow 
consumers objective and meaningful comparisons of the QHPs' quality 
data. We believe that review of quality measures data by an independent 
third party entity will ensure that only valid and appropriate data are 
used to calculate the quality rating information for QRS public 
reporting. In the initial years, HHS intends to direct QHP issuers to 
follow the process specified by the quality measure steward for 
validation of its quality measures that are incorporated into the QRS. 
For example, for any Healthcare Effectiveness Data and Information Set 
(HEDIS)[supreg] measure in the QRS, the measure should be validated 
through the HEDIS[supreg] Compliance Audit process using a certified 
auditor, as defined by the National Committee for Quality Assurance 
(NCQA). We have drawn from our experience with the Medicare program 
which also ensures that clinical quality HEDIS[supreg] data submitted 
and reported on behalf of the Medicare Advantage and Prescription Drug 
Programs are valid and reliable by

[[Page 15850]]

requiring data to be validated through the NCQA HEDIS[supreg] 
Compliance Audit process before being provided to CMS for public 
reporting. HHS would specify in technical guidance a validation process 
for any measures for which the measure steward has not defined a 
validation process. In the future and as the QRS evolves, HHS is 
considering establishing an application and approval process for 
independent third party data validators to allow QHP issuers to 
contract with validators that would be approved and monitored by HHS.
    In paragraph (a)(3), we propose that a QHP issuer must include 
information in its data submission only for those QHP enrollees at the 
reporting level specified by HHS that is necessary to calculate the 
quality ratings. As we stated in the QRS Notice, HHS intends to specify 
that for the initial years of QRS implementation, a QHP issuer must 
collect and submit data for enrollees in each product type offered by a 
QHP issuer in each State for which the QHP operates (for example, 
Health Maintenance Organization (HMO), Point of Service (POS), and 
Preferred Provider Organization (PPO)).\50\ While we understand that 
there may be value in reporting quality rating information at more 
granular QHP levels, such as the QHP product metal level, we believe 
that a QHP's enrollment size at the product metal level will be too 
small to ensure reliable QRS results across the measure domains in the 
beginning years of the Exchange. We intend to revisit the level of QHP 
issuer reporting for the QRS as Exchanges mature and enrollment sizes 
increase. We also recognize that a QHP issuer may offer a QHP outside 
an Exchange that would be considered the same plan as one that is 
certified as a QHP and offered through the Exchange, if the benefits 
package, provider network, service areas and cost-sharing structure of 
the two offerings are identical as outlined in the Program Integrity 
Final Rule.\51\ We intend to allow a QHP issuer to collect data for the 
QRS based on enrollees of QHPs offered through and outside of the 
Exchange as long as they are considered the same plan. If this approach 
is finalized, we intend to clarify the operational details of this 
approach in future technical guidance.
---------------------------------------------------------------------------

    \50\ Patient Protection and Affordable Care Act; Exchanges and 
Qualified Health Plans, Quality Rating System (QRS) Framework, 
Measures and Methodology; Notice with Comment, 78 FR 69418 (Nov. 19, 
2013).
    \51\ Patient Protection and Affordable Care Act; Program 
Integrity: Exchange, SHOP, and Eligibility Appeals; Final rule, 78 
FR 54070 (Aug 30, 2013).
---------------------------------------------------------------------------

    We seek comment on the data submission requirements proposed in 
paragraph (a) including comment regarding the reporting timeframes and 
any additional criteria for the submission or reporting of quality data 
for QRS purposes. We seek comment on the proposed approach, for the 
initial years of QRS implementation, of product level reporting and 
allowing the incorporation of quality measure data from QHPs offered 
outside the Exchange, if they are considered the same plan as the QHP 
offered through the Exchange. We also solicit comment to inform future 
rulemaking regarding the potential requirement for QHP issuers to use 
independent third party data validators that would be approved and 
monitored by HHS for QRS purposes.
    As described in 45 CFR 156.275, QHP issuers are required to be 
accredited on the basis of local performance of a QHP by an 
accreditation entity recognized by HHS, and to submit to such entity 
clinical quality measures, such as HEDIS[supreg]. We are seeking 
comment to inform future rulemaking on how best to align QRS measures 
reporting requirements with the accreditation standards for QHP 
issuers.
    We note that multi-State plans, as defined in Sec.  155.1000(a), 
are subject to reporting QRS data for calculation of quality ratings by 
HHS, as described in paragraph (a). The U.S. Office of Personnel 
Management (OPM) will provide guidance on quality reporting to issuers 
with whom it holds multi-State plan contracts.
Marketing Materials
    In paragraph (c), we propose that an issuer may reference its QHP's 
quality rating information in its marketing materials, in a manner 
specified by HHS. In the subsequent section 156.1125 regarding the ESS, 
we propose a similar marketing standard in Sec.  156.1125(c) that a QHP 
issuer may reference the ESS results for its QHPs in its marketing 
materials, in a manner specified by HHS.
    A QHP issuer has the option to use quality rating information and 
ESS results in its marketing materials; however, an issuer that elects 
to use the information must do so in a manner that does not mislead 
consumers into enrolling in a QHP based on inaccurate information. We 
intend to provide details regarding display of rating information and 
ESS results in marketing materials in technical guidance that we 
anticipate releasing in 2015. We seek comment regarding the proposed 
allowance for issuers to include its QHPs' quality rating information 
and ESS results in its marketing materials in paragraphs (c) of 
156.1120 and 156.1125 and ways to prevent the use of the information in 
a misleading manner when being presented to consumers.
c. Enrollee Satisfaction Survey (Sec.  156.1125)
    Section 1311(c)(4) of the Affordable Care Act directs the Secretary 
to establish an enrollee satisfaction survey (ESS) system that would 
evaluate the level of enrollee satisfaction of members in each QHP with 
more than 500 enrollees in the previous year that is offered through an 
Exchange. It also directs Exchanges to display enrollee satisfaction 
information on their Web sites to allow individuals to readily compare 
enrollee satisfaction data between QHPs. To implement this provision, 
HHS is developing the ESS as described in the Federal Register Notice 
dated Nov. 1, 2013 (ESS Notice).\52\ We outline standards in this 
proposed rule for a QHP issuer to collect and submit validated enrollee 
experience data from QHPs offered through an Exchange.
---------------------------------------------------------------------------

    \52\ Agency Information Collection Activities: Health Insurance 
Marketplace Consumer Experience Surveys: Enrollee Satisfaction 
Survey and Marketplace Survey Data Collection; Notice, 78 FR 65658 
(Nov. 1, 2013).
---------------------------------------------------------------------------

    We believe it is important that QHPs offered through Exchanges be 
assessed using a reliable and valid survey, administered and scored 
according to standards developed and monitored by independent 
organizations. We based the ESS on the Consumer Assessment of Health 
Providers and Systems (CAHPS[supreg]) Health Plan 5.0 Medicaid survey 
to assure consumers and stakeholders that the ESS survey data submitted 
meet the validity and reliability standards reported by the 
CAHPS[supreg] program and are comparable to data from other quality 
comparison tools. We used existing CAHPS[supreg] supplemental item sets 
or other CAHPS[supreg] surveys, when available and appropriate, to 
identify any additional items for the ESS.
ESS Administration
    At Sec.  156.1125(a), we propose to direct QHP issuers to contract 
with an HHS-approved ESS vendor, as identified by Sec.  156.1105, to 
administer the ESS of the QHP's enrollees. We also propose to direct a 
QHP issuer to authorize its contracted ESS vendor to report survey 
results to HHS and the Exchange on the issuer's behalf. We believe this 
proposed approach aligns with the Medicare program, which uses a 
similar process by having approved survey vendors administer the 
CAHPS[supreg] survey

[[Page 15851]]

to an issuer's Medicare Advantage and Prescription Drug Program 
enrollees. Similar to the proposed general requirement for the QRS in 
Sec.  156.1120(a), which directs a QHP issuer to submit data to HHS and 
the Exchange, QHPs must ensure that their contracted ESS vendors submit 
the data collected from the ESS survey to HHS and the Exchange so that 
HHS can calculate the ESS scores and benchmarks based on a standard 
scoring methodology that will allow for reliable, uniform, and 
comparable scoring across Exchanges. HHS intends to send calculated ESS 
scores to the Exchanges for their respective QHPs and also intends to 
use a subset of scores from the ESS as part of the quality rating for 
QHPs as described in Sec.  156.1120. We intend for the ESS to be 
administered from January through April of each calendar year beginning 
in 2015.
    HHS is considering the development of an ESS child-only survey to 
assess the experience of children enrolled in child-only plans. Similar 
to the implementation of the QRS child-only measure set, CMS is 
currently assessing the feasibility of a child-only ESS based upon the 
number of child-only QHPs and enrollees in Exchanges.
    In paragraph (b), we propose several data requirements to clarify 
the standards for collection and submission of ESS data. At Sec.  
156.1125(b)(1), we propose to direct a QHP issuer to collect data of 
eligible enrollees for each QHP with more than 500 enrollees in the 
previous year that has been offered in an Exchange for at least one 
year following a survey sampling methodology provided by HHS. We 
propose that eligible enrollees would be those individuals enrolled for 
at least six months during the year prior to the administration of the 
survey and solicit comment on this approach.
    In paragraph (b)(2), we propose to direct a QHP issuer to submit 
data, necessary to conduct the ESS, that has been validated in a form 
and manner specified by HHS. We propose that the data for the sample of 
eligible enrollees that a QHP issuer provides to their contracted ESS 
vendor be validated in a consistent way as data validated for the QRS. 
For example, if a QHP issuer submits data collected for a quality 
measure that is validated through the HEDIS[supreg] Compliance Audit 
process using a NCQA certified auditor, we expect the data that the QHP 
issuer provides to its HHS-approved ESS vendor for the ESS sample be 
included in that validation process. We solicit comment on this 
approach for validation of the data for the ESS sample of eligible 
enrollees.
    In paragraph (b)(3), we propose to direct a QHP issuer to include 
only those QHP enrollees at the reporting level specified by HHS, for 
data submitted for the ESS. We believe that the QHP metal level (i.e., 
HMO Silver, HMO Bronze, PPO Silver, PPO Bronze) for each of the 
issuer's products is the appropriate level (if enrollment is sufficient 
to ensure credibility) to assess enrollee experience and would provide 
information regarding experience with plans charging differing 
premiums. We intend to aggregate the ESS data from the QHP metal level 
to the QHP product level (for example, a QHP issuer's HMO silver and 
HMO bronze would be aggregated into one HMO level score) for public 
reporting purposes to provide consistency with the product-level data 
that would be submitted for the QRS and align with the QRS methodology 
in the initial years of implementation of these proposed quality 
standards for QHPs.
    We recognize that a QHP issuer may offer a plan outside an Exchange 
that would be considered the same plan as one that is certified as a 
QHP and offered through the Exchange, as defined in Sec.  153.500. 
Similar to our proposed approach with the QRS, we are considering in 
the initial years to allow a QHP issuer to include enrollees of QHPs 
offered through and outside of the Exchange, to ensure a reliable ESS 
sample size, as long as they are considered the same plan as 
established in Sec.  153.500. We intend to clarify the operational 
details of this approach in future technical guidance. OPM will issue 
technical guidance regarding the sampling methodology for multi-State 
plans, as defined in 45 CFR 155.1000(a). We envision that the sampling 
methodology for multi-State plans will align with that of QHPs.
    In paragraph (d), we propose to direct a QHP issuer to submit data 
necessary to conduct the survey to its contracted ESS vendor on a 
timeline and in a form and manner specified by HHS. We intend to align 
the timeframes of the proposed reporting requirements for the ESS and 
the QRS. In future technical guidance, we also intend to specify the 
timeframes for a QHP issuer to submit the sampling data to its 
contracted ESS vendor and for the vendor to submit to HHS and the 
Exchange, data from the administration of the survey.
ESS Implementation and Reporting
    HHS proposes to phase in implementation of the ESS over time which 
is consistent with the proposed implementation of the QRS. We believe 
this will allow for appropriate development and testing of the ESS and 
the survey methodology; time for QHP issuers to prepare for data 
collection, validation and submission; and time for QHP enrollees to 
build experience with the QHP and their providers to adequately assess 
their experience and to ensure reliable survey results. Therefore, we 
propose that for QHPs offered in the Exchange during the 2014 open 
enrollment period, the QHP issuer would submit the required data 
elements for ESS beta testing in 2015. The QHP Issuer would then submit 
the required data elements in 2016 for ESS public reporting during the 
2017 open enrollment period. Specifically, we intend for QHP issuers to 
provide data necessary to conduct the survey to their contracted HHS-
approved ESS vendors, as described in paragraph (a), during the first 
month of the calendar year and to ensure that survey results are 
submitted to HHS or its' designee, by the fifth month of the calendar 
year. For example, a QHP issuer reporting data for the 2015 ESS beta 
test would provide sample frame data necessary to conduct the ESS for 
eligible enrollees who would be surveyed, to their contracted survey 
vendor in January 2015, allowing adequate time for the vendor to draw 
the sample in time to begin fielding the survey on February 1. Then, a 
QHP issuer would ensure that the ESS survey results are submitted to 
HHS on or around May 31, 2015. For the first year of ESS public 
reporting, a QHP issuer would provide sample frame data necessary to 
conduct the ESS in January 2016 and ensure that results are submitted 
to HHS or its' designee on or around May 31, 2016. We intend for the 
ESS sample to include all eligible QHP enrollees covered during the 
measurement year which would be the previous calendar year and based on 
sampling specifications. We intend to provide details of the ESS 
sampling methodology in technical guidance that would be periodically 
updated and which will be published in draft form on an HHS Web site to 
obtain feedback from stakeholders.
    We seek comment on the proposed requirement in paragraph (a) to 
direct a QHP issuer to contract with an HHS-approved enrollee 
satisfaction survey vendor and to authorize its contracted vendor to 
submit data to HHS and the Exchange. Specifically, request feedback on 
our proposed approaches for data collection from eligible enrollees for 
each QHP with more than 500 enrollees in the previous year that has 
been offered in an Exchange for at least one year, to require 
validation consistent with the process for QRS measure data and to 
provide data for eligible enrollees

[[Page 15852]]

at the QHP metal level for each of the issuer's products offered on the 
Exchange. We also seek comment on the proposed annual data submission 
requirements in paragraph (b) and (d).
    We note that Multi-State Plans, as defined in 45 CFR 155.1000(a), 
are subject to providing the data described in paragraph (b). The OPM 
will provide guidance on ESS reporting to issuers with whom it holds 
Multi-State Plan contracts.
Marketplace Survey
    Sections 1313 and 1321(a) of the Affordable Care Act provide the 
Secretary with general authority to establish standards and regulations 
related to Exchanges, QHPs, and other components of title I of the 
Affordable Care Act. In Sec.  155.1200(b)(3), we direct State Exchanges 
to submit performance monitoring data on an annual basis, which would 
include information on consumer satisfaction. Pursuant to this legal 
authority, HHS has proposed a consumer experience survey, or the 
Marketplace survey, to assess consumer experience with the 
Exchange.\53\ Similar to the ESS, the Marketplace survey has been 
developed based on the core set of CAHPS[supreg] principles and the 
format and language of the survey drew from existing CAHPS[supreg] 
items, to the extent possible. However since the CAHPS[supreg] program 
does not have a comparable survey to assess entities similar to 
Exchanges, the Marketplace survey items are new and were developed 
based on research and feedback from public comment, technical experts 
and focus groups. We believe it is important to assess experience of 
consumers interacting with an Exchange including obtaining information 
regarding aspects such as the application and eligibility determination 
process for Medicaid/Children's Health Insurance Program (CHIP) 
coverage and the Insurance Affordability Programs. We anticipate that 
results from the Marketplace survey would drive quality improvement in 
Exchanges and provide regulators and stakeholders with information to 
use for monitoring and oversight purposes.
---------------------------------------------------------------------------

    \53\ Agency Information Collection Activities: Health Insurance 
Marketplace Consumer Experience Surveys: Enrollee Satisfaction 
Survey and Marketplace Survey Data Collection; Notice, 78 FR 65658 
(Nov. 1, 2013).
---------------------------------------------------------------------------

    We intend to use a single contracted survey vendor to administer 
the annual Marketplace survey for each Exchange. We are currently in 
the survey developmental testing period for the Marketplace survey in 
the States in the Federally-facilitated Exchange and we anticipate the 
survey beta test to be conducted in early 2015 in all States. We intend 
to provide each Exchange with its respective Marketplace survey 
results, beginning in 2015, to be able to make improvements for 
upcoming open enrollment periods.
    We seek further comment to inform future rulemaking regarding data 
provided by State Exchanges to conduct the Marketplace survey. We are 
considering directing a State Exchange to provide sampling data for 
four types of consumers in an Exchange including: (1) Potential 
applicants (individuals who provided contact information but did not 
submit an application); (2) potential enrollees (individuals who 
successfully applied and were given eligibility and plan information 
but did not enroll); (3) enrollees (individuals successfully enrolled); 
and (4) effectuated enrollees (individuals who have made their first 
premium payment). We are also considering directing a State Exchange to 
submit sampling data for the Marketplace survey based on language 
preference and disability status across each Exchange and we seek 
comment on the feasibility for a State Exchange to provide such data.

G. Part 158--Issuer Use of Premium Revenue: Reporting and Rebate 
Requirements

1. Subpart A--Disclosure and Reporting
a. ICD-10 Conversion Expenses (Sec.  158.150)
    In September 2012, the Secretary changed the date on which issuers 
are required to adopt ICD-10 as the standard medical code set from 
October 1, 2013 to October 1, 2014. Because HHS cannot accept claims 
using the ICD-10 code sets prior to that date, issuers may incur 
conversion costs in 2014 that would otherwise have been incurred only 
in 2012 and 2013. In the 2012 and 2013 MLR reporting years, issuers 
were allowed to report their ICD-10 conversion costs as expenditures 
for activities that improve health care quality (QIA), up to 0.3 
percent of an issuer's earned premium in the relevant State and market 
(MLR Final Rule, 76 FR 76574). Because the ICD-10 implementation date 
has been postponed to 2014, we propose that issuers be allowed to 
report their 2014 ICD-10 conversion costs as QIA in the 2014 reporting 
year, up to 0.3 percent of an issuer's earned premium in the relevant 
State and market. Although there are no plans to further postpone the 
ICD-10 implementation date, in recognition of this possibility and to 
avoid the need for additional regulatory changes, the regulatory change 
proposed herein permits issuers to include their ICD-10 conversion 
costs as QIA through the MLR reporting year in which ICD-10 
implementation is required by the Secretary.
2. Subpart B--Calculating and Providing the Rebate
a. MLR and Rebate Calculations in States With Merged Individual and 
Small Group Markets (Sec. Sec.  158.211, 158.220, 158.231)
    Our previous rulemakings concerning PHS Act section 2718 permitted 
issuers to aggregate individual and small group market data for MLR 
purposes in States that require these two markets to be merged pursuant 
to section 1312(c)(3) of the Affordable Care Act. This proposed rule 
would modify the requirements for data aggregation in Sec.  158.220(a) 
and Sec.  158.231(a) to specify that the individual and small group 
market data must always be aggregated if a State requires these two 
markets to be merged. In addition, this proposed rule would modify the 
requirements regarding a higher State MLR standard in Sec.  158.211 to 
clarify that if a State establishes a higher MLR standard for the 
merged market, this higher standard must be used to calculate any 
rebates for the merged market. These modifications would align the MLR 
methodology in the Federal MLR rule with the MLR methodologies applied 
by the affected States.
b. Accounting for Special Circumstances (Sec.  158.221)
    On November 14, 2013, the Federal government announced a policy 
under which, if certain conditions were met, it would decline to 
enforce certain specified 2014 market reforms against certain non-
grandfathered health insurance coverage in the individual or small 
group market renewed between January 1, 2014 and October 1, 2014, and 
requested that States adopt a similar non-enforcement policy.\54\ CMS 
noted in the Proposed 2015 Payment Notice (78 FR 72322) that this 
transitional policy would not have been anticipated by issuers in 
setting rates for 2014 and stated that we were exploring modifications 
to different programs to help mitigate the impact of this policy.
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    \54\ Letter to Insurance Commissioners, Center for Consumer 
Information and Insurance Oversight, November 14, 2013. Available 
at: http://www.cms.gov/CCIIO/Resources/Letters/Downloads/commissioner-letter-11-14-2013.pdf.
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    Issuers that provided transitional coverage may have incurred 
additional administrative costs, such as expenses related to developing 
and sending required consumers notices, and creating and submitting new 
policy and

[[Page 15853]]

rate filings. We also recognize that issuers of QHPs in the individual 
and small group markets may have incurred costs due to technical 
problems during the launch of the State and Federal Exchanges.
    Pursuant to the direction under PHS Act 2718(c), our development of 
the standardized methodologies for calculating an issuer's MLR must be 
designed to ``take into account the special circumstances of smaller 
plans, different types of plans, and newer plans.'' In the MLR Interim 
Final Rule (75 FR 74864), HHS exercised this authority by making 
adjustments to the formula for calculating an issuer's MLR with respect 
to ``expatriate plans'' (i.e., policies that provide coverage to 
employees outside their country of citizenship, employees outside their 
country of citizenship and outside their employer's country of 
domicile, and non-U.S. citizens working in their home country) and 
``mini-med'' plans (i.e., plans with a total annual benefit maximum of 
$250,000 or less).
    In its discussion of the ``special circumstances'' that applied to 
expatriate plans, the Interim Final Rule noted that ``their unique 
nature results in a higher percentage of administrative costs in 
relation to premiums than plans that provide coverage primarily within 
the United States.'' \55\ Examples of the higher administrative costs 
for these plans include: Identifying and credentialing providers 
worldwide in countries with different licensing and other requirements 
from those found in the United States, processing claims submitted in 
various languages that follow various billing procedures and standards, 
providing translation and other services to enrollees, and helping 
subscribers locate qualified providers in different countries. The 
Interim Final Rule also recognized the ``special circumstances'' that 
applied to mini-med plans. In this latter case, it was not higher 
administrative costs, but lower claims costs relative to administrative 
costs, due to the very low annual dollar limits of mini-med plans. In 
both cases, adjustments were made to the MLR methodology as applied to 
such plans so that they would not be required to pay rebates based on 
their plan design, even if they were relatively as efficient as other 
plans that are able to meet the MLR standard under the standard 
methodology.
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    \55\ 75 CFR 74871.
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    Consistent with this approach, we are proposing to exercise our 
authority to account for the special circumstances of plans affected by 
the transitional policy or the technical problems during the launch of 
the State and Federal Exchanges. These adjustments would only extend to 
issuers in the individual and small group markets that offered 
transitional coverage or participated in the State and Federal 
Exchanges, and only for the 2014 reporting year. A transitional policy 
cost adjustment to the formula for calculating an issuer's MLR would 
not apply in States that did not implement the transitional policy, or 
in States that did, to issuers that did not elect to implement it.
    With respect to the adjustment for issuers offering transitional 
coverage, we are proposing that the MLR calculation methodology for the 
individual and small group markets would be changed to allow these 
issuers to multiply the incurred claims and expenses for quality 
improving activities incurred in 2014 in the MLR numerator by 1.0001. 
This adjustment takes into account the fact that the multiplier would 
be applied to the issuer's entire experience in 2014, which may also 
include experience for plans other than transitional coverage in that 
State and market. In developing this adjustment, we considered the 
following costs as they relate to the transitional policy: (1) 
Developing and sending required notices; (2) actuarial work, including 
that with respect to premium stabilization programs; (3) regulatory and 
rate filings; and (4) activities related to re-contracting.
    With respect to the adjustment for issuers offering coverage 
through the State and Federal Exchanges, we are proposing that the MLR 
calculation methodology for the individual and small group markets 
would be changed to allow issuers participating in the Exchanges to 
multiply the incurred claims and expenses for quality improving 
activities incurred in 2014 in the MLR numerator by 1.0004. This 
adjustment takes into account the fact that the multiplier would be 
applied to the issuer's entire experience in 2014, which may also 
include experience for plans offered off the Exchange in that State and 
market. In developing this adjustment, we considered the following 
costs as they relate to the technical issues during the launch of the 
State and Federal Exchanges: (1) Information technology (IT) 
development and testing; (2) IT system modifications and re-
programming; (3) providing feedback to CMS or a State on functionality 
and data transmission; (4) assistance to enrollees (e.g., enhanced call 
center activity); (5) engaging in pilot projects relating to direct 
enrollment; (6) developing technical ``tickets'' for the CMS or a State 
help desk; (7) work with the Exchange(s) to resolve these technical 
problems; (8) manual processing of enrollment data, including but not 
limited to enrollment and payment data template creation, monthly 
submission of data reports, and monthly submission of data accuracy 
certification forms; and (9) development of other manual workarounds.
    HHS believes that these adjustments would appropriately account for 
the special circumstances related to implementation of the transitional 
policy and the rollout of the Exchanges, while still requiring issuers 
to comply with the statutory MLR requirement.
    In addition to seeking comment on the above proposed approach, we 
also invite comment on other options for making an appropriate 
adjustment to the MLR formula to account for the unanticipated costs 
related to the transitional policy and the Exchange implementation.
c. Distribution of De Minimis Rebates (Sec.  158.243)
    The MLR December 7, 2011 final rule defines the threshold amounts 
below which rebates are considered to be de minimis and sets forth the 
provisions for distribution of such rebates. In this proposed rule, we 
propose to amend the provisions for de minimis rebates in Sec.  158.243 
to clarify how issuers must distribute rebates where (1) all of an 
issuer's rebates are de minimis, or (2) distribution of de minimis 
rebates to enrollee(s) whose rebates are not de minimis would result in 
an enrollee receiving a rebate that exceeds the enrollee's annual 
premium. We propose that in these two situations, the issuer must 
distribute de minimis rebates to enrollees in the policies that 
generated the de minimis rebates. The current de minimis rebate 
provisions allow issuers not to distribute de minimis rebates to 
enrollees in the policies that generated those rebates, but instead to 
aggregate such rebates and distribute them to other enrollees whose 
rebates are not de minimis.

IV. Collection of Information Requirements

    Under the Paperwork Reduction Act (PRA) of 1995, we are required to 
provide 60-day notice in the Federal Register and solicit public 
comment before a collection of information requirement is submitted to 
the Office of Management and Budget (OMB) for review and approval. This 
proposed rule contains information collection requirements (ICRs) that 
are subject to review by OMB. In order to fairly evaluate whether an 
information collection should be approved by OMB, section 3506(c)(2)(A) 
of the Paperwork

[[Page 15854]]

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.
    We are soliciting public comment on each of these issues, which 
contain ICRs.
A. ICRs Regarding Recertification for Certified Application Counselors 
(Sec.  155.225)
    Under proposed Sec.  155.225(d)(7), certified application 
counselors would be required to be recertified on at least an annual 
basis after successfully completing recertification training as 
required by the Exchange. Each Exchange would be required to establish 
its own recertification process and standards consistent with these 
requirements. We expect that establishing a process for recertification 
would include creating a recertification request form (or similar 
document) in Exchanges that directly certify certified application 
counselors. We estimate that up to 18 State Exchanges would develop 
their own recertification request form.\56\ We estimate that the 
development of a recertification request form, as may be applicable for 
Exchanges that directly certify certified application counselors would 
take a health policy analyst (at $49.35 labor cost per hour) up to 1 
hour to create, a senior manager (at $79.08 cost per hour) up to .5 
hours (30 minutes) for review, and an attorney up to .5 hours (at 
$90.15 labor cost per hour) for legal review. We estimate that the one-
time cost burden would be two hours with a cost burden of $134 for each 
Exchange, and the total burden for 18 State Exchanges would be 36 hours 
with a cost burden of $2,412.
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    \56\ We estimate 18 State Exchanges (which includes Utah) will 
develop their own processes for recertification. HHS will establish 
a single process in all FFEs.
---------------------------------------------------------------------------

    There are recordkeeping requirements associated with developing and 
maintaining a request form. We estimate that the time burden associated 
with maintaining a copy of the request form would be .016 hours (1 
minute); we assume a mid-level health policy analyst would maintain the 
form through electronic copies at minimal cost, which we estimate as 
$0.79 as a one-time requirement for the Exchange. The total burden for 
18 Exchanges would be 1.08 hours and the total cost burden would be 
$14.22.
    There would also be third-party disclosure requirements for 18 
State Exchanges associated with reviewing each certified application 
counselor's recertification request, which would require the Exchange 
to notify the individual of the result of its review and issue a new 
certificate for each individual who successfully completes 
recertification. This notice requirement would apply to the Exchange on 
an annual basis. We estimate that it would take a mid-level health 
policy analyst in the Exchange up to .08 hours (5 minutes) to notify an 
individual. The estimated cost burden is $4.11 for each individual 
notice, including the certificate. For purposes of this analysis, we 
estimate that there would be approximately 30,000 certified application 
counselors nationwide, or approximately 10,600 application counselors 
in 18 State Exchanges. The total cost burden would be approximately 
$2,422 for each State Exchange. The total burden for 18 State Exchanges 
would be approximately 883 hours and the total cost burden would be 
$43,593. There would be recordkeeping requirements associated with 
issuing each individual notice. We estimate that the time burden 
associated with maintaining a copy of the notice and certificate would 
be .016 hours (1 minute); we assume a mid-level health policy analyst, 
with a labor cost of $49.35 an hour, would maintain the form through 
electronic copies at minimal cost, which we estimate as $0.79 per 
notice for each individual certified application counselor. The total 
recordkeeping burden for 10,600 certified application counselors in 18 
State Exchanges would be 170 hours and the total cost burden would be 
$8,374, or $265 per Exchange.
    For Exchanges that designate organizations to directly certify 
certified application counselors under Sec.  155.225(b)(1), there would 
be requirements associated with implementing a recertification process 
under the applicable Exchange's standards. We expect that this process 
would include creating and issuing a recertification request form (or 
similar document) for an organization's certified application 
counselors to submit to indicate their intention to be recertified and 
provide an updated conflicts of interest disclosure or other 
attestations as may be required. We estimate that up to 5,000 
designated organizations would develop their own recertification 
request form. We estimate that the development of a recertification 
request form would take a health policy analyst (at $49.35 labor cost 
per hour) up to 1 hour to create, a senior manager (at $79.08 labor 
cost per hour) up to .5 hours (30 minutes) for review, and an attorney 
(at $90.15 labor cost per hour) up to .5 hours (30 minutes) for legal 
review. We estimate that the one-time cost burden would be $134 for 
each organization. The total one-time burden for 5,000 organizations 
nationwide would be 10,000 hours and the total cost burden would be 
$670,000.
    There would be recordkeeping requirements associated with 
developing and maintaining a request form. We estimate that the time 
burden associated with maintaining a copy of the request form would be 
.016 hours (1 minute); we assume a mid-level health policy analyst with 
a labor cost of $49.35 an hour would maintain the form through 
electronic copies at minimal cost, which we estimate as $0.79 as a one-
time requirement for each organization. The total one-time burden for 
5,000 organizations nationwide would be 80 hours and the total cost 
burden would be $3,950.
    There would also be third-party disclosure requirements for 
designated organizations associated with reviewing each certified 
application counselor's recertification request, which would require 
the organization to notify the individual of the result of its review 
and issue a new certificate as appropriate. This notice requirement 
would apply to the organization on an annual basis. For purposes of 
estimating the burden on designated organizations, we assume that of 
the estimated 30,000 certified application counselors nationwide, 
approximately 19,400 would be directly certified by designated 
organizations, or four certified applications counselors on average per 
designated organization. We estimate that it would take a mid-level 
health policy analyst up to .08 hours (5 minutes) to notify an 
individual and issue a new certificate. The estimated cost burden is 
$4.11 for each individual notice. For an estimated 19,400 certified 
application counselors nationwide, or approximately four certified 
application counselors on average in each organization, the total cost 
burden would be approximately $16.44 for each organization. The total 
burden for 5,000 designated organizations nationwide would be 
approximately 1,617 hours and the total cost burden would be 
approximately $79,734.
    There would be recordkeeping requirements associated with issuing a 
certificate. We estimate that the time burden associated with 
maintaining a copy of each certificate issued at recertification would 
be .016 hours (1

[[Page 15855]]

minute); we assume a mid-level health policy analyst with a labor cost 
of $49.35 an hour would maintain the form through electronic copies at 
minimal cost, which we estimate as $0.79 as a per certificate for each 
organization. The total recordkeeping cost per organization would be 
$3.16. The total burden for 5,000 organizations nationwide would be 323 
hours and the total cost burden would be approximately $15,326.
    There would be third-party disclosure requirements for individual 
certified application counselors associated with completing the 
requirements for recertification, whether done directly through the 
Exchange or through an Exchange-designated certified application 
counselor organization. Such recertification requirements would include 
completing Exchange required training and might also include satisfying 
other requirements consistent with the Exchange-established processes, 
such as providing conflicts of interest disclosures, other attestations 
and submitting a recertification request form (or similar document) and 
other attestations. These requirements would apply to certified 
application counselors on an annual basis. Although nothing prohibits 
individual certified application counselors or organizations from being 
funded through sources such as applicable private, State, or Federal 
programs, we expect that certified application counselors would not be 
guaranteed any specific funding. We estimate the professional wage of 
certified application counselors for this type of work as equivalent to 
that of an eligibility interviewer for assistance from government 
programs and agency resources. We estimate that it would take a 
certified application counselor with a labor cost of $26.65 an hour up 
to 0.17 hours (10 minutes) to complete and submit the recertification 
request to the organization or Exchange, as applicable. The estimated 
cost burden would be $4.53 for each individual seeking recertification. 
We estimate that there would be approximately 30,000 recertification 
requests provided, for a total burden of 5,000 hours and a total cost 
burden of $135,915 for all certified application counselors nationwide.
    There would be third-party disclosure requirements associated with 
taking recertification training. We expect that an individual certified 
application counselor would provide proof to the organization or 
Exchange that he or she has successfully completed the recertification 
training, in accordance with the Exchange's process. We estimate that 
it would take a certified application counselor with a labor cost of 
$26.65 an hour up to .03 hours (2 minutes) to provide the training 
certificate to the organization or Exchange, as may be required. The 
total estimated cost burden is $0.80 for each individual seeking 
recertification. We estimate that there would be approximately 30,000 
training certificates provided, and the total burden would be 1,000 
hours, with a total cost burden of $24,000 for all certified 
application counselors nationwide.
    In addition, there would be recordkeeping requirements associated 
with the training certification. We expect each person who receives 
training would obtain and maintain a record of training certification. 
We estimate that the time burden associated with maintaining proof of 
training certification is .016 hours (1 minute), since we assume this 
proof would be maintained through electronic copies, at minimal cost. 
The total cost estimated for each individual to maintain proof of 
training certification would be $0.43. The total burden would be 500 
hours and the total cost burden would be $12,900 for all certified 
application counselors nationwide.

B. ICRs Regarding Consumer Authorization (Sec. Sec.  155.210 and 
155.215)

    For purposes of the ICRs associated with this proposal, we use the 
same labor cost estimates that were used in the final Navigator and 
non-Navigator assistance personnel standards rule (Patient Protection 
and Affordable Care Act; Exchange Functions: Standards for Navigators 
and Non-Navigator Assistance Personnel, July 17, 2013, 78 FR 42842). 
Navigator personnel and non-Navigator assistance personnel to which 
Sec.  155.215 applies are estimated to have a labor cost of $20 per 
hour. Navigator and non-Navigator assistance project leads to which 
Sec.  155.215 applies are estimated to have a labor cost of $29 per 
hour. Navigator and non-Navigator senior executives to which Sec.  
155.215 applies are estimated to have a labor cost of $48 per hour. 
These are estimates commonly used for estimating paperwork burden and 
do not represent a recommendation or a requirement of how much 
Navigator and non-Navigator personnel to which Sec.  155.215 applies 
are to be paid. There is nothing in the proposed regulations that would 
require any of these workers to be paid any specific amount.
    In the ICR currently approved under OMB control number (OCN) 0938-
1220, we noted that there were 105 Navigator grantee organizations at 
that time in FFEs, including SPEs, and we estimated that there were 
3,000 individuals working as Navigators. We estimated the number of 
non-Navigator assistance project leads to be 300 and 1,800 for 
personnel and we use those estimates here as well.
    In accordance with proposed Sec.  155.210(e)(6) and Sec.  
155.215(g), Navigators, as well as those non-Navigator personnel to 
whom Sec.  155.215 applies, would be required to maintain procedures to 
inform consumers of the functions and responsibilities of Navigators 
and non-Navigator assistance personnel (as applicable), and to obtain 
authorization for the disclosure of consumer information to the 
Navigator or non-Navigator assistance personnel (as applicable). This 
would be a one-time requirement for the organization. We estimate that 
it would take a Navigator or non-Navigator assistance personnel project 
lead up to 2 hours to create the form for providing authorization to 
applicants, and a Navigator or non-Navigator senior executive up to 1 
hour to review the procedure, for a total time burden of up to 3 hours. 
We estimate the cost burden associated with creating this procedure 
would be $106 per organization. The total cost for all 105 Navigator 
grantee organizations is estimated to be $11,130. The total cost for 
all 300 non-Navigator assistance personnel organizations is estimated 
to be $31,800.
    There are also recordkeeping requirements associated with 
developing and maintaining a model agreement and authorization form. 
Each organization is expected to maintain a copy of the executed forms. 
We estimate that the time burden associated with maintaining a copy of 
executed agreement and authorization forms for each consumer would be 
0.016 hours (1 minute); we assume these would be maintained through 
electronic copies with minimal cost.
    In addition, there would be burdens on individual Navigators, as 
well as those non-Navigator assistance personnel to whom Sec.  155.215 
applies. Under Sec.  155.210(e)(6) and Sec.  155.215(g), respectively, 
Navigators and non-Navigator assistance personnel would be required to 
inform consumers of the functions and responsibilities of Navigators 
and non-Navigator assistance personnel and obtain authorization for the 
disclosure of consumer information to a Navigator or non-Navigator 
assistance personnel prior to obtaining the consumer's personally 
identifiable information. In the final rule on certified application 
counselors (78 FR 42824, 42854-42855), we estimated that it would take 
a certified application counselor 0.25 hours (15 minutes) to provide 
consumers with information

[[Page 15856]]

about the functions and responsibilities of a certified application 
counselor, obtain their authorizations, and provide any applicable 
conflict of interest disclosures. Because here we are only estimating 
the time required to provide consumers with information about the 
functions and responsibilities of a Navigator or non-Navigator 
assistance personnel and obtain their authorization, we estimate that 
it would take a Navigator or non-Navigator assistance personnel 0.1667 
hours (10 minutes) to perform this task. The total cost estimate for 
the consumer authorization process for Navigators and non-Navigator 
assistance personnel therefore would be $3.33. The total time burden on 
all 3,000 Navigators is estimated to be approximately 500 hours, and 
the total cost burden on all 3,000 Navigators is estimated to be 
$9,990. The total time burden on all 1,800 non-Navigator assistance 
personnel is estimated to be 300 hours, and the total cost burden on 
all 1,800 non-Navigator assistance personnel is estimated to be $5,994.

C. ICRs Regarding Enrollee Satisfaction & Marketplace Surveys 
(Sec. Sec.  155.1200, 156.1105 and 156.1125)

    In Sec.  156.1105 of this proposed rule, we would establish a 
monitoring and appeals process for HHS-approved enrollee satisfaction 
survey vendors. Specifically, in Sec.  156.1105(d), we would establish 
a process in which HHS would monitor approved vendors for ongoing 
compliance. HHS might require additional information from approved 
vendors to be periodically submitted in order to ensure continued 
compliance. We estimate that HHS would approve approximately 40 ESS 
vendors. We estimate that it would take no longer than one hour for 
each vendor (at a cost of $24.10 per hour) to comply with any 
additional monitoring by HHS. Therefore, we estimate a total annual 
burden of 40 hours for all vendors for a total cost burden estimate of 
$964.00.
    In Sec.  156.1105(e) of this proposed rule, we propose a process by 
which an enrollee satisfaction survey vendor that is not approved by 
HHS could appeal HHS's determination. It is estimated that filing an 
appeal with HHS would take no longer than one hour. We estimate that 
five survey vendors that apply would not be approved and all of those 
vendors would appeal HHS's determination and submit additional 
documentation to HHS. Therefore, we estimate five responses, for a 
total of five burden hours, for a total cost of $120.50.
    The burden estimate associated with quality standards for QHP 
issuers related to the ESS outlined in Sec.  156.1125 would include the 
time and effort required for QHP issuers to collect, submit and 
validate ESS data on an annual basis. The burden and cost related to 
the survey respondents and ESS vendors associated with the ESS has been 
approved under OCN 0938-1221. In addition, we estimate that each QHP 
would need an average of 54 hours or $1,349.60 for the ESS to be 
administered by mail, phone and/or by web for its QHPs. Assuming a 
total of 575 QHP issuers, we estimate that the annual burden would be 
31,050 hours or $776,020.
    The burden with the Marketplace survey under Sec.  155.1200(b)(3) 
would include the time, cost and effort related to survey respondents 
and has been approved under OCN 0938-1221. In addition, we will revise 
the information collection currently approved under OCN 0938-1119 to 
account for any additional burden for an Exchange if sampling data is 
needed from State Exchanges for CMS to administer the Marketplace 
survey.

D. ICR Regarding Quality Rating System (Sec.  156.1120)

    The burden and cost estimates associated with quality standards for 
QHP issuers related to the QRS outlined in Sec.  156.1120 would include 
estimates for QRS measure data collection, validation, and submission 
to CMS. We estimate that a total of 575 QHP issuers would be collecting 
and reporting QRS measure data, by product type, using administrative 
data sources and medical records. Using the BLS labor category 
estimates for a general operations manager, computer programmer, 
business operations specialist, registered nurse, and medical records 
and health information analyst, the estimated annual cost and hourly 
burden for a QHP issuer would be $117,424 and 1650 hours, for an issuer 
who has performance measures data collection experience. We estimate 
that approximately eighty percent of all issuers, or 460 issuers, have 
such experience. We anticipate additional software purchases to 
generate measure data and rates and increased third-party data 
validation fees for issuers that do not have the experience in data 
collection and reporting for the QRS as proposed in Sec.  156.1120. 
Therefore, we estimate that the additional cost burden for each of the 
remaining 115 issuers would be approximately $102,500 in the initial 
year as they develop their data collection systems and processes, for a 
total of approximately $11,787,500. We estimate $67,518,800 and 948,750 
hours as the total annual burden for the anticipated 575 QHP issuers to 
collect and report QRS data.

E. ICRs Regarding Quality Standards for Exchanges (Sec. Sec.  155.1400 
and 155.1405)

    In Sec.  155.1400 and Sec.  155.1405, we propose that each Exchange 
must display, on its Web site, quality rating and enrollee satisfaction 
survey result information for QHPs offered on the Exchange. We estimate 
18 State Exchanges and the FFE would collect the relevant QRS and ESS 
information for display. The burden estimate associated with these 
standards would include collection of the necessary data by each 
Exchange to display on its Web site. This burden and cost for Exchanges 
are currently approved under ONC 0938-1156 in the total Web site site 
that provides information including ESS and quality ratings, on 
available QHPs. The provisions of this proposed rule would not affect 
the burden.

F. ICR Regarding Medical Loss Ratio Requirements (Sec. Sec.  158.150, 
158.211, 158.220, 158.221, 158.231 and 158.243)

    This proposed rule would amend the MLR provisions regarding the 
treatment of ICD-10 conversion costs. This proposed rule further 
proposes MLR calculation adjustments for issuers affected by the 
transitional policy announced in the CMS letter dated November 14, 2013 
and for issuers participating in the State and Federal Exchanges. This 
proposed rule would also clarify how issuers are to calculate their 
MLRs in States that require the small group market and individual 
market to be merged. In addition, this proposed rule would clarify how 
issuers must distribute de minimis rebates. Both MLRs and rebates are 
reported on the MLR annual reporting form.
    The burden for the existing information collection requirement is 
approved under OCN 0938-1164. This includes the annual reporting form 
and instructions that are currently used by issuers to submit MLR 
information to HHS. The MLR annual reporting form collects information 
on all distributed and owed rebate amounts, regardless of whether they 
are de minimis. Prior to the July 31, 2015 deadline for the submission 
of the annual MLR report for the 2014 MLR reporting year, and in 
accordance with the PRA, HHS plans to solicit public comment and seek 
OMB approval for an updated MLR annual form that would reflect the 
changes in MLR calculations. In addition, although HHS is seeking OMB 
approval for updates to the MLR annual form that reflect changes in MLR 
calculations in States that require the small group market and 
individual market to be

[[Page 15857]]

merged, and changes that would allow issuers to separately report 
transitional coverage, these changes are not considered new reporting 
requirements as they utilize information that is a subset of 
information that issuers already submit to HHS. We do not anticipate 
that the proposed changes would increase the burden on issuers.

G. ICRs Regarding Civil Money Penalties (Sec. Sec.  155.206 and 
155.285)

    Section 155.206 describes the bases and processes HHS proposes to 
use to impose CMPs on noncompliant consumer assistance personnel and 
organizations. Section 155.285 describes the bases and processes HHS 
proposes to use to impose CMPs on persons who provide false or 
fraudulent information required under section 1411(b) of the Affordable 
Care Act or who knowingly and willfully use or disclose information in 
violation of section 1411(g) of the Affordable Care Act. The ICRs 
proposed in these provisions are exempt from PRA requirements in 
accordance with 5 CFR 1320.4(a)(2) because this information would be 
collected during the conduct of an administrative action or 
investigation involving an agency against specific individuals or 
entities.

H. ICRs Regarding Fixed Indemnity Insurance, Minimum Essential 
Coverage, Certifications of Creditable Coverage and HIPAA Opt-Out 
Election Notice, Notice of Discontinuation, Notice of Renewal 
(Sec. Sec.  146.152, 146.180, 147.106, 148.122, 148.124, 148.220, and 
156.602)

    In Sec.  148.220 of this proposed rule, we propose that issuers of 
individual market fixed indemnity insurance include a notice in plan 
materials stating that the coverage is not a substitute for major 
medical coverage and that lack of minimum essential coverage may result 
in an additional payment with one's taxes. The notice requirement could 
be satisfied by inserting a statement into existing plan documents. HHS 
would provide the exact text of the notice and it would not need to be 
customized. In addition, under proposed Sec.  156.602, issuers of 
foreign group health coverage would be required to provide notice to 
enrollees who are citizens or nationals of the United States of its 
minimum essential coverage status. Plan documents are usually reviewed 
and updated annually before a new plan year begins. Issuers would be 
able to insert the statements in their plan documents at that time at 
minimal cost. Once the notice is included in the plan documents the 
first year, no additional cost would be incurred in future years. 
Sections 146.152, 147.106 and 148.122 of this proposed rule provide 
that issuers that discontinue a product in the group or individual 
market, or that provide the option to renew coverage, would also be 
required to provide written notices to enrollees in a form and manner 
specified by the Secretary. HHS would provide the exact text of the 
notices and they would not need to be customized. The burden associated 
with these notices would not be subject to the Paperwork Reduction Act 
of 1995 in accordance with 5 CFR 1320.3(c)(2).
    Certifications of creditable coverage under Sec.  148.124 would no 
longer be required to be provided starting December 31, 2014. The 
burden is currently approved under OCN 0938-0702. In the individual 
market, the anticipated reduction in annual burden hours would be 
835,517, with an anticipated reduction in cost of $25,625,306. The 
burden for HIPAA Opt-out Election notices under Sec.  146.180 is 
currently approved under OCN 0938-0702 as well. Electronic submission 
of opt-out election notice will also reduce costs for plans by 
eliminating the need for mailing paper forms.
    If you comment on these information collection requirements, please 
do either of the following:
    1. Submit your comments electronically as specified in the 
ADDRESSES section of this proposed rule; or
    2. Submit your comments to the Office of Information and Regulatory 
Affairs, Office of Management and Budget, Attention: CMS Desk Officer, 
CMS-9949-P. Fax: (202) 395-6974; or Email: OIRA_submission@omb.eop.gov.

V. Regulatory Impact Analysis

A. Summary

    This proposed rule addresses various requirements applicable to 
health insurance issuers, Exchanges, Navigators, non-Navigator 
assistance personnel, and other entities under the Affordable Care Act. 
It also proposes a number of amendments relating to the premium 
stabilization programs, the medical loss ratio program, certified 
application counselor programs, affordability exemptions, guaranteed 
availability and renewability of coverage, and quality reporting 
requirements. Additionally, it proposes the grounds for imposing CMPs 
on persons who provide false or fraudulent information to the Exchange 
and on persons improperly using or disclosing information; to modify 
standards related to opt-out provisions for self-funded non-Federal 
governmental plans and individual market provisions under the Health 
Insurance Portability and Accountability Act of 1996; and standards for 
recognition of certain types of foreign group coverage as minimum 
essential coverage.
    CMS has crafted this rule to implement the protections intended by 
Congress in an economically efficient manner. We have examined the 
effects of this 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 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, CMS has quantified the benefits, costs and transfers 
where possible, and has also provided a qualitative discussion of some 
of the benefits, costs and transfers that may stem from this proposed 
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.

[[Page 15858]]

    Section 3(f) of Executive Order 12866 defines a ``significant 
regulatory action'' as an action that is likely to result in a proposed 
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. HHS has concluded that this rule is likely to have economic 
impacts of $100 million or more in any one year, and therefore meets 
the definition of ``significant rule'' under Executive Order 12866. 
Therefore, HHS has provided an assessment of the potential costs, 
benefits, and transfers associated with this proposed regulation.
1. Need for Regulatory Action
    Starting in 2014, qualified individuals and qualified employers are 
able to obtain coverage provided through Exchanges. The proposed 
provisions, amendments and clarifications in this proposed rule would 
address stakeholder concerns and inquiries and ensure smooth 
functioning of health insurance markets and Exchanges and ensure that 
individuals have access to high quality and affordable health insurance 
coverage. In addition, this proposed rule would establish methodologies 
for calculating the MLR to address ICD-10 conversion costs, MLR and 
rebate calculations in States that require the individual and small 
group markets to be merged, the distribution of de minimis rebates, and 
to accommodate the special circumstances of issuers affected by the 
transitional policy announced in the CMS letter dated November 14, 
2013, and issuers participating in the State and Federal Exchanges.
2. Summary of Impacts
    In accordance with OMB Circular A-4, Table V.1 below depicts an 
accounting statement summarizing CMS's assessment of the benefits, 
costs, and transfers associated with this regulatory action. The period 
covered by the RIA is 2014-2018.
    HHS anticipates that the provisions of this proposed rule will 
ensure that all consumers have access to quality and affordable health 
care and are able to make informed choices, ensure smooth operation of 
Exchanges, ensure that premium stabilization programs work as intended, 
provide flexibility to SHOPs and employers, and protect consumers from 
fraudulent and criminal activities. Affected entities such as QHP 
issuers, Navigators and non-Navigator assistance personnel, designated 
certified application counselor organizations, survey vendors, and 
States, would incur costs to comply with the proposed provisions, 
including administrative costs related to notices, surveys, training, 
and recertification requirements. In accordance with Executive Order 
12866, HHS believes that the benefits of this regulatory action justify 
the costs.

                                           Table V.1--Accounting Table
----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
Benefits:
Qualitative:
    * Ensure access to affordable and quality health insurance coverage for all individuals.....................
    * Allow consumers to make informed choices..................................................................
    * Lower out-of-pocket costs for individuals who purchase fixed indemnity insurance..........................
    * Possible reduction in cost sharing due to adjustment in methodology for calculating annual limitations on
     cost-sharing and small group deductibles..
    * Ensure sufficiency of funds in the reinsurance payment pool...............................................
    * Ensure consumer protection and privacy and security of PII................................................
    * Discourage fraudulent or criminal activity by consumer assistance personnel and entities..................
    * Provide additional flexibility to SHOPs and employers and allow employers to select plans with updated
     rate information..
    * Improve consistency of MLR calculations among issuers in States with merged individual and small group
     markets and improve accuracy of rebate payments..
----------------------------------------------------------------------------------------------------------------
Costs:                                  Estimate                     Year dollar        Discount          Period
                                                                                    rate percent         covered
----------------------------------------------------------------------------------------------------------------
Annualized Monetized ($millions/year).  $48.78 million \1\......            2013               7       2014-2018
                                        $49.52 million \1\......            2013               3       2014-2018
----------------------------------------------------------------------------------------------------------------
Net annual costs to enrollees related to ESS and Marketplace survey; recertification of certified application
 counselors by States; administrative costs incurred by survey vendors to appeal application denials;
 administrative costs to QHP issuers related to data submissions for QRS and ESS administration; costs related
 to notice and disclosure requirements for certified application counselor recertification; consumer
 authorization for Navigators and non-Navigator personnel; and a reduction in costs for issuers in the
 individual market due to discontinuation of certification of creditable coverage.
----------------------------------------------------------------------------------------------------------------
Qualitative:
    * Costs to certified application counselors to obtain required training for recertification.................
    * Reduction in costs to consumers due to ability to make requests to dismiss appeals by telephone...........
    * Possible increase in premiums due to adjustments in methodology for calculating annual limitations on cost-
     sharing and small group deductibles..
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------


[[Page 15859]]


                                     Table V.1--Accounting Table - Continued
----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
Transfers:                              Estimate                     Year dollar        Discount          Period
                                                                                    rate percent         covered
----------------------------------------------------------------------------------------------------------------
Annualized Monetized ($millions/year).  $2.93 million...........            2013               7       2014-2018
                                        $2.99 million...........            2013               3       2014-2018
----------------------------------------------------------------------------------------------------------------
Net annual transfer of rebate dollars to enrollees from shareholders or nonprofit stakeholders, resulting from
 adjustment in MLR methodology for issuers in States with merged individual and small group markets.
Qualitative:
    * Possible reduction in rebates paid by issuers to enrollees due to adjustment in MLR methodology for
     issuers affected by the November 2013 transitional policy and unexpected costs during the implementation of
     the Exchanges, and to account for ICD-10 conversion costs..
    * Possible transfer of transitional reinsurance program funds from the Federal government to non-
     grandfathered reinsurance-eligible plans in the individual market..
    * Possible increase in total risk corridors payment amounts made by the Federal government and decrease in
     total risk corridors receipts, although the Federal government intends to implement the risk corridors
     program in a budget neutral manner..
----------------------------------------------------------------------------------------------------------------
1. Note: Approximately $13 million in costs are estimated in the RIA below and the remaining costs related to
  ICRs are estimated in section IV above.

3. Anticipated Benefits, Costs and Transfers
    The impacts of the existing regulations that are being amended and 
clarified in this proposed rule have already been addressed in RIAs 
included in previous rulemaking. This RIA only includes the impacts of 
new provisions and any changes to previous estimates as a result of 
amendments to existing provisions.
Benefits
    Provisions of this proposed rule would ensure that all individuals 
have access to affordable and quality health insurance coverage and the 
necessary information to make informed choices. Making quality rating 
and enrollee satisfaction survey information available to consumers 
would allow them to make informed choices and provide issuers with an 
incentive to improve quality of care and consumer experience. The 
results from the Marketplace survey would drive quality improvement in 
Exchanges and provide regulators and stakeholders with information to 
use for monitoring and oversight purposes. The proposed amendments to 
special enrollment periods would ensure that individuals who experience 
loss of coverage or exceptional circumstances have continued access to 
healthcare. The proposal to designate foreign group health coverage for 
individuals on expatriate status as minimum essential coverage would 
ensure that such individuals have appropriate coverage while abroad or 
visiting the United States.
    The proposed amendments for fixed indemnity insurance would allow 
such plans to be sold as secondary to other health insurance coverage 
that meets the definition of minimum essential coverage. This would 
allow individuals that buy such coverage to lower their out-of-pocket 
costs.
    The proposed adjustments to the transitional reinsurance program 
would ensure that the reinsurance pool is sufficient to provide the 
premium stabilization benefits intended by statute. The proposed 
adjustments to the risk corridors formula for the 2015 benefit year 
would help to mitigate issuers' unexpected administrative costs and 
uncertainties around operations and the risk pool, and to stabilize the 
market as it continues to transition to full compliance with Affordable 
Care Act requirements.
    The proposed regulations would clarify some of the standards for 
Navigator and certified application counselor conduct that would ensure 
consumer protection and ensure that Navigators provide information and 
services concerning enrollment in QHPs in a fair and impartial manner 
and that certified application counselors act in consumers' best 
interests. The proposed rule would also provide HHS with the authority 
to impose CMPs on Navigators, non-Navigator assistance personnel, 
certified application counselors, and certified application counselor 
organizations in the FFE who violate the Exchange standards applicable 
to them. This would ensure that consumers interacting with the Exchange 
receive high-quality assistance and robust consumer protection. The 
proposed provisions to impose CMPs for provision of false or fraudulent 
information, and improper use or disclosure of information would also 
ensure privacy and security of consumers' PII.
    The proposed amendments to the annual employer and employee 
enrollment periods in the SHOP would benefit SHOPs by providing issuers 
with the same amount of time to complete the SHOP QHP certification 
process as that available for the individual Exchange. Aligning the 
start dates for the employer election period with the start of 
individual market Exchange open enrollment for 2015 would provide 
Exchanges with a uniform timeline for improving and launching Exchange 
services for 2015. Additionally, a uniform QHP filing and review 
timeline for both markets for 2015 would reduce confusion and provide 
efficiencies to scale in review, providing potential resource savings 
to Exchanges and QHP issuers. Removing the required minimum lengths of 
both the employer election period and the employee open enrollment 
period would provide additional flexibility to SHOPs and employers and 
allow employers to select plans with the most up-to-date rate 
information.
    The proposed amendment to provide for a one year transition policy 
under which a SHOP would be permitted to not implement employee choice 
in 2015 would alleviate concerns that HHS has with specific 
circumstances where employee choice would result in significant adverse 
selection in the State's small group market that cannot be remediated 
through the premium stabilization programs or the single risk pool, or 
that there would not be a meaningful choice of QHPs and/or stand-alone 
dental plans in the State's SHOP. Allowing for this transitional policy 
in 2015 will provide minimal disruption to small group markets.
    The proposed amendment to our methodology for calculating the 
annual limitation on cost sharing and the annual limitation on small 
group deductibles could reduce cost sharing paid by some enrollees in 
the individual and group markets.
    The proposed amendments to the MLR methodology in States that 
require the small group market and individual market to be merged would 
improve the

[[Page 15860]]

consistency of MLR calculations among issuers in those States and 
improve the accuracy of rebate payments.
    The approaches we are considering to define the required 
contribution percentage would provide that determinations of 
affordability exemptions would take into account the rate of premium 
growth over the rate of income growth. We do not anticipate that these 
approaches would significantly alter the number of individuals who 
would be expected to enroll in health insurance plans or make shared 
responsibility payments.
Costs
    Affected entities would incur costs to comply with the provisions 
of this proposed rule. Costs related to ICRs subject to PRA are 
discussed in detail in section IV and include administrative costs 
incurred by survey vendors to appeal application denials; costs to QHP 
issuers related to data submissions for QRS, ESS administration; costs 
related to notice and disclosure requirements for certified application 
counselor recertification, consumer authorization for Navigators and 
non-Navigator assistance personnel; and a reduction in costs for 
issuers in the individual due to discontinuation of certification of 
creditable coverage. In this section, we discuss other costs related to 
the proposed provisions.
    Each Exchange must establish its own recertification process for 
certified application counselors and designated certified application 
counselor organizations. We expect that establishing a process for 
recertification would include updating recertification training 
materials in all Exchanges. We estimate that up to 18 State Exchanges 
will develop their own training materials. We expect that an Exchange 
would develop training materials for recertification on an annual 
basis. We assume that it would take a mid-level health insurance 
analyst (with an hourly labor cost of $49.35) 8 hours to update the 
training, 4 hours for a computer programmer (at $52.50 per hour) to 
update the online training module and 1 hour by a senior manager (at 
$79.08 per hour) to review. The total cost for each State Exchange is 
estimated to be approximately $680, and the total cost for 18 State 
Exchanges would be approximately $12,240.
    The proposed requirement for appeals entities to dismiss an appeal 
if the request is received via telephonic signature (if the appeals 
entity is capable of accepting telephonic withdrawals) would make the 
process more efficient and may reduce costs to the appellant.
    The enrollee satisfaction survey would impact enrollees responding 
to the survey, survey vendors and QHP issuers. In 2014, a psychometric 
test of the survey would be carried out, while in 2015 a beta test 
would be performed. The cost to issuers is addressed in section IV. We 
anticipate that in 2014, 4,200 enrollees would participate in the 
psychometric test and in 2015 onwards, 6,000,040 enrollees would 
complete the survey. The total cost in 2014 of administering the survey 
to enrollees is estimated to be approximately $45,549 and the total 
cost to enrollees and survey vendors is estimated to be approximately 
$6,507,964 in 2015 and future years. In 2014, only one survey vendor 
would conduct the psychometric test and in the following years, about 
40 vendors are expected to conduct the survey.\57\ In addition, each 
QHP issuer would have to contract with an ESS vendor. We estimate 
approximately $16,000 as the annual cost for a QHP issuer to contract 
with an ESS vendor, for a total annual cost of $9.2 million for 575 QHP 
issuers.
---------------------------------------------------------------------------

    \57\ Detailed burden estimates can be found in the Supporting 
Statement for the Health Insurance Marketplace Consumer Experience 
Surveys: Enrollee Satisfaction Survey and Marketplace Survey Data 
Collection, found at https://www.cms.gov/Regulations-and-Guidance/Legislation/PaperworkReductionActof1995/PRA-Listing.html.
---------------------------------------------------------------------------

    The Marketplace survey would be administered by a survey vendor 
under contract with HHS. A psychometric test would be conducted in 2014 
with a beta test in 2015. Consumers would incur burden to respond to 
the survey. We estimate that each response would take 0.4 hours for a 
total of 3,150 responses requiring 1,260 hours in 2014 and a total of 
61,200 responses requiring 24,480 hours in 2015 onwards. Total costs 
would be approximately $30,366 in 2014 and $589,968 in following 
years.\58\
---------------------------------------------------------------------------

    \58\ Detailed burden estimates can be found in the Supporting 
Statement for the Health Insurance Marketplace Consumer Experience 
Surveys: Enrollee Satisfaction Survey and Marketplace Survey Data 
Collection, found at https://www.cms.gov/Regulations-and-Guidance/Legislation/PaperworkReductionActof1995/PRA-Listing.html.
---------------------------------------------------------------------------

    The proposed amendment to our methodology for calculating the 
annual limitation on cost sharing and the annual limitation on small 
group deductibles could lead some issuers to increase premiums 
slightly, potentially resulting in higher premiums for consumers.
Transfers
    Currently, the MLR regulation permits inclusion of ICD-10 
conversion costs in quality improving activity expenses only through 
the 2013 MLR reporting year. However, the Secretary has changed the 
date by which issuers are required to adopt ICD-10 as the standard 
medical code set from October 1, 2013 to October 1, 2014. Therefore, 
this proposed rule proposes to permit issuers to include their ICD-10 
conversion costs through the MLR reporting year in which the Secretary 
requires conversion to be completed, which is currently expected to be 
2014. Based on the 2012 MLR data, we estimate that the current ICD-10 
provision reduced total rebates for 2012 by less than 2 percent. To the 
extent issuers may have completed a substantial portion of ICD-10 
conversion prior to 2014, we expect that the impact of the proposed 
change on the 2014 rebates would be even smaller.
    This proposed rule also proposes to account for the special 
circumstances of issuers affected by the CMS November 2013 transitional 
policy by allowing those issuers to multiply the incurred claims and 
expenses for quality improving activities incurred in 2014 in the MLR 
numerator by 1.0001. This adjustment would be limited to issuers that 
provided transitional coverage in the individual or small group markets 
in States that adopted the transitional policy. In addition, this 
proposed rule proposes to account for the special circumstances of the 
issuers that provided coverage through the State and Federal Exchanges 
by allowing those issuers to multiply the incurred claims and expenses 
for quality improving activities incurred in 2014 in the numerator by 
1.0004. This adjustment would be limited to issuers offering coverage 
in the individual or small group markets through the Exchanges. Based 
on the 2012 MLR data, we estimate that the proposed adjustment for 
issuers affected by the transitional policy and for issuers affected by 
the Exchanges rollout might reduce the total rebates by 0.5 percent for 
2014.
    In addition, this proposed rule proposes to amend the MLR 
methodology to clarify how issuers must calculate MLRs in States that 
require the small group market and individual market to be merged for 
MLR calculation purposes. This would improve the consistency of MLR 
calculations among issuers in those States and improve the accuracy of 
rebate payments. Currently, only Massachusetts, Vermont, and the 
District of Columbia require the small group market and individual 
market to be merged (the Vermont and the District of Columbia 
requirements take effect in 2014). If an issuer met the respective MLR 
standards in the separate markets,

[[Page 15861]]

then this provision would not have any impact on rebates. However, if 
an issuer met the MLR standards only in one market and merging the two 
markets would result in the issuer meeting (or being unable to meet) 
the MLR standards in the merged market, the issuer might have to pay 
lower (or higher) rebates and there would be a transfer from enrollees 
to issuers (or from issuers to enrollees). Based on the 2012 MLR data, 
we anticipate that the proposed change might result in issuers paying 
an additional $3.8 million in rebates.
    This proposed rule also proposes that issuers must distribute 
rebates directly to enrollees where (1) all of an issuer's rebates are 
de minimis, or (2) distribution of de minimis rebates to enrollee(s) 
whose rebates are not de minimis would result in an enrollee receiving 
a rebate that exceeds the enrollee's annual premium. The current de 
minimis rebate provisions allow issuers not to distribute de minimis 
rebates to enrollees, but instead to aggregate such rebates and 
distribute them to enrollees whose rebates are not de minimis. With 
respect to the first proposed de minimis provision, the current de 
minimis rebate provisions do not account for a situation where all of 
an issuer's rebates are de minimis. It is presumed that in such a 
circumstance, issuers would distribute the de minimis rebates to all 
enrollees whose rebates are de minimis since these issuers would not 
have any enrollees with non-de minimis rebates; therefore, we do not 
consider the proposed clarification to create any additional burden. We 
are currently aware of one issuer that was in this situation, but more 
issuers may benefit from this clarification as they begin to come 
closer to meeting the MLR standard in future years. With respect to the 
second proposed de minimis provision, we are not currently aware of any 
issuers that experienced this circumstance. Further, there should not 
be any impact to the total amount of rebates disbursed because the 
changes proposed here only impact the recipient of rebates and not the 
total amount paid.
    In this proposed rule, we propose to revise our allocation of 
reinsurance contributions collected for the 2014 and 2015 benefit years 
so that reinsurance contributions collected are allocated first to the 
reinsurance pool and administrative expenses and second to payments to 
the U.S. Treasury. We expect that this proposal would not have a 
significant effect on transfers, because we estimate that we will 
collect the full amount of reinsurance contributions. This proposal 
could lower premiums by reducing the uncertainty associated with 
reinsurance payments to non-grandfathered plans in the individual 
market that are eligible for such payments under 45 CFR 153.234.
    The Affordable Care Act creates a temporary risk corridors program 
for the years 2014, 2015, and 2016 that applies to QHPs, as defined in 
Sec.  153.500. The risk corridors program creates a mechanism for 
sharing risk for allowable costs between the Federal government and QHP 
issuers. The Affordable Care Act establishes the risk corridors program 
as a Federal program; consequently, HHS will operate the risk corridors 
program under Federal rules with no State variation. The risk corridors 
program will help protect against inaccurate rate setting in the early 
years of the Exchanges by limiting the extent of issuer losses and 
gains. For the 2015 benefit year, we are proposing an adjustment to the 
risk corridors formula that would help mitigate potential QHP issuers' 
unexpected administrative costs. Although our initial modeling suggests 
that this adjustment could increase the total risk corridors payment 
amount made by the Federal government and decrease risk corridors 
receipts, we estimate that, even with this change, the program can be 
implemented in a budget neutral manner.

C. Regulatory Alternatives

    Under the Executive Order, CMS is required to consider alternatives 
to issuing rules and alternative regulatory approaches. CMS considered 
the regulatory alternatives below:
1. Collecting ESS Data at the Product Level Instead of Each Product per 
Metal Tier
    Under this alternative, HHS would require QHPs to collect ESS data 
from a single sample for each product (versus each product in each 
metal tier). This option would reduce the cost for issuers who offer 
the same product in multiple tiers. However, collecting data at the 
product level would prevent consumers from understanding differences in 
enrollee satisfaction at the individual product per tier level, which 
may vary with differences in cost sharing. This would reduce the 
benefits that consumers derive from ESS data.
2. Using Medicaid CAHPS as Is Instead of Adding Additional and New 
Questions to the ESS
    Under this alternative, HHS would require QHPs to collect enrollee 
satisfaction information using the Medicaid CAHPS instrument without 
further enhancement. The ESS will include more questions than the 
Medicaid CAHPS--including detailed questions about the patient's 
costs--that are particularly appropriate to Exchange enrollees. 
Eliminating these questions would reduce the cost to issuers, but also 
reduce benefits that consumers derive from the ESS data.
3. Collecting QRS Data for Each Product per Metal Tier Instead of at 
the Product Level
    Under this alternative, HHS would require QHPs to collect the QRS 
data at the same level (individual product per metal tier) as they 
collect ESS information. Assuming that QHPs offer each product in two 
metal tiers this option would double the cost to QHPs of collecting QRS 
data. However, it might not appreciably increase consumer information 
about QHPs in the early years of the Exchanges if the quality of care 
in the same product does not differ significantly within tiers (i.e., 
the variation should only be by the configuration of cost sharing 
within a limited range of actuarial value). Further, a QHP's enrollment 
size at the product metal level may be too small in the early years of 
Exchange implementation to ensure reliable results.
4. Using the Medicare Advantage (MA) CAHPS Instrument and Star System
    Under this alternative, HHS would require QHPs to collect enrollee 
satisfaction information from Exchange enrollees using the MA CAHPS 
instrument. The ESS presently includes 29 more questions, than MA 
CAHPS. Use of the MA CAHPS would reduce the cost to consumers and also 
the QHP cost of data entry. However, the MA CAHPS instrument and Star 
ratings are designed for a different population and are not necessarily 
suitable to measure experience among Exchange enrollees. It also would 
have limited applicability for use by consumers for QHP comparison and 
selection purposes.
    CMS believes that the options adopted for this proposed rule would 
be more efficient ways to extend the protections of the Affordable Care 
Act to enrollees without imposing significant burden on issuers and 
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

[[Page 15862]]

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''). CMS 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.
    As discussed in the Web Portal interim final rule with comment 
period published on May 5, 2010 (75 FR 24481), CMS examined the health 
insurance industry in depth in the RIA we prepared for the proposed 
rule on 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 entity'' established by the SBA. Based on data 
from MLR annual report submissions for the 2012 MLR reporting year,\59\ 
out of 510 companies offering comprehensive health insurance policies 
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 would therefore be subject to the provisions of 
this proposed rule.\60\ Forty-three percent of these small entities 
belong to holding groups, and many if not all of these small entities 
are likely to have other lines of business (e.g., insurance business 
other than health insurance, and business other than insurance) that 
would result in their revenues exceeding $35.5 million. Based on this 
analysis, HHS expects that the proposed provisions would not affect a 
substantial number of small issuers.
---------------------------------------------------------------------------

    \59\ These data can be accessed at http://www.cms.gov/CCIIO/Resources/Data-Resources/mlr.html.
    \60\ The size threshold for ``small'' business established by 
the SBA is currently $35.5 million in annual receipts for health 
insurance issuers. See ``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.
---------------------------------------------------------------------------

    The proposed amendments to the annual employer and employee 
election periods in the SHOP, including removing the required minimum 
lengths of both the employer election period and the employee open 
enrollment period would benefit SHOPs and employers. HHS does not 
anticipate that this will impose any costs on small employers.
    Some of the entities that voluntarily act as Navigators and non-
Navigator assistance personnel subject to Sec.  155.215, or as 
designated certified application counselor organizations, might be 
small entities and would incur costs to comply with the provisions of 
this proposed rule. It should be noted that HHS, in its role as the 
operator of the FFEs, does not impose any fees on these entities for 
participating in their respective programs, nor are there fees for 
taking the Federally required training or completing continuing 
education or recertification in FFEs. Further, the cost burden related 
to continuing education and recertification, and recordkeeping would 
generally be considered an allowed cost that would be covered by the 
Navigator grants for the FFEs, and these grant funds may be drawn down 
as the grantee incurs such costs. The costs associated with these 
proposals might also be covered by other compensation provided by an 
Exchange, such as payments through contracts to non-Navigator 
assistance personnel. Though it is very likely that all costs 
associated with these proposals would be largely covered by affected 
entities' and individuals' funding sources, HHS cannot guarantee that 
all such costs would be covered because of the possibility of budget 
limitations applicable to the FFE in any given period, and because 
there may be variations in how State Exchanges provide funding for 
these programs. To the extent that all such costs would not covered by 
these funding sources, other outside sources may also be available to 
cover unfunded costs that remain. Costs incurred by designated 
certified application counselor organizations related to continuing 
education and recertification and recordkeeping are expected to be low. 
In some circumstances funds from sources outside of the Exchange, 
including Federal funds such as Health Resources and Services 
Administration (HRSA) grants to health centers, or private or State 
funds might be available to cover certified application counselor 
costs.

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 proposed 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 2014, that 
threshold level is approximately $141 million.
    UMRA does not address the total cost of a proposed 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.
    This proposed rule includes mandates on State, local, or tribal 
governments. Issuers, certified application counselors and Exchanges 
are expected to incur costs of approximately $13 million in 2014 and 
approximately $85 million in 2015 onwards to comply with the provisions 
of this proposed rule. However, beginning in 2015, issuers in the 
individual market would experience a reduction in costs of 
approximately $26 million due to the discontinuation of the 
certification of creditable coverage. Consistent with policy embodied 
in UMRA, this proposed rule has been designed to be the least 
burdensome 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 proposed 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 proposed rule, unless they conflict with or prevent application of 
the provisions of title I of the Affordable Care Act within the meaning 
of section 1321(d) of the Affordable Care Act. Accordingly, States have 
significant latitude to impose requirements with respect to health 
insurance coverage that are more restrictive than the Federal law 
requirements.
    The proposed amendment to Sec.  155.225(d) would clarify that 
certified application counselors must meet any licensing, certification 
or other

[[Page 15863]]

standards prescribed by the State so long as such standards do not 
prevent the application of the provisions of title I of the Affordable 
Care Act, within the meaning of section 1321(d) of the Affordable Care 
Act. The proposed provisions also specify State requirements applicable 
to Navigators, non-Navigator assistance personnel, or certified 
application counselors that would prevent the application of the 
provisions of title I of the Affordable Care Act, within the meaning of 
section 1321(d) of the Affordable Care Act. They include requirements 
that require referrals to entities or individuals not required to 
provide impartial information or act in a consumer's best interest, or 
prevent Navigators, non-Navigator assistance personnel, or certified 
application counselors from providing services to all individuals 
seeking assistance, or providing advice regarding substantive benefits 
or comparative benefits of different health plans; in FFEs conflict 
with Federal standards or make it impossible to fulfill required 
duties, as such requirements are applied or implemented in the State; 
in FFEs, render ineligible otherwise eligible individuals or entities 
from participating as Navigators, non-Navigator assistance personnel 
subject to Sec.  155.215 or certified application counselors under 
standards applicable to an FFE; and requiring that Navigators hold an 
agent or broker license or carry errors or omissions insurance.
    Some States already have requirements for and publicly report 
health plan quality and outcomes data, and we want to encourage State 
flexibility and innovation, consistent with the Affordable Care Act. In 
addition to prominently displaying quality rating information for each 
QHP, as calculated by HHS in accordance with the QRS, a State Exchange 
may display additional QHP quality-related information, as appropriate.
    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. HHS has consulted with stakeholders on policies 
related to the operation of Exchanges, including the SHOP and the 
premium stabilization programs. HHS has held a number of listening 
sessions with State representatives to gather public input. HHS 
consulted with State representatives through regular meetings with the 
National Association of Insurance Commissioners (NAIC) and regular 
contact with States through the Exchange Establishment grant and 
Exchange Blueprint approval processes.
    Throughout the process of developing this proposed rule, CMS has 
attempted to balance the States' interests in regulating health 
insurance issuers. By doing so, it is CMS' 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 proposed rule in 
a meaningful and timely manner.

G. Congressional Review Act

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

List of Subjects

45 CFR Part 146

    Health care, Health insurance, Reporting and recordkeeping 
requirements.

45 CFR Part 147

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

45 CFR Part 148

    Administrative practice and procedure, Health care, Health 
insurance, Penalties, Reporting and recordkeeping requirements.

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 appeals, Administrative practice and procedure, 
Administration and calculation of advance payments of premium tax 
credit, Advertising, Advisory committees, Brokers, Conflict of 
interest, Consumer protection, Cost-sharing reductions, 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, Payment and collections reports, Public assistance programs, 
Reporting and recordkeeping requirements, State and local governments, 
Sunshine Act, Technical assistance, Women, and Youth.

45 CFR Part 158

    Administrative practice and procedure, Claims, Health care, Health 
insurance, Health plans, Penalties, Reporting and recordkeeping 
requirements, Premium revenues, Medical loss ratio, Rebating.

    For the reasons set forth in the preamble, the Department of Health 
and Human Services proposes to amend 45 CFR parts 146, 147, 148, 153, 
155, 156, and 158 as set forth below:

PART 146--REQUIREMENTS FOR THE GROUP HEALTH INSURANCE MARKET

0
1. The authority citation for part 146 continues to read as follows:

    Authority: Secs. 2702 through 2705, 2711 through 2723, 2791, and 
2792 of the PHS Act (42 U.S.C. 300gg-1 through 300gg-5, 300gg-11 
through 300gg-23, 300gg-91, and 300gg-92).

0
2. Section 146.152 is amended by--
0
A. Revising paragraphs (c)(1) and (f).
0
B. Redesignating paragraph (g) as paragraph (h).
0
C. Adding new paragraph (g).
    The revision and addition reads as follows:


Sec.  146.152  Guaranteed renewability of coverage for employers in the 
group market.

* * * * *
    (c) * * *
    (1) The issuer provides notice in writing, in a form and manner 
specified

[[Page 15864]]

by the Secretary, to each plan sponsor provided that particular product 
in that market (and to all participants and beneficiaries covered under 
such coverage) of the discontinuation at least 90 days before the date 
the coverage will be discontinued;
* * * * *
    (f) Exception for uniform modification of coverage. (1) Only at the 
time of coverage renewal may issuers modify the health insurance 
coverage for a product offered to a group health plan in the 
following--
    (i) Large group market; and
    (ii) Small group market if, for coverage available in this market 
(other than only through one or more bona fide associations), the 
modification is consistent with State law and is effective uniformly 
among group health plans with that product.
    (2) For purposes of this paragraph (f), modifications made solely 
pursuant to applicable Federal or State law are considered a uniform 
modification of coverage. Other types of modifications are considered a 
uniform modification of coverage if the product that has been modified 
meets all of the following criteria:
    (i) The product is offered by the same health insurance issuer 
(within the meaning of section 2791(b)(2) of the PHS Act).
    (ii) The product is offered as the same product type (e.g., 
preferred provider organization (PPO) or health maintenance 
organization (HMO)).
    (iii) The product covers a majority of the same counties in its 
service area;
    (iv) The product has the same cost-sharing structure, except for 
variation in cost sharing solely related to changes in cost and 
utilization of medical care, or to maintain the same level of coverage 
described in sections 1302(d) and (e) of the Affordable Care Act.
    (v) The product provides the same covered benefits, except for 
changes in benefits that cumulatively impact the rate for the product 
by no more than 2 percent (not including changes required by applicable 
Federal or State law).
    (3) A State may establish criteria that broaden, but not restrict, 
the definition of a uniform modification of coverage under paragraph 
(f)(2) of this section.
    (g) Notice of renewal of coverage. If an issuer is renewing 
coverage as described in paragraph (a) of this section, or uniformly 
modifying coverage as described in paragraph (f) of this section, the 
issuer must provide to each plan sponsor written notice of the renewal 
in a form and manner specified by the Secretary.
* * * * *
0
3. Section 146.180 is revised to read as follows:


Sec.  146.180  Treatment of non-Federal governmental plans.

    (a) Opt-out election for self-funded non-Federal governmental 
plans--(1) Requirements subject to exemption. The PHS Act requirements 
described in this paragraph are the following:
    (i) Limitations on preexisting condition exclusion periods in 
accordance with section 2701 of the PHS Act as codified before 
enactment of the Affordable Care Act.
    (ii) Special enrollment periods for individuals and dependents 
described under section 2704(f) of the PHS Act.
    (iii) Prohibitions against discriminating against individual 
participants and beneficiaries based on health status under section 
2705 of the PHS Act, except that the sponsor of a self-funded non-
Federal governmental plan cannot elect to exempt its plan from 
requirements under section 2705(a)(6) and 2705(c) through (f) that 
prohibit discrimination with respect to genetic information.
    (iv) Standards relating to benefits for mothers and newborns under 
section 2725 of the PHS Act.
    (v) Parity in mental health and substance use disorder benefits 
under section 2726 of the PHS Act.
    (vi) Required coverage for reconstructive surgery following 
mastectomies under section 2727 of the PHS Act.
    (vii) Coverage of dependent students on a medically necessary leave 
of absence under section 2728 of the PHS Act.
    (2) General rule. For plan years beginning on or after September 
23, 2010, a sponsor of a non-Federal governmental plan may elect to 
exempt its plan, to the extent the plan is not provided through health 
insurance coverage (that is, it is self-funded), from one or more of 
the requirements described in paragraphs (a)(1)(iv) through (vii) of 
this section.
    (3) Special rule for certain collectively bargained plans. In the 
case of a plan that is maintained pursuant to a collective bargaining 
agreement that was ratified before March 23, 2010, and whose sponsor 
made an election to exempt its plan from any of the requirements 
described in paragraphs (a)(1)(i) through (iii) of this section, the 
provisions of paragraph (a)(2) of this section apply for plan years 
beginning after the expiration of the term of the agreement.
    (4) Examples--(i) Example 1. A non-Federal governmental employer 
has elected to exempt its self-funded group health plan from all of the 
requirements described in paragraph (a)(1) of this section. The plan 
year commences September 1 of each year. The plan is not subject to the 
provisions of paragraph (a)(1)(ii) of this section until the plan year 
that commences on September 1, 2011. Accordingly, for that plan year 
and any subsequent plan years, the plan sponsor may elect to exempt its 
plan only from the requirements described in paragraphs (a)(1)(iv) 
through (vii) of this section.
    (ii) Example 2. A non-Federal governmental employer has elected to 
exempt its collectively bargained self-funded plan from all of the 
requirements described in paragraph (a)(1) of this section. The 
collective bargaining agreement applies to five plan years, October 1, 
2009 through September 30, 2014. For the plan year that begins on 
October 1, 2014, the plan sponsor is no longer permitted to elect to 
exempt its plan from the requirements described in paragraph (a)(1) of 
this section. Accordingly, for that plan year and any subsequent plan 
years, the plan sponsor may elect to exempt its plan only from the 
requirements described in paragraphs (a)(1)(iv) through (vii) of this 
section.
    (5) Limitations. (i) An election under this section cannot 
circumvent a requirement of the PHS Act to the extent the requirement 
applied to the plan before the effective date of the election.
    Example 1. A plan is subject to requirements of section 2727 of the 
PHS Act, under which a plan that covers medical and surgical benefits 
with respect to a mastectomy must cover reconstructive surgery and 
certain other services following a mastectomy. An enrollee who has had 
a mastectomy receives reconstructive surgery on August 24. Claims with 
respect to the surgery are submitted to and processed by the plan in 
September. The group health plan commences a new plan year each 
September 1. Effective September 1, the plan sponsor elects to exempt 
its plan from section 2727 of the PHS Act. The plan cannot, on the 
basis of its exemption election, decline to pay for the claims incurred 
on August 24.
    (ii) If a group health plan is co-sponsored by two or more 
employers, then only plan enrollees of the non-Federal governmental 
employer(s) with a valid election under this section are affected by 
the election.
    (6) Stop-loss or excess risk coverage. For purposes of this 
section--
    (i) Subject to paragraph (a)(6)(ii) of this section, the purchase 
of stop-loss or excess risk coverage by a self-funded non-Federal 
governmental plan does not prevent an election under this section.

[[Page 15865]]

    (ii) Regardless of whether coverage offered by an issuer is 
designated as ``stop-loss'' coverage or ``excess risk'' coverage, if it 
is regulated as group health insurance under an applicable State law, 
then for purposes of this section, a non-Federal governmental plan that 
purchases the coverage is considered to be fully insured. In that 
event, a plan may not be exempted under this section from the 
requirements described in paragraph (a)(1) of this section.
    (7) Construction. Nothing in this part should be construed as 
imposing collective bargaining obligations on any party to the 
collective bargaining process.
    (b) Form and manner of election--(1) Election requirements. The 
election must meet the following requirements:
    (i) Be made in an electronic format in a form and manner as 
described by the Secretary in guidance.
    (ii) Be made in conformance with all of the plan sponsor's rules, 
including any public hearing requirements.
    (iii) Specify the beginning and ending dates of the period to which 
the election is to apply. This period can be either of the following 
periods:
    (A) A single specified plan year, as defined in Sec.  144.103 of 
this subchapter.
    (B) The ``term of the agreement,'' as specified in paragraph (b)(2) 
of this section, in the case of a plan governed by collective 
bargaining.
    (iv) Specify the name of the plan and the name and address of the 
plan administrator, and include the name and telephone number of a 
person CMS may contact regarding the election.
    (v) State that the plan does not include health insurance coverage, 
or identify which portion of the plan is not funded through health 
insurance coverage.
    (vi) Specify each requirement described in paragraph (a)(1) of this 
section from which the plan sponsor elects to exempt the plan.
    (vii) Certify that the person signing the election document, 
including (if applicable) a third party plan administrator, is legally 
authorized to do so by the plan sponsor.
    (viii) Include, as an attachment, a copy of the notice described in 
paragraph (f) of this section.
    (2) ``Term of the agreement'' defined. Except as provided in 
paragraphs (b)(2)(i) and (ii), for purposes of this section ``term of 
the agreement'' means all group health plan years governed by a single 
collective bargaining agreement.
    (i) In the case of a group health plan for which the last plan year 
governed by a prior collective bargaining agreement expires during the 
bargaining process for a new agreement, the term of the prior agreement 
includes all plan years governed by the agreement plus the period of 
time that precedes the latest of the following dates, as applicable, 
with respect to the new agreement:
    (A) The date of an agreement between the governmental employer and 
union officials.
    (B) The date of ratification of an agreement between the 
governmental employer and the union.
    (C) The date impasse resolution, arbitration or other closure of 
the collective bargaining process is finalized when agreement is not 
reached.
    (ii) In the case of a group health plan governed by a collective 
bargaining agreement for which closure is not reached before the last 
plan year under the immediately preceding agreement expires, the term 
of the new agreement includes all plan years governed by the agreement 
excluding the period that precedes the latest applicable date specified 
in paragraph (b)(2)(i) of this section.
    (3) Construction--(i) Dispute resolution. Nothing in paragraph 
(b)(1)(ii) of this section should be construed to mean that CMS 
arbitrates disputes between plan sponsors, participants, beneficiaries, 
or their representatives regarding whether an election complies with 
all of a plan sponsor's rules.
    (ii) Future elections not preempted. If a plan must comply with one 
or more requirements described in paragraph (a)(1) of this section for 
a given plan year or period of plan coverage, nothing in this section 
should be construed as preventing a plan sponsor from submitting an 
election in accordance with this section for a subsequent plan year or 
period of plan coverage.
    (c) Filing a timely election--(1) Plan not governed by collective 
bargaining. Subject to paragraph (c)(4) of this section, if a plan is 
not governed by a collective bargaining agreement, a plan sponsor or 
entity acting on behalf of a plan sponsor must file an election with 
CMS before the first day of the plan year.
    (2) Plan governed by a collective bargaining agreement. Subject to 
paragraph (d)(4) of this section, if a plan is governed by a collective 
bargaining agreement that was ratified before March 23, 2010, a plan 
sponsor or entity acting on behalf of a plan sponsor must file an 
election with CMS before the first day of the first plan year governed 
by a collective bargaining agreement, or by the 45th day after the 
latest applicable date specified in paragraph (b)(2)(i) of this 
section, if the 45th day falls on or after the first day of the plan 
year.
    (3) Verifying timely filing. For elections submitted via hard copy 
through U.S. Mail, CMS uses the postmark on the envelope in which the 
election is submitted to determine that the election is timely filed as 
specified under paragraphs (c)(1) or (2) of this section, as 
applicable. If the latest filing date falls on a Saturday, Sunday, or a 
State or Federal holiday, CMS accepts a postmark on the next business 
day.
    (4) Filing extension based on good cause. CMS may extend the 
deadlines specified in paragraphs (c)(1) and (2) of this section for 
good cause if the plan substantially complies with the requirements of 
paragraph (e) of this section.
    (5) Failure to file a timely election. Absent an extension under 
paragraph (c)(4) of this section, a plan sponsor's failure to file a 
timely election under paragraph (c)(1) or (2) of this section makes the 
plan subject to all requirements of this part for the entire plan year 
to which the election would have applied, or, in the case of a plan 
governed by a collective bargaining agreement, for any plan years under 
the agreement for which the election is not timely filed.
    (d) Additional information required--(1) Written notification. If 
an election is timely filed, but CMS determines that the election 
document (or the notice to plan enrollees) does not meet all of the 
requirements of this section, CMS may notify the plan sponsor, or other 
entity that filed the election, that it must submit any additional 
information that CMS has determined is necessary to meet those 
requirements. The additional information must be filed with CMS by the 
later of the following dates:
    (i) The last day of the plan year.
    (ii) The 45th day after the date of CMS's written notification 
requesting additional information.
    (2) Timely response. For submissions via hard copy via U.S. Mail, 
CMS uses the postmark on the envelope in which the additional 
information is submitted to determine that the information is timely 
filed as specified under paragraph (d)(1) of this section. If the 
latest filing date falls on a Saturday, Sunday, or a State or Federal 
holiday, CMS accepts a postmark on the next business day.
    (3) Failure to respond timely. CMS may invalidate an election if 
the plan sponsor, or other entity that filed the election, fails to 
timely submit the additional information as specified under paragraph 
(d)(1) of this section.
    (e) Notice to enrollees--(1) Mandatory notification. (i) A plan 
that makes the election described in this section must notify each 
affected enrollee of the

[[Page 15866]]

election, and explain the consequences of the election. For purposes of 
this paragraph (e), if the dependent(s) of a participant reside(s) with 
the participant, a plan need only provide notice to the participant.
    (ii) The notice must be in writing and, except as provided in 
paragraph (e)(2) of this section with regard to initial notices, must 
be provided to each enrollee at the time of enrollment under the plan, 
and on an annual basis no later than the last day of each plan year (as 
defined in Sec.  144.103 of this subchapter) for which there is an 
election.
    (iii) A plan may meet the notification requirements of this 
paragraph (e) by prominently printing the notice in a summary plan 
description, or equivalent description, that it provides to each 
enrollee at the time of enrollment, and annually. Also, when a plan 
provides a notice to an enrollee at the time of enrollment, that notice 
may serve as the initial annual notice for that enrollee.
    (2) Initial notices. (i) If a plan is not governed by a collective 
bargaining agreement, with regard to the initial plan year to which an 
election under this section applies, the plan must provide the initial 
annual notice of the election to all enrollees before the first day of 
that plan year, and notice at the time of enrollment to all individuals 
who enroll during that plan year.
    (ii) In the case of a collectively bargained plan, with regard to 
the initial plan year to which an election under this section applies, 
the plan must provide the initial annual notice of the election to all 
enrollees before the first day of the plan year, or within 30 days 
after the latest applicable date specified in paragraph (b)(2)(i) of 
this section if the 30th day falls on or after the first day of the 
plan year. Also, the plan must provide a notice at the time of 
enrollment to individuals who--
    (A) Enroll on or after the first day of the plan year, when closure 
of the collective bargaining process is reached before the plan year 
begins; or
    (B) Enroll on or after the latest applicable date specified in 
paragraph (b)(2)(i) of this section if that date falls on or after the 
first day of the plan year.
    (3) Notice content. The notice must include at least the following 
information:
    (i) The specific requirements described in paragraph (a)(1) of this 
section from which the plan sponsor is electing to exempt the plan, and 
a statement that, in general, Federal law imposes these requirements 
upon group health plans.
    (ii) A statement that Federal law gives the plan sponsor of a self-
funded non-Federal governmental plan the right to exempt the plan in 
whole, or in part, from the listed requirements, and that the plan 
sponsor has elected to do so.
    (iii) A statement identifying which parts of the plan are subject 
to the election.
    (iv) A statement identifying which of the listed requirements, if 
any, apply under the terms of the plan, or as required by State law, 
without regard to an exemption under this section.
    (f) Subsequent elections--(1) Election renewal. A plan sponsor may 
renew an election under this section through subsequent elections. The 
timeliness standards described in paragraph (c) of this section apply 
to election renewals under this paragraph (f).
    (2) Form and manner of renewal. Except for the requirement to 
forward to CMS a copy of the notice to enrollees under paragraph 
(b)(1)(viii) of this section, the plan sponsor must comply with the 
election requirements of paragraph (b)(1) of this section. In lieu of 
providing a copy of the notice under (b)(1)(viii), the plan sponsor may 
include a statement that the notice has been, or will be, provided to 
enrollees as specified under paragraph (e) of this section.
    (3) Election renewal includes provisions from which plan not 
previously exempted. If an election renewal includes a requirement 
described in paragraph (a)(1) of this section from which the plan 
sponsor did not elect to exempt the plan for the preceding plan year, 
the advance notification requirements of paragraph (e)(2) of this 
section apply with respect to the additional requirement(s) of 
paragraph (a) from which the plan sponsor is electing to exempt the 
plan.
    (4) Special rules regarding renewal of an election under a 
collective bargaining agreement--(i) If protracted negotiations with 
respect to a new agreement result in an extension of the term of the 
prior agreement (as provided under paragraph (b)(2)(i) of this section) 
under which an election under this section was in effect, the plan must 
comply with the enrollee notification requirements of paragraph (e)(1) 
of this section, and, following closure of the collective bargaining 
process, must file an election renewal with CMS as provided under 
paragraph (c)(2) of this section.
    (ii) If a single plan applies to more than one bargaining unit, and 
the plan is governed by collective bargaining agreements of varying 
lengths, paragraph (c)(2) of this section, with respect to an election 
renewal, applies to the plan as governed by the agreement that results 
in the earliest filing date.
    (g) Requirements not subject to exemption--(1) Genetic information. 
Without regard to an election under this section that exempts a non-
Federal governmental plan from any or all of the provisions of 
Sec. Sec.  146.111 and 146.121, the exemption election must not be 
construed to exempt the plan from any provisions of this part 146 that 
pertain to genetic information.
    (2) Enforcement. CMS enforces these requirements as provided under 
paragraph (j) of this section.
    (h) Effect of failure to comply with certification and notification 
requirements--(1) Substantial failure--(i) General rule. Except as 
provided in paragraph (h)(1)(iii) of this section, a substantial 
failure to comply with paragraph (e) or (g)(1) of this section results 
in the invalidation of an election under this section with respect to 
all plan enrollees for the entire plan year. That is, the plan is 
subject to all requirements of this part for the entire plan year to 
which the election otherwise would have applied.
    (ii) Determination of substantial failure. CMS determines whether a 
plan has substantially failed to comply with a requirement of paragraph 
(e) or paragraph (g)(1) of this section based on all relevant facts and 
circumstances, including previous record of compliance, gravity of the 
violation and whether a plan corrects the failure, as warranted, within 
30 days of learning of the violation. However, in general, a plan's 
failure to provide a notice of the fact and consequences of an election 
under this section to an individual at the time of enrollment, or on an 
annual basis before a given plan year expires, constitutes a 
substantial failure.
    (iii) Exceptions--(A) Multiple employers. If the plan is sponsored 
by multiple employers, and only certain employers substantially fail to 
comply with the requirements of paragraph (e) or (g)(1) of this 
section, then the election is invalidated with respect to those 
employers only, and not with respect to other employers that complied 
with those requirements, unless the plan chooses to cancel its election 
entirely.
    (B) Limited failure to provide notice. If a substantial failure to 
notify enrollees of the fact and consequences of an election is limited 
to certain individuals, the election under this section is valid only 
if, for the plan year with respect to which the failure has occurred, 
the plan agrees not to apply the election with respect to the 
individuals who were not notified and so informs those individuals in 
writing.
    (2) Examples--(i)


[[Page 15867]]


    Example 1. A self-funded, non-Federal group health plan is co-
sponsored by 10 school districts. Nine of the school districts have 
fully complied with the requirements of paragraph (e) of this 
section, including providing notice to new employees at the time of 
their enrollment in the plan, regarding the group health plan's 
exemption under this section from requirements of this part. One 
school district, which hired 10 new teachers during the summer for 
the upcoming school year, neglected to notify three of the new hires 
about the group health plan's exemption election at the time they 
enrolled in the plan. The school district has substantially failed 
to comply with a requirement of paragraph (e) of this section with 
respect to these individuals. The school district learned of the 
oversight six weeks into the school year, and promptly (within 30 
days of learning of the oversight) provided notice to the three 
teachers regarding the plan's exemption under this section and that 
the exemption does not apply to them, or their dependents, during 
the plan year of their enrollment because of the plan's failure to 
timely notify them of its exemption. The plan complies with the 
requirements of this part for these individuals for the plan year of 
their enrollment. CMS would not require the plan to come into 
compliance with the requirements of this part for other enrollees.

    (ii)

    Example 2. Two non-Federal governmental employers cosponsor a 
self-funded group health plan. One employer substantially fails to 
comply with the requirements of paragraph (e) of this section. While 
the plan may limit the invalidation of the election to enrollees of 
the plan sponsor that is responsible for the substantial failure, 
the plan sponsors determine that administering the plan in that 
manner would be too burdensome. Accordingly, in this example, the 
plan sponsors choose to cancel the election entirely. Both plan 
sponsors come into compliance with the requirements of this part 
with respect to all enrollees for the plan year for which the 
substantial failure has occurred.

    (i) Election invalidated. If CMS finds cause to invalidate an 
election under this section, the following rules apply:
    (1) CMS notifies the plan sponsor (and the plan administrator if 
other than the plan sponsor and the administrator's address is known to 
CMS) in writing that CMS has made a preliminary determination that an 
election is invalid, and states the basis for that determination.
    (2) CMS's notice informs the plan sponsor that it has 45 days after 
the date of CMS's notice to explain in writing why it believes its 
election is valid. The plan sponsor should provide applicable statutory 
and regulatory citations to support its position.
    (3) CMS verifies that the plan sponsor's response is timely filed 
as provided under paragraph (c)(3) of this section. CMS will not 
consider a response that is not timely filed.
    (4) If CMS's preliminary determination that an election is invalid 
remains unchanged after CMS considers the plan sponsor's timely 
response (or in the event that the plan sponsor fails to respond 
timely), CMS provides written notice to the plan sponsor (and the plan 
administrator if other than the plan sponsor and the administrator's 
address is known to CMS) of CMS's final determination that the election 
is invalid. Also, CMS informs the plan sponsor that, within 45 days of 
the date of the notice of final determination, the plan, subject to 
paragraph (i)(1)(iii) of this section, must comply with all 
requirements of this part for the specified period for which CMS has 
determined the election to be invalid.
    (j) Enforcement. To the extent that an election under this section 
has not been filed or a non-Federal governmental plan otherwise is 
subject to one or more requirements of this part, CMS enforces those 
requirements under part 150 of this subchapter. This may include 
imposing a civil money penalty against the plan or plan sponsor, as 
determined under subpart C of part 150.
    (k) Construction. Nothing in this section should be construed to 
prevent a State from taking the following actions:
    (1) Establishing, and enforcing compliance with, the requirements 
of State law (as defined in Sec.  146.143(d)(1)), including 
requirements that parallel provisions of title XXVII of the PHS Act, 
that apply to non-Federal governmental plans or sponsors.
    (2) Prohibiting a sponsor of a non-Federal governmental plan within 
the State from making an election under this section.

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

0
4. 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
5. Section 147.104 is amended by revising paragraph (b)(1)(i) and 
adding paragraph (h) to read as follows:


Sec.  147.104  Guaranteed availability of coverage.

* * * * *
    (b) * * *
    (1) * * *
    (i) Group market. (A) Subject to paragraph (b)(1)(i)(B) of this 
section, a health insurance issuer in the group market must allow an 
employer to purchase health insurance coverage for a group health plan 
at any point during the year.
    (B) In the case of a group health plan in the small group market 
that cannot comply with employer contribution or group participation 
rules for the offering of health insurance coverage, as allowed under 
applicable State law and in the case of a QHP offered in the SHOP, as 
permitted by Sec.  156.1250(c) of this subchapter, a health insurance 
issuer may restrict the availability of coverage to an annual 
enrollment period that begins November 15 and extends through December 
15 of each calendar year.
    (C) With respect to coverage in the small group market, and in the 
large group market if such coverage is offered through a Small Business 
Health Options Program (SHOP) in a State, coverage must become 
effective consistent with the dates described in Sec.  155.725(a)(2) of 
this subchapter, except as provided in paragraph (b)(1)(iii) of this 
section.
* * * * *
    (h) Construction. Nothing in this section should be construed to 
require an issuer to offer coverage otherwise prohibited under 
applicable Federal law.
0
6. Section 147.106 is amended by--
0
A. Revising paragraphs (c)(1) and (e).
0
B. Redesignating paragraphs (f), (g), and (h) as paragraphs (h), (i) 
and (j).
0
D. Adding new paragraphs (f) and (g).
    The revisions and additions read as follows:


Sec.  147.106  Guaranteed renewability of coverage.

* * * * *
    (c) * * *
    (1) The issuer provides notice in writing, in a form and manner 
specified by the Secretary, to each plan sponsor or individual, as 
applicable, provided that particular product in that market (and to all 
participants and beneficiaries covered under such coverage) of the 
discontinuation at least 90 calendar days before the date the coverage 
will be discontinued.
* * * * *
    (e) Exception for uniform modification of coverage. (1) Only at the 
time of coverage renewal may issuers modify the health insurance 
coverage for a product offered to a group health plan or an individual, 
as applicable, in the following:
    (i) Large group market.
    (ii) Small group market if, for coverage available in this market 
(other than only through one or more bona fide associations), the 
modification is consistent with State law and is

[[Page 15868]]

effective uniformly among group health plans with that product.
    (iii) Individual market if the modification is consistent with 
State law and is effective uniformly for all individuals with that 
product.
    (2) For purposes of this paragraph (e), modifications made solely 
pursuant to applicable Federal or State law are considered a uniform 
modification of coverage. Other types of modifications are considered a 
uniform modification of coverage if the product that has been modified 
meets all of the following criteria:
    (i) The product is offered by the same health insurance issuer 
(within the meaning of section 2791(b)(2) of the PHS Act).
    (ii) The product is offered as the same product type (e.g., 
preferred provider organization (PPO) or health maintenance 
organization (HMO)).
    (iii) The product covers a majority of the same counties in its 
service area;
    (iv) The product has the same cost-sharing structure, except for 
variation in cost sharing solely related to changes in cost and 
utilization of medical care, or to maintain the same level of coverage 
described in sections 1302(d) and (e) of the Affordable Care Act.
    (v) The product provides the same covered benefits, except for 
changes in benefits that cumulatively impact the plan-adjusted index 
rate for the product (as described in Sec.  156.80(d)(2)) by no more 
than 2 percent (not including changes required by applicable Federal or 
State law).
    (3) A State may establish criteria that broaden, but not restrict, 
the definition of a uniform modification of coverage under paragraph 
(e)(2) of this section.
    (f) Notice of renewal of coverage. If an issuer is renewing 
coverage as described in paragraph (a) of this section, or uniformly 
modifying coverage as described in paragraph (e) of this section, the 
issuer must provide to each plan sponsor or individual, as applicable, 
written notice of the renewal in a form and manner specified by the 
Secretary.
    (g) Construction. Nothing in this section should be construed to 
require an issuer to renew or continue in force coverage for which 
continued eligibility would otherwise be prohibited under applicable 
Federal law.
* * * * *

PART 148--REQUIREMENTS FOR THE INDIVIDUAL HEALTH INSURANCE MARKET

0
7. The authority citation for part 148 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
8. Section 148.101 is revised to read as follows:


Sec.  148.101  Basis and purpose.

    This part implements sections 2741 through 2763 and 2791 and 2792 
of the PHS Act. Its purpose is to guarantee the renewability of all 
coverage in the individual market. It also provides certain protections 
for mothers and newborns with respect to coverage for hospital stays in 
connection with childbirth and protects all individuals and family 
members who have, or seek, individual health insurance coverage from 
discrimination based on genetic information.
0
9. Section 148.102 is revised to read as follows:


Sec.  148.102  Scope, applicability, and effective dates.

    (a) Scope and applicability. (1) Individual health insurance 
coverage includes all health insurance coverage (as defined in Sec.  
144.103 of this subchapter) that is neither health insurance coverage 
sold in connection with an employment-related group health plan, nor 
short-term, limited-duration coverage as defined in Sec.  144.103 of 
this subchapter.
    (2) The requirements that pertain to guaranteed renewability for 
all individuals, to protections for mothers and newborns with respect 
to hospital stays in connection with childbirth, and to protections 
against discrimination based on genetic information apply to all 
issuers of individual health insurance coverage in the State.
    (b) Applicability date. Except as provided in Sec.  148.124 
(certificate of creditable coverage), Sec.  148.170 (standards relating 
to benefits for mothers and newborns), and Sec.  148.180 (prohibition 
of health discrimination based on genetic information), the 
requirements of this part apply to health insurance coverage offered, 
sold, issued, renewed, in effect, or operated in the individual market 
after June 30, 1997.


Sec.  148.103  [Removed]

0
10. Section 148.103 is removed.
0
11. Section 148.120 is revised to read as follows:


Sec.  148.120  Guaranteed availability of individual health insurance 
coverage to certain individuals with prior group coverage.

    The rules for guaranteeing the availability of individual health 
insurance coverage to certain eligible individuals with prior group 
coverage have been superseded by the requirements of Sec.  147.104 of 
this subchapter, which set forth Federal requirements for guaranteed 
availability of coverage in the group and individual markets.
0
12. Section 148.122 is amended by--
0
A. Revising paragraphs (a), (d)(1), and (g).
0
B. Redesignating paragraph (h) as paragraph (i).
0
C. Adding new paragraph (h).
    The revisions and addition read as follows:


Sec.  148.122  Guaranteed renewability of individual health insurance 
coverage.

    (a) Applicability. This section applies to non-grandfathered and 
grandfathered health plans (within the meaning of Sec.  147.140 of this 
subchapter) that are individual health insurance coverage. See also 
Sec.  147.106 of this subchapter for requirements relating to 
guaranteed renewability of coverage with respect to non-grandfathered 
health plans.
* * * * *
    (d) * * *
    (1) Provides notice in writing, in a form and manner specified by 
the Secretary, to each individual provided coverage of that type of 
health insurance at least 90 calendar days before the date the coverage 
will be discontinued.
* * * * *
    (g) Exception for uniform modification of coverage. (1) An issuer 
may, only at the time of coverage renewal, modify the health insurance 
coverage for a policy form offered in the individual market if the 
modification is consistent with State law and is effective uniformly 
for all individuals with that policy form.
    (2) For purposes of this paragraph (g), modifications made solely 
pursuant to applicable Federal or State law are considered a uniform 
modification of coverage. Other types of modifications are considered a 
uniform modification of coverage if the product that has been modified 
meets all of the following criteria:
    (i) The product is offered by the same health insurance issuer 
(within the meaning of section 2791(b)(2) of the PHS Act).
    (ii) The product is offered as the same product type (e.g., 
preferred provider organization (PPO) or health maintenance 
organization (HMO)).
    (iii) The product covers a majority of the same counties in its 
service area;
    (iv) The product has the same cost-sharing structure, except for 
variation in cost sharing solely related to changes in cost and 
utilization of medical care, or to maintain the same level of coverage

[[Page 15869]]

described in sections 1302(d) and (e) of the Affordable Care Act.
    (v) The product provides the same covered benefits, except for 
changes in benefits that cumulatively impact the rate for the product 
by no more than 2 percent (not including changes required by applicable 
Federal or State law).
    (3) A State may establish criteria that broaden, but not restrict, 
the definition of a uniform modification of coverage under paragraph 
(g)(2) of this section.
    (h) Notice of renewal of coverage. If an issuer is renewing 
coverage as described in paragraph (b) of this section, or uniformly 
modifying coverage as described in paragraph (g) of this section, the 
issuer must provide to each individual written notice of the renewal in 
a form and manner specified by the Secretary.
* * * * *
0
13. Section 148.124 is revised to read as follows:


Sec.  148.124  Certification and disclosure of coverage.

    (a) General rule. The rules for providing certificates of 
creditable coverage and demonstrating creditable coverage have been 
superseded by the prohibition on preexisting condition exclusions. See 
Sec.  147.108 of this subchapter for rules prohibiting the imposition 
of a preexisting condition exclusion.
    (b) Applicability. The provisions of this section apply beginning 
December 31, 2014.
0
14. Section 148.126 is revised to read as follows:


Sec.  148.126  Determination of an eligible individual.

    The rules for guaranteeing the availability of individual health 
insurance coverage to certain eligible individuals with prior group 
coverage have been superseded by the requirements of Sec.  147.104 of 
this subchapter, which set forth Federal requirements for guaranteed 
availability of coverage in the group and individual markets.
0
15. Section 148.128 is revised to read as follows:


Sec.  148.128  State flexibility in individual market reforms--
alternative mechanisms.

    The rules for a State to implement an acceptable alternative 
mechanism for purposes of guaranteeing the availability of individual 
health insurance coverage to certain eligible individuals with prior 
group coverage have been superseded by the requirements of Sec.  
147.104 of this subchapter, which set forth Federal requirements for 
guaranteed availability of coverage in the group and individual 
markets.
0
16. Section 148.220 is amended by--
0
A. Revising the introductory text.
0
B. Revising paragraph (b)(3).
0
C. Redesignating paragraphs (b)(4) through (6) as paragraphs (b)(5) 
through (7), respectively.
0
D. Adding new paragraph (b)(4).
    The revisions and additions read as follows:


Sec.  148.220  Excepted benefits.

    The requirements of this part and part 147 do not apply to 
individual health insurance coverage in relation to its provision of 
the benefits described in paragraphs (a) and (b) of this section (or 
any combination of the benefits).
* * * * *
    (b) * * *
    (3) Coverage only for a specified disease or illness (for example, 
cancer policies) if the policies meet the requirements of Sec.  
146.145(b)(4)(ii)(B) and (C) of this subchapter regarding 
noncoordination of benefits.
    (4) Hospital indemnity or other fixed indemnity insurance only if--
    (i) The benefits are provided only to individuals who have other 
health coverage that is minimum essential coverage within the meaning 
of section 5000A(f) of the Internal Revenue Code.
    (ii) There is no coordination between the provision of benefits and 
an exclusion of benefits under any other health coverage.
    (iii) The benefits are paid in a fixed dollar amount per day of 
hospitalization or illness or per service (for example, $100/day or 
$50/visit) regardless of the amount of expenses incurred and without 
regard to the amount of benefits provided with respect to the event or 
service under any other health coverage.
    (iv) A notice is displayed prominently in the plan materials in at 
least 14 point type that has the following language: ``THIS IS A 
SUPPLEMENT TO HEALTH INSURANCE AND IS NOT A SUBSTITUTE FOR MAJOR 
MEDICAL COVERAGE. LACK OF MAJOR MEDICAL COVERAGE (OR OTHER MINIMUM 
ESSENTIAL COVERAGE) MAY RESULT IN AN ADDITIONAL PAYMENT WITH YOUR 
TAXES.''
* * * * *

PART 153--STANDARDS RELATED TO REINSURANCE, RISK CORRIDORS, AND 
RISK ADJUSTMENT UNDER THE AFFORDABLE CARE ACT

0
17. The authority citation for part 153 continues to read as follows:

    Authority: Secs. 1311, 1321, 1341-1343, Pub. L. 111-148, 24 
Stat. 119.

0
18. Section 153.500 is amended by revising the definition of 
``adjustment percentage,'' as added on March 11, 2014 (79 FR 13835), 
effective on May 12, 2014, to read as follows:


Sec.  153.500  Definitions.

* * * * *
    Adjustment percentage means, with respect to a QHP:
    (1) For benefit year 2014, for a QHP offered by a health insurance 
issuer with allowable costs of at least 80 percent of after-tax premium 
in a transitional State, the percentage specified by HHS for such QHPs 
in the transitional State; and otherwise zero percent.
    (2) For benefit year 2015, for a QHP offered by a health insurance 
issuer in any State, two percent.
* * * * *

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

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

    Authority: Title I of the Affordable Care Act, sections 1301, 
1302, 1303, 1304, 1311, 1312, 1313, 1321, 1322, 1331, 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
20. Section 155.120 is amended by revising paragraph (c) to read as 
follows:


Sec.  155.120  Non-interference with Federal law and non-discrimination 
standards.

* * * * *
    (c) Non-discrimination. (1) In carrying out the requirements of 
this part, the State and the Exchange must:
    (i) Comply with applicable non-discrimination statutes; and
    (ii) Not discriminate based on race, color, national origin, 
disability, age, sex, gender identity or sexual orientation.
    (2) Exception. Notwithstanding the provisions of paragraph (c)(1) 
of this section, an organization that receives Federal funds to provide 
services to a defined population under the terms of Federal legal 
authorities that participates in the certified application counselor 
program under Sec.  155.225 may limit its provision of certified 
application counselor services to the same defined population. If the 
organization limits its provision of certified application counselor 
services pursuant to this exception, but is approached for certified 
application counselor services by an individual who is not included in 
the defined population that the organization serves, the organization 
must refer the

[[Page 15870]]

individual to other Exchange-approved resources that can provide 
assistance. If the organization does not limit its provision of 
certified application counselor services pursuant to this exception, 
the organization must comply with paragraph (c)(1) of this section.
0
21. Section 155.206 is added to read as follows:


Sec.  155.206  Civil money penalties for violations of applicable 
Exchange standards by consumer assistance entities in Federally-
facilitated Exchanges.

    (a) Enforcement actions. If an individual or entity specified in 
paragraph (b) of this section engages in activity specified in 
paragraph (c) of this section, the Department of Health and Human 
Services (HHS) may impose the following sanctions:
    (1) Civil money penalties (CMPs), subject to the provisions of this 
section.
    (2) Corrective action plans. In the notice of assessment of CMPs 
specified in paragraph (l) of this section, HHS may provide an 
individual or entity specified in paragraph (b) of this section the 
opportunity to enter into a corrective action plan to correct the 
violation instead of paying the CMP, based on evaluation of the factors 
set forth in paragraph (h) of this section. In the event that the 
individual or entity does not follow such a corrective action plan, HHS 
could require payment of the CMP.
    (b) Consumer assistance entities. CMPs may be assessed under this 
section against the following consumer assistance entities:
    (1) Individual Navigators and Navigator entities in Federally-
facilitated Exchanges, including grantees, sub-grantees, and all 
personnel carrying out Navigator duties on behalf of a grantee or sub-
grantee;
    (2) Non-Navigator assistance personnel authorized under Sec.  
155.205(d) and (e) and non-Navigator assistance personnel entities in 
Federally-facilitated Exchanges, including but not limited to 
individuals and entities under contract with HHS to facilitate consumer 
enrollment in QHPs in Federally-facilitated Exchanges; and
    (3) Organizations that the Federally-facilitated Exchanges have 
designated as certified application counselor organizations and 
individual certified application counselors carrying out certified 
application counselor duties in the Federally-facilitated Exchanges.
    (c) Grounds for assessing CMPs. HHS may assess CMPs against a 
consumer assistance entity if, based on the outcome of the 
investigative process outlined in paragraphs (d) through (i) of this 
section, HHS has reasonably determined that the consumer assistance 
entity has failed to comply with the Federally-facilitated Exchange 
requirements and standards applicable to the consumer assistance 
entity, unless a CMP has been assessed for the same conduct under 45 
CFR 155.285.
    (d) Basis for initiating an investigation of a potential violation. 
(1) Information. Any information received by HHS that indicates that a 
consumer assistance entity may have engaged or may be engaging in 
activity specified in paragraph (c) of this section may warrant an 
investigation. Information that might trigger an investigation 
includes, but is not limited to, the following:
    (i) Complaints from the general public;
    (ii) Reports from State regulatory agencies, and other Federal and 
State agencies; or
    (iii) Any other information that indicates potential involvement in 
activity specified in paragraph (c) of this section.
    (2) Who may file a complaint. Any entity or individual, or the 
legally authorized representative of an entity or individual, may file 
a complaint with HHS alleging that a consumer assistance entity has 
engaged or is engaging in an activity specified in paragraph (c) of 
this section.
    (e) Notice of investigation. If HHS learns of a potential violation 
described in paragraph (c) of this section through the means described 
in paragraph (d) of this section, HHS must provide a written notice of 
its investigation to the consumer assistance entity. This notice must 
include the following:
    (1) Description of the activity that is being investigated.
    (2) Explanation that the consumer assistance entity has 30 days 
from the date of the notice to respond with additional information or 
documentation, including information or documentation to refute an 
alleged violation.
    (3) State that a CMP might be assessed if the allegations are not, 
as determined by HHS, refuted within 30 days from the date of the 
notice.
    (f) Request for extension. In circumstances in which a consumer 
assistance entity cannot prepare a response to HHS within the 30 days 
provided in the notice of investigation described in (e) of this 
section, the entity may make a written request for an extension from 
HHS detailing the reason for the extension request and showing good 
cause. If HHS grants the extension, the consumer assistance entity must 
respond to the notice within the time frame specified in HHS's letter 
granting the extension of time. Failure to respond within 30 days, or, 
if applicable, within an extended time frame, may result in HHS's 
imposition of a CMP depending upon the outcome of HHS's investigation 
of the alleged violation.
    (g) Responses to allegations of noncompliance. In determining 
whether to impose a CMP, HHS may review and consider documents or 
information received or collected in accordance with paragraph (d)(1) 
of this section, as well as additional documents or information 
provided by the consumer assistance entity in response to receiving a 
notice of investigation in accordance with paragraph (e)(2) of this 
section. HHS may also conduct an independent investigation into the 
alleged violation, which may include site visits and interviews, if 
applicable, and may consider the results of this investigation in its 
determination.
    (h) Factors in determining noncompliance and CMPs, if any. In 
determining whether there has been noncompliance by the consumer 
assistance entity, and whether CMPs are appropriate,
    (1) HHS must take into account the following:
    (i) The consumer assistance entity's previous or ongoing record of 
compliance, including but not limited to compliance or noncompliance 
with any corrective action plan under section (c) of this section.
    (ii) The gravity of the violation, which may be determined in part 
by--
    (A) The frequency of the violation, taking into consideration 
whether any violation is an isolated occurrence, represents a pattern, 
or is widespread; and
    (B) Whether the violation caused, or could reasonably be expected 
to cause, financial or other adverse impacts on consumer(s), and the 
magnitude of those impacts;
    (2) HHS may take into account the following:
    (i) The degree of culpability of the consumer assistance entity, 
including but not limited to--
    (A) Whether the violation was beyond the direct control of the 
consumer assistance entity; and
    (B) The extent to which the consumer assistance entity received 
compensation--legal or otherwise--for the services associated with the 
violation;
    (ii) Aggravating or mitigating circumstances; or
    (iii) Other such factors as justice may require.
    (i) Maximum per-day penalty. The maximum amount of penalty imposed

[[Page 15871]]

for each violation is $100 for each day for each consumer assistance 
entity for each individual directly affected by the consumer assistance 
entity's noncompliance; and where the number of individuals cannot be 
determined, the Exchange may reasonably estimate the number of 
individuals directly affected by the violation.
    (j) Settlement authority. Nothing in Sec.  155.206 limits the 
authority of HHS to settle any issue or case described in the notice 
furnished in accordance with paragraph (e) or to compromise on any 
penalty provided for in this section.
    (k) Limitations on penalties. (1) Circumstances under which a civil 
money penalty is not imposed. HHS will not impose any civil money 
penalty on:
    (i) Any violation for the period of time during which none of the 
consumer assistance entities knew, or exercising reasonable diligence 
would have known, of the violation; or
    (ii) The period of time after any of the consumer assistance 
entities knew, or exercising reasonable diligence would have known, of 
the failure, if the violation was due to reasonable cause and not due 
to willful neglect and the violation was corrected within 30 days of 
the first day that any of the consumer assistance entities against whom 
the penalty would be imposed knew, or exercising reasonable diligence 
would have known, that the violation existed.
    (2) Burden of establishing knowledge. The burden is on the consumer 
assistance entity or entities to establish to HHS's satisfaction that 
the consumer assistance entity did not know, or exercising reasonable 
diligence would have known, that the violation existed, as well as the 
period of time during which that limitation applies; or that the 
violation was due to reasonable cause and not due to willful neglect 
and was corrected pursuant to the elements in subparagraph (k)(1)(ii).
    (l) Notice of assessment of CMP. If HHS proposes to assess a CMP in 
accordance with this section, HHS will send a written notice of this 
decision to--
    (1) The consumer assistance entity against whom the sanction is 
being imposed, which notice must include the following:
    (i) A description of the basis for the determination;
    (ii) The basis for the CMP;
    (iii) The amount of the CMP, if applicable;
    (iv) The date the CMP, if applicable, is due;
    (v) Whether HHS would permit the consumer assistance entity to 
enter into a corrective action plan in place of paying the CMP, and the 
terms of any such corrective action plan;
    (vi) An explanation of the consumer assistance entity's right to a 
hearing under paragraph (m) of this section; and
    (vii) Information about the process for filing a request for a 
hearing.
    (m) Appeal of proposed sanction. Any consumer assistance entity 
against which HHS has assessed a sanction may appeal that penalty in 
accordance with the procedures set forth at 45 CFR Part 150, Subpart D.
    (n) Failure to request a hearing. (1) If the consumer assistance 
entity does not request a hearing within 30 days of the issuance of the 
notice of assessment of CMP described in paragraph (l) of this section, 
HHS may require payment of the proposed CMP.
    (2) HHS will notify the consumer assistance entity in writing of 
any CMP that has been assessed and of the means by which the consumer 
assistance entity may pay the CMP.
    (3) The consumer assistance entity has no right to appeal a CMP 
with respect to which it has not requested a hearing in accordance with 
paragraph (m) of this section unless the consumer assistance entity can 
show good cause in accordance with Sec.  150.405(b) of this subchapter 
for failing to timely exercise its right to a hearing.
0
22. Section 155.210 is amended--
0
A. By revising paragraph (c)(1)(iii).
0
B. In paragraph (d)(3) by removing ``or,'' after the semicolon.
0
C. In paragraph (d)(4) by removing the period at the end of the 
paragraph and adding a semicolon in its place.
0
D. By adding paragraphs (d)(5) through (9) and (e)(6) and (7).
    The revision and additions read as follows:


Sec.  155.210  Navigator program standards.

    (c) * * *
    (1) * * *
    (iii) Meet any licensing, certification or other standards 
prescribed by the State or Exchange, if applicable, so long as such 
standards do not prevent the application of the provisions of title I 
of the Affordable Care Act. Standards that would prevent the 
application of the provisions of title I of the Affordable Care Act 
include but are not limited to the following:
    (A) Except as otherwise provided under Sec.  155.705(d), 
requirements that Navigators refer consumers to other entities not 
required to provide fair, accurate, and impartial information.
    (B) Except as otherwise provided under Sec.  155.705(d), 
requirements that would prevent Navigators from providing services to 
all persons to whom they are required to provide assistance.
    (C) Requirements that would prevent Navigators from providing 
advice regarding substantive benefits or comparative benefits of 
different health plans.
    (D) Requiring that a Navigator hold an agent or broker license or 
carry errors or omissions insurance.
    (E) In a Federally-facilitated Exchange, imposing standards that 
would prohibit individuals or entities from acting as Navigators that 
would be eligible to participate as Navigators under standards 
applicable to the Federally-facilitated Exchange.
    (F) In a Federally-facilitated Exchange, imposing standards that 
would, as applied or as implemented in a State, prevent the application 
of requirements applicable to the Federally-facilitated Exchange.
* * * * *
    (d) * * *
    (5) Charge any applicant or enrollee, or request or receive any 
form of remuneration from or on behalf of an individual applicant or 
enrollee, for application or other assistance related to Navigator 
duties; or
    (6) Provide compensation to individual Navigators on a per-
application, per-individual-assisted, or per-enrollment basis.
    (7) Provide gifts, including gift cards or cash, unless they are of 
nominal value, or provide promotional items that market or promote the 
products or services of a third party, to any applicant or potential 
enrollee in connection with or as an inducement for application 
assistance or enrollment.
    (8) Solicit any consumer for application or enrollment assistance 
by going door-to-door or through other unsolicited means of direct 
contact, including calling a consumer to provide application or 
enrollment assistance without the consumer initiating the contact.
    (9) Initiate any telephone call to a consumer using an automatic 
telephone dialing system or an artificial or prerecorded voice.
    (e) * * *
    (6) Ensure that applicants--
    (i) Are informed of the functions and responsibilities of 
Navigators;
    (ii) Provide authorization in a form and manner as determined by 
the Secretary prior to a Navigator's obtaining access to an applicant's 
personally identifiable information, and that the Navigator maintains a 
record of the authorization provided. The Exchange must establish a 
reasonable retention period for maintaining these records. In 
Federally-facilitated Exchanges, this period is three years,

[[Page 15872]]

unless a different retention period has already been provided under 45 
CFR 92.42 and 45 CFR 74.53 or other applicable Federal law; and
    (iii) May revoke at any time the authorization provided the 
Navigator pursuant to paragraph (e)(6)(ii) of this section.
    (7) Maintain a physical presence in the Exchange service area, so 
that face-to-face assistance can be provided to applicants and 
enrollees.
* * * * *
0
23. Section 155.215 is amended by adding paragraphs (f) and (g) to read 
as follows:


Sec.  155.215  Standards applicable to Navigators and Non-Navigator 
Assistance Personnel carrying out consumer assistance functions under 
Sec. Sec.  155.205(d) and (e) and 155.210 in a Federally-facilitated 
Exchange and to Non-Navigator Assistance Personnel funded through an 
Exchange Establishment Grant.

* * * * *
    (f) State or Exchange standards. All non-Navigator entities or 
individuals carrying out consumer assistance functions under Sec.  
155.205(d) and (e) must comply with the eligibility standard set forth 
under Sec.  155.210(c)(1)(iii), except for Sec.  155.210(c)(1)(iii)(D).
    (g) Consumer authorization. All non-Navigator entities or 
individuals carrying out consumer assistance functions under Sec.  
155.205(d) and (e) must establish procedures to ensure that 
applicants--
    (1) Are informed of the functions and responsibilities of non-
Navigator assistance personnel;
    (2) Provide authorization in a form and manner as determined by the 
Secretary prior to a non-Navigator assistance personnel's obtaining 
access to an applicant's personally identifiable information, and that 
the non-Navigator assistance personnel maintains a record of the 
authorization provided. The Exchange must establish a reasonable 
retention period for maintaining these records. In Federally-
facilitated Exchanges, this period is three years, unless an different 
retention period has already been provided in applicable Federal law; 
and
    (3) May revoke at any time the authorization provided the non-
Navigator assistance personnel pursuant to paragraph (g)(2) of this 
section.
0
24. Section 155.225 is amended--
0
A. In paragraph (b)(1)(i) by removing ``and'' after the semicolon.
0
B. In paragraph (b)(1)(ii) by removing the period at the end of the 
paragraph and adding ``; and'' in its place.
0
C. By adding paragraph (b)(1)(iii).
0
D. In paragraph (d)(5) by removing ``and'' after the semicolon.
0
E. In paragraph (d)(6) by removing the period at the end of the 
paragraph and adding a semicolon in its place.
0
F. By adding paragraphs (d)(7) and (8).
0
G. By revising paragraphs (f)(1) and (2) and (g).
    The revisions and additions read as follows:


Sec.  155.225  Certified application counselors.

* * * * *
    (b) * * *
    (1) * * *
    (iii) Maintain a physical presence in the Exchange service area, so 
that face-to-face assistance can be provided to applicants and 
enrollees.
* * * * *
    (d) * * *
    (7) Is recertified on at least an annual basis after successfully 
completing recertification training as required by the Exchange; and
    (8) Meets any licensing, certification, or other standards 
prescribed by the State or Exchange, if applicable, so long as such 
standards do not prevent the application of the provisions of title I 
of the Affordable Care Act. Standards that would prevent the 
application of the provisions of title I of the Affordable Care Act 
include but are not limited to the following:
    (i) Requirements that certified application counselors refer 
consumers to other entities not required to act in the best interest of 
applicants assisted.
    (ii) Requirements that would prevent certified application 
counselors from providing services to all persons to whom they are 
required to provide assistance.
    (iii) Requirements that would prevent certified application 
counselors from providing advice regarding substantive benefits or 
comparative benefits of different health plans.
    (iv) In a Federally-facilitated Exchange, imposing standards that 
would prohibit individuals or entities from acting as certified 
application counselors that would be eligible to participate as 
certified application counselors under standards applicable to the 
Federally-facilitated Exchange.
    (v) In a Federally-facilitated Exchange, imposing standards that 
would, as applied or as implemented in a State, prevent the application 
of requirements applicable to the Federally-facilitated Exchange.
* * * * *
    (f) * * *
    (1) Are informed of the functions and responsibilities of certified 
application counselors;
    (2) Provide authorization prior to a certified application 
counselor obtaining access to an applicant's personally identifiable 
information and that the organization or certified application 
counselor maintains a record of the authorization. The Exchange must 
establish a reasonable retention period for maintaining these records. 
In Federally-facilitated Exchanges, this period is three years, unless 
a different retention period has already been provided under other 
applicable Federal law; and
* * * * *
    (g) Fees, consideration, solicitation, and marketing. Organizations 
designated by the Exchange under paragraph (b) of this section and 
certified application counselors must not--
    (1) Impose any charge on applicants or enrollees for application or 
other assistance related to the Exchange;
    (2) Receive any consideration directly or indirectly from any 
health insurance issuer or issuer of stop-loss insurance in connection 
with the enrollment of any individuals in a QHP or a non-QHP;
    (3) Provide compensation to individual certified application 
counselors on a per-application, per-individual- assisted, or per-
enrollment basis;
    (4) Provide gifts, including gift cards or cash, unless they are of 
nominal value, or provide promotional items that market or promote the 
products or services of a third party, to any applicant or potential 
enrollee in connection with or as an inducement for application 
assistance or enrollment;
    (5) Solicit any consumer for application or enrollment assistance 
by going door-to-door or through other unsolicited means of direct 
contact, including calling a consumer to provide application or 
enrollment assistance without the consumer initiating the contact; or
    (6) Initiate any telephone call to a consumer using an automatic 
telephone dialing system or an artificial or prerecorded voice.
0
25. Section 155.240 is amended by adding paragraph (e) to read as 
follows:


Sec.  155.240  Payment of premium.

* * * * *
    (e) Premium calculation. The Exchange may establish one or more 
standard processes for premium calculation.
    (1) For a Federally-facilitated Exchange, the premium for coverage 
lasting less than one month must equal the product of--

[[Page 15873]]

    (i) The premium for one month of coverage divided by the number of 
days in the month; and
    (ii) The number of days for which coverage is being provided in the 
month described in paragraph (e)(1)(i) of this section.
    (2) [Reserved]
0
26. Section 156.260 is amended by revising paragraph (g) to read as 
follows:


Sec.  155.260  Privacy and security of personally identifiable 
information.

* * * * *
    (g) Improper use and disclosure of information. Any person who 
knowingly and willfully uses or discloses information in violation of 
section 1411(g) of the Affordable Care Act will be subject to a CMP of 
not more than the maximum amount specified in section 1411(h)(2) of the 
Affordable Care Act per person or entity, per use or disclosure, 
consistent with the bases and process for imposing civil penalties 
specified at Sec.  155.285 of this subpart, in addition to other 
penalties that may be prescribed by law.
0
27. Section 155.285 is added to subpart C to read as follows:


Sec.  155.285  Bases and process for imposing civil penalties for 
provision of false or fraudulent information to an Exchange or improper 
use or disclosure of information.

    (a) Grounds for imposing civil money penalties. (1) HHS may impose 
civil money penalties on any person, as defined in paragraph (a)(2) of 
this section, if, based on credible evidence, HHS reasonably determines 
that a person has engaged in one or more of the following actions:
    (i) Failure to provide correct information under section 1411(b) of 
the Affordable Care Act where such failure is attributable to 
negligence or disregard of any rules or regulations of the Secretary 
with negligence and disregard defined as they are in section 6662 of 
the Internal Revenue Code of 1986:
    (A) ``Negligence'' includes any failure to make a reasonable 
attempt to provide accurate, complete, and comprehensive information; 
and
    (B) ``Disregard'' includes any careless, reckless, or intentional 
disregard for any rules or regulations of the Secretary.
    (ii) Knowing and willful provision of false or fraudulent 
information required under section 1411(b) of the Affordable Care Act, 
where knowing and willful means the intentional provision of 
information that the person knows to be false; or
    (iii) Knowing and willful use or disclosure of information in 
violation of section 1411(g) of the Affordable Care Act, where knowing 
and willful means the intentional use or disclosure of information in 
violation of section 1411(g). Such violations would include, but not be 
limited to, the following:
    (A) Any use or disclosure performed which violates relevant privacy 
and security standards established by the Exchange pursuant to Sec.  
155.260;
    (B) Any other use or disclosure which has not been determined by 
the Secretary to be in compliance with section 1411(g)(2)(A) of the 
Affordable Care Act pursuant to Sec.  155.260(a); and
    (C) Any other use or disclosure which is not necessary to carry out 
a function described in a contract with a non-Exchange entity executed 
pursuant to Sec.  155.260(b)(2).
    (2) For purposes of this section, the term ``person'' is defined to 
include, but is not limited to, all individuals; corporations; 
Exchanges; Medicaid and CHIP agencies; other entities gaining access to 
personally identifiable information submitted to an Exchange to carry 
out additional functions which the Secretary has determined ensure the 
efficient operation of the Exchange pursuant to Sec.  155.260(a)(1); 
and non-Exchange entities as defined in Sec.  155.260(b) which includes 
agents, brokers, Web-brokers, QHP issuers, Navigators, non-Navigator 
assistance personnel; certified application counselors, in-person 
assistors, and other third party contractors.
    (b) Factors in determining the amount of civil money penalties 
imposed. In determining the amount of civil money penalties, HHS may 
take into account factors which include, but are not limited to, the 
following:
    (1) The nature and circumstances of the conduct including:
    (i) The number of violations;
    (ii) The severity of the violations;
    (iii) The person's history with the Exchange including any prior 
violations that would indicate whether the violation is an isolated 
occurrence or represents a pattern of behavior;
    (iv) The length of time of the violation;
    (v) The number of individuals affected or potentially affected;
    (vi) The extent to which the person received compensation or other 
consideration associated with the violation; and
    (vii) Any documentation provided in any complaint or other 
information, as well as any additional information provided by the 
individual to refute performing the violation.
    (2) The nature of the harm resulting from, or reasonably expected 
to result from, the violation including:
    (i) Whether the violation resulted in financial harm;
    (ii) Whether there was harm to an individual's reputation;
    (iii) Whether the violation hindered or could have hindered an 
individual's ability to obtain health insurance coverage;
    (v) The actual or potential impact of the provision of false or 
fraudulent information or of the improper use or disclosure of the 
information; and
    (vi) Whether any person received a more favorable eligibility 
determination for enrollment in a QHP or insurance affordability 
program, such as greater advance payment of the premium tax credits or 
cost-sharing reductions than he or she would be eligible for if the 
correct information had been provided.
    (3) No penalty will be imposed under paragraph (a)(1)(i) of this 
section if HHS determines that there was a reasonable cause for the 
failure to provide correct information required under section 1411(b) 
of the Affordable Care Act and that the person acted in good faith.
    (c) Maximum penalty. The amount of a civil money penalty will be 
determined by HHS in accordance with paragraph (b) of this section.
    (1) The following provisions provide maximum penalties for a single 
``plan year,'' where ``plan year'' has the same meaning as at Sec.  
155.20 of this part:
    (i) Any person who fails to provide correct information as 
specified in paragraph (a)(1)(i) of this section may be subject to a 
maximum civil money penalty as specified in section 1411(h)(1)(A)(i) of 
the Affordable Care Act for each application, as defined at paragraph 
(c)(1)(iii) of this section, pursuant to which a person fails to 
provide correct information.
    (ii) Any person who knowingly and willfully provides false 
information as specified in paragraph (a)(1)(ii) of this section may be 
subject to a maximum civil money penalty as specified in section 
1411(h)(1)(B) of the Affordable Care Act for each application, as 
defined at paragraph (c)(1)(iii) of this section, on which a person 
knowingly and willfully provides false information.
    (iii) For the purposes of this subsection, ``application'' is 
defined as a submission of information, whether through an online 
portal, over the telephone through a call center, or through a paper 
submission process, in which the information is provided in relation to 
an eligibility determination; an eligibility redetermination based on a 
change in an individual's circumstances; or an annual eligibility 
redetermination for any of the following:
    (A) Enrollment in a qualified health plan;

[[Page 15874]]

    (B) Premium tax credits or cost sharing reductions; or
    (C) An exemption from the individual shared responsibility payment.
    (2) Any person who knowingly or willfully uses or discloses 
information as specified in paragraph (a)(1)(iii) of this section may 
be subject to the following civil money penalty:
    (i) A civil money penalty for each use or disclosure described in 
paragraph (a)(1)(iii) of this section of not more than the maximum 
amount specified in section 1411(h)(2) of the Affordable Care Act per 
use or disclosure.
    (ii) For purposes of this subsection, a use or disclosure includes 
one separate use or disclosure of a single individual's personally 
identifiable information where the person against whom a civil money 
penalty may be imposed has made the use or disclosure.
    (3) These penalties may be imposed in addition to any other 
penalties that may be prescribed by law.
    (d) Notice of intent to issue civil money penalty. If HHS intends 
to impose a civil money penalty in accordance with this part, HHS will 
send a written notice of such intent to the person against whom it 
intends to impose a civil money penalty.
    (1) This written notice will be either hand delivered, sent by 
certified mail, return receipt requested, or sent by overnight delivery 
service with signature upon delivery required. The written notice must 
include the following elements:
    (i) A description of the findings of fact regarding the violations 
with respect to which the civil money penalty is proposed;
    (ii) The basis and reasons why the findings of fact subject the 
person to a penalty;
    (iii) Any circumstances described in paragraph (b) of this section 
that were considered in determining the amount of the proposed penalty;
    (iv) The amount of the proposed penalty;
    (v) An explanation of the person's right to a hearing under any 
applicable administrative hearing process;
    (vi) A statement that failure to request a hearing within 60 
calendar days after the date of issuance printed on the notice permits 
the assessment of the proposed penalty; and
    (vii) Information explaining how to file a request for a hearing 
and the address to which the hearing request must be sent.
    (2) The person may request a hearing before an ALJ on the proposed 
penalty by filing a request in accordance with the procedure to file a 
request specified in the notice of intent to issue a civil money 
penalty.
    (e) Failure to request a hearing. If the person does not request a 
hearing within 60 calendar days of the date of issuance printed on the 
notice described in paragraph (d) of this section, HHS may impose the 
proposed civil money penalty.
    (1) HHS will notify the person in writing of any penalty that has 
been imposed, the means by which the person may satisfy the penalty, 
and the date on which the penalty is due.
    (2) A person has no right to appeal a penalty with respect to which 
the person has not timely requested a hearing in accordance with 
paragraph (d) of this section.
    (f) Appeal of proposed penalty. Subject to paragraph (e)(2) of this 
section, any person against whom HHS has imposed a civil money penalty 
may appeal that penalty in accordance with the rules and procedures 
outlined at 45 CFR part 150, subpart D, excluding Sec. Sec.  150.461, 
150.463, and 150.465.
    (g) Enforcement authority. (1) CMS. CMS may impose civil money 
penalties up to the maximum amounts specified in paragraph (d) of this 
section for any of the violations described in paragraph (a) of this 
section.
    (2) OIG. In accordance with the rules and procedures of 42 CFR part 
1003, and in place of imposition of penalties by CMS, the OIG may 
impose civil money penalties for violations described in paragraphs 
(a)(1)(ii) and (iii) of this section.
    (h) Settlement authority. Nothing in this section limits the 
authority of CMS to settle any issue or case described in the notice 
furnished in accordance with Sec.  155.285(d) or to compromise on any 
penalty provided for in this section.
    (i) Limitations. No action under this section will be entertained 
unless commenced, in accordance with Sec.  155.285(d), within 6 years 
from the date on which the violation occurred.
0
28. Section 155.320 is amended by revising the section heading and 
removing paragraph (d)(4).
    The revision reads as follows:


Sec.  155.320  Verification process related to eligibility for 
insurance affordability programs.

* * * * *
0
29. Section 155.330 is amended by revising paragraph (d)(2)(ii) to read 
as follows:


Sec.  155.330  Eligibility redetermination during a benefit year.

* * * * *
    (d) * * *
    (2) * * *
    (ii) Comply with the standards specified in paragraph (e)(2) of 
this section.
* * * * *
0
30. Section 155.400 is amended by adding paragraphs (e) and (f) to read 
as follows:


Sec.  155.400  Enrollment of qualified individuals into QHPs.

* * * * *
    (e) Premium payment. Exchanges may, and the Federally-facilitated 
Exchange will, require payment of the first month's premium to 
effectuate an enrollment.
    (f) Processing enrollment transactions. The Exchange may provide 
requirements to QHP issuers regarding the instructions for processing 
electronic enrollment-related transactions.
0
31. Section 155.420 is amended by revising paragraphs (b)(2)(i) through 
(iii), (c), (d)(1), (d)(6)(iii), and (e) introductory text to read as 
follows:


Sec.  155.420  Special enrollment periods.

* * * * *
    (b) * * *
    (2) * * *
    (i) In the case of birth, adoption, placement for adoption, or 
placement in foster care, the Exchange must ensure that coverage is 
effective for a qualified individual or enrollee on the date of birth, 
adoption, placement for adoption, or placement in foster care, but may 
permit the qualified individual or enrollee to elect a later coverage 
effective date. If the Exchange permits the qualified individual or 
enrollee to elect a later coverage effective date, the Exchange must 
ensure coverage is effective on the date elected by the qualified 
individual or enrollee.
    (ii) In the case of marriage, or in the case where a qualified 
individual loses minimum essential coverage or other coverage, as 
described in paragraph (d)(1) of this section, the Exchange must ensure 
that coverage is effective for a qualified individual or enrollee on 
the first day of the following month.
    (iii) In the case of a qualified individual or enrollee eligible 
for a special enrollment period as described in paragraphs (d)(4), 
(d)(5), (d)(9), or (d)(10) of this section, the Exchange must ensure 
that coverage is effective on an appropriate date based on the 
circumstances of the special enrollment period, in accordance with 
guidelines issued by HHS.
* * * * *
    (c) Availability and length of special enrollment periods. (1) 
Unless specifically stated otherwise herein, a qualified individual or 
enrollee has 60

[[Page 15875]]

days from the date of a triggering event to select a QHP;
    (2) A qualified individual or enrollee whose coverage specified in 
paragraph (d)(1) or whose eligibility for qualifying coverage in an 
eligible-employer sponsored plan as specified in paragraph (d)(6)(iii) 
of this section will end within the next 60 days has 120 days from the 
date that is 60 days prior to the end of such coverage or eligibility 
to select a QHP, including prior to the end of his or her existing 
coverage or eligibility for qualifying coverage in an eligible-employer 
sponsored plan as specified in paragraph (d)(6)(iii) of this section, 
although he or she is not eligible for advance payments of the premium 
tax credit until the end of his or her existing coverage or eligibility 
for qualifying coverage in an eligible-employer sponsored plan as 
specified in paragraph (d)(6)(iii) of this section;
    (3) In the case of a qualified individual or enrollee eligible for 
a special enrollment period as described in paragraphs (d)(4), (d)(5), 
(d)(9), or (d)(10) of this section, the Exchange may define the length 
of this special enrollment period as appropriate based on the 
circumstances of the special enrollment period, in accordance with 
guidelines issued by HHS.
    (d) * * *
    (1) The qualified individual or his or her dependent loses minimum 
essential coverage, is enrolled in any non-calendar year individual 
health insurance policy as described in Sec.  147.104(b)(2) of this 
subchapter, even if the qualified individual or his her or dependent 
has the option to renew the expiring non-calendar year individual 
health insurance policy, or loses pregnancy-related coverage described 
under section 1902(a)(10)(A)(i)(IV) and (a)(10)(A)(ii)(IX) of the 
Social Security Act (42 U.S.C. 1396a(a)(10)(A)(i)(IV), 
(a)(10)(A)(ii)(IX)).
* * * * *
    (6) * * *
    (iii) A qualified individual or his or her dependent who is 
enrolled in an eligible employer-sponsored plan is determined newly 
eligible for advance payments of the premium tax credit based in part 
on a finding that such individual is ineligible for qualifying coverage 
in an eligible-employer sponsored plan in accordance with 26 CFR 1.36B-
2(c)(3), including as a result of his or her employer discontinuing or 
changing available coverage within the next 60 days, provided that such 
individual is allowed to terminate existing coverage.
* * * * *
    (e) Loss of coverage. Loss of minimum essential coverage or other 
coverage described in paragraph (d)(1) of this section includes those 
circumstances described in 26 CFR 54.9801-6(a)(3)(i) through (iii). 
Loss of coverage does not include voluntary termination or loss due 
to--
* * * * *
0
32. Section 155.430 is amended by revising paragraph (d)(6) and adding 
paragraph (e) to read as follows:


Sec.  155.430  Termination of coverage.

* * * * *
    (d) * * *
    (6) In the case of a termination in accordance with paragraph 
(b)(2)(v) of this section, the last day of coverage in an enrollee's 
prior QHP is the day before the effective date of coverage in his or 
her new QHP, including any retroactive enrollments effectuated under 
Sec.  155.420(b)(2)(iii). In cases of retroactive terminations dates, 
the Exchange will ensure that appropriate actions are taken to make 
necessary adjustments to advance payments of the premium tax credit, 
cost-sharing reductions, premiums, and claims.
* * * * *
    (e) Termination, cancellation, and reinstatement. The Exchange may 
establish operational instructions as to the form, manner, and method 
for addressing each of the following:
    (1) Termination. A termination is an action taken after a coverage 
effective date that ends an enrollee's coverage through the Exchange 
for a date after the original coverage effective date, resulting in a 
period during which the individual was covered by the issuer.
    (2) Cancellation. A cancellation is specific type of termination 
action that ends a qualified individuals' enrollment on the date 
coverage became effective resulting in coverage never having been 
effective with the QHP.
    (3) Reinstatement. A reinstatement is a correction of an erroneous 
termination or cancellation action and results in restoration of an 
enrollment with no break in coverage.


Sec.  155.505  [Amended].

0
33. Section 155.505 is amended in paragraph (b)(4) by removing ``; 
and'' at the end of the paragraph and adding a period in its place.
0
34. Section 155.530 is amended by revising paragraph (a)(1) to read as 
follows:


Sec.  155.530  Dismissals.

    (a) * * *
    (1) Withdraws the appeal request in writing or by telephone, if the 
appeals entity is capable of accepting telephonic withdrawals.
    (i) Accepting telephonic withdrawals means the appeals entity--
    (A) Records in full the appellant's statement and telephonic 
signature made under penalty of perjury; and
    (B) Provides a written confirmation to the appellant documenting 
the telephonic interaction.
    (ii) [Reserved]
* * * * *
0
35. Section 155.555 is amended by--
0
A. Redesignating paragraphs (d) introductory text, (d)(1), (d)(2) 
introductory text, (d)(2)(i), (ii), (iii), (d)(3), and (d)(4) as 
paragraphs (d)(1) introductory text, (d)(1)(i), (d)(1)(ii) introductory 
text, (d)(1)(ii)(A), (B), (C), (d)(1)(iii), and (d)(2).
0
B. Revising new paragraph (d)(2) introductory text.
    The revision reads as follows:


Sec.  155.555  Employer appeals process.

* * * * *
    (d) * * *
    (2) Upon receipt of an invalid appeal request, the appeals entity 
must promptly and without undue delay send written notice to the 
employer that the appeal request is not valid because it fails to meet 
the requirements of this section. The written notice must inform the 
employer--
* * * * *
0
36. Section 155.625 is revised to read as follows:


Sec.  155.625  Options for conducting eligibility determinations for 
exemptions.

    (a) Options for conducting eligibility determinations. The Exchange 
may satisfy the requirements of this subpart--
    (1) Directly or through contracting arrangements in accordance with 
Sec.  155.110(a); or
    (2) For an application submitted before November 15, 2014, through 
the approach described in paragraph (b) of this section.
    (b) Use of HHS service. Notwithstanding the requirements of this 
subpart, for an application submitted before November 15, 2014, the 
Exchange may adopt an exemption eligibility determination made by HHS, 
provided that--
    (1) The Exchange adheres to the eligibility determination made by 
HHS;
    (2) The Exchange furnishes to HHS any information available through 
the Exchange that is necessary for an applicant to utilize the process 
administered by HHS; and
    (3) The Exchange call center and Internet Web site specified in 
Sec.  155.205(a) and (b), respectively,

[[Page 15876]]

provide information to consumers regarding the exemption eligibility 
process.
0
37. Section 155.705, as amended March 11, 2014 (79 FR 13838), and 
effective May 12, 2014, is amended by--
0
A. Revising paragraphs (b)(2) and (b)(3)(ii) introductory text and 
(b)(3)(iv) introductory text.
0
B. Adding paragraph (b)(3)(vi).
    The revisions and addition read as follows:


Sec.  155.705  Functions of a SHOP.

* * * * *
    (b) * * *
    (2) Employer choice requirements. With regard to QHPs offered 
through the SHOP for plan years beginning on or after January 1, 2015, 
the SHOP must allow a qualified employer to select a level of coverage 
as described in section 1302(d)(1) of the Affordable Care Act, in which 
all QHPs within that level are made available to the qualified 
employees of the employer, unless the SHOP makes an election pursuant 
to paragraph (b)(3)(vi) of this section.
    (3) * * *
    (ii) Unless the SHOP makes an election pursuant to paragraph 
(b)(3)(vi) of this section, for plan years beginning on or after 
January 1, 2015, a SHOP:
* * * * *
    (iv) Unless the Secretary makes an election pursuant to paragraph 
(b)(3)(vi) of this section, for plan years beginning on or after 
January 1, 2015, a Federally-facilitated SHOP will provide a qualified 
employer a choice of two methods to make QHPs available to qualified 
employees:
* * * * *
    (vi) For plan years beginning in 2015, the SHOP may, based on the 
recommendation of a State regulatory agency, elect to provide employers 
only with the options set forth at paragraph (b)(3)(ii)(B) or in the 
case of a Federally-facilitated SHOP, only with the option set forth at 
paragraph (b)(3)(iv)(B) of this section, only if:
    (A) The implementation of paragraphs (b)(3)(ii)(A) or (b)(3)(iv)(A) 
of this section would result in significant adverse selection in the 
State's small group market resulting in market disruptions that could 
not be remediated by sections 1312(c), 1342, and 1343 of the Affordable 
Care Act (relating to single risk pool, risk corridors, and risk 
adjustment); or
    (B) There are insufficient issuers of qualified health plans or 
qualified stand-alone dental plans in the SHOP to allow for meaningful 
choice among qualified health plans or qualified stand-alone dental 
plans for all levels of coverage as described in section 1302(d)(1) of 
the Affordable Care Act.
* * * * *
0
38. Section 155.725 is amended by revising paragraphs (c) and (e) to 
read as follows:


Sec.  155.725  Enrollment periods under SHOP.

* * * * *
    (c) Annual employer election period. (1) Notwithstanding any other 
paragraph in this section, for coverage beginning in 2015, a qualified 
employer's annual election period may begin no sooner than November 15, 
2014.
    (2) The SHOP must provide qualified employers with a standard 
election period prior to the completion of the employer's plan year and 
before the annual employee open enrollment period, in which the 
qualified employer may change its participation in the SHOP for the 
next plan year, including--
    (i) The method by which the qualified employer makes QHPs available 
to qualified employees pursuant to Sec.  155.705(b)(2) and (3);
    (ii) The employer contribution towards the premium cost of 
coverage;
    (iii) The level of coverage offered to qualified employees as 
described in Sec.  155.705(b)(2) and (3); and
    (iv) The QHP or QHPs offered to qualified employees in accordance 
with Sec.  155.705.
* * * * *
    (e) Annual employee open enrollment period. The SHOP must establish 
a standardized annual open enrollment period for qualified employees 
prior to the completion of the applicable qualified employer's plan 
year and after that employer's annual election period.
* * * * *
0
39. Section 155.740 is amended by--
0
A. Redesignating paragraphs (g) introductory text, (g)(1) introductory 
text, (g)(1)(i), (g)(1)(ii), (g)(2), and (g)(3) as paragraphs (g)(1)(i) 
introductory text, (g)(1)(i)(A), (g)(1)(i)(B), (g)(1)(ii), and (g)(2).
0
B. Revising paragraph (i)(1)(i).
    The revision read as follows:


Sec.  155.740  SHOP employer and employee eligibility appeals 
requirements.

* * * * *
    (i) * * *
    (1) * * *
    (i) Withdraws the request in accordance with the standards set 
forth in Sec.  155.530(a)(1); or
* * * * *
0
40. Subpart O is added to read as follows:
Subpart O--Quality Reporting Standards for Exchanges
Sec.
155.1400 Quality rating system.
155.1405 Enrollee satisfaction survey system.

Subpart O--Quality Reporting Standards for Exchanges


Sec.  155.1400  Quality rating system.

    The Exchange must prominently display the quality rating 
information assigned to each QHP on its Web site, in accordance with 
Sec.  155.205(b)(1)(v), as calculated by HHS and in a form and manner 
specified by HHS.


Sec.  155.1405  Enrollee satisfaction survey system.

    The Exchange must prominently display results from the Enrollee 
Satisfaction Survey for each QHP on its Web site, in accordance with 
Sec.  155.205(b)(1)(iv), as calculated by HHS and in a form and manner 
specified by HHS.

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

0
41. 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
42. Section 156.130 is amended by revising paragraph (d) to read as 
follows:


Sec.  156.130  Cost-sharing requirements.

* * * * *
    (d) Increase annual dollar limits in multiples of 50. For a plan 
year beginning in a calendar year after 2014, any increase in the 
annual dollar limits described in paragraphs (a) and (b) of this 
section that does not result in a multiple of 50 dollars will be 
rounded down, to the next lowest multiple of 50 dollars.
* * * * *
0
43. Section 156.200 is amended by revising paragraph (b)(5) and adding 
paragraph (h) to read as follows:


Sec.  156.200  QHP issuer participation standards.

* * * * *
    (b) * * *
    (5) Implement and report on a quality improvement strategy or 
strategies described in section 1311(c)(1)(E) of the Affordable Care 
Act consistent with the

[[Page 15877]]

standards of section 1311(g) of the Affordable Care Act, disclose and 
report information on health care quality and outcomes described in 
sections 1311(c)(1)(H), (c)(1)(I), and (c)(3) of the Affordable Care 
Act, and implement appropriate enrollee satisfaction surveys consistent 
with section 1311(c)(4) of the Affordable Care Act;
* * * * *
    (h) Operational requirements. As a condition of certification of a 
QHP, an issuer must attest that it will comply with all QHP operational 
requirements described in Subparts D, E, H, K, L and M of this part.
0
44. Section 156.265 is amended by revising paragraph (d) to read as 
follows:


Sec.  156.265  Enrollment process for qualified individuals.

* * * * *
    (d) Premium payment. A QHP issuer--
    (1) Must follow the premium payment process established by the 
Exchange in accordance with Sec.  155.240.
    (2) Must, for QHPs offered through a Federally-facilitated 
Exchange, establish the date by which a qualified individual that has 
selected a QHP within the enrollment period dates in Sec.  155.410(b) 
of this subchapter must make a premium payment in order to effectuate 
coverage by the applicable coverage date, provided that:
    (i) The payment date is no later than the day before the coverage 
effective date.
    (ii) The payment date policy is applied consistently to all 
applicants in a non-discriminatory manner.
* * * * *
0
45. Section 156.602 is amended by redesignating paragraph (e) as 
paragraph (f) and adding a new paragraph (e) to read as follows:


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

* * * * *
    (e) Foreign group health coverage. (1) Foreign group health 
coverage for expatriates. The following types of foreign group health 
coverage will be recognized as minimum essential coverage for 
expatriates:
    (i) Group health coverage for citizens or nationals of the United 
States working abroad, provided by either of the following:
    (A) A foreign, self-insured group health plan.
    (B) Health insurance regulated by a foreign government or health 
coverage provided by a foreign national health plan with respect to a 
citizen or national of the United States who, for such month, is 
physically absent from the United States for at least one day of the 
month, or who is physically present in the United States for an entire 
month if the coverage provides health benefits within the United 
States.
    (ii) Group health coverage for non-United States citizens or 
nationals residing in the United States, provided by a self-insured 
group health plan, health insurance regulated by a foreign government, 
or health coverage provided by a foreign national health plan, if the 
coverage provides health benefits within the United States.
    (2) Notice. The sponsor, issuer, or plan administrator of foreign 
group health coverage as described in this paragraph (e) must provide 
notice to enrollees who are citizens or nationals of the United States 
of its minimum essential coverage status and must comply, if 
applicable, with the information and reporting requirements of section 
6055 of the Code and implementing regulations with respect to those 
enrollees.
    (3) Definition of expatriate. For purposes of this section, an 
expatriate means an individual for whom there is a good faith 
expectation that such individual will reside outside of their home 
country or outside of the United States for at least six months of a 
12-month period and any covered dependents.
* * * * *
0
46. Section 156.604 is amended by revising paragraphs (a)(2) 
introductory text and (d) to read as follows:


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

    (a) * * *
    (2) Procedural requirements for recognition as minimum essential 
coverage. To be considered for recognition as minimum essential 
coverage, the sponsor of the coverage, government agency, health 
insurance issuer, or plan administrator must submit the following 
information to HHS:
* * * * *
    (d) Notice. Once recognized as minimum essential coverage, the 
sponsor of the coverage, government agency, health insurance issuer, or 
plan administrator must provide notice to all enrollees of its minimum 
essential coverage status and must comply with the information 
reporting requirements of section 6055 of the Code and implementing 
regulations.
0
47. Section 156.800 is amended by adding paragraph (d) to read as 
follows:


Sec.  156.800  Available remedies; Scope.

* * * * *
    (d) HHS may consult and share information about QHP issuers with 
other Federal and State regulatory and enforcement entities to the 
extent that the consultation and information is necessary for HHS to 
determine whether an enforcement remedy under subpart I is appropriate.
0
48. Section 156.805 is amended by--
0
A. Removing ``or'' after the semicolon in paragraph (a)(6).
0
B. Removing the period in paragraph (a)(7) and adding ``; or'' in its 
place.
0
C. Adding paragraph (d)(3).
0
D. Revising paragraph (e)(2).
    The revisions and additions read as follows:


Sec.  156.805  Bases and process for imposing civil money penalties in 
Federally-facilitated Exchanges.

* * * * *
    (d) * * *
    (3) HHS will deliver notice under this paragraph by either hand 
delivery, certified mail, return receipt requested, or by overnight 
delivery service with signature upon delivery required.
    (e) * * *
    (2) HHS will notify the issuer in writing of any penalty that has 
been assessed under this subpart and of the means by which the QHP 
issuer or another responsible entity may satisfy the CMP assessment.
* * * * *
0
49. Section 156.806 is added to read as follows:


Sec.  156.806  Notice of non-compliance.

    If HHS learns of a potential violation described in Sec.  156.805 
or if a State informs HHS of a potential violation, prior to imposing 
any CMPs, HHS must provide a written notice to the issuer, to include 
the following:
    (a) Describe the potential violation.
    (b) Provide 30 days from the date of the notice for the QHP issuer 
to respond and to provide additional information to refute an alleged 
violation.
    (c) State that a civil money penalty may be assessed if the 
allegations are not, as determined by HHS, refuted.
0
50. Section 156.810 is amended--
0
A. By revising paragraph (a)(6).
0
C. In paragraph (a)(9) by removing ``or'' after the semicolon.
0
D. In paragraph (a)(10) by removing the period and adding a semicolon 
in its place.
0
E. By revising paragraph (a)(11).
0
F. By adding a new paragraph (a)(12).
0
G. By revising paragraph (d) introductory text.
    The revisions and additions read as follows:

[[Page 15878]]

Sec.  156.810  Bases and process for decertification of a QHP offered 
by an issuer through a Federally-facilitated Exchange.

    (a) * * *
    (6) The QHP no longer meets the applicable standards set forth 
under subpart C of Part 156.
* * * * *
    (12) The QHP issuer substantially fails to meet the requirements 
related to the cases forwarded to QHP issuers under Subpart K; or
    (13) The QHP issuer substantially fails to meet the requirements 
related to the offering of a QHP under Subpart M.
* * * * *
    (d) Expedited decertification process. For decertification actions 
on grounds described in paragraphs (a)(6), (7), (8), or (9) of this 
section, HHS will provide written notice to the QHP issuer, enrollees, 
and the State department of insurance in the State in which the QHP is 
being decertified. The written notice must include the following:
* * * * *
0
51. Section 156.1105 is amended by adding paragraphs (d) and (e) to 
read as follows:


Sec.  156.1105  Establishment of standards for HHS-approved enrollee 
satisfaction survey vendors for use by QHP issuers in Exchanges.

* * * * *
    (d) Monitoring. HHS will periodically monitor HHS-approved enrollee 
satisfaction survey vendors to ensure ongoing compliance with the 
standards in paragraph (b) of this section. If HHS determines that an 
HHS-approved enrollee satisfaction survey vendor is non-compliant with 
the standards required in paragraph (b) of this section, the survey 
vendor may be removed from the approved list described in paragraph (c) 
of this section and/or the submitted survey results may be ineligible 
to be included for ESS results.
    (e) Appeals. An enrollee satisfaction survey vendor that is not 
approved by HHS after submitting the application described in paragraph 
(a) of this section may appeal HHS's decision by notifying HHS in 
writing within 15 days from receipt of the notification of not being 
approved and submitting additional documentation demonstrating how the 
vendor meets the standards in paragraph (b) of this section. HHS will 
review the submitted documentation and make a final approval 
determination within 30 days from receipt of the additional 
documentation.
0
52. Section 156.1120 is added to subpart L to read as follows:


Sec.  156.1120  Quality rating system.

    (a) Data submission requirement. (1) A QHP issuer must submit data 
to HHS and Exchanges to support the calculation of quality ratings for 
each QHP that has been offered in an Exchange for at least one year.
    (2) In order to ensure the integrity of the data required to 
calculate the QRS, a QHP issuer must submit data that has been 
validated in a form and manner specified by HHS.
    (3) A QHP issuer must include in its data submission information 
only for those QHP enrollees at the reporting level specified by HHS.
    (b) Timeline. A QHP issuer must annually submit data necessary to 
calculate the QHP's quality ratings to HHS and Exchanges, on a timeline 
and in a standardized form and manner specified by HHS.
    (c) Marketing requirement. A QHP issuer may reference the quality 
ratings for its QHPs in its marketing materials, in a manner specified 
by HHS.
    (d) Multi-State plans. Issuers of multi-State plans, as defined in 
Sec.  155.1000(a) of this subchapter, must provide the data described 
in paragraph (a) of this section to the U.S. Office of Personnel 
management, in the time and manner specified by the U.S. Office of 
Personnel Management.
0
53. Section 156.1125 is added to subpart L to read as follows:


Sec.  156.1125  Enrollee satisfaction survey system.

    (a) General requirement. A QHP issuer must contract with an HHS-
approved enrollee satisfaction survey (ESS) vendor, as identified by 
Sec.  156.1105, in order to administer the Enrollee Satisfaction Survey 
of the QHP's enrollees. A QHP issuer must authorize its contracted ESS 
vendor to report survey results to HHS and the Exchange on the issuer's 
behalf.
    (b) Data requirement. (1) A QHP issuer must collect data for each 
QHP, with more than 500 enrollees in the previous year that has been 
offered in an Exchange for at least one year and following a survey 
sampling methodology provided by HHS.
    (2) In order to ensure the integrity of the data required to 
conduct the survey, a QHP issuer must submit data that has been 
validated in a form and manner specified by HHS, and submit this data 
to its contracted ESS vendor.
    (3) A QHP issuer must include in its data submission information 
only for those QHP enrollees at the reporting level specified by HHS.
    (c) Marketing requirement. A QHP issuer may reference the survey 
results for its QHPs in its marketing materials, in a manner specified 
by HHS.
    (d) Timeline. A QHP issuer must annually submit data necessary to 
conduct the survey to its contracted ESS vendor on a timeline and in a 
standardized form and manner specified by HHS.
    (e) Multi-State plans. Issuers of multi-State plans, as defined in 
Sec.  155.1000(a) of this subchapter, must provide the data described 
in paragraph (b) of this section to the U.S. Office of Personnel 
management, in the time and manner specified by the U.S. Office of 
Personnel Management.

PART 158--ISSUER USE OF PREMIUM REVENUE: REPORTING AND REBATE 
REQUIREMENTS

0
54. The authority citation for part 158 continues to read as follows:

    Authority: Section 2718 of the Public Health Service Act (42 
U.S.C. 300gg-18), as amended.

0
55. Section 158.150 is amended by revising paragraph (b)(2)(i)(A)(6) to 
read as follows:


Sec.  158.150  Activities that improve health care quality.

* * * * *
    (b) * * *
    (2) * * *
    (i) * * *
    (A) * * *
    (6) Commencing with the 2012 reporting year and extending through 
the first reporting year in which the Secretary requires ICD-10 as the 
standard medical data code set, implementing ICD-10 code sets that are 
designed to improve quality and are adopted pursuant to the Health 
Insurance Portability and Accountability Act (HIPAA), 42 U.S.C. 1320d-
2, as amended, limited to 0.3 percent of an issuer's earned premium as 
defined in Sec.  158.130.
* * * * *
0
56. Section 158.211 is amended by revising paragraph (a) to read as 
follows:


Sec.  158.211  Requirement in States with a higher medical loss ratio.

    (a) State option to set higher minimum loss ratio. For coverage 
offered in a State whose law provides that issuers in the State must 
meet a higher MLR than that set forth in Sec.  158.210, the State's 
higher percentage must be substituted for the percentage stated in 
Sec.  158.210. If a State requires the small group market and 
individual market to be merged and also sets a higher MLR standard for 
the merged market, the State's higher percentage must be substituted 
for the percentage

[[Page 15879]]

stated in Sec.  158.210 for both the small group and individual 
markets.
* * * * *
0
57. Section 158.220 is amended by revising paragraph (a) to read as 
follows:


Sec.  158.220  Aggregation of data in calculating an issuer's medical 
loss ratio.

    (a) Aggregation by State and by market. In general, an issuer's MLR 
must be calculated separately for the large group market, small group 
market and individual market within each State. However, if a State 
requires the small group market and individual market to be merged, 
then the data reported separately under subpart A for the small group 
and individual market in that State must be merged for purposes of 
calculating an issuer's MLR and any rebates owing.
* * * * *
0
58. Section 158.221 is amended by adding paragraphs (b)(6) and (7) to 
read as follows:


Sec.  158.221  Formula for calculating an issuer's medical loss ratio.

* * * * *
    (b) * * *
    (6) The numerator of the MLR in the individual and small group 
markets in States that adopted the transitional policy outlined in the 
CMS letter dated November 14, 2013 must be the amount specified in this 
paragraph (b), except that issuers that provided transitional coverage 
may multiply the total incurred claims and expenditures for activities 
that improve health care quality incurred in 2014 in the respective 
State and market by a factor of 1.0001.
    (7) The numerator of the MLR in the individual and small group 
markets for issuers participating in the State and Federal Exchanges 
(sometimes referred to as ``Marketplaces'') must be the amount 
specified in this paragraph (b), except that the total incurred claims 
and expenditures for activities that improve health care quality 
incurred in 2014 in the respective State and market may be multiplied 
by a factor of 1.0004.
* * * * *
0
59. Section 158.231 is amended by revising paragraph (a) to read as 
follows:


Sec.  158.231  Life-years used to determine credible experience.

    (a) The life-years used to determine the credibility of an issuer's 
experience are the life-years for the MLR reporting year plus the life-
years for the two prior MLR reporting years. If a State requires the 
small group market and individual market to be merged, then life-years 
used to determine credibility must be the life-years from the small 
group market and the individual market for the MLR reporting year plus 
the life-years from the small group market and the individual market 
for the two prior MLR reporting years.
* * * * *
0
60. Section 158.243 is amended by revising paragraph (b)(1) and adding 
paragraph (b)(3) to read as follows:


Sec.  158.243  De minimis rebates.

* * * * *
    (b) * * *
    (1) Except as provided in paragraph (b)(3) of this section, an 
issuer must aggregate and distribute any rebates not provided because 
they did not meet the minimum threshold set forth in paragraph (a) of 
this section by aggregating the unpaid rebates by individual market, 
small group market and large group market in a State and use them to 
increase the rebates provided to enrollees who receive rebates based 
upon the same MLR reporting year as the aggregated unpaid rebates. An 
issuer must distribute such aggregated rebates by providing additional 
premium credit or payment divided evenly among enrollees who are being 
provided a rebate.
* * * * *
    (3) If distribution of aggregated unpaid rebates according to 
paragraph (b)(1) of this section would result in any enrollee(s) 
receiving rebates that exceed their premium paid during the MLR 
reporting year, or if no enrollees receive rebates based upon the same 
MLR reporting year as the aggregated unpaid rebates, then the issuer 
must not aggregate the unpaid rebates according to paragraph (b)(1) of 
this section and must instead distribute them according to Sec.  
158.241 directly to those enrollees whose rebates did not meet the 
minimum threshold set forth in paragraph (a) of this section.

    Dated: March 11, 2014.
Marilyn Tavenner,
Administrator, Centers for Medicare & Medicaid Services.
    Approved: March 13, 2014.
Kathleen Sebelius,
Secretary, Department of Health and Human Services.
[FR Doc. 2014-06134 Filed 3-17-14; 4:15 pm]
BILLING CODE 4120-01-P